Although its my smallest position in the portfolio, I have writte quite a lot about Nagacorp in the past. More about Nagacorp.
When i finally took a position, I did so with some short term hesitance, given that I did not see any short term triggers. It will take time to scale up the revenue when Naga2 becomes fully operational. That means there is still time for potential share weakness when short term investors are shaken out. I think we have seen that over the last few months. And although the majority owner is not treating minority ownerd fully fairly, the crubles we get still goes a far away at these valuation levels. With a succcesful launch and almost doubling of revenue over the coming 2-3 years warrants a share price in the 6-7 HKD range depending on the margins they manage to achieve, as well as what the Camobidan government decides to do with its tax levels.
Im willing to double my holding at these levels, with further share weakness it could potentially become one of my high conviction holdings.
Shanghai Fosun Pharmaceutical
Although Nagacorp is HK listed and a part of its customers are Chinese, its not a pure-play Chinese company, given that it is located in Cambodia. Even so I feel obligated to keep reducing my China exposure. Which is not an easy task given that I see a lot of value (lower valuations) there than elsewhere. But as I written before this is a tactical portfolio decision, I just have to do my best to find interesting investment cases in other markets. Given this I say thank you and good bye to a holding that has become a real success investment, Shanghai Fosun Pharmaceutical. I bought the stock at 19 HKD in August and sell out now at 31.85 HKD, where a large part of the gains has been multiple expansion.
The long long term case for Chinese Pharma and stocks in the Hospital business particularly I think is still intact, I hope the future gives me another opportunity to buy this stock on the cheap.
In the future I will move to quarterly performance reviews, so this is the last irregular update. The portfolio has done extremely well and I must say this much out-performance does not come without a certain amount of luck. I feel we are reaching the end of this long bull-market and we are probably moving into a more challenging investment climate over the coming years. Even so I still think there is enough dispersion in the market that it gives some comfort in attempting to pick stocks. The strength of the USD is concerning I think. I don’t see how the US stock market can be at it’s peak and the USD keep strengthening as well, at the same time other equity markets are far from peak levels. Something got to give.
Performance
The graph above shows The “GSP Portfolio” performance including all trading and dividends since the blog inception (no trading fees deducted).
Current Holdings
Previously held stocks
Notable Movers
+ Coslight Technologies
After tremendous results in it’s semi-annual report, the stock soared. I have been analyzing all the battery companies that are listed and I have been able to invest in. Out of all of those I placed my bets into two stocks, that were pure-play battery companies. One has with a lot of volatility, mostly gone sideways, but Coslight had the sales turnaround I was expecting, driven by China’s significant insentives for electric vehicles, both buses and cars. Nice to be right for once, after spending tremendous amount of research on the topic over a 1 year period. Now there is talks about a potential over-supply situation among the Chinese battery-makers, I’m somewhat worried about that, but more short-term than long-term. I see signs everywhere that the growth of Plug-in hybrids and all electric cars is just in its infancy. If this company keeps playing their cards right, this stock could go another 100% within the next 2 years. Previous write-up on Coslight.
+ Shanghai Fosun Pharma
This was an example where a lot of things together made me take the investment decision in this holding company. The chart looked like the stock was set for a leg up, I wanted a healthcare stock in my portfolio and the valuation started to look more and more compelling (SinoPharm holding >50% of Fosun Pharmas Market Value). Right after I bought the stock started surging, a quick 25% gained. Lucky yes, but at the same time it was strangely out of sync with SinoPharm. Now the stock is more fairly valued, although still not expensive. Since I have understood from Chinese friends that Shanghai Fosun’s management have a bit of a reputation, I might need to have some margin of safety in this one. I have another “Pharma” holding on my radar, if it looks more compelling I might switch this for something else. Fosun Pharma write-up
+ NetEase
This fantastic company is over-delivering for every report they release. But I can’t keep holding the stock at these valuations, so I sold all, at an average gain of over +50%. I’m hoping there will be a rebound, because this is probably still a great stock to hold over the long-term. NetEase full analysis
– MQ
Well, I thought I got this stock on the cheap, and I still think I did. But it got even cheaper. I’m surprised by how weak retail sales are in Sweden, given how well the economy is doing. This was a play on the Swedish consumer, and although I wasn’t dead wrong, I was not right either. Seems it’s sales through internet channels that are hurting retail all around the world and perhaps also in Sweden? Well I chose to move on since I don’t believe in the Swedish consumption over the coming 5-6 years anymore., even if it pains me to sell something that is still cheap.
– LG Chem
Again I thought I got in on a technically good level, where the graph looked like a move up was in the cards. And it was, but it became very short-lived, a month later the stock peaked and then took a serious turn downwards, now sitting -10% from my purchase price. But the stock falling doesn’t generally bother me much, I’m in for the long-run for their battery production (although it’s not a pure-play). But there was a reason for the stock falling, which was plans from LG to merge LG Chem with LG Life Science. I don’t know anything about LG Life Science, but what I do know is that I bought this for it’s future in battery making, not to own a conglomerate with a small part in battery-making (like Panasonic) – frustrating! So, right now it is wait and see, I’m not ready sell, especially when the stock is trading fairly cheap. On a more positive note the Chevy Bolt is coming out with great positive reviews from everywhere, just like the Tesla model S before the Tesla share surged with 300%. The Bolt is very much a LG product, with battery produced by Chem and the electronics inside is produced by LG Electronics. Looking at competitors it’s clear that LG is one step ahead of its competitors in battery technology (price per kWh). Short LG write-up
So the earnings season continues and it is definitely throwing a mixed bag at me this time, some serious burns and a few good ones. Let’s go through the largest movers:
NetEase
The day before the earnings release I cut my holding with 30%. So was that a good move? Yes and no. Yes, because the stock price actually initially fell 6-7%, but since I am not a day-trader that doesn’t matter much to me. The stock later recovered and is now trading a few percent below my selling price. No, because they actually came out with the best possible earnings I could imagine, I’m actually surprised the stock has not traded higher. So at the moment the market is still putting a fairly substantial risk premium to this stock, I still feel its american investors not trusting a Chinese company.
Zhengtong Auto
Well this was a disaster report, I have counted this as one of my value stocks in the portfolio. A lot of the other car sales and services companies in China has started to recover nicely, both in terms of earnings and share-price appreciation. But Zhengtong is clearly lagging her, suffering from mainly their tilt towards BMW cars. BMW sales have been weak, because BMW is not delivering new models attractive to the Chinese consumers. Stock was down -15% on the report and continued down from there, ouch.
Shanghai Fosun Pharmaceutical
I bought this just before their earnings release, which was solid, not amazing, but solid. The stock market slowly took the figures to its heart and the stock trended slowly upwards ending up over +8% on the day, lucky start for this holding.
CRRC
OK earnings and net income, but outlook was weaker than expected, the report was not well liked by the market, I think it has been punished somewhat harshly, but my doubling up in this stock just before earnings became terrible, the stock is down -9% from where I increased my position, again, ouch.
Yes, it’s time to deeplet these high cash levels, I have suffered some serious performance drag having 15% cash in an uptrending market. First it was LG Chem announced the other day. As of today’s close I’m allocating a 6% position in my first Pharmaceutical company – and no, it’s not Valeant (although it seems to have bottomed out by now).
Shanghai Fosun Pharmaceutical (2196 HK)
Yet again I dig into the Chinese market, this time through the fairly famous Fosun Group, which I previously been a shareholder in. Shanghai Fosun Pharmaceutical (from now on Fosun Pharma) is a H-share listed in Hong Kong, meaning it’s also listed in mainland China (as is some of my other holdings – BYD, Ping An)
Provide Healthcare services, they have been fairly aggressively buying up hospitals.
In Co-operation with it’s big shareholding and partner Sinopharm they co-operate in drug distribution in China.
Produce Medical Devices.
I’m taking this position for a number of reasons:
In general I think the Pharmaceutical companies need a re-visit, after being the market darling stocks, they have taken a beating lately and I have been looking for a good candidate to invest in.
Fosun Pharma listed in HK is fairly cheap, trading at trailing P/E 15 and looking like 2016 figures will come out around P/E 13-14.
The stock looks oversold and the China listed stock has started to move upwards lately, the spread between China and HK listed stock is as stretched valuations as they historically ever been. See picture below for spread in orange.
Fosun Pharma is a big shareholder (11%) in the pharmacy distributions company SinoPharm, this stock has been soaring lately. This holding accounts for over 50% of the price for Fosun Pharma’s stock price, meaning you get the rest of it’s business very cheap.
I need a Pharma holding in my Portfolio.
This is the first time the China listed stock has been moving so significantly, without any spike in either the stock or the Chinese stock market.
Portfolio Update
I also include a Portfolio update (not including Fosun Pharma yet).
A lot of beats
Skandiabanken came out with fantastic results that beat estimates, after Altor came in as a new big investor, the stock has been soaring. As always when you bet correctly you wish you did not allocate more in an earlier stage, but with this significant gain the current weight in the portfolio has become a high conviction position.
NetEase continues to deliver, awaiting a report in a few days, if the stock keeps soaring I will probably cut the weight in this one short term. It’s a struggle to stay long-term in companies where the gains you were hoping for over the coming 1-2 years materialize in 3-4 months. Definitely the type of luxury problems I would like to keep having.
Microsoft also came with a beat, the market seems to start to value it’s Cloud business (my reason for investing), not sure about the hefty price tag for buying LinkedIn though..
Sony beat estimates with a strong report, I read some comment like “Nintendo should look at Sony, a Japanese game maker that actually makes money”.
One big disappointment was Ramirent’s report and the market struck down the stock -13% over two days. The momentum seems to keep holding though, which was one of the one the reasons I bought this stock (no I’m not a value investor).
Overall in the strong market many holdings has started to recover (Zhengtong, Ctrip, CRRC and MQ). The only company that is strangely weak is Avanza Bank, I might need to re-evaluate this one, as I always listen to what the market is trying to tell me. Stocks going side-ways in a up-trending market will not do well the day the market breaks down. I have also discussed this company with some friends who are knowledgeable about Swedish Banking, they think Avanza will have a tough time finding ways to making money out of their customers. More to follow..
