I bought my first shares on 25 January 2019 at 56.50 SEK per share. In this post you’ll find my investment thesis and the reason why I sold 25 % of my holdings in the company on 25 September 2019.
Updated 16 October 2019: Sold an additional 25 % of my original holdings in Eolus Vind at 122.6 SEK per share. My holdings in the company is now 50% of my initial position, and is now the third smallest holding in my portfolio.
Updated 17 January 2020: Sold remaining position in Eolus Vind AB at 113 SEK per share. Holding period 1 year and it became a double-bagger in my portfolio. I sold my position to make room for a new company in my portfolio, upside potential in Eolus is now limited with few projects in pipeline (primarily Wind Wall project and Øyfjellet), cost over-runs on latest projects delivered, increased scrutiny for wind parks in the Nordic regions and last but not least, my opinion is that the company announced a dividend that is not in line with the capital needs of the company. Their big net cash position should be distributed to shareholders of the company as there are no need to witheld this amount of cash (few projects in pipeline and Øyfjellet is sold to Aquila Capital).
Nevertheless, I will keep an eye on the company going forward and may initiate a new position at more desirable prices.
Introduction: Eolus Vind is Sweden’s first commercial wind power developer. Since inception in 1990, the company has become a leading Nordic wind power developer and has installed and delivered more than 540 wind turbines. The core business is to construct wind power facilities in favorable wind locations and transfer them to customers. The company operates in the Nordics, Baltics and the US and the company is listed on Nasdaq Stockholm Small Cap.
Investment thesis: Demand for electricity and wind power is expected to increase over the next decades at a 7 % CAGR. The shift to renewable energy will require investments in wind power parks, as there is little room for more hydro power and solar power is less competitive in the Nordic region due to the climate. For more details see analysis by Introduce.
Why did I choose to sell 25% of my holdings?
When I decide to part with an investment it is mostly because the investment thesis did not play out as I thought, the investment case changed or the company announced a dividend cut. In this case, I actually violate my own rules, but I’ll try to justify my reasoning below.
First, I only sold a quarter of my holdings, hence I still have a great exposure to the company. The shares I sold has been held for 9 months and gave me a return of ~83% (including dividends), which is greatly above what I expected in January.
- Secondly, I see limited triggers in the company the next couple of years since there are less projects under development.
- Increased controversy surrounding wind power, especially in Norway, might increase the project risk at Öyfjellet and other ongoing and future project.
- I bought the shares at 56.50 SEK, with an implied yield of 2.7% (1.5 SEK per year). With a share price of 102 SEK the yield is around 1.5%. I do expect though that the company will announce an extraordinary dividend due to their strong cash position (expectations in the market of 10 SEK per share), but this is a one-time occurence.
- The company became my largest holding and I wanted to reduce my exposure to a small cap company.
- My exposure to the green economy is too high at the moment (e.g. Brookfield Renewable Partners, TransAlta Renewables, Scatec Solar to name a few).
Will I sell future holdings in the company? It depends on the performance going forward, but I’m definitely in it for the long run.