Portfolio for 40 million Norilsk — long-term investment on the current example

25 сентября, 2021 от fake Выкл

«There are lees to every wine».

(c) folk wisdom

An entire article wrote. But in the last days there are numerous disputes in the comments about MMC Norilskel, associated with his sharp drop — had to roll the sleeves and prepare this material. As they say «urgently in the room»))

And then I feel in comments — can and tremble the slender rows of my favorite long-term investors. Separate voices are heard, submitting the idea of selling. And even justifications under this thought are summarized.

Well, as usual — let’s understand.

So.

First of all —

On February 20, an accident occurred at the Norilsk processing factory.

During the repair work at the factory, the building of the ore overload point and the pedestrian gallery adjacent to it was collapsed. A terrible tragedy with human victims — according to the information today, three people died.

But the trouble is known not to coming alone.

February 24 there was a flooding at two mines of the company — «Oktyabrsky» and «Taimyr». These mines provide more than 30% of the company’s mining — so the suspension of work on them is a very serious problem for the Norilsk Region.

The market reacted to the data of the news very acute —

Previous paragraph suggests to re-read — pay attention «blocked the whole growth for this year.» It was because to overlap. The growth for «this year» is, in fact, growth in two months. I write an article at the end of February. Shares were traded at their historical maxima and one of the reasons for such a sharp fall and such an acute response to bad news is the nervous desire of the players to fix profits. But it is — remark, we only go to the disaster role.

Summarize the facts.

Flooding of two mines, giving a total of 30% of the production of ore.

Accident with human victims at the mining and processing factory.

Huge (unprecedented!) Fine at 146 billion rubles for an ecological catastrophe that happens in the summer.

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Discussion of the amendments to the legislation restricting dividends for non-environmental companies.

Discussion of cutting dividends for the modernization of equipment and paying a giant penalty.

The terrible worniness of the company’s practically all equipment.

It seems to be everything?

No, I can still pour oil into the fire, to those who want to sell Nickel’s shares.

Not only are dividends to cut off right now — they will almost certainly be cut after the end of the shareholder agreement with RUSAL.

Potanin has long called a joint-stock agreement, obliging Norilskel to pay huge dividends «Rudimiment» and is fighting for the modernization of the company the sums of completely different order were spent. After the end of the shareholder agreement, dividends will decrease with a very significant probability. And this new cut can be already quite long-term — the modernization of the MMC will not take a year and not two. And all this time, shareholders will have to «tighten the belt.»

Well, is the horror stories? All nervous readers have already fled to sell shares? ))

Now with a calmer part of the audience, let’s understand something else.

Here is this long list of Nickel problems — it all overlaps completely only one factor —

In the following years, nickel will be shortage.

Constantly. And grow in price will be constantly. And copper, by the way — too. The electrical conductivity, you know, better only in silver and gold, but of them the wires only for military and «new Russians» do)) and copper Norilskel sells, too, a lot — 2% of world production, not to be unfounded.

And this is this crazy price for nickel, copper, and on other produced metals — gives Norilsk nickel a completely unique «bonus», which on the long horizon overlaps all his problems. A huge cash flow from which it is possible to master the production and (with a successful defold), even shareholders for dividends will remain.

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The company came out those who wanted to fix profits — it was on historical maxima.

From the company, those who are very concerned with ecology or image (Western funds, above all) can be published. Such stories — with frequent accidents and victims — this is a bad PR.

From the company, those who are important to the stability of dividends are important — either are inflicted now, or the end of the action of the shareholder agreement with RUSAL and will come out.

And it’s quite a terrible flight, maybe we will see after the end of the agreement with RUSAL, if the Potanan «tightens the nuts» at all «and the dividends will become very tiny.

All listed moments can create downward movements. For me, these are only signals for additional purchases — both now and in perspective.

Why am I so loyal to a company that plans to cut dividends? For me, Norilskie — buy for many years. Therefore, I appreciate the management actions from the perspective of many years of ownership.

Do a simple exercise. Just imagine for a minute that Norilsk is yours. Whole. Belongs to you 100%. What would you do with profit from him? Your huge nickel, which you can give grandchildren to bequeath — there are almost one hundred years old in stocks only explored — today falls apart from old age and needs to be repaired. There workers die and the mines flood. Would you really paid dividends by sparing at the dying asset? I really do not believe.

So, I am my share of Norilsk — even though she is not 100% — I also want to make grandchildren. And I want the company to flourish dozens of years, and not for me tomorrow the dividends paid, and then «at least the grass does not grow.» Therefore, I am completely on the side of the Potanina and glad if he invests funds in the modernization of prospective production. And the fact that in the process of this modernization, perhaps the shares at some point will become cheaper — well, this is my chance to increase the share in this unique company. And your chance too.

For a long-term investor, this is not very clear this is today’s hype around the flooding of mines.

What is the tragedy — I understand it. But what is the news?

Anecdote about Brezhnev is remembered. «It is worth Leonid Ilyich in front of the mirror and melancholically, looking at his reflection:

«I’m old …

I am very old …

«I’m a super star!»

So with Nickel.

Only there rather from the opposite end — everyone was known that he was «Superstar», but somehow everyone did not like to remember that he was still «very old.» Although Potanin constantly reminded this to shareholders, but it was constantly dismissed. Finally made. Human victims appeared.

And investors are now discussing — to emerge in connection with the accidents from Nickel or not to go out.

Dear friend, I want to ask, when I bought the shares of Nickel, — are you really not aware that the company built the prisoners of the Gulag for Joseph Vissarionovich? And it is good that they were built on the century — because about more than one time there was no much upgraded, judging by eyewitness stories that recently visited the company’s facilities.

What did you know the new, following the results of accidents? What old equipment can break? That is, all your life experience has not suggested? And now it is for you — how thunder in the middle of a clear sky?

In short — from the point of view of human — the tragedy happened, people died. This is terrible.

From the point of view of a long-term investor, practically nothing happened.

What happened from the point of view of a long-term investor — so that he wanted to sell Nickel’s shares? Let me give a couple of examples.

Invented the batteries from the tree. Work better metallic. Copper on wires is also not needed — the wires are made from the prutics.

Due to the fact that electric cars and cars are harmful to health, the UN Security Council from Monday has banned both types of transport.

This news is a signal for sale Norilsk. And the flooding of a pair of mines is not even a problem. Perhaps — this is just the beginning of the sale of excellent shares that will make you