Swiss National Bank’s Monetary Racket, US Stock Holdings & the Wild Ride of its Own Shares

Wolf Richter wolfstreet.com, www.amazon.com/author/wolfrichter

We’ll also look at its garbage pile at the bottom. These folks don’t even pretend to be stock pickers. They buy and let it stick till it falls off on its own.

The Swiss National Bank, which filed its disclosure of US stock holdings today with the SEC, has figured out the best money racket of all times. It works because currency speculators are eagerly gobbling up Swiss francs. In January 2015, the SNB started to print Swiss francs ostensibly to depress the value of the CHF, a tiny currency with huge global demand. It then began selling those francs for dollars, euros, and other currencies to buy securities denominated in those currencies. This monetary racket only works as long as there is endless global demand for the tiny currency.

The SNB doesn’t disclose its holdings of securities. But in the US, it has to disclose its holdings of US-traded stocks via a quarterly 13F filing with the SEC. So we know what US-traded stocks it owns, but this is just a slice of the securities it owns globally.

In its 13F filing today, the SNB revealed that it held 2,520 US-traded stocks and American Depositary Receipts (ADRs) of foreign companies at the end of the third quarter, of about 3,500 stocks traded in the US. The value of these holdings rose 1.5% during the third quarter to a record of $94.1 billion.

Its portfolio is loaded up with the FANGMAN stocks – Facebook, Amazon, Nvidia, Microsoft, Alphabet, and Netflix – with Apple and Microsoft as its largest positions. It also holds a number of ADRs, including ADRs of Chinese companies, such was Weibo, Alibaba (16th largest holding), Baozun, ZTO Express Cayman, and Huazhu Group.

These are the top 20 holdings by dollar value as of the end of the quarter. The SNB holds Alphabet’s Class A and Class B shares, in 5th and 7th position. At $2,47 billion combined, they’re the SNB’s third largest position, ahead of Amazon:

Company Name Type of shares Value, $ millions # of Shares
1 APPLE COM $3,419 15,267,199
2 MICROSOFT COM $3,376 24,281,217
3 AMAZON COM $2,399 1,382,051
4 FACEBOOK CL A $1,413 7,933,942
5 ALPHABET CL C $1,262 1,035,096
6 JOHNSON & JOHNSON COM $1,242 9,595,766
7 ALPHABET CL A $1,207 988,722
8 PROCTER & GAMBLE COM $1,143 9,192,748
9 VISA CL A $1,104 6,421,094
10 EXXON MOBIL COM $1,053 14,917,592
11 AT&T COM $995 26,293,437
12 VERIZON COM $936 15,510,451
13 HOME DEPOT COM $882 3,800,464
14 MASTERCARD CL A $863 3,176,352
15 COCA COLA COM $829 15,223,644
16 ALIBABA ADR $803 4,814,286
17 DISNEY COM $775 5,943,371
18 MERCK & CO COM $773 9,176,857
19 PEPSICO COM $763 5,559,679
20 INTEL COM $762 14,785,104

The garbage pile at the bottom.

The good folks at the SNB don’t even pretend to be stock pickers. They apparently go by the motto: Just buy and let it stick till it falls off on its own. So when markets surge, that’s great. But there are also a bunch of collapsed shares in its portfolio. At the garbage pile at the bottom we find:

Mammoth Energy Services [TUSK], an oil and gas driller based in Oklahoma City, is in 2520th position in terms of dollar value. The 13F lists 24,900 shares with a value of $62,000 at the end of the third quarter. At today’s price of $1.38, those shares are down another 44%, to $34,400. The shares had their IPO in October 2016 at $15, then rose to $41 by June last year, before collapsing 97%. One of those IPO miracles, and the SNB bought into it lock, stock, and barrel.

Chaparral Energy [CHAP] is second from the bottom in the garbage pile, with 68,200 shares, valued on the 13F at $91,000 at the end of Q3. It went public in March 2017, was trading around $25 a share until February 2018, then collapsed, and is now down 96% to $0.94. Since the end of Q3, the value of the SNB’s position has plunged another 30% to $64,000.

Aduro [ADRO], a discarded biotech, is in third position from the bottom. It IPOed in April 2015 and instantly collapsed and is now down to $1.06. The SNB lists 89,000 shares valued at $94,000; about flat with today’s price.

Exela [XELA], a business process automation provider, collapsed in June 2017 from around $10 a share to $0.61 now. The SNB lists 80,141 shares valued at $95,000. This position has since crashed by another 48% to $49,000.

Calyxt [CLXT], an ag gene-splicing company, is in fifth position from the bottom. The 13F lists 18,300 shares with a value of $103,000 at the end of Q3. At today’s price of $4.09, that position has dropped another 25% to $75,000.

The wild ride of the SNB’s own shares.

The SNB has issued 100,000 shares that are owned by these entities:

  • 55.9% by the Swiss Cantons.
  • 18.4% by public Cantonal banks.
  • 0.5% by other public institutions.
  • 25.3% by the public, as publicly traded shares.

The SNB pays an annual dividend not exceeding 6% of the nominal share value set at 250 CHF, which has amounted to an annual dividend of 15 CHF no matter what the actual shares do. At the current price of 5,330 CHF, this amounts to a dividend yield of 0.28%.

From the late 1990s on, the 25,300 publicly traded shares had been trading at around 1,000 CHF. But in 2016, they suddenly started surging and in 2017 began skyrocketing, to hit 8,600 CHF a share by April 2018.

The entire float is only 25,300 shares, and it’s very easy to push up the price with a little determination.

So the baffled SNB responded. Its president Jean Studer told shareholders at the SNB annual general meeting in April 2018:

“Even though the SNB refrains, in principle, from commenting on its share price performance, I am fully aware that this current movement may raise questions.”

“SNB shares are unlike other shares. They are subject to certain restrictions on shareholder rights imposed by law … the special character of SNB shares means that they are less a conventional investment than a means for shareholders to express their solidarity with our institution.”

What a way to douse the enthusiasm. Its shares plunged by over half, reaching 4,050 CHF a share by December 2018.  At today’s price of 5,330 CHF, the shares are down 38% from their peak.

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