Targets, Objectives, and Strategy

A.f.f.e, our Stock Club, has one overall objective. It is to grow the nominal asset base to SEK10.000.000 by year 2034. This will be achieved through an annual 10% net growth (post 30% tax, 1,5% inflation, SEK300/month, yields not included). If a 1% average yield is reinvested it will increase the annual net growth to 10,7% and achieve objective by year 2033.

To achieve overall objective the following 10 club targets have been established:

1. SEK100,000 - A Six Digit Number - year 2000
2. SEK250.000 - Quarter of a Million - year 2004
3. SEK500.000 - Half a Million - year 2008
4. SEK600.000 - ROI SEK100.000 (gross) - year 2009
5. SEK750.000 - Three Quarter of a Million - year 2010
6. SEK1.000.000 - A Seven Digit Number - year 2013
7. SEK3.000.000 - ROI SEK500.000 (gross) - year 2022
8. SEK6.000.000 - ROI SEK1.000.000 (gross) - year 2028
9. $1.000.000 - Dollar Millionaire - year 2030 ($ as of Feb 2007)
10. SEK10.000.000 - A Magical Figure - year 2033

Vision $2.000.000 - Multi Millionaire - year 2036

Income of capital exceeds salary from employment over time. It is an indication of economic independence as of its definition. Some individual targets have been established.

• Value of SEK50.000/per membership - A Nice Figure Halfway to a Small Car - year 2007
• Value of SEK100.000/per membership - A 3-Month Vacation in Thailand - year 2011
• Value of SEK250.000/membership - Quarter of a Million - year 2019
• Value of SEK500.000/membership - Half a Million - year 2025
• Value of SEK1.000.000/membership - Millionaires - year 2032
• Payment inflow stops year 2033
• A.f.f.e pays yield net SEK10.000/year and member - year 2034 till deceased, and/or
• A.f.f.e pays net SEK10.000/month and member - year 2034 till deceased, or
• A.f.f.e pays net SEK1.100.000/member - year 2034 (on leave or deceased)

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Industry Sectors

An analysis of our portfolio and in comparison with major financial institutes shows differences.

2007-02-25
Consumer Discretionary, Affe 15.8%, Recomm. 10.3% = 5.5%
Consumer Staples, Affe 0.0%, Recomm. 6.0% = -6.0%
Energy, Affe 0.0%, Recomm. 12.7% = -12.7%
Financials, Affe 11.3%, Recomm. 22.9% = -11.6%
Health Care, Affe 13.4%, Recomm. 11.2% = 2.2%
Industrials, Affe 0.0%, Recomm. 15.5% = -15.5%
IT & Telecommunication Services, Affe 31.7%, Recomm. 13.0% = 18.7%
Materials, Affe 12.2%, Recomm. 5.1% = 7.1%
Utilities, Affe 5.8%, Recomm. 1.6% = 4.2%
Funds and Cash not included.

I suggest we adjust our portfolio accordingly.

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Cont´d high demand for raw material

Due to the strong Asian demand access to raw material will not only lead to political tensions but also create a new global demand level, which can increase prices and profits. This scenario suggest the following investments:

- Monsanto, plant security and is a winner on new alternative energy.
- Deere, tractor mfg and is a winner on alternative energy.
- Schlumberger, biggest player on services within oil exploration.
- Other Nordic related stocks are Vestas Wind, Statoil, Neste Oil, Boliden och SSAB.

My recommendation is an overall exposure to the sector of SEk 25000 and with investments in above stocks. Financed through -SEk7000 in E-lux, -SEK5000 in Boss, -SEK13000 in cash.

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Diversification in Geo Exposure

To continue our intention to decrease European exposure and diversify our investments I recommend the following investments:

- Boeing, rides on a strong growth related to the need for larger aircrafts and Chinese demand.
- Time Warner, works hard to develop content solutions based on internet technology. A rapidly growing segment (Nordic alternatives are Ericsson and MTG).

Finance trough decrease in Ericsson.

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Volvo and AlfaLaval

A review of our portfolio show a weak exposure to stocks with strong connection to Asian growth and in rapidly growing segments. Since Asian growth is expected to continue several years and with high GDP growth it is highly recommended to move low-performing investments over to high-performing investments. A negative factor is our is our late position in the business cycle, but a long-term perspective justify an investment. Also, the usage of alternative energy and trucks are both highly demanded in growth economies and in times of political change.

My recommendation is to invest in:
- Volvo (L/T SEK 1000, S/T SEK 670). Recommend SEK 10.000.
- AlfaLaval (S/T SEK 400). Recommend SEK 10.000.

Finance it through -SEK5000 in Boss Media and -SEK15000 in cash.

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Volvo

Although we have been involved in Volvo before I still think there are potential in this stock. Their growth markets, India and China, shows strength. I suggest we return to this stock with a first target of SEK670.

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Bure

Bure has gone through tough financial times but recovered successfully. The trend is only upwards. They are actively working to find exit solutions on their investments. I would not be surprised if they merger or get acquired during 2007. Bure is a smaller investment for A.f.f.e. but also one of its backbones.

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Tele 2

Tele2 has a positive trend. They are implementing strategy that makes values more visible. Next level is SEK 120. Affe objective is to exit during 2007.

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Stock markets

It´s Feb 2007 and we have had a good start of the year. The stock market in Sweden has shown a positive year end since year 2002. Normally, 5 positive and consecutive years are very rare. Only twice before in history have this happened. During the 90s we experienced a long economic growth followed by a deep dip on the stock exchange markets.

So, what is our immediate direction?

I think we will find answers in the macro economy. There are changes in the economic world. It is not dependent on US economy any longer. We have four major growing markets (BRIC) and even if they don´t compete with the size of American economy it keep up demand.

The beginning of this century we have experienced an unbalance in the worlds supply and demand, which have pushed up prices in many sectors. It takes time to invest and develop new capacity but the world is slowly adjusting to a new demand level. This will continue for many years. The growth in China can be compared to the growth in western Europe post WWII.

In conclusion, Asia will most likely experience a steady growth for the next 20-30 years. There will be setbacks but overall a higher return on investments than money on the bank.

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About the Author

My latest assignment in the field of investments is as the elected chairman of a small stock exchange club in Sweden, A.f.f.e (Aktieföreningen Friends For Ever). The club started August 1998 with 0:- cash and has gone through the rollercoaster.

Previous experience was as a chairman in another stock exchange club, Investmentgruppen (the Investment Group). It was later formed as a club of Gents.

The core of it all is my interest for business in general and investing in particular. I follow business news on a daily basis and try to put it all together. I use the knowledge I earned through my MBA to support my analysis.

The objective with my blog is to expose my thoughts and careful analysis to invite community dialogue in the decision-making process.

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