JD.com was a tough investment case, continuing to fall sharply after I bought into the company at 25.7 USD per share. This was an investment in my Opportunistic bucket, after allegations against the CEO and majority owner Richard Liu. I thought the stock looked extremely cheap and had a unique position with the logistics network of warehouses and quick deliveries. Far better than what Alibaba could muster. This has proven not entirely true, this article sheds some light on the situation: JD vs Alibaba in the last mile: what’s happening behind the Great Wall.
Bottoming around 20 USD per share, JD.com now has rebounded trading around 29 USD per share. A nice bounce and also a gain for the portfolio, which during the same period is more or less flat. What I spent the last few months to consider is if JD.com is a worthy long term holding in my portfolio. I have come to the conclusion that it’s not. First of all the whole allegation against Richard does leave a bit of bad taste in the mouth. Maybe more importantly, Richard Liu seems to have fallen somewhat from grace in Chinese circles. In a country built on relationships and government contacts, this should not be weighted lightly. Secondly, just some personal reflections I got from people that know this company more from the inside. JD.com apparently is not at all as culturally open as many other tech companies, Richard himself does not come from a upper class background where he studied abroad at a young age. This seems to be reflected also within the company from what I hear. In many other tech companies it is common with droves of Chinese who lived/worked/studied abroad and recently returned to the “motherland”. I think this is an issue long term for an innovative company. Thirdly this space is so extremely competitive, that although a current low valuation, this does not make it into my long term portfolio as it currently stands. Therefore the opportunistic case kind of has played out, perhaps I could ride the positive momentum a bit longer, but I think I found a more interesting case. Therefore today I sell my full holding in JD.com to instead buy a position in..
From one controversial investment to another. Today is the last day Swedbank trades including a dividend of 14.2 SEK per share, with a current price of 142 SEK, that gives exactly a payout of 10%. I have followed this case very closely, it actually rather started when the Danske Bank money laundering scandal came out. Swedish television has after that followed up with a number of programs, exposing Swedbank. Partly it is a risk of BIG fines, but partly this has also been poor communication from Swedbank management. Today the CEO of Swedbank, Brigitte was kicked out and the CFO becomes the acting CEO until they find someone to take the permanent role. The whole thing is pretty much a shit show, right now its very hard to say where the share price will bottom. I think we are at attractive levels now. The money laundering that has been done in Swedbank, is not nearly in the same scale as Danske Bank. Danske dropped some -45% in total during their scandal, Swedbank is now down some -31% percent, but the bank stocks had already traded down a bit on back of the Danske scandal, so I would say Swedbank is down some -36% to compare it with Danske’s drop. This is in my view too much for one of the most profitable banks in the world. So this becomes my new Opportunistic holding, taking the cash from the JD.com sell and buying into Swedbank as of today’s close for the same amount. The SEK is also traded pretty weakly, so one can hope that that could also give a bit of boost in returns, if it’s strengthens.
5 thoughts to “JD.com out Swedbank in”
Hey, I was just wondering if you’ve read this article from Bloomberg…there are some interesting China ideas here:
No I havent, nice to see that some larger players are fishing in the same waters as me 🙂 Thanks!
Here a small constructive criticism. Hope readers reflect on it and no one gets hurt.
I am sorry to highlight it….but when an article says “blah blah blah… fund manager that discovered one stock went 300% up in 2 years… blah blah blah”… red alarm should be immediately pulled: RUBISH !
Obvious question is: if that brilliant fund manager spotted this fantastic stock, why did not he/she spot so many other stocks that also went up 200%, 300%, 400% or 1500% (like Hema Care) ? The obvious reason is that picking that stock was a lucky accident. In fact that manager picked many other stocks, and her fund had a rather average 2018 performance and disastrous 2017 performance (see http://www.daltoninvestments.com/wp-content/uploads/2019/03/2018.12-Greater-China-Newsletter-Final.pdf).
The BIG RED FLAG is because a bloomberg journalist makes such MALICIUOUS articles. Unfortunately there are many readers without time/skills/education to spot such MALICIOUS behaviours upfront… (and many readers don’t do the homework too).
Long term, investors that do their homework properly get rewarded. This is demonstrated by a handful of fund managers that consistently beat their benchmarks (smart readers surely know how to find such great professionals, just a bit of google). Getting excited by ‘one-time-luck’ (as in that bloomberg malicious article) is the last thing proper investors should do.
Of course banks are dangerous stocks in their own way. A bank might fall quickly from grace if it really loses the customers trust. Knowing the Swedish banking market quite well, I’m confident so far that is not the case for most customers.
Re- valuating a bank’s value without proper info on economic damage, but by analogy, seems a bit of russian roulette…
Point as you say is feeling comfort at the entry price. Guess it will bounce back at some point.
I got already ‘disciplined’ years ago with banks falling knives. Not a fan of playing roulette