Tuesday, September 6, 2016

Romania economy grew 6% in 2nd quarter


Romania’s economy increased by 6% in the second quarter of this year compared to the same period of 2015, boosted by domestic consumption on the demand side and by trade and IT&C on the supply side.

The household consumption contributed 7.3 percentage points to the gross domestic product (GDP) growth in the second quarter and gross fixed capital formation added another 2.6 pp. However, the high domestic demand also led to a significant increase in imports, which is why net exports had a negative contribution of 3.4 pp to the second quarter GDP growth. Inventories also had a negative contribution of 0.8 pp, according to the National Statistics Institute (INS).

My holdings in Fondul Proprietatea are up about 10% since the fund announced it was doing a tender offer for outstanding shares. The fund shares are still selling at big discount to the underlying assets. In addition the fund pays a cash dividend of about 6% per year. Not bad in this low interest rate environment. The expect the company will keep on buying back shares until the gap in valuation closes. You also get optionality because quite a bit of the fund does not publicly trade so I am sure those assets are valued far less than true value. 

Most people reading this could care less but buying things like this and waiting for them to close their valuation gap is how you make money long term. 

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