Closed some FDJ Trades.
$FDJU.PA (FDJ United) has been one of our top positions for the past few months and I believe that it is still undervalued. But I had to close some trades at a loss.
The reason is because of capital allocation.
The only way that FDJ returns cash to shareholders is through an annual dividends, which is now at 6% yield. It looks big but after taxes, it comes down to 4.5% for me. I believe that over the long-term, this dividend will increase. But I made a mistake. I was a little too optimistic and believed that the company would pay a higher dividend this year itself after the acquisition of Kindred. This was not the case.
Now should we wait another year for a dividend increase?
We need to consider the alternatives.
Is it better to have so much cash locked up on a 4.5% dividend for one year or instead invest in alternatives that are more undervalued and with better capital allocation. One such alternative is $EVO.ST (Evolution AB ) which I bought more shares today.
FDJ remains a good business and remains undervalued but the opportunities have changed in the markets compared to when I first invested in it more than a year ago.... Show More
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