Portfolio update

Performance review cancelled – Let’s talk DNA

8th January 20178th January 2017 globalstockpicking 8 Comments

The last few months I struggled somewhat to keep up the posting, I clocked only one post in November and two in December. This is partly due to me moving back to Asia, but to be totally honest also a bit of writing fatigue from my side. Especially writing these performance/portfolio updates and the time it takes to update my Excel spreadsheets with the new NAV. It is fairly cumbersome to log all portfolio movements including corporate actions etc to replicate a full portfolio NAV.

I started this post writing a year end update, but then I changed my mind. I did update my portfolio, so you can find all details under the Portfolio page, but I’m not going to spend more time reflecting on my past performance, it was good, but not great. So screw it, writing should be fun, not an obligation. Let’s talk about investment ideas and what I have been looking at the past few months, I will on focus on a new emerging theme in this post and will move on to more specific stuff in the coming posts.

Finding a new theme

For those of you who have followed me for a while, know that I like to find themes with obvious tailwinds, winds that more or less prevail even though the general cycle turns south. Within that theme it then usually takes a considerable amount of time finding the right companies to invest in, and in most cases there are no ideal/perfect candidates.

Sequencing the genome

Something that I started to hear and read about a few years ago is how quickly the cost of sequencing a human beings full genome has come down. People knowledge on the topic takjed about that in a few years time, anybody would be able to afford sequencing their own genome. I thought it sounded cool but did not spend so much time looking into it. Then about a year ago I listened to a very inspirational speech about this, and realized this is going to be real in all of our lives very soon, just as we go to the dentist or any other routine check-up needed.

There is another fairly recent finding and technological breakthrough, which a good friend of mine educated me about. It is called CRISPR and a very nice educational video is available on YouTube:

This ties in very nicely with this new understanding of our DNA. First understanding our defects through sequencing, and then being able to edit out those defects. Also it should be mentioned that the possibility to analyze all of this genetic data becomes possible thanks to new big data technology and cloud storage. So 3 big technological fields together opens up a world of possibilities. All of this is fantastically interesting to me. Most likely this will affect all of our lives one way or another in the future. Could this also be a new investment theme for my portfolio? Just as with electric vehicles I will spend time during 2017 to educate myself on the topic and let’s see what emerges.

Can we get a discussion going?

I have not managed to get a discussion going here on the blog with those of you who read my posts, but if you have something to contribute on this topic, please do so.

I leave you with some stock leads to look into in these two fields, all listed in the US:

Genome sequencing field: Illumina (ILMN), Thermo Fisher (TMO), Qiagen (QGEN) and Myriad (MYGN).

CRISPR Technology: Editas Medicine (EDIT), Intellia Therapeutics (NTLA) and CRISPR Therapeutics (CRSP)

Performance Review – since inception

9th October 20169th October 2016 globalstockpicking Leave a comment

Still a stock pickers market

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

I leave you with this test drive of the Chevy:

My first pharma holding and Portfolio Update

15th August 201617th August 2016 globalstockpicking Leave a comment

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)

Fosun Pharma:

Develop drugs (metabolism, anti-infection, cardiovascular, oncology etc).
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.

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..

Portfolio Update

30th June 201630th June 2016 globalstockpicking Leave a comment

I was expecting a higher degree of PTBD – Post Traumatic Brexit Disorder. But some markets are all almost back to their pre-Brexit highs. The Global Stock Picking portfolio fared extremely well and was even up on the Brexit week.

So here it is, performance updated with 3 new fresh weekly data-points:

Holdings as of yesterday:

Comments

The small-cap battery maker Coslight Technology has rallied sharply lately, without any major news. This is very common in smaller Chinese companies and it would not surprise me if good news of some sorts will be released within the coming months. Don’t underestimate insider-trading in China. The stock is high risk, high reward, so I might reduce my position if it keeps rallying. I have also read reports that the battery market in China is turning into an oversupply situation, at least short term towards end of 2016.

The weakness in the portfolio came rather the week before Brexit, with for example the Swedish clothes company MQ that I had my doubts about falling sharply. Here I regret not at least slicing my position when I had doubts, that would have saved me some dollars. I still believe though that the company has got a very good CEO, so long-term still feels OK-ish.

NetEase (which I increased my weight in recently) has soared on smaller news and analyst upgrades, I still feel there is upside short-term and long-term.

Yuexiu Transport might need to be sold, since they are hurt by the RMB weakness and it seems the Chinese government is on a path to further weakness. I need to do a more proper evaluation before deciding.

As a last comment, cash levels is somewhat high, although very short term (1-2 weeks) I think we will see a pull-back. I need to find 1-2 new investments, and potentially add to one of my current holdings.

Portfolio update +8% in less than 3 months

5th June 20165th June 2016 globalstockpicking Leave a comment

What a start

Incredible start to my fund +8% in less than three month – annualize that! This really shows what a skillful investor I am – just joking I have been lucky. This is way too short time-frame to evaluate an investment track-record, but it sure feels nice to have a bit of outperformance from the start.

A big contribution was of course the SAFT position which I now have sold, this gave almost 2% outperformance. I also managed to avoid heavier losses by taking action and cut my holding in Highpower International. The portfolio feels good, the weaker stocks in the portfolio as I feel right now are MQ and Yuexiu Transport. The Swedish retail market for clothes has come in much weaker than I would have thought and even if I believe in the new CEO for MQ (my reason for investing) that might not be enough. Yuexiu a owner of toll-roads in China, with very stable cashflows (high dividend) I’m worried of the weakening RMB having a big effect on results as well as government rulings on electric vehicles travelling for free through the tolls.

Portfolio stats

Although the portfolio is a mix and mash of very different styles, here is the Bloomberg harmonic weighted averages of some quick stats for the whole portfolio:

Dividend Yield: 1.81%

P/E: 15

P/CF: 6.54

P/B: 1.48

Debt/Equity: 191%

The trailing P/E is so high mainly because of Criteo, Ctrip and Coslight, the rest of the book is more Value oriented with a P/E between 5-15. But it is a conscious choice to blend the portfolio. The Debt levels are high from my Financials who carry much debt on the balance sheet.

Portfolio changes and Value Investing

1st June 20161st June 2016 globalstockpicking Leave a comment

SAS Pref – Slicing position

So my biggest position in the portfolio is the SAS Preference shares, this is somewhat of a high yield bond position and therefore has a different kind of characteristics than the rest of the portfolio. For instance the position would lose in value if/when the Swedish Riksbank decided to hike interest rates. I think the position has performed tremendously well, +6% since investment and even more (+7.5%) since I recommended buying the SAS Pref in one of my first posts on the blog. Given the strong performance I decided to slice my position in half as of today and I will soon allocate my money elsewhere. Although I don’t mind keeping a bit in cash after a good run over the last couple of weeks.

Another observation, SAS ordinary is trading at P/E of about 6.5 and Lufthansa P/E is below 5. Either profits are going to come down or valuations up in a not too distant future. If I look at ticket pricing the last 12 months, I’m guessing we as customers are getting a lot of the oil-price decrease. So another reason to stay a bit cautious on the SAS Prefs.

Poor Value investors

An Article has been hitting headlines the last few days talking about Growth vs Value investing:

“Using a formula created by Ned Davis Research that tracks changes in the relative performance between the two styles, growth has been in an uptrend versus value since July 2006, a stretch of dominance that outlasts virtually every other feature in the American stock market. At present, growth’s edge has gone on about three times what it normally has since 1932 and is the longest in history.“

In other words, it’s been pretty shitty being a Value investor over the last 10 years. But the bigger point is, maybe now it is time to shine? I for one believe that is the case, and I should try to shift my portfolio more towards Value than it currently is, a deeper dive into this is definitely needed as soon as I can find time.

Portfolio Update & Trading

22nd May 20161st June 2016 globalstockpicking Leave a comment

The portfolio has been running neck-and-neck with the benchmark MSCI World Gross Return, but with the help of the bid on SAFT and strong performance from Criteo and a few other holdings we have managed to de-couple somewhat over the last two weeks. An unexpected bid is always a lucky shot, but I believe this shows big things is going on in the battery sector, we have both the whole electric car side as well as electricity storage from the grid. This is probably not the last battery buyout we will see over the coming years. I’m staying cautious still though, the industry is still driven by subsidies and China will most likely favor the Chinese makers. It is still many years until we see big profits from the Korean companies like Samsung SDI and LG Chem, I’m waiting for a good entry-point in Samsung SDI as the best pure-play in the sector.

Performance graph

Trading

I have also decided to take one new position and add further to an existing holding.

Microsoft

I have been looking for a good entry in Microsoft, it never gets cheap but with a little bit of weakness here I use 4% of my cash to make a first entry in the stock. The short rational is how Microsoft is pushing hard for cloud computing and I believe they will succeed taking a huge part of the corporate market. Corporations are already heavy Microsoft Office / SQL Server etc users and are so ensnared that they automatically go for Microsoft Azure cloud. This will be a huge deal over the coming 10 years.

NetEase

This is already a holding at 6.6% and I decided to make it a high conviction position at 9% by allocating 2.4% cash. Within a few days a bigger piece on the company will be out explaining the rationale, so stay tuned.

I’m now fully invested with only a small cash residual and I’m truly live, putting my neck out there to see if I have any alpha/skill. 3 months has passed since the first pen-strokes on the blog and 2 months of live performance and I feel I passed the trial period of the blog. Now let’s do this great!

Trading 2016-04-19

19th April 20161st June 2016 globalstockpicking Leave a comment

As I said in my previous post I will start with shorter updates (from my phone) with trades done. Trades will be announced on the same day and trades on close prices.

1. Sell half of my position in Highpower International.

Rational is the risk for a rights issue outweights the upside of the bid from the Chinese company, I still believe in the case, but taking down position size in the portfolio.

2. Use the cash from the sell to enter a position in Avanza Bank.

Rational is this is the most popular online broker in Sweden. The “old” four big banks in Sweden do not take up the race and they are losing out bigtime. When Avanza takes the step to become a more full service bank with mortgage loans and credit cards, they could put a serious dent in the customer base for the big 4 banks. Also the deposit base will be worth somehing when interest rates go above zero again.

Portfolio update 2016-04-15

17th April 20161st June 2016 globalstockpicking Leave a comment

Not a great start to my new blog, not making a single post for 4 weeks, I have been busy with work and a longer trip to Asia. I have realized I need some rules to how I announce trading in my portfolio. Starting now I will write a short post for every time I trade in one of my holdings. This has the upside that I can’t be blamed for back-trading my portfolio. Another added bonus is making the blog a little bit more lively with more frequent updates.

The portfolio will be calculated with a official NAV once per week, results will be presented on the blog with about monthly frequency. Latest results will always be available under the Portfolio page. So let’s review the performance of the portfolios first month live.