Czech Sphinx turns unloved British stocks into gold
A billionaire Czech investor is sitting on hundreds of millions of pounds in profit thanks to puns on ill-loved British stocks Sainsbury’s and Royal Mail.
Daniel Kretinsky, known as the Czech Sphinx for his unfathomable investing style, last week watched the value of his stakes in the two companies exceed £ 1.3 billion as their shares hit record highs. years.
Growing demand for the shares means the 45-year-old, who is also president and owner of top Czech football club Sparta Prague, can boast of making paper profits approaching £ 600million just for Sainsbury’s and Royal Mail. This includes £ 500million from its Royal Mail shares and £ 85million from an almost 10% stake in Sainsbury.
Puffy: Daniel Kretinsky during a Sparta match with his girlfriend Anna Kellnerova
The shares of both companies have been given new life since the Czech arrived at their doorstep without warning last year. Sainsbury’s share price has climbed almost 40% to £ 2.65 since Kretinsky crushed the UK grocery sector in September, far outpacing those of Morrisons and Tesco, which barely rose in the past. during the same period.
Sainsbury’s is currently the best-selling stock in Britain, which means some large investors are betting on the stock price falling.
But that meteoric rise only bolstered Kretinsky’s reputation for his ability to find a good deal, while also putting painful pressure on hedge funds and short sellers, including BlackRock, Marshall Wace, and Citadel.
Thanks to its Vesa Equity Investment vehicle, Kretinsky is now the second largest shareholder in the grocer, which is Britain’s largest supermarket group after Tesco.
Kretinsky’s 15.6% stake in Royal Mail also makes it its largest shareholder. Royal Mail shares have more than tripled to £ 5.26 since its first investment in March 2020.
The increase in the value of the two shares was in part aided by Kretinsky’s reputation as an activist and potential buyer, which sparked speculation about the two companies’ offerings. But it has also invested as each business grows with the arrival of new leaders.
He first bet on Royal Mail two months before the surprise resignation of its German managing director, Rico Back. On Thursday, the privatized postal service, now run by Simon Thompson, said profits had quadrupled to £ 726million in March 2021, as parcel deliveries increased.
There is no apparent connection between the purchase of Kretinsky and the departure of Back. But this isn’t the first time his stock picks have hit the sweet spot, although he still finds time for his passion for football.
Kretinsky is often seen at Sparta matches with his showjumper girlfriend Anna Kellnerova, daughter of fellow Czech billionaire Petr Kellner. He has been busy lately with a series of equity raids on companies across Europe and the United States.
Together with its Slovak business partner Patrik Tkac, Kretinsky now has a wide range of investments, including European energy giant EPH and a significant stake in French newspaper Le Monde.
Riding High: Kretinsky’s showjumper girlfriend Kellnerova is the daughter of fellow Czech billionaire Petr Kellner
His recent moves have revealed his interest in overlooked stocks, particularly in the retail sector. Last summer he made a surprise move on US department store Macy’s, earning nearly £ 30million in less than a month, as the easing of the lockdown pushed the price up 65%. He also owns shares in US retailer Foot Locker, where his sudden purchase of 12% of the shares was followed by the implementation of a shareholder rights policy to make it more difficult to launch a public offering of purchase by Kretinsky.
It also acquired stakes in the French grocery and distribution group Casino Guichard-Perrachon, which owns Casino, Géant, Vival and Monoprix, and which manages 10,800 stores in France, South America and Africa.
At the same time, another Kretinsky company, EP Corporate Group, invested last year with the Spanish supermarket group Eroski in Supratuc, which operates the Caprabo and Cecosa stores in Catalonia and the Balearic Islands.
The grocery sector has been the subject of a wave of buyout activity and investors are awaiting a repeat of last fall’s attempt by EP Global Commerce to seize German cash and haul giant Metro.
Kretinsky had taken control of a third of the shares and had spoken out about management shortcomings, requiring, among other things, that the wholesaler sell his properties. This was pushed back by Metro’s board, but Kretinsky’s stake has since risen to 45% – worth £ 1.4 billion.
Sainsbury’s chief executive Simon Roberts, who has overseen a detailed review of operations since joining a year ago, can rest easy for now. In April, Vesa said he “supports the team’s strategy.” Vesa said last night that “its directors cannot comment” on strategy and future investment intentions.
YOUR GAME PLAN? WATCH WHAT THIS GURU IS DOING NEXT …
Like many of the best investments, it all seems so obvious in hindsight.
Daniel Kretinsky bought shares in Royal Mail days before the UK lockdown. He invested in Sainsbury’s last September, when everyone was eating at home.
Both stocks have rebounded from the Czech Sphinx surge and it’s easy to see why. Royal Mail has seen parcel volumes skyrocket during the pandemic. Parcels now represent nearly three quarters of turnover, supported by a good performance from GLS, the least known but the most profitable overseas parcel branch. At Sainsbury’s, recent figures show strong growth in sales of food products and its subsidiary Argos, as online revenues reach new heights.
Obviously, Kretinsky has carefully timed his purchases, but he still has high stakes at both companies. Should individual investors follow his lead? Many institutions in the city are unsure of Sainsbury’s, but it is making headway under Simon Roberts, who paid a 10p dividend for the year through March. Royal Mail also announced a 10 pence dividend in its latest results and pledged 20 pence for this year. But, citing deep uncertainty, President Keith Williams stopped short of advice on the months to come.
Both companies must prove that they can support the progress made during the pandemic. This is particularly difficult for Royal Mail as it battles intense competition, outdated technology and union leaders in the UK. Sainsbury’s faces different challenges, but Kretinsky has undoubtedly noted its property portfolio, valued at £ 10.1bn against the company’s £ 5.9bn market valuation.
My verdict? Underwriters for Royal Mail shares at the IPO price of £ 3.30 are expected to sell half of their shares but keep the rest in case there is a share in the companies or if it finally delivers its long promised transformation . Sainsbury’s is a strong position. But perhaps the greatest value can be gained by thinking about what Kretinsky might look at next. Marks & Spencer maybe …
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