Summary 2022

This has been one of the most eventful years since I started investing, I would say only 2008 tops it for me. War in Ukraine, crazy inflation, huge rate hikes, collapsing currencies and China who locked in their population to keep dynamic zero. And with all these events happening, my return for the year is anything else than spectacular – a meager -3.5% (but great vs MSCI World at -18.3%). Last year I dodged being down with a slim margin, but this year, unfortunately, became my first down-year since the blog started. I’m actually surprised I fared as well as I did given I was down 20% in October but with the strong Hang Seng rebound I was back in the game by December. One can try to be a stock picker like me, but in the end Beta matters a lot for your performance. Being allocated mostly to European and Chinese stocks I’m proud how much I out-performed these markets both this year and previous years (since the blog started MSCI World Excluding USA is up 17% and I’m up 123%). At the same time it has been such a big mistake to be so underweight USA previously. 2022 was the first year in a long time where Hang Seng did actually not perform worse than MSCI World, so finally I did not fight a headwind and as such I was back to printing alpha!

So without further ado here are the 2022 results (as always results in USD)

The share with holding period less than 1 year where bought during 2022 (best purchase Vitasoy, worst purchase Anicom).

Best stocks in 2022 – PAX Global and Vinda

Worst stocks in 2022 – Modern Dental & Greatview Aseptic

Instead of making a massive comment about these stocks here I will do a separate write-up of these four holdings, this also ties into my topic below about exposure to Chinese stocks – to be continued!

A number of holdings were sold during the year:

Overall the holdings I sold gave a positive contribution to my 2022 performance of about 3.5%. (press to read more)

RaySearch – Full position sold after CFO was fired, I needed time to see there was no account scandal in the works on the back of this. I thought I had done my homework so I was quite confident to enter again after a few quarterly reports. I have now over the past months built this up to a full position again (1% positive contribution in 2022 for the buy/sell part)

Dairy Farm – After many years of poor performance especially for the supermarket segment I have now concluded the Jardine family are awful stewards of their big conglomerate. You think you are buying value but you end up in a trap, probably never again will I touch their companies. Unfortunate as the assets they have are really great. I do think this still is a re-opening play that has not repriced yet, so for the short term punt this could yield a really nice bounce. I exchanged this 1:1 for Vitasoy which has been a star performer in the portfolio (Dairy Farm flattish contribution in 2022).

Agnico Eagles Mines – This was my small gold-hedge position in the portfolio, did not work out, but that’s OK it was a hedge after all. When things calmed down in the second half of 2022 it was time to let it go (-0.5% contribution in 2022).

Irisity – One of my larger investment disappointments ever. I was expecting this small-cap to really create some big alpha in my portfolio. I have confirmed over conference call that users of their software systems is great. I can’t for the life of me understand why they didn’t manage to sell this in to G4S and other security companies at a large scale and a large profit. The largest competitor in this was from China, but with politics involved no US/EU player would buy the Chinese surveillance systems. Under other leadership this could still be a big company in the future, but for now it was a total dud and a pretty large detractor in my portfolio (-1.5% contribution in 2022)

AK Medical Holding – I believe in the product, hip and knee replacements for old people in China. But the central procurement totally threw this company off its game, sure they are now one a major share suppliers under the central procurement with a 20% market share (this partly saved my bacon) so the share rebounded actually 100% from it’s bottom. I did not want both China exposure and be at the whim of the CCP for if I get to keep any margin on the hip replacements sold, so I’m out. Even with such an impressive rebound it was in total a big loss for me (although in 2022 it gave positive performance around 1%)

Swedish Match – I have written a whole post about this buy-out by PM, I’m sad I lost a company that I thought would be a long term strong compounder, but I also got a very nice return in a year when much else is down. Hopefully I can recycle the gains into something that will perform at least almost as strong as Swedish Match. (+3.5% contribution in 2022, why it’s not more is because SEK lost so much against USD)

Enquest – I wanted to diversify my oil exposure to two companies, I did not even manage to get further than a starting position before tax issues in UK showed up, I decided to reverse my decision and exited the position I had just started building (flat contribution).

Should I continue having such a large allocation to China?

For many investor the Ukraine/Russia war has been the largest event to consider, for me personally it was rather China. The war also pin-pointed a China risk which has been talked about a long time but mostly ignored, the Taiwan situation. The other situation which already started during Covid is that the world has realized it can’t rely on China for all manufacturing, this will be a headwind for many years to come. These two factors and China’s leadership behavior during Covid gave me a lot to think about.

It was clear that basically most international investors sold China or underweighted China as much as they were allowed in their portfolios during 2022. The sentiment reached a level of negativity I could not have imagined. Even hearing what fund managers here in HK some were saying, some where so negative that although their expertise was the Chinese market, they planned to convert their strategy to investing in the US instead. Going into 2023 basically all weak hands have already been shaken out. That does not mean the only way is up, but the throwing the baby out with the bathwater selling is probably over by now. My idea all along has been to stay in this market to pick up babies that were unfairly thrown out. I think my large positions in PAX Global and Modern Dental Group are good examples of such. But the negative views on China from international investor does scare me a bit, also some holdings does rely much more on the Chinese market. So to conclude as especially Europe got cheaper already and US is getting there, I will try to allocate to more cases in developed western markets. That will also mean selling out or reducing the position size in some HK listed holdings. A good late example of a US investment idea I really like is ZimVie. I even have another US investment which will enter the portfolio in the coming days. I will try to find time to write up both of these companies soon!

Portfolio since inception:

Visitor statistics

Lastly I would briefly like to discuss you – the readers. Love it when you engage with me, but the fact is engagement is down and visitors numbers too. I have been playing with the idea of starting to use substack, I’m not sure in what format though. One idea has been to push out a few more stock ideas than I currently do. Basically today I only write up what enters my portfolio, but I never write a word about all the stocks I research that does not meet my bar. I have been thinking of to perhaps keep a free section here on with very brief pitches and for the ones that want deeper info and full write-ups, does would be pay-walled at the substack.

As can be seen from the stats where you readers are from, I would probably get higher engagement if I wrote up more European and US stock cases. At the same time what I find a bit sad with that is that there are so many out there doing that. There are very few like me that shares freely online stock ideas of smaller Hong Kong companies. Would appreciate feedback what you want to see going forward.

The macro does not look great for 2023, but I’m still hopeful that I can deliver a positive return in 2023 after two quite un-remarkable years from a performance perspective. All the best to you all and let’s kick ass in 2023!

15 thoughts to “Summary 2022”

  1. Please keep focusing on the Eastern Europe/ EM and Hong Kong focus. As said, there are just so blogs/sites writing about the US already-

  2. Great results!
    I have a small paid substack and I recommend you go forward.
    Your work has value because it covers the uncovered, and it is nice to get some rewards for your work. What is tricky is the balance between paid and unpaid. your existing readers would like to have their updates like before. So for the paid substack you either take some stuff that was free and make it paid, or you add more stuff like full company reviews or more frequent updates.

  3. I am not paid for my GNP activities either, ny friend.

    Pricing exercise Gedankenexperiment: your subscription should be based on the value created. In your case you should consider incremental value per unit of risk over the risk/reward profile of an MSCI Quality ETF, for portfolios of 100kEUR (avg pf size of your readership, generous assumption).

    Another factor to consider is your production cost … or production profit (!!). Many investobloggers benefit from the stock-pumping effect (see CathieWoods). Maybe without publishing a free blog your performance would be poorer !! πŸ˜›

    And above all, we should re-learn to demonetize our activities. It’s bad/narcissistic to presume whatever we do is valuable. Specially in our private life. You have kids not for the value it brings, but for the joy you get (on avg). I sing in a choir not for the value of our concerts, but because of my joy (actually my choir costs me dearly cash! :-P). So be happy to get so many readers, be thankful of their input, and stay happy with it.

    And happy+healthy new year

    1. Fair point not everything has to be for profit and I do have a good salary on my dayjob, which is why this is free. And just like for you hosting the webpage and the work I put in cost me quite a bit. Agree with you my blog has lower value if I don’t outperform, but a person smarter than me might still find it useful as they can refine my ideas further and extract more alpha than I’m able to. Just like you might be inspired by my nose picking, but you might extract more from your nose than I would every dream to find. Then again my track record is very strong now, I invested these years mainly in Europe and Hang Seng and to be fair my closest benchmark is really MSCI World Ex USA, the index has gone nowhere and I’m up well over 100%. That an handsome 11% alpha per year basically. Take that 11%*100k EUR and that’s is 11k EUR compared to index investing.

      1. Jokes aside, right attitude is to get more pleasure in giving than in receiving. Specially if you have proper job/income.

        1. I think I have done that these past 7 years πŸ™‚ Jokes aside also, the income from this would be supporting so I dont need to wake up each morning go to work and then write these blog posts at night/weekends

  4. Congrats on a great year GSP! Unbelievable numbers given the general HK angst this year.
    Regarding your blog, it’s a personal decision how hard you want to push it, but I would say don’t go down the paid route unless you are 100% committed and prepared to risk taking the fun out of it.
    Having said that, you are high quality investor and a strong writer and I’m sure you would give it a good go.

    1. Thanks Guy, appreciate you as a good twitter friend! 2023 started fantastic now as well, I feel like I’m holding the positions with tailwind for the first time in a loong while this past month. You are right that the paid route is not something to do lightly, I’m mostly toying with the thought now, unlikely to take action at this point but good to get some reader input.

  5. Keep focusing on the HK and mainland (ex megacaps and soe) China. That is where there is dearth of research, in a language we understand, English. US and EU markets are overanalyzed, expensive and their economies lack China’s growth potential.

    Thank you for sharing your work.


  6. Indeed, great job in such a tough market, congrats!

    I just wanted to second James’ thoughts. I’m in the Netherlands but I’m here for the “global” part of GlobalStockPicking; I can get US / west-EU ideas anywhere, but I’m always looking for ideas _outside_ of those regions, e.g. in EM / Asia.

    PS. On the paid-substack subject: I totally get that people want to get paid for their work, and I have no right whatsoever to read your posts for free… but I find most paid investing substacks prohibitively expensive. If I subscribe to just a few, it’s easily a 1-2% drag on my portfolio, which is quite a hit. So if you do move to substack and a paid tier, I’ll be rooting for you but I’m afraid I’ll be one of the unpaid subscribers πŸ™‚

    Appreciate your blog, looking forward to reading more πŸ™‚
    Have a great year!

    1. Thanks! Fully understand and I feel the same its very hard for a private investor to get so much value out of a blog that its worth spending serious money to read someone elses ideas, basically ideas have to be so special you want to replicate large parts of the portfolio. How much would you be willing to pay?

      1. I’m pretty new to your blog so I can’t really say yet.

        But in general: it’s tricky!

        A blog that brings me, say, at least 2 ideas per year that I decide to invest in, would easily be worth $50+/month to me. But I haven’t found any of those yet. I follow maybe 20 blogs, and pass on maybe 98% of the ideas because they aren’t my kind of thing. The remaining 2% is very important and valuable to me – it’s just that I have no way to pay for them without paying for the other 98% as well, which would pretty much annihilate my performance.

        A blog that brings me say 0.5-1 idea per year that I invest in: worth it for $10/month, but I would probably pass on it for $20/month. The only problem, of course, is that I don’t know in advance if a blog will bring me ideas that I will want to replicate, and at a rate of 0.5-1 per year it takes quite long to find out.

        So, I don’t know 😬
        The silly thing is, when I successfully invest in an idea from a blog (which happens quite a lot), of course I’d happily pay a significant sum for that idea. (On the order of, idunno, $500?) It’s just hard, for me, to “spread that out” over a subscription, i.e. pay for the other 98% as well.

        I would personally be interested in a per-idea “tip jar”, as in, “read the ideas for free but if you derive profit from them, please tip me say 5-10% of the profit” or so. No idea if that would work in real life – since I haven’t come across this, I guess probably not, but who knows πŸ™‚

  7. Hi!
    Well done on your year. Down 3.5% in such a tough market is very commendable.

    I’d like to see more of your research and thought process with stock picks that are on your watchlist, or even those that do not meet your bar to actually invest in.

    In terms of geography, I’m sure that I, like many others, would like to continue your Eastern Europe/ EM and Hong Kong focus. As you say, there are just so many people writing about the US already!

    Happy New Year to you. May you be healthy and prosperous.

    Looking forward to reading more of your posts!

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