Thoughts: If You Had Bought Swatch Group Shares One Year Ago…

… you would have lost 42% of your investment. So why is this happening and where is this going?

Following the May export results, which were up due to a spike in demand for alarm clocks, I quickly scanned the quotes from the various groups that are publicly listed. One that is difficult to ignore is the performance, or lack thereof, of the Swatch Group.

What gives is essentially consecutive disappointing earnings (mainly below expectations) that have not only kept stock growth flat but pushed it further down. The Asian slow down has not been much help either of course.

The Apple Watch is also rumored to be a bit of a pain for the group which has a bunch of watches firmly rooted in that same price segment. The sub 500CHF price segment is being hit hardest essentially since the Apple Watch launched. The official verdict is not out yet whether there is any direct correlation between the launch of the Apple Watch and the terrible performance of the sub 500CHF watch category… What is a fact is that for the past year the analysts have also significantly revised their profit estimates downward for the group.

Swatch Group has been hard at work and making some radical moves. In addition it is not being reported as slowing down (quite the contrary) its purchasing of raw materials needed to make wristwatches. The Group has stated a strong net cash position and could traditionally speaking consider either future acquisitions or share buybacks, both could substantially benefit the shareholders.

I for one am also wildly curious to see the impact of its still ongoing Battery project on the overall value of the company. They are aiming to create a product in this category that is better than industry standard. If successful this could just be the spark to ignite their ascent out of the stock performances rut. Overall, count me in the camp of the bulls as to what we can expect from the stock performance over the next 24 months or so.

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