Thermador 2024 numbers
Thermador released 2024 numbers last Friday. The most positive part of the release is the fact that Thrmador manages to put everything you need to know on two pages without any BS. The numbers were clearly not good, with sales down -13,5% in 2024 and profit down -23,3%:
On the positive side, Thermador seems to continue to look for acquisition targets:
At a 2024 P/E of 13,3, Thermador is neither super cheap nor super expensive. For the time being I will sit on my hands, but if the share price would go below 60 EURper share, I might add on an opportunistic basis.
Some thoughts on (European) Defence stocks
Not too surprisingly, European Defence stocks have been on a tear already for some time, only to further accelerate at the time of writing following the Shitshow that happened in Mr. Trump’s offices on Friday.
For me, Defence stocks always have been difficult as they are often dependent on mainly one group of buyers (Governements) and rely on infrequent large orders with significant “covenants”. The list of disappointments for these stocks is long.
Nevertheless, Defence stocks are clearly the momentum stocks of the moment, as the charts of these selected European stocks show:
Rheinmetall, the German tank and ammunition manufacturer is a 13 bagger over the past 5 years. Even companies that have real problems and only some exposure to Defence, such as Thyssenkrupp are now in “vertical mode”:
One question I have to ask myself is clearly: Wouldn’t it have been somehow smart and a kind of “hedge” to own some of the names since it was clear that Trump won the election in the US ? In perfect hindsight, this looks obvious. Something to remember for the next similar situation. Diversification is never a bad thing in volatile times.
The next question would be: Does it make sense to jump on that Defence FOMO train right now ?
I guess that very much depends on the time horizon one is looking at. Personally, I am really a super bad short term momentum investor. Also fundamentally, it is not so clear to me to what extend and how fast the profits of the Defence companies will increase.
Rheinmetall for instance trades at a trailing P/E of around 70x. Looking at the last 23 years, we can see that on average, EBIT margins have been single digits and ROCE at best at 15%.
Yes, EBIT margins did increase and might increase some more but for me the big question is the following: There will be clearly a boom in defence spending for a couple of years but then what ?
This is a capital intensive industry and Rheinmetall & Co will need to spend a lot on PP&A. But unless there is a full blown war and/or the Ukraine war massively escalates, after a few years, Europe will have beefed up its defence capabilities significantly and then the required capacity will drop significantly becasue you don’t replace your tanks or ammunation every 3-5 years.
Another negative scenario would be that the US/Trump pressure Europe to massively buy American weapons in order to avoid punitive tariffs. I think this scenario is not so unlikely and might also limit the upside for the European competitors in the mid term.
To me, the current defence boom looks a little bit like the Renewables boom from 2022 when Russia attacked Ukraine:
Renewable Energy was hailed as the long term solution (“independence energy”) and a long and prosperous future was almost guaranteed. Now, 3 years later, ,ost Renewable players lost -50% to -60% from their peak and are trading lower than when the war began and the gas was shut off.
For me personally, I will not invest into these hyped up defense stocks. Of course they can easily go up another 20%, 30% or even 50%, but in the mid-term, I guess they are more than fairly valued on a fundamental basis. And as I mentioned: I am not very good on timing these short term “FOMO” moves.
There might be opportunities along the value chain, but for the time being I will stick with my boring & underperforming “quality” small caps.