Sold Modern Dental at a huge win over 600% in a year. This could be a long term compounder, but I am very wary of cyclicality, and it could be a short term pent up demand after covid restriction. In fact, our family has been going to the dentist a lot in the past month, because we had been avoiding dentists for a year.
Its easy to have 100 baggers in hindsight, but it requires conviction that the TAM still has growth (I do have it) and that the sales and profit are not cyclical (I am afraid that it may not be the case).
So now I found myself myself with a PE 20 lowish conviction in a remote HK small cap and a 600% gain or more. With cheaper opportunities around, I am happily out, and I incorporated it in my watchlist. I must admit that I could have expected a 3X return but not that much. It appeared so cheap initially that I felt that it must be something wrong. Luck was involved.
Sold Jiashili group, as results of this defensive Chinese biscuits business showed weakness in the sale front, due to "customer preference changes". It is possible that this company is defensive a la Kraft Heinz, ie on the wrong side of changing customer preferences for healthier snacks or less dull snacks, but still very profitable. Additionally it has been investing money in a ingredient joint venture with no transparency on the profitability and prospects of the JV. It was a loss of about 15%
Its important to know that In my small caps Hong Kong buys I am mostly investing on a quantitative basis, with few stocks I have long term confidence in.
Bought two small HK bargains
I keep a mostly non tech, non China exposure with very cheap HK stocks, but do not want to concentrate the portfolio on one geographic location. I actually decreased my exposure to China greatly but I bought two excellent businesses at PE ratios of 5. Very small positions on a quantitative basis. I copied them from the Kamikaze investor @mrierathelen who is just a deep deep value investor buying Mongolian mining cos and Norwegian Rigs and the likes. He had excellent returns so far.
Zengame Technology: PE 5, net cash, dividend payer, operates mobile games in China. Tries to expand abroad. The good thing is that the mobile games are card and board games, so a hit can stay monetised ... forever like solitaire?
QPGroup: PE 5, dividend payer. Its an OEM exporting printed board games mostly to the USA and ROW. Developping Ecommerce and net cash.
Sold HC surgical: presented in my last update. It went up a bit and preferred other opportunities.
HC surgical:
Market cap of $72M, Revenue $17M. Profit of $+-7M
This company does endoscopy and stomach procedures with 16 centers in Singapore.
It also owns passive stakes that it acquires in listed healthcare small caps in Singapore.
Flexibility and going back to your ex positions:
I keep an eye on my ex investments in google sheets and I saw that some fell too much or stagnated, and became attractive in terms of P/FCF or discount to NAV.
AB inbev, Softbank, Fresenius SE, Bastide Le Confort, Poulaillon
With few big conviction ideas, and my Emerging markets Ideas maxed out in terms of individual position sizing, I went back to ex holdings of mine. Also, with a large gain in Modern Dental and good results this year, I feel more defensive than offensive at the moment, to consolidate the gain with GARP rather than aggressive value.
AB inbev: I owned this stock in the past like 3 or 4 times profitably (buy low, sell high), before covid, during the covid crisis where I bought at the bottom but then got shacky hands with fundamentals shaken by lockdowns (or I thought at the time).
It concluded 2020 with about $8bn of Free cash flow. Market cap when I bought back was about $120bn. in a normal year in 2019 it made about $10bn of Free cash flow.
I long admired the scale and brands of AB Inbev so I really loaded the truck. I am currently a bit down on the position. It suffers a bit from cost inflation in 2021, but I believe this to be temporary because no moat commodity businesses will add more supply when prices are high, and they can pass over time the costs to consumers.
It is a bargain in my opinion because a company so dominant, with hidden (by covid panic FX movements) organic growth in Latam, Asia and Africa deserves a PE 25 like Coca Cola. AB inbev is now the first position in my portfolio. I will wait it out.
Bought and sold Softbank, I bought it to play $BABA and the discount. It was not made like a trade, but it surged strongly on some news of share swaps with Deutsche Telecom and Suga resignation in Japan. Looking back, while I saw continued crackdown on $BABA and Ant Financial and I am not comfortable about owning it for now.
Bought back Fresenius that I had sold on reasonable valuation and better idea. Roughly same price as sold.
Bought back Bastide le confort that I had sold on reasonable valuation and better idea. Roughly same price as sold.
Bought back Poulaillon at a price 12% higher than I sold, but I am very happy about it and it is not an error. Why? Poulaillon is a French Bakery and Fast food microcap, that was a high conviction, that I sold as covid hit (too late) and I could not guess if the business was going to remain cash flow positive, how long would restaurants stay closed, if a recapitalisation was necessary or not. Now there is some clarity, the business can stay cash flow positive after the initial shock and downsizing, the vaccine passports mean at least a large reopening. I applied a good process by protecting capital because the survivability was uncertain, and now returning into the stock as the survivability is certain. P/depressed CF of 3. not bad for consumer goods. But its a French illiquid microcap.
New ideas:
When you come out of a 600+% gain position, you have less problems paying up. so I finally gave in to paying up for defensive and growing LVMH after it had smashing results and fell a bit on China crackdown. I am French, and never quite understood why it was expensive, but also never really looked at earnings growth. and wow it is good, très très bien!. So I paid up, it hurts, but it is a good one to keep. LVMH, Its Louis Vuiton, Moet Champagne, Hennessy, Sephora, etc etc. Large moat and buy and holding this one.
Associated British foods. Half of the business is a boring and defensive food business, half of it is Primark, a discount clothing retailer with no online store. It suffered when the stores were closed by the maniacs? in charge in the UK. With vaccines hopefully they will stop closing stores. If they keep closing stores, it should not be for too long because people will start complaining, since people are vaccinated now.
For Readers outside of Europe, Primark is to clothing what Ikea is to furniture or what Mcdonalds is to hamburgers. An unstoppable and growing phenomenon, expanding now in the USA. This one is based on low cost with fashion element to it. Online got nothing on Primark because 1-it is cheaper. 2-many of the customer base do not shop online, want to go and try things, or are just not online shopping savy. 3-it is a destination.
I believe that the valuation is a bargain for Primark, and the food business is not bad as well. The company is managed by a family and they are long term oriented and very conservative.
Thai Beverage: PE of 12-13 for such a high quality business in EMs. what else?
How is my portfolio geared for $100+ oil?
That is the only thing worrying me in the portfolio. Not Xi or Evergrande or Bolsonaro.
The answer is: Badly. So I thought about what I could do to be defensive in this crisis scenario.
Lastly I sold Remgro at about 12x pre covid earnings ( and 18X current) but not guaranteed to rebound, for a South Africa business, with macro risks, it is not low.
Bought Gazprom Neft that I held before. 5PE, high dividend. I also increased Petrobras by 20% +-
This is still a small part of my portfolio, and would not protect it from problems at $150+ oil, although some African and Brazilian stocks that I own could benefit with currency.
Turkey
I am still looking to buy into some Turkish stocks due to valuation, as soon as it is available in the Degiro broker. ( I also need some stocks to reach fair value quickly to sell !)
Q? How do I follow many positions? A: they should be defensive enough that they do not need following.
Comments