This is the editorial of our monthly Quant Value Investment Newsletter published on 2023-04-04. To receive it in your inbox every first Tuesday of the month, sign up here.

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Subscribers frequently inquire about reputable affordable brokers. In this edition, I will provide an update on the brokers I utilize here in Germany, and more importantly, I encourage you to share your experiences with brokers.  

However, let's begin with the portfolio updates.

Portfolio Changes

Europe – Acquire Two

Two new recommendations have been added this month as the index exceeds its 200-day simple moving average.

The initial recommendation is a UK-based debt-free residential construction firm. Although it may appear expensive with a Price to Earnings ratio of 21.2, it offers attractive metrics such as Price to Free Cash Flow of 10.9, EV to EBIT of 2.0, EV to Free Cash Flow of 5.5, a Price to Book of 0.6, as well as a compelling dividend yield of 7.8%.

The second recommendation is a French environmental services company trading at a compelling 3.6 times Earnings, Price to Free Cash Flow of 3.2, EV to EBIT of 4.3, EV to Free Cash Flow of 5.7, with a Price to Book of 0.9 and delivers a 5.9% dividend.

North America – Buy One – Sell One

One addition is made to the portfolio this month as the index is above its 200-day simple moving average.

The company is a US-based distributor of building products valued attractively at a Price to Earnings ratio of 2.1, Price to Free Cash Flow of 1.7, EV to EBIT of 2.1, EV to Free Cash Flow of 2.5, and trading at book value.

Sell Linamar Corporation for a profit of +22.6%. After a year, it no longer conforms with the newsletter's selection criteria.

Asia – Buy One – Retain One

One new recommendation is introduced to the portfolio this month as the index surpasses its 200-day simple moving average.

It is a rapidly growing Singaporean food and beverages company valued at a Price to Earnings ratio of 6.8, Price to Free Cash Flow of 6.9, EV to EBIT of 6.2, EV to Free Cash Flow of 5.5, Price to Book of 1.5, and also offers a dividend of 3.9%.

Continue to retain Shaver Shop Group Limited (-0.3%), recommended in April 2022, as it still meets the selection criteria for this portfolio.

Crash Portfolio – Acquire Two – Sell One

Two recommended additions to the Crash Portfolio this month.

The initial is a UK-based innovator of advanced concrete placement equipment trading at a Price to Earnings ratio of 8.3, Price to Free Cash Flow of 11.6, EV to EBIT of 5.3, EV to Free Cash Flow of 10.1, with a Price to Book of 3.4 and offering a generous dividend of 11.8%.

The second recommendation is a Japanese Information Technology (IT) company trading at a Price to Earnings ratio of 11.0, Price to Free Cash Flow of 7.5, EV to EBIT of 4.7, EV to Free Cash Flow of 4.9, with a Price to Book of 1.8 and a dividend yield of 3.2%.

Stop Loss – Sell

Sell Lee & Man Chemical Company Limited at a loss of -9.9%

Which brokers do I utilize?

Subscribers frequently inquire about brokers. Consequently, I will provide an update on the brokers I use.

Prior to that, I'd very much appreciate your insights on the brokers you utilize.

It appears that US subscribers encounter challenges in global investments, particularly in small companies, so I would value any recommendations for reliable brokers.

If you permit, I would like to incorporate your insights into next month's newsletter.

I employ three brokers

I have three brokers at my disposal.

One is with my primary bank, an exclusively online bank in Germany, a second being the online broker at Deutsche Bank, and a third is my recently opened account at SAXO Bank.

I distribute my funds across three brokers to mitigate the risk in case one encounters difficulties or alters its strategy and seeks to terminate my client status (this has happened to me previously).

Each option presents its unique advantages. For instance, while Deutsche Bank may not offer low costs, it excels in executing trades for small caps in almost all global markets. SAXO Bank provides a user-friendly interface and facilitates the straightforward opening of currency accounts.

Here are some additional details about a few brokers.

Interactive Brokers (IB)

A friend of mine, Philip, who is an astute investor, highly commends Interactive Brokers.

According to their website, Interactive Brokers LLC (IB) is a NASDAQ-listed agency-only, direct market access broker that offers execution, clearance, settlement, and prime brokerage services to clients. They do not engage in proprietary trading and are rated ‘BBB+’, Outlook Stable by Standard & Poor's.

They provide access to 150 markets in 26 currencies. Additionally, their trading costs are notably low. Furthermore, their services are accessible via websites in multiple languages.

They seem to maintain a conservative and judicious risk management system to safeguard your assets. Customer funds are invested in very short-term government securities maturing within a few months.

Advantages

• Philip emphasizes the remarkable advantage of their excellent API (Application Programming Interface) that can be customized using the Microsoft .NET software development framework and the Python programming language.
• They also offer a variety of built-in algorithms for trading purposes.
• They boast minimal trading costs.
• Adequate fund manager-level reporting is available for a reasonable fee, such as EMIR.

Disadvantages

• Due to the robust trading interface, new users may initially find it overwhelming.
• There exists a steep learning curve to fully leverage the platform.
• Some markets, such as the UK AIM stock market, are not available.

SAXO Bank

Contrary to a prior recommendation from a reader, I recently established an account with Saxo Bank A/S (Saxo). Similar to IB, their websites are available in various languages.

Saxo is a fully licensed European bank under the supervision of the Danish FSA. It is a private company, with 50.89% ownership by Geely Financials Denmark A/S, a subsidiary of Zhejiang Geely Holding Group Co., Ltd., a Chinese automotive firm.

I'm still uncertain about the majority ownership by this Chinese automotive company. It is not my primary account, and I do not hold a substantial amount of funds with them. Nonetheless, it appears that deposit insurance of EUR 100,000 is available.in place.

Their website mentions that they enable the trading of about 70,000 financial instruments on exchanges worldwide.

Pricing is competitive and is tied to your account tier, which is connected to your account deposit amount. On the NASDAQ exchange in the USA, the pricing fluctuates from 2 cents per share to 1 cent per share, aligning with your account tier.

Advantages

• Simple and intuitive user interface
• Provides delayed bid and ask prices for most securities
• Competitive fees and access to most developed markets for trading
• Facilitates the use of different currency accounts, which eliminates the 1% currency buy and sell fee

Disadvantages

• Unavailability of some small stocks and an additional cost of $200 to add them
• 1% cost for currency conversions, considered relatively high
• Possibility of unavailability of tax reporting for your country, resulting in additional work for you or your accountant. This aspect may apply to all brokers, so it's essential to verify this.

What brokers do you use – feedback please

I trust this information has been beneficial. However, what I (and other subscribers) am eager to learn about is your encounters with your broker. Simply tap the Need help? button at the bottom right of this page to share your experience.

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