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Czech Sphinx turns unloved British stocks into gold

A billionaire Czech investor is sitting on hundreds of millions of pounds in profit from punts on unloved British stocks Sainsbury’s and Royal Mail. 

Daniel Kretinsky, who is known as the Czech Sphinx for his inscrutable investment style, last week watched the value of his stakes in the two companies top £1.3billion as their shares hit highs not seen for years. 

Soaring demand for the stocks means the 45-year-old, who is also president and owner of top Czech football club Sparta Prague, can boast paper profits closing in on £600million on Sainsbury’s and Royal Mail alone. That includes a whopping £500million from his Royal Mail shares and £85million from a near10 per cent Sainsbury’s stake. 

Pumped up: Daniel Kretinsky at a Sparta game with girlfriend Anna Kellnerova

Shares in both firms have found new life since the Czech arrived on their doorstep without warning last year. Sainsbury’s share price has soared nearly 40 per cent to £2.65 since Kretinsky gatecrashed the British grocery sector in September, vastly outperforming those of Morrisons and Tesco, which have barely risen in the same period. 

Sainsbury’s is currently the most-shorted stock in Britain, meaning some large investors are betting on the share price falling.

But the stunning rise has only served to boost Kretinsky’s reputation for being able to spot a bargain, while delivering a painful squeeze to speculative hedge funds and short-sellers, including BlackRock, Marshall Wace and Citadel. 

Through his Vesa Equity Investment vehicle, Kretinsky is now the second largest shareholder in the grocer, which is Britain’s largest supermarket group after Tesco. 

Kretinsky’s 15.6 per cent stake in Royal Mail also makes him its biggest shareholder. Royal Mail shares have more than tripled to £5.26 since he first invested in March 2020. 

The rise in value of the two stocks has been helped in part by Kretinsky’s reputation as an activist and potential acquirer, which has sparked speculation about bids for both firms. But he has also invested as each firm gains momentum on the arrival of new management. 

He first made his bet on Royal Mail two months before the surprise resignation of its German chief executive, Rico Back. On Thursday, the privatised postal service, now run by Simon Thompson, said profit had risen fourfold to £726million in the year to March 2021 as parcel deliveries increased. 

There is no apparent connection between Kretinsky’s purchase and Back’s departure. But it is not the first time his stock picks have hit the sweet spot, despite still finding time for his passion for football. 

Kretinsky is often seen at Sparta games with his showjumper girl friend, Anna Kellnerova, daughter of another Czech billionaire, Petr Kellner. He has been busy of late with a series of share raids on companies across Europe and the US. 

Together with his Slovak business partner Patrik Tkac, Kretinsky now boasts a vast array of investments, including central European energy giant EPH and a big stake in French newspaper Le Monde. 

Riding high: Kretinsky's showjumper girl friend  Kellnerova is the daughter of another Czech billionaire, Petr Kellner

Riding high: Kretinsky’s showjumper girl friend  Kellnerova is the daughter of another Czech billionaire, Petr Kellner

His recent moves have revealed his interest in overlooked stocks, especially in the retail sector. Last summer, he made a surprise move on US department store Macy’s, making nearly £30million in less than a month as lockdown easing sent the price soaring 65 per cent. He also owns shares in US retailer Foot Locker, where his sudden purchase of 12 per cent of the stock was followed by the implementation of a shareholder rights policy to make it more difficult for Kretinsky to launch a takeover bid. 

He has also taken stakes in French grocery and retail group Casino Guichard-Perrachon, which owns Casino, Geant, Vival and Monoprix, and which runs 10,800 shops in France, South America and Africa. 

Meanwhile, another Kretinsky firm, EP Corporate Group, last year invested with Spanish supermarket group Eroski in Supratuc, which runs Caprabo and Cecosa stores in Catalonia and the Balearic Islands. 

The grocery sector has been the focus of a flurry of takeover activity and investors are watching for a repeat of a push last autumn by EP Global Commerce to seize German cash and carry giant Metro. 

Kretinsky had taken control of a third of the shares and been vocal about management shortcomings, demanding, among other things, the wholesaler sell its properties. This was rebuffed by Metro’s board, but Kretinsky’s stake has since risen to 45 per cent – worth £1.4billion. 

Sainsbury’s chief executive Simon Roberts, who has been overseeing a detailed review of operations since he arrived a year ago, can rest easy for now. In April, Vesa said it ‘supported the strategy of the team’. Vesa said last night ‘its directors cannot comment’ on future investment strategy and intentions.

YOUR GAME PLAN? WATCH WHAT THIS GURU DOES NEXT… 

Like many of the best investments, it all looks so obvious in hindsight. 

Daniel Kretinsky bought shares in Royal Mail days before the UK went into lockdown. He invested in Sainsbury’s last September, when everyone was eating at home. 

Both stocks have rebounded since the Czech Sphinx pounced and it is easy to see why. Royal Mail has seen parcel volumes soar in the pandemic. Packages now account for nearly three-quarters of turnover, bolstered by a strong showing by GLS, the lesser-known but more profitable overseas parcel arm. At Sainsbury’s, recent figures showed robust growth in food sales and at its subsidiary, Argos, while online revenue reached new highs. 

Clearly, Kretinsky timed his purchases exquisitely, but he still has big stakes in both firms. Should individual investors follow his lead? Many City institutions are unsure about Sainsbury’s but it is making progress under Simon Roberts, who paid a 10p dividend for the year to March. Royal Mail also announced a 10p dividend in its latest results and promised 20p for this year. But, citing deep uncertainty, chairman Keith Williams stopped short of guidance about coming months. 

Both firms need to prove they can sustain advances made during the pandemic. This is especially hard for Royal Mail, as it battles with intense competition, outdated technology and union bosses in the UK. Sainsbury’s faces different challenges but Kretinsky has doubtless noted its property portfolio, valued at £10.1billion against the firm’s £5.9billion stock market valuation. 

My verdict? Subscribers to Royal Mail shares at the £3.30 flotation price should sell half their stock but keep the rest in case there is some corporate action or it finally delivers its long-promised transformation. Sainsbury’s is a strong hold. But perhaps the most value can be gained from thinking about where Kretinsky might look next. Marks & Spencer perhaps… 

                                                                                                                                     Joanne Hart 

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