Again I have made quite some moves. The reasons are finding opportunities, raising prices somewhere or dropping prices somewhere changed facts.
The last update had me writing "Do not expect new updates to bring many new stocks like this one, this was a very unusual trading time. " I was wrong.
Maybe my style is not fully buy and hold but to do switches and adjustments from a pool of stocks, with come backs part of the game. I have to pay attention to capital gains versus expected returns. The stocks I sell are added to my watchlist and in most cases are investable again, because I still like them, but I cannot hold all.
In Turkey, Erdogan fired the central bank director because he aggressively raised rates. While there is some legitimate debate about the fact that high rates do not necessarily help against inflation due to higher cost of capital, and historical examples, there is no debate that firing central bank directors is bad for business sentiment. I sold MLP care in Turkey before that meltdown, but this one was just a review of earnings and a mistake in my analysis (profit attributable to minorities was not displayed in earning release and presentations).
I kept my Ulker Biskuvi because it is crazy cheap, absurdly cheap.
I sold my Coca Cola Icecek stock that had run up well (in valuation) since I bought, to make Turkey a smaller part of my portfolio, and I bought some Kaspi. It is basically Alipay+Alibaba in Kazakstan. After some small run up also, I sold Kaspi due to small country concentration risk, and mostly due to the high risk earthquake risk in Almaty, that I overlooked, and which is 40% of the country's industrial base. I really like Kaspi but I do not need that systemic risk when opportunities come about. Some other countries have higher natural disasters risks, but are bigger, but Kaspi gives credit to consumer and is more exposed.
I still like Coca Cola Icecek and it is on my shopping list.
I sold my Bollore. I like the stock but, late in the cycle, I am not such a fan of Sum of the Parts including a part needed to have a 30+ PE, or a thesis requiring a business simplification. I think Bollore has a good future and keep it in my watchlist. I would have kept it if not for my next purchase:
I sold it because a fellow investor I copied found the Italian company Newlat foods.
It is an amazing opportunity to own good food brands in Italy with 50% exports, with M&A track record and strategy at 8 P/FCF. No brainer and big position.
I reinforced British American Tobacco. This one is a 200% no brainer. It is a no-no brainer, I do not need to write more. I made it a big position. Since I started writing this update there was a story in the news about nicotine levels in cigarettes and mentol in the USA. My timing is not always right. So I will explain more: First it is cheap, and second I am bullish on ecigarettes, safe nicotine delivery and Weed. I think that this is the future, and once de-risked, despite the media panic over E-cigarettes risk (Unjustified and not based on scientific facts in my opinion), there is no reason for the Total addressable market not to grow in volume.
I bought a Chinese small cap listed in HK, producing biscuits at 5-6 times profit, At these prices there is no point counting the profits multiples. It is getting ridiculous. The company is distributing dividends: Jiashili Group. No Brainer again. I checked on JD,com and I found their products. So they also benefit from e-commerce.
I bought a Polish small cap at 7,5 times 9 month earnings , producing sausages, : Tarczynski. On one hand they may be over earning due to reduced cost of porks in 2020, on the other hand the growth track record is perfect, and they just launched veggie snack sausages, and snack Beef Jerky, and bought a German distributor. So it is exciting to see how the business will grow, and I like ambition.
I also have entered positions in my other Polish stocks.
Increased position in Indofoods;
Exits that I still like but I went elsewhere:
Fresenius SE, Grupo Bimbo. AB inbev.
News of the stocks in the portfolio;
Huge move from Modern Dental bought recently on great earnings. With such a quick double, one may be tempted to sell, but I am not sure it would be a wise decision yet. Should I sell, and buy back Bollore or Grupo Bimbo for example? What are the future prospects? Can it rerate much higher in line with Peers?
Petrobras timing was also bad, with Bolsonaro firing the CEO, but in my opinion this is noise. Petrobras is making a ton of cash flow, and you can put a clown or a mushroom as CEO, this will not stop that fact.
Last thoughts on the markets; I do not want to get caught in a bear market where multiples compress, and in a bad business time where cyclical business get hurt. So I really play defense with food stocks at low multiples.
I am still looking for ideas online. I saw a lot of Ideas in Japan, but I cannot find exciting things, probably because it pales in growth rates and distributions compared to HK and even Poland.
Thanks, that is all for this quick update. My next post will be an analysis of one of my African stocks.
edit: I was really sleepless when I finished this update, loads of typos have been fixed.
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