New holding Mix Telematics, reducing AK Medical

A very quick post, just to register my portfolio changes:

Adding Mix Telematics – 4% position

After a lot of searching I found a new investment interesting enough to take a small position here the day before the quarterly report is out. The company is Mix Telematics, which is dual listed in South Africa and the U.S., ticker MIXT in the U.S. I have been following this company for quite a while, but waited to invest given the fairly high valuation in the past. This has come down now and I find the valuation a bit to attractive to stand outside when they are going to release their quarterly figures. There are risks, as always, a large part of revenue is derived from South Africa, the currency being the big issue here. Also some exposure to Brazil, where a larger competitor has had some troubles lately. But the company seems to hit off on a lot of my investment criteria: Customers seems happy with their products and customer retention is good, owner led, expanding in USA after the owner moved there to grow the business. Long track record of growth. Fantastic capital allocation, doing large buybacks when the shares were undervalued a few years back. Seems to overall be a high quality company. At a later point I will try to do a full write up, in the meantime, if you want to do your own DD, feel free to comment and we can discuss!

Reducing AK Medical with 30%

The stock has had a fantastic run, the latest leg up on the back of a article in the telegraph: Questor: buy into China’s stability and growth via this maker of artificial hips and knees

The valuation has really run ahead of the company now, I’m not selling my full holding, because I want to be long term in this holding. But I need to stay somewhat true to my principles of not being too exposed to companies that has taken a lot of future potential growth upfront in the share price. I’m sure there will be future buying opportunities to add back to this position if the company continues to deliver.

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Sell Tonly Electronics, add to Dairy Farm & LiveChat

Something a bit odd happened recently with my holding Tonly Electronics. Due to re-structuring in the company which is the majority shareholder in Tonly, the HK exchange forced TCL to make a bid for the shares in Tonly. Since this was an involuntary bid, the bid premium was very small to non-existent. I had not to planned to sell my shares in this bid, since the company intended to let the company be listed. But over the last weeks it seems a lot of shares have turned over just around the bid price and I’m afraid the free-float will be so significantly reduced that this already illiquid company will be virtually impossible to trade in. Given this and that there are many other China related companies with attractive valuations I decided to sell my full holding as of close Friday. This was a very unusual sell for me, given that I think I’m selling my shares too cheaply, but given the strange circumstances I don’t want to get stuck holding these shares.

This increases my already pretty large cash buffer, so I choose to add to two of my holdings:

Dairy Farm – I’m bringing this back up to a 6% weight in my portfolio. I sold some of my shares at 9 USD and now I get to buy then back at below 6 USD. I’m expecting a terrible report given the situation in Hong Kong. This is truly a buying, when there is blood on the streets, investments. Go back to my old full analysis if you want to understand the company better. For example Dairy Farm’s holding in Yonghui Superstores is worth almost 3 USD per share. So you are getting large parts of this company for free right now. The HK situation does not look good, but I still think this is a buying opportunity.

LiveChat – Also bringing this to a 6% position. Have been experimenting with their sales process, which did not end up satisfactory according to the companies latest update. Nevertheless the company continued to grow the number of customers, which is impressive. I’m very interested to see the next set of financials, if we can see some early signs of increased revenue per customer. I think they might be getting there.

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