«Among balanced funds, only Monocle stand out from the crowd.»

Les Echos, 1st French Business Newspaper, November 22d, 2018







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Monocle Fund Part A

November 30, 2020
 YTD:                  +8.01%

Dear Investors,

As of November 30, Monocle (part A) is at +8.01% over 2020.

2019: +6.09%
2018: +0.11%
2017: -1.25%
2016: +6.91%
2015: +7.32%

If we look at the global evolution of the markets, it is difficult to understand what is going on at the moment. It is more enlightening to look in detail at a particular issue.

Take NIKOLA, the startup that wanted to repeat the example of Tesla in the truck sector.

The name began to circulate in the spring, quickly followed by an IPO. The price went up to $70, valuing the company at $26.5B.

Cowen's analyst had a price target of $80. However, the stock fell back to $40, but in early August, JP Morgan's analyst advised to "accumulate" Nikola's stock. Deutsche Bank set a target price of $54.

On September 8, General Motors announced that it was taking 11% of the capital of Nikola within a strategic partnership.

Then things became more complicated. On September 10, Hindenburg Research released a report questioning the Nikola case : there is no truck. The prototype seen driving in the video presentation has no motor. It was just rolling down from a hill.

Following this report, the DoJ and the SEC sent subpoenas to Nikola and its founder Trevor Milton. Milton resigned within days. The company tried to put forward some arguments, but they were weak. The stock price was halved from $38 to $18 (note that at this level Nikola remained valued at $7 billion). GM did not move however, its CEO, Mary Barra, kicking the questions put to her.

In the weeks that followed, buoyed by the euphoria of the markets, the stock went back up to $35. And then on Monday, when GM finally announced that there will be no capital transaction with Nikola (note GM's reaction time: 80 days), the price is halfed again in 48 hours, falling to $17 at yesterday's close (market cap: $6.5 billion).

Since November 10 we have Nikola's financial statements for the first 9 months of the year. It is quite simple:

(in millions of $)

  • $Revenues: 0
  • Expenses: 235
  • Net Income -235
  • Capex(investment): 5
  • Cash: 900 (from the IPO in June).

How could GM announce a partnership with a company that has to put its truck on the top of a hill to get it moving?

How could analysts give price targets for a company with such a track record and such accounts?

How does the market still manage to value Nikola at $6.5 billion as of yesterday's close?

As an external investor, it seems consistent to see Nikola today as an empty shell with just a net cash position of $900M.

The company should therefore be worth about this cash amount (there are few liabilities), which corresponds to a stock price of $2.50, that means 90% lower than the current price.

This is the Nikola example. If these arguments seem coherent to you, you may understand our concern with today's markets: they are filled with the same analysts, managers and investors, using the same reasoning as in the Nikola case.


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