Big profit gain for Mexican Qualitas
Carnegie Global rose 2.7 percent in January, with currency effects contributing around 2.2 percent. Several of our portfolio companies reported for the full year 2019 in January, and the news was mostly good.
KKR continues to do well. Its assets under management increased by 8 percent and the net asset value per share was up 24 percent. Although the share rose by more than 50 percent in 2019, this investment company is valued at less than 5 times earnings when adjusted for values on the balance sheet.
Qualitas also had a good year. The motor insurance market in Mexico grew, and with it Qualitas. It also improved the profitability of its insurance arm, which led to a substantial increase in profits. The results were reflected in the share price as Qualitas was up 95 percent in 2019.
Franklin Covey increased its recurring revenue by 22 percent and estimates that it will generate USD 25–30 million in cash flow during 2020. This means the consulting company is not only growing significantly faster than the market, but is also cheaper.
HCA Healthcare grew at a slightly faster rate than last year. Sales increased by 10 percent and free cash flow per share by 8 percent. Of the USD 3 billion that the company earned during the year, half was spent on dividends and share repurchases. The rest was used to acquire Mission Health, one of the largest healthcare companies in North Carolina.
ADS was the only disappointment among the reports. After streamlining itself towards private label credit cards, the company has experienced some headwinds in its transition from the shrinking offline segment to the more attractive online segment. In 2019, sales were unchanged but costs and bad debt losses increased, leading to a 35 percent decrease in earnings per share. Replacing Melisa Miller as CEO after only five months also added to the uncertainty surrounding the company, which performed poorly during the year.
However, one finance company that has performed better is Credit Acceptance Corp. Its earnings per share increased by 18% during the year.