End of Year update – All holdings

Does my portfolio need a brush up?

The year is coming to an end and I think it’s time for some year end cleaning. What I mean is that I perhaps have not spend enough time following my portfolio holdings and more focusing on finding new good investment cases. My current holdings need an evaluation if the company is progressing as planned and still worth to hold. Some investments have developed better than I could ever have hoped and others have not performed well at all. One way of looking at any portfolio would be – start every day with a blank paper and choose how to allocate your cash. If your current portfolio is different, you should change your current portfolio. I do not practice this, as it would be way too time consuming, I rather practice a philosophy of letting my initial judgement play out, although it might take (much) more time than I anticipated. This also kind of ties in with let your winners run etc, although here I’m sometimes (too) quick to take profits. One risk with just holding on to your initial idea is that when you are wrong and time just pulls your stocks deeper and deeper into the red, you reach a point when it is time to admit that you have been wrong in your investment thesis. And you at some point realize that you should have been quicker to adjust/update your view. Admitting to this can be a painful process, at least for me. Below is an attempt to critically judge all my current holdings (prepare for a long post).

Portfolio Overview

holdings_20161226

My holdings – one by one

Spending a few minutes on each holding, and also taking the opportunity to decide: Add/Reduce, Keep or Sell.

Skandiabanken – Keep

I bought this Norwegian Bank stock after reading some Swedish sell side research and there was a few points I really liked, the company had the most satisfied customers in Norway. They are building their bank on a purely digital platform and they are small and nimble. Digital in combination with high customer satisfaction gave me the confidence that this bank is already where the larger banks want to be and what I believe is the future of banking. Since then the stock has performed tremendously well, basically starting after Altor went in as a new large shareholder. It’s not a screaming buy anymore, but rather valued in line with large Norwegian banks like DNB. But being such a small bank it should be doable for Skandiabanken to steal market share from the large banks and keep up the growth. Therefor I’m still bullish, since it already is my largest position I can’t really do more than Keep.

Coslight Technologies – Keep

This stock has been falling helplessly without any company specific news. I feel fairly confident this is just Mr Market playing with us shareholders and not reflecting any true change in the company. I therefore decided recently to add to my position and bring it up to a high conviction position again. Coslight is one of car producer BAIC’s main battery providers and they have a long co-operation, I have not been able to confirm if it is Coslight’s batteries that goes into BAIC’s EVs but I would not find it too unlikely if that was the case. Recently BAIC’s latest EV EU260 has been selling really well (Ev-Sales Blog) and this could (if they are selling to BAIC EVs) increase sales for Coslight significantly during the second half of 2016 and going forward in 2017. With Coslight moving to more normalized sales margins in lithium ion battery sales I expect this stock trading up about 100% from it’s current level. It is currently the stock I see most potential in of all my holdings, but the risk is high and the liquidity and coverage thin, so there is more room for me to misjudge the situation. For example it is a delicate balance if there will be oversupply in the battery production space. That the next annual report continues to show strong margins/figures is crucial.

Ping An Insurance – Keep

It’s hard to find the right companies to ride the growth from the Chinese consumer.  The price pressure (think Taobao) eats away a lot of the bottom line, even if your top-line grows. But an area which the Chinese just have to move into as they get richer is insurance, and the margins are still very healthy here. Ping An is not a pure insurance company since a fair chunk of its earnings comes from Ping An Bank. But they are in a good position as one of the market leaders, they put a lot of money into online and innovative mobile sales etc. The company is trading very cheap and is for me a good way to capture Chinese growth, I don’t expect any crazy returns but stable growth.

Shanghai Fosun Pharmaceutical – Reduce

I timed the purchase in this stock extremely well, it had a good run and has after that been treading water. Again I have my views of China long-term, which definitely entails having Chinese pay more for healthcare, medication etc in the future. As this is a holding company of many types of hospital/health/medicine exposures it’s not all too easy to analyze exactly how well each sub category will perform. Given that I don’t have the full visibility and the under-valuation i previously saw now has corrected somewhat I choose to reduce my holding from 7.5% to 5%. This is after all not a high conviction position for me.

Ramirent – Keep

This company I bought part as a price momentum play and part as being a late cyclical, which is what I believe is where we are in both the Nordic construction and equity cycle. It is very obvious that the stock just wants to go up, even though the company keeps delivering disappointing results time and time again. Hard to hold on to this kind of company when the fundamentals looks “so so”, but I still believe we will see a substantial move upwards, perhaps when the fundamentals finally do turn around.

Rottneros – Keep

I have written a lot about this company quite recently, after my analysis the Q3 EPS came in a bit lower than expected and the stock took a bit of a nose dive, bad timing on my side. But I believe my investment case holds true so far, meaning as long as the SEK is so weak against the USD and Europe NBSK Pulp prices keep steady, this company should be a cash cow. This cash is used to increase production output even further. Obvious risk in this stock if the pulp price starts to fall.

LG Chem – Keep

I can’t really get my head around the valuation of this company. In my view the Chemicals part seems to be doing fine. On the battery side, the Bolt has been launched with raving reviews, this car is going to sell really really well! And other EV producers are lining up to use LG’s batteries. On top of that even Samsung, who have their own listed battery company Samsung SDI (which fucked up the Note 7) now is considering using LG’s batteries instead. But performance wise the stock just keep getting hammered and even though Samsung SDI had such a scandal, stock performance wise LG is under-performing Samsung SDI since the scandal started to unravel – this is just beyond me. A very easy keep for me and I’m biding my time with this one.

CRRC – Reduce

This holding might take a very long time to play out. But it’s a play on the Chinese governments One Belt One Road plans. The stock is fairly priced at the moment in my view, share price increases will come if the sales starts to increase. If new interested investments would come up, I have to admit that this one might leave the portfolio, as I don’t really see any immediate triggers. Currently I just choose to reduce.

BYD – Add

The stock has been trending down for a while now. Looking at the 5 year price chart one can observe that without much fundamentally changing in this company, the market has not been able to price this stock very effectively. The stock price has shown wild swings between HK$20 and HK$60, although with somewhat of a drift upwards. With risk of becoming a chartist one can say that for the trend to hold, the stock need to reverse its downward trend around HK$35 and we are currently at HK$40. But bullocks with concentrating so much on the chart, the case is intact. China is insanely polluted, the government has clearly decided that China is going to be world leading in EV production. BYD is a clear leader in the electric bus space. BYD is the only Chinese company they has the scale to produce batteries totaling more than 8 GWh and thereby qualify to the new subsidy rules the Chinese government has proposed. One question mark that I had since the start is how well they can position themselves in the personal vehicle space. Their SUV Tang did initially very well, but has already started to drop in the rankings, this is my only worry at the moment. I believe the stock has been harshly punished lately and I decide this is a good level to add to the stock.

Ctrip – Keep

A play on Chinese travelling, this holding has not yet shown any returns, just a sideways roller coaster. Top-line has been growing nicely, but the profit margins are a bit wobbly. This one of my holdings I have not done such a deep due diligence on (yet). This is definitely in the cards for 2017, after that it will be easier to take a decision.

Ericsson – Keep

It was psychologically hard to keep buying into this when the stock just kept falling. But the stock found a bottom and I’m now in positive territory. My play that Cisco is coming with a bid obviously not materialized, I’m waiting for that, or that the stock recovers further (around 65 SEK) before I sell.

Sony – Add

I tried to get hold of a VR set for the Playstation as a Christmas gift, that was impossible, such long waiting times. Also I’m impressed with Sony’s digital cameras, which is something of best in class. I think Sony is in a good spot, active in many areas with continued good consumer consumption, given that I sell a number of holdings, I bring this up to a full position.

Microsoft – Reduce

I still believe Microsoft will make a lot of money on cloud computing, that was my main investment case. But now the US stock market has disconnected too far from other markets, stocks in the US is just expensive right now, I decide to reduce just because of that, even though I like Microsoft long term.

Zhengtong Auto – Sell

Here is just have to admit that I have been wrong, this was one of few Value companies in my portfolio, but it’s killing me, disappointment after disapointment. I have been wrong on the investment case and therefor I chose to sell the full holding.

Highpower International – Keep

A very tricky holding, they are super small cap, the stock is not very liquid and information on the company is hard to come by. The best way is basically listening to quarterly result calls and the following Q&A sessions. They seem to hold their own in the battery production market and also have backing from a joint venture. This is a highly speculative holding, but I still decide to keep it, because it is so cheap, I might exit if the stock spikes up, which it does from time to time.

Avanza Bank – Keep

This stock has traded up nicely, but since its trading in SEK, the currency weakness is taking back most of the stock gains. The case is still the same, stealing market share from the big Swedish banks by broadening their offering (perhaps introduce mortgage loans in larger scale). Their deposit base will also become more valuable when/if Sweden comes back to positive interest rates.

Autoliv – Sell

This stock has made a swift move upwards, probably much driven by the weak SEK, I have re-evaluated this company somewhat, I don’t know if they will actually be such a winner on the future “smart car”. There are so many technology companies moving into this field, so it is becoming a much more crowded space. I decided to sell after this nice run-up.

Summit Ascent Holding – Keep

This Russian casino company (it just realized how crazy it sounds to invest in Russian casinos) became a sink bomb in the portfolio. It is anyway Hong Hong listed, run by Chinese and tries to facilitate rich Chinese in the northern region that fly in to play (instead of going to Macau). In the last semi-annual the last few months results hinted at a big increase in turnover and I would normally be willing to double up now after the stock has fallen further. But now we have the problem of China tightening capital controls even further, it might not be that easy to gamble for big amounts in Russia at the moment. I will still keep this as a small speculative holding, it will be very interesting to see the next annual report.

Portfolio Movements Summary

The stats of my portfolio moves are the following:

Shanghai Fosun down from 7.4% to 4%

CRRC down from 5.6% to 4%

BYD up from 5.6% to 7%

Sony up from 4.5% to 7%

Microsoft down from 4.4% to 3%

Zhengtong Auto Sell full holding (4.1%)

Autoliv Sell full holding (3.2%)

The score takes me from 0% cash back to 9.8% cash. Time to find one or two new investments!

 

 

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Back on track – adding to Coslight!

This is going to be a very short update. Life has been very busy lately, moving country and a new role at work. I expect to start writing more frequently again. I’m currently in Shanghai on business trip and the latest on the ground data point is that regulators are putting in place very strict capital controls. Most of the controls has been through as it is called “window guidance”, where they tell banks that they need to change their procedures for controls of capital flow. Not good and many call this turning back the clock 10 years in terms of capital opening, something that needs to watched closely. I don’t think this has got enough attention in media and markets take it a bit too calmly – but maybe it’s just me that is wrong.

Hong Kong stocks are lagging, perhaps because of the above mentioned reasons, but it feels rather like more short term worries over US Gov rates and new scares that the Chinese property market is wobbling. Even so I find the significant pullback in some stocks unwarranted. In particular Coslight, I will write a longer update shortly, but if anything the business case for Coslight is even stronger. I think the stock is easy to manipulate with fairly thin volumes and it is now oversold, I’m using the cash I have left to make it a high conviction position again. More portfolio changes will follow soon.

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