After a fairly long period of lower activity both on the blog and holding wise, in these past weeks I have sprung to action to make some changes. Others like Swedish Match were force upon me, now to be fully bought out by Philip Morris. This is a quite a dramatic change to the portfolio and Swedish Match leaves both very big shoes to fill and a lot of cash to deploy. I also have a new holding to reveal, so let’s go through the changes. But first let’s start with some brief thoughts about the market and all craziness that happened during this year.
It’s been difficult six months to try to find somewhere to hide, I have taken some hits but managed to navigate the downturn decently well.
My portfolio detracted -11% in the first half of 2022 vs -20% for my main benchmark MSCI World Total Return, both denominated in USD. Never fun to be down, but after a very weak 2021 I’m of course pleased to finally stay ahead of the index. I have talked a lot about the US market and the USD in the past. Being underweight the US market has for a very long time been a big mistake. This is probably the first half year in a long time when its been positive. The USD itself feels like one of the main macro factors to mention for this period as many compare their returns in their local currencies, which of course comes out favorably if one compares returns in a currency that lost a lot to the dollar. The USD is just insanely strong right now, this has been a big detractor for some of my investments denominated in Swedish Krona, Polish Zloty and Euro.
Returns for first half 2022
Below is the returns for my holdings during 2022 and the ending weights (not including dividends). For example Swedish Match has been a larger position but has been sold down over the past months and Modern Dental has been increased after it already fell. My position sizing and buying/selling has had a major positive contribution to the outcome.
Returns since inception
Quick comment on each holding
There is a lot to say about this half year in terms of Macro etc, but I will try to keep it as brief as possible with some thoughts on all my holdings. I hate to be so non-humble but my “everything is a bubble post” from January this year was timed almost perfectly for the start of the downturn. Ok bragging over, press more and read all thoughts on my holdings:
There is no beating around the bush on this one, 2021 unfortunately was a lost year for the GSP portfolio. I bought a watch in mid 2021, it has already appreciated with roughly 10%, easily beating my 2021 performance of 3% return. That a watch can out-perform my portfolio is a pretty humbling experience but also nicely summarizes how upside down the world has been in later parts of 2020 and 2021. I have very mixed feelings about my 3% return for the year. I’m proud of how I covered stocks nobody else looked at, for example Modern Dental which is up +286% this year and I took profits when it was up 600% on the year. It’s pretty head-scratching then to have achieved such home runs and only be up 3% overall. The explanation is of course that broad parts of my (China/Hong Kong related) portfolio has just been hammered. So I will spend at least a bit of time harping about how incredible the spread is between Hong Kong and USA listed stocks in 2021. As you can see in the graph below, MSCI World excluding USA is on a total different trajectory. Since I barely invest in US listed companies I look like a terrible investor not because of stock picking, but because I have not been allocating to US stocks – rough! I do have exposure to other countries like Sweden/Finland/Poland, but even they failed me this year except one bright spot – Irisity. There I can’t blame having bad Beta exposure, I just didn’t pick the right stocks.
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Given the low correlation (43%) to MSCI World is it still fair to use this as my benchmark? For 2020 that correlation was 87%.
Portfolio changes
Some highlight below in terms of good & bad decisions for the portfolio in 2021
The mistakes
AK Medical
I had initially bought the stock at 4.7 HKD in 2019 and quickly sold out around the 9 HKD level as the stock surged. The company continued to post great results and with multiple expansion on top of that it peaked at 26 HKD. The stock after that started a major down move due to fears of the changes in Chinas central purchasing of medical equipment and devices. I tried to look into the topic and as I understood it it would mostly be the distributors taking the hit and not AK Medical. I still believed in the long term story of aging population with higher disposable income, there will be a huge need for knee and hip operations in the coming 10 years in China. On top of that China is getting more nationalistic, surely they want the market leading local player to have a pole position here? I started the year by taking a position again in AK Medical at 14,7 HKD and a few months later doubled my position at 9.7 HKD. How the central purchasing actually pans out is still unknown, but for now it seems the market has agreed upon that it will be brutal. The stock ended the year at 6.6 HKD, -46% from my average purchase price. I’m slightly shell shocked by this move down, the market is basically saying that nobody will make serious money on hip and knee replacements in China, although China is one of the worlds largest markets. I can’t really believe that will be the case but the market doesn’t really agree with me. In my view AK Medical has good enough products to even shift focus to selling their devices abroad, which they already do in smaller scale. I will stubbornly keep this holding for now but not add until I see some proof of where this is heading. Market has already priced in a disaster, so I will only sell on proof of disaster.
Valneva
It was a pretty lucky stroke to research vaccine producers in 2019, 3 months before Covid started. Given that I did so, one might say I should have bought Moderna, which I never did. I am very happy though that I did buy Valneva and what a ride it was. I first purchased the stock at the very end of 2019 at 2.57 EUR, I then sold in Feb 2020 at 3.4 EUR (this was all still non-covid related). In May 2020 they announced their partnership with Pfizer for Lyme diseases, I also had a small hope that they could somehow get involved in Covid vaccine production. So I took a position again, unfortunately smaller than my original position at 3.98 EUR. I rode this and sold this at an average of some 14 EUR in February 2021. Given how Covid has developed, this was like the other vaccine makers something to hold on to, its now trading at 19 EUR per share (very volatile in the past days). It felt good when I sold but it would have been a good portfolio hedge to keep.
Alibaba
Another disaster decision was trying to buy the dip in Alibaba. I mean its not really even my style to invest in large caps, I have concluded many times I have no edge in these large cap stocks. So I feel double the fool when I dip my toe into one of these mega-caps and manage to catch the largest wealth destructor ever in a single year. I bought shares in May at 214 USD and increased my position in late September at 147 USD. Stock ended the year at 119 USD.
The right moves
Modern Dental Group
My shining star investment in 2021 which I already mentioned, was ironically on the Hong Kong exchange. In this weak market find a winner makes it so much more extreme. I sold most of my Modern Dental in the bottom of the Covid crash 2020 at 1.14 HKD. The reason was because I realized that dental clinics would be shut down and indeed they were. I kept a small position because I still believed in the company long term. As soon as the positive profit alert came showing that the business had rebounded I re-entered with all shares that I sold at 1.84 HKD. That turned out to be fantastic timing as the stock just sky-rocketed basically from that day onwards. I took some profits at 5.2 HKD as the stock grew into one of my largest positions and then cut again at 9.4 HKD as it again grew to one of my largest positions. Around these levels I felt the stock had gotten ahead of itself just momentum speculators pushing it past fair value. Today it’s trading at 5.54 HKD and business seems to continue to perform very well. I do think I found a potential gem to hold in the portfolio for the long term here. The stock is just barely up from its IPO price in 2015, revenues have doubled and profits more than tripled since then. It is still not an expensive stock and just today I actually added a little bit.
Essex Biotech
This was a serious laggard in the market early this year and I wrote a blog post in February 2021: Essex Biotech – Why I am bullish. I increased my position at 3.95 HKD. The stock then went on to almost double from there on back of good results and a strong Hong Kong stock market. For portfolio balancing reasons I took a small profit in July at 7 HKD. This turned out to be fantastic timing as the stock has been pulled down heavily by the weak Hong Kong sentiment, ending the year at 4.95 HKD. Fundamentally the company still seems to be on the right track and I’m looking forward to if the company can finally get a breakthrough with the wet-AMD (eye disease) trials they are funding through listed company Henlius.
JOYY
What a mess this stock has been, its almost painful to write about. Baidu wanted to buy JOYYs Mainland business, a short report was released that targeted the mainland business. Left was a fairly attractive international Videochat business called Bigo Live. Baidu seemed happy to go through the with the deal, shooting down the short case for the stock. I believed them and added to my position since the cash from Baidu + other cash was as much as the market cap of the company. This was at 119 USD per share, my previous shares were bought at 64 USD. I capitulated when the deal finally seemed to be falling through when stock was at 55 USD, its now trading at 45 USD. So short term it was the right decision to sell but to be honest it still feels bad to have sold at these levels. Finally why I actually did sell was because I did track the Bigo Live app a lot myself (meaning I used it) and I could see that the popularity with the app was dying, basically negative momentum when they should have had positive momentum. Since I sold and it continued down I put this in good decisions (for now).
Other worthy mentions
Pax Global
This didn’t really feel like a mistake on my side, but a very very freaky event. In the middle of the Hong Kong stock market weakness, when PAX was one of few holdings to still trade close to all time highs, the nightmare news were released. FBI was raiding PAX warehouse in the USA on alleged security concerns with their payment terminals. The customer which alerted FBI had also decided to stop using PAX devices, stock was down some -45% in one day and this was before the drop my largest position – what a nightmare. Now the dust hasn’t fully settled on this but some of PAXs largest purchasers have come out and defended PAX saying they don’t see anything wrong with the devices. One could argue that is in their interest since they probably don’t want to recall millions of payment devices. Adding to this PAX still operates in USA, FBI or any other agency has not banned them from the US market, so it does not seem they so far has found anything. Lastly PAX has hired a large famous US security firm to independently check their devices (Unit 42 by Palo Alto Networks). The results from this was: “Unit 42 reported that the network traffic reviewed was consistent with the intended features of the associated services of PAX terminals. Unit 42 also concluded that there were no unexplained network traffic in the course of its comprehensive and thorough inspection.“. I don’t think PAX actually can do much more, some confidence in the company has been lost for sure both from investors but more importantly the distributors and purchasers of their devices. How much will these large buyers in Brazil/India and elsewhere shift to other brands to avoid PAX due to this? Well that’s basically what the market has taken a view on here. The market is basically pricing zero to very low growth, meaning that a major shift to competitors will happen over the coming years, I think that is exaggerated and there must be good reasons why they choose PAX in the first place (pricing vs competition, Android capabilities, PAX app store etc). I’m betting that this will slightly affect growth but PAX will still be growing at +10% or more per year. I slightly added to my position today.
Nagacorp
Another big loser for 2021, but here it’s in my view actually warranted. Given how China continues to be closed down and the funding risk of completing the Naga3 construction it’s pretty fair Nagacorp has traded down as it has. Given this view, this is where I found some of my funds (except the small cash buffer I had) to fund my purchases in Modern Dental and PAX. I haven’t sold all of my Nagacorp, but I reduced this to a smaller position today. I think the company could bounce back majorly in 2023 but Asia is still far behind on moving on from Covid.
That’s a wrap for my 2021 review. In my next post I will dive a little bit deeper into why my watch outperformed my stock portfolio in 2021. Because it has really been a year where all assets went up (except my stock portfolio and a few poor other bag holders who invested in Hong Kong) 🙂
With ~5 years of announcing every buy/sell transaction on the blog, I have now for a while shifted to only post changes under “Trade History”. Sacrificing some transparency but with the aim to focus blog posts on more interesting things than every trade done. I imagine this will be my new format, where I look back on the past months and comment on what I feel is most relevant to mention. This is the batch of trades I will discuss.
Much can be said about this year, I choose to focus on how extreme the dispersion been this year. A very small subset of the markets has been doing tremendously well in 2020. Bitcoin has tripled and Tesla and other ESG trendy “hot stocks” soared hundreds of percent on back of the massive stimulus we seen. 2020 has been a treacherous year for us long term more value oriented investors. With the exception of 1999, it has probably never been harder to stay true to your investment philosophy. The liquidity flywheel has been turning extremely quick in a smaller segment of the total market at the same time we all know how poorly the real economy is doing. I’m pretty active Twitter user and never have I seen such euphoria among investors that had a portfolio of loss making, high growth tech stocks with as many SaaS etc in the company description as possible. I was still very young in 1999 and history never repeat itself, but I’m pretty sure it rhymes. And the rhymes I have been hearing lately are not positive for the returns for the coming years.
2020 has also been a terrible year from the perspective of have and have nots. And I’m sitting as a clear winner here from that perspective, with a stable high paid job and and assets that just keep appreciating at a high speed. At the same time a lot of the people who don’t have the luxury of big savings even lost their jobs this year.
The crisis months
What defined most investment returns in 2020 was how one navigated the period of February to April this year. Given that I live in Asia I had a front row seat to what was happening in Wuhan. In my post from Feb 9th I wrote the following:
I would like to start of by saying, that I think we are facing an extremely serious virus spread. It’s the sneaky feature of the virus that it can spread before people feel sick, which really makes this so very dangerous. Thanks to very powerful actions taken in China and elsewhere, we might just dodge a major major global health crisis.
When I started to write on this post a few days ago I felt my fellow investors in the US and Europe had not understood what is going on in China. But just over the past few days I think investors are getting input from company management and decent news reporting on what is actually going on. I felt all worked up, how could equity markets continue up when 1.4 billion people had decided to sit at home, not work and basically tend to basic needs!?
We humans are pretty easy to scare and what influences most of all, is the behavior of the people around us. People can be calm and rational about the likelihood of catching the virus, but change mindset very quickly when put with a new group of people that act more panicked about the virus spread. It’s very quick back to basics in situations like this, Maslow’s pyramid comes to mind. Nobody is any longer thinking about which Hermes bag or new car to buy, when you are fighting at the local supermarket for the last rolls of toilet paper. Maybe it sounds like a joke, but this has been the actual situation in Singapore and Hong Kong over the last few days.
I think I was fairly spot on in my analysis in early February and really early to voice my views/concerns as well. After that point of being correct early I got a lot of things wrong. First of all I was very bearish and thought this bull market had in general ran its course. I thought we where staring at a crisis that would trigger a more long term economical decline. This meant I did not think of upside potential and buying potential winners from the crisis. I focused all my energy on downside protection and rotating out of anything with high leverage and/or severely affected by the virus. When all the stimulus packages started to kick in, again I was more thinking downside protection, that the USD would be devalued long term, so I took some positions in gold. The right move of course, now that we now the results would have been going in heavy on what was a Covid winner. For example I wrote my analysis on Valneva late 2019 so I was well aware of Moderna, go back to my post and you will see I compare Valneva to Moderna. A company probably nobody heard about in late 2019. In general the strength of the stock market boom from the lows really surprised me and still does.
The year of Poland
2020 was also the year that the Polish stocks in a more significant way entered my portfolio. It’s always a bit scary when one starts to trade a new market, where a lot of information is not available in English. My earlier investing years was very Europe and US focused and later when I moved to Asia I focused much of my investments on mastering investing on the Hong Kong exchange. I know feel I have a good grip of the western markets + HK/China. The become a truly global stock picker, I have over the past 2-3 years tried to widen my scope to other more undiscovered markets. I firstly focused on Italy but struggled to find real gems to invest in there (the market is still clearly on my radar). I then shifted my focus to Poland, a more emerging market than what I previously invested in. The companies have very tiny market caps and one has to accept poor liquidity to buy anything except the 5-10 larger companies on the list. The one big market I have left to look at would be Japan. I know there are tons of interesting companies there and I have from time to time been close to pull the trigger, but so far not.
Exceptional return in an exceptional year
I’m both extremely pleased and somewhat surprised over my return in 2020. With twice the return of MSCI World and at a lower standard deviation (measured on weekly data), it’s my best year since the blog started from an outperformance perspective. When I say that I’m surprised it’s because how strong the US tech segment been, which has a large weight in MSCI World. I have had very little to no such exposure (perhaps you can count LiveChat and JOYY in that segment). If you look at the below table of where most of that performance was created, it’s almost all from holdings that I added during 2020 (holding period less than 1 year). Many of my 2020 losers are my long term holdings such as Nagacorp and Dairy Farm, so activity has definitely paid off this year.
Thank you all for following my blog all these years, if you do enjoy it, please subscribe go get all my posts in your mailbox.
It’s high time to review my holdings and if anything changed in their investment thesis. This will be a monster post, for me it’s a great way to review all my holdings and make sure I stay up to date. For you, if you hold or are interested in one of these stocks you will get a quick “what’s the latest” with some sprinkles of why this is a great company (or not anymore). As a bonus there is a short elevator pitch of my two new holdings.
I stopped posting updates for every portfolio change (instead found under Trade History tab), so I have some changes to comment on: MIX Telematics left the portfolio and Lvji entered and exited without comment from my side. MIX Telematics was a case of having too high exposure to the oil industry in the US, I don’t see that coming back at all in the same way as in the past. This was something I did not understand when I invested, properly hidden oil exposure and a mistake on my side. Lvji was a tech play on travel guides for Chinese, but soon after taking a position some twitter friends alerted me of doubtful accounting. I looked at it myself and couldn’t really feel comfortable, better safe than sorry I then sold at almost the same price I bought.
Now on to comments on all my current holdings from top to bottom in the table below.
I have been thinking and discussing a lot over the past few months, what is actually going on in the world? I think most investors have been taken by surprise by size of the disconnect between the stock market and the underlying economy. I try to stay clear of taking too much notice of this, just stick to my stock picking process, but it’s damn hard not to. In my view central banks after the financial crisis distorted the Fixed Income markets and to some extend with that also the property market in many places around the world. I think equity markets were fairly free from such distortions previously, but it’s becoming more and more clear to me that is no longer the case. We are reaching bubble territory in some sub-segments of the stock market, probably to a large extend due to central bank and political interventions.
Mr Market seems to believe a few things right now:
1. Interest rates will stay close to zero for the coming 10-20 years. This gives large incentives to own growth stocks, instead of value stocks. Growth stocks have their profits further out in the future and are therefore gaining more on a lowered interest rate.
2. “New economy” tech stocks that can show large growth today, will continue to grow in the same fashion for a very long time.
3. These new economy stocks will so to say eat the old world and nobody will be able to out-compete them or destroy their margins, rather the opposite, with scale they grow even stronger. There are many examples, better cars (Tesla), new ways of shopping (Amazon), new ways of watching TV (Netflix), new ways of providing software services (A huge number of SaaS companies). These are the champions of the market right now and every company that has a look and feel anything like these champions are bid up in a similar fashion.
4. Lastly, momentum feeds momentum, when liquidity is ample (again thanks to CBs), people tend to pile into what is already rallying. I see clear tendencies that when a stock starts to move and establishes an uptrend, it moves a lot.
So this is where we are, maybe the market is rights, maybe not. This has anyhow created a divide in the market, with a sub-set of the market rallying like there was no tomorrow. One can also describe this as the growth/value spread being at extreme levels compared to history etc.
My portfolio is not immune
Obviously my portfolio is not immune to the above points, my holdings like LiveChat, Swedish Match, Vinda, JOYY and a few other I already sold have rallied like there is no tomorrow since the rebound started. This is great news and has helped me have a fantastic performance this year, the portfolio now up some 16% on the year. But it has also pulled the valuation of a few of these companies slightly out of wack. So what do I do? Well I want to invest for the long term, but I also have to stay true to my approach of allocating my money where I see the most value. Not just momentum riding something that quite frankly short term starts to look expensive. So just like in previous stocks I sold I run the risk of selling too early. But this time I’m not selling my full holdings I just trim them a bit and re-allocate some capital to stocks that haven’t followed up in this stock market crazy, but still are solid companies, valued very conservatively.
Portfolio before re-balance
This is my portfolio as of last Friday, all re-balancing happens on today’s close:
The company is doing a lot of things right. The company recently spent quite a fair sum of money to acquire the livechat.com web-address which I think is important (previously they had livechatinc.com). They have also spent money on creating a new Logo and revamping the look and feel of their brand. The launched a brave mission statement of how they want to develop the company going forward. Read it yourself: Living Constitution
“I don’t want to build a company that only has 100,000 clients and billions in revenue. I want us to go down in history as the company that revolutionized internet communication. We need an ambitious goal and the courage to achieve it.”
Everything I read about the company speaks of leaders that have vision and are still hungry to be even better. As you can see the stock is on a phenomenal run and it’s turning into one of the better stocks picks I made since the blog started, especially considering the short holding period. I’m happy to keep holding this long term, but valuation is for sure much more stretched now, therefore, to keep my investing discipline I reduce the size here.
Nagacorp – Increase to 10% position
Another company that I thought a lot about lately. The casino has been closed for months and recently reopened. Cambodia does not have that many covid-19 cases but there are troublesome restrictions to travel there. They will for sure be hurting until this virus is over. Early bull case would be travel bubble towards China (not unlikely). But they are in a good cash position anyhow, I don’t have the slightest worry that Naga will end up in cash-flow trouble. I will save a longer write-up here for later, but at these valuation levels this is a very nice holding to have as my high conviction position. Maybe it will be even cheaper during the autumn, but I’m happy buying at these levels.
TGS Nopec – Reduce to 2% position
A put this is a long term holding when I bought it, but to be honest this was a bit of oil punt. I still believe the oil price will recover long term and this is a high quality company in the sector. The only issue is that I haven’t done a deep due diligence on this company. The position is a bit too large, given that. That’s my only reason for reducing the position. Either I will do a deeper DD and decide to take up the position size again, or it will sooner or later leave the portfolio.
PAX Global – Increase to 6% position
This is a holding that has been growing on me. The valuation is suspiciously low, meaning one starts to think in terms of fraud. I have been discussing both on Twitter and emailing with investor relations. I’m not as confident as I can be that it’s not a fraud. There is for sure a lot of competitors that can create a payment point of sales devices. But they seem to a fit a very nice niche of being cheaper than the best solutions and better than all the other cheap options. With card payments being on an extreme uptrend worldwide before Corona, this is actually a real Corona-theme play for the coming years. I just have to increase my position here and hope the market will agree with me at some point. Shout out to Gabriel Castro with twitter handle @gabcasla for good discussions!
I will give you a sneak peak into my next theme, which is partly related to eye sight. With the analysis I have done of the “eye sector”, my conviction on this holding has also grown. Another fast growing company, doing a lot of things right, but the market has yet to revalue it. I increase and I’m ready for re-valuation!
Kirkland Lake Gold – Increase to 5% position
Markets are as stated slightly crazy right now, in my view there is a decent probability that we get a total rocket lift-off in gold price (remember the market love momentum trades right now and gold momentum looks fantastic). Money printing should create inflation, this is my hedge (also a company with track record of creating shareholder value).
Summary
All in all this reduced my cash balance from 12.4% to about 7.7%. Comments as always welcome!
My portfolio has dropped -22% year to date and it’s been a struggle how to position myself in this type of market. This still compares fairly well to MSCI World which is down -30% YTD, both calculated in USD. Talking about USD, the currency moves we have seen lately has been out of this world. I have a few holdings in NOK and SEK, in the last three weeks USD strengthened 25% vs NOK and 8% vs SEK. This means that my portfolio calculated in NOK is actually UP year to date! Such moves are way to big to ignore and must be incorporated in the analysis of the company you are buying, especially if the companies income is in USD. And then we have the oil, here I feel a bit unlucky buying into my first oil investment since I started the blog just before this epic double whammy of Corona scare and Saudi/Russia oil price war. A bit more on that later. Oil is important, but the big one has of course been the spread of the virus and lock downs around the world. First of all, I think it has been a process for all of us investors to come to grips with this. What does this all mean for my holdings and the economy? I had a head-start given I had closely followed this situation in China before most investors barely looked at it. Even with a head-start it has not been easy. Question like should I re-balance my portfolio when one holding drops unreasonably much compared to another, pops up for me on a daily basis. It’s very easy to over trade in this type of market. I will do a new quick review of all my holdings from a corona perspective. Debt levels for example become more important (I have usually been careful with this). First a few more Corona thoughts..
Further virus thoughts
First I want to say, you are probably pretty tired of reading about virus opinions from unknown readers online. Like 99.9% of these opinions I’m not an expert on virology. That said, I spent an almost unreasonable amount of time following this, listening to experts, trying to form an opinion on what is happening, long before most of you did. Not because I’m more clever or anything, it just happens that I live in a region which was close to the epicenter of this. I mentioned this many times before over the years in my blog, normally I would ignore Macro and focus on stock picking. But some events are so large you should not ignore them, this is such an event. I previously posted about how serious I thought this virus was in China. I just assumed that other developed countries closely monitored the situation and would sound the alarm if cases started to spread elsewhere. I was wrong. It’s now clear that the virus must have spread for a long time in Italy before getting noticed. But I wasn’t entirely wrong, in my post Feb 9th I wrote: “I really don’t understand why we are 1% off all time high the S&P500 when we are staring this situation right in the eye.” That doesn’t mean though that my portfolio was hedged for this scenario. I have tried to stay in defensive stocks for quite some time now, but that was defensive in a general sense, not Covid-19 defensive. In the past three weeks the whole developed world has changed and with that stock markets has totally repriced the world economic outlook. Credit/default risk and significant rise in unemployment is a certainty. The question now is not if, but how bad it will get, before it gets better? Vaccines is everyone’s big hope and that would be wonderful, but unrealistic to have before late this year. If we are locked down until a vaccine comes around then, this will be as bad as the depression in the 1920’s in my opinion. My hope stands to a medicine which significantly reduces the symptoms and the deadliness (right now malaria medicine + zinc seems like the best candidate, with HIV medicines a good second). Such a medicine could potentially reduce symptoms and would enable the younger/healthier part of the population to dare to go back to work and a more normal life. I read that most countries are now giving their patients the malaria medicine (based on the results from China and Korea). Given that governments have to find a way to at least partially normalize this situation, I see such medicines as the base case scenario, where governments can within a month or so go out and proclaim that they have a positive effect. A more bullish scenario would be an even more effective medicine, making the disease harmless, which seems unlikely to me. Then there is the depression scenario, one has to at least have a plan to survive that as well. That scenario goes a bit outside of this blog though. It means buying physical gold (which I have done and potentially I will buy more), stock up on goods at home, and hope you are lucky still have a job with cash flow coming in. I will focus less on the depression scenario, such scenario is a bit to bleak and in my view, still unrealistic, at least at this point.
2nd Corona status check on my holdings
I need to redo my Corona virus status check from Feb 9th, since the one I did a month ago was discounting “only” a significant spread in China, not a world pandemic. So here we go again (press read more):
It’s 5 years since I started this blog and what a journey it has been so far! When I set out on a mission, of becoming a better investor through this blog, I realized it would be hard to consistently keep posting. With life having it’s ups and down it has from time to time been a challenge to do so but I’m proud to have been able to keep up the pace. I have at least posted once every month since I started, and on averaged slightly above 2 posts a month. This sometimes cathartic exercise of publicly sharing all my investment decision has really been helpful in honestly reviewing what works and what does not work. Some of you readers have been part of most this journey and some might have scrolled back through my posts. But most of you are likely readers that found my blog in the last 3 years. So let me take the opportunity to introduce how I view my journey and also highlight some older posts that might still be worthwhile for you to read.
Pre-blog days
Everyone have their story of how they started investing and how they became better investors. My early days of investing is very colored by the 2003-2007 bull market. I had fantastic returns, about 200% return in 4 year time period. I really thought I had investing figured out back then, the 2008-2009 period taught me I did not. I like explain my feelings around how skilled of an investor I am with the hype cycle:
For me I was at the clueless stage in the early 2000’s, I got naively confident around 2006-2007 and discouragingly realistic around 2008-2010. I understood around 2011-2012 that the path to “Mastery Achieved” is extremely long. I needed to find a venue to set a long term plan to become a better investor. I considered just writing a personal diary, but realized it would be hard to keep it up. At the same time, I had been doing deep research into Electric Vehicle investments, trying to understand the whole supply-chain. This theme I spent some 6 months to research and that was how it started. I wanted to write down everything I had learned about this emerging sector and share it online. I realized I could use a blog format to share such information and at the same time structure the thoughts in my head around investments. I really wanted to get on the journey towards “mastery” in investing and a blog seemed like a good way to structure it.
First year of the blog
So my first big investment theme was that Electric Vehicles would totally change the car industry, below is the post where I truly kicked off my blog. Back in 2015 people did not talk about EVs like today, most people were still great skeptics that EVs would take over the car industry, I believed after all my research that they would. I think I have been proven right by now (sentiment actually turned already around late 2016). In the same post I formed my early thoughts around what kind of edges you can have in the market. I identified that investing with a longer term horizon was one such way.
As you know by now, my blog mixes discussions about my current portfolio, sometimes dropping a shorter note on a holding and writing lengthier write-ups of stocks. One of my first lengthier write-ups was of NetEase, which has been a very strong performer in the stock market since:
I particularly like this point I made in the post. I will come back to this later:
“but for me personally I want to spend a few more years understanding both stock markets around the world, different sectors, as well as different investing styles. Because if it’s one thing I learnt from meeting all these great managers out there, with great track-records of alpha generation – there is not one style that is superior to others, all different styles of investing can work, if you do it right. And maybe as important, different investing styles will outperform during different times.”
Second year
I started the second year with the best analysis I probably produced on this blog. At least if you evaluate it in terms of stock price returns (I don’t count stocks I just mention, like the DNA discussion I start of the post with – CRISPR there would have been a fantastic buy). The post was followed up with an equally good commenting from many of you readers.
I was very early on the sneakers trend in China and invested long before Anta and Li Ning moved up multiple-fold. I did get a good return with XTEP in the end, but it also shows that buying value is not always the best case. A lot of the value sits in a brand and here Li Ning for example was a much stronger candidate. I understood that during my due diligence, but instead went with what looked cheap on fundamentals. As often is the case, cheap is cheap for a reason. I have gotten better at being skeptical against cheap companies, although I still do mistakes.
Another analysis I spent a lot of time on was YY, which recently changed name to JOYY and which I re-bought into the portfolio. I was way too quick to sell the company as it doubled after I sold (and later came back down again).
Since I started the portfolio I always had a fairly high weight towards companies with exposure in the Chinese market and often listed on the HK exchange. The reason for that has been valuation and the nice growth prospects. At the same time I’m always fully aware of the Macro backdrop, which always scared me. I’m pretty sure at some point we will see a major economical collapse in China (before they really take over the world), maybe it will come now triggered by Corona. Anyway, the first time I got cold feet was in 2017 and I wrote this post.
Well in the end I have not been able to stay away from China, I still have a lot of China exposure in my portfolio, perhaps I should take a look at that once again?
Tokmanni was a company where I did the analysis correctly, but I did not have the patients to wait for the stock to reprice (which it did in the end):
One of the larger write-ups and due diligence processes I ever done on a stock was Teva. That taught me a lot about the industry which was good, but it also taught me that it’s not really worth it. A large Pharma company is just too complex to value and it takes too much of my precious time. Time better spent on smaller companies. I guess my analysis is still somewhat relevant (written in two parts) and the company is still a controversial highly leveraged investment:
Finally in December 2017 I did another large piece on a company I still hold, Dairy Farm. The company really is in a pickle right now with Corona virus, HK protests and in generally mis-managed supermarkets. The valuation also reflects it. This post gives a good overview what the company is about:
Given that these are more recent I will keep a bit more brief.
I was very proud of how I combined my knowledge of China and an entity listed in Europe when I presented this idea (which turned out be perfectly timed):
One of the post I’m most proud of in terms of originality is my Art of Screening post. I took a fairly scientific approach of trying to find out which markets have the lowest retail stock investing participation and through that approach find the stock that are most overlooked. This concept has stayed with me since and is another important puzzle piece to what today is how I go about finding new investments and building my portfolio. I think I will have to follow-up on this post, there never was a Part 2 written..
Another major stepping stone in my approach to investing came with this post, where I introduced 3 buckets of investing, Long Term, Opportunistic and Speculative:
Just as Electric Vehicle was this big theme I researched I in the same way researched the Dental Industry in a three part series. Unfortunately most of the investment cases were in my view priced for perfection, but I learned a lot, which will be helpful to pick up these stocks in the future if the market provides a buying opportunity. The stock I choose to invest in which I still hold is Modern Dental Group:
I hope you liked what I have written over the years! What were your favorite posts? What would you like to see more of and what should I spend less time on? Please comment!
This time around I thought I would take a different approach. Recently I walked through all my current holdings: Short comment on all holdings
Today as a year end evaluation I will do the opposite, go through all companies I held but sold. This will also give new readers who hasn’t read through my blog from the start a better understanding what has built my performance over the years. For every holding, if you want to kno more, check through the drop down menu (if you are in a web browser) and select the stock in question. The purpose of this exercise which took quite some time to compile is to evaluate if I’m turning over my portfolio, too much or too little. And even more importantly of all the investment ideas I put in my portfolio over these years, are they of high quality? Have they kept performing after I sold or am I buying too many poor performing businesses?
All stock performance data is converted into USD and total return (meaning dividends are reinvested) and benchmark against my GSP portfolio. Also take note that the Y-axis varies in scale, let’s get started!
Press “Read More” and be ready for a lot of graphs!
In stock code alphabetic order, all stocks I held but sold:
