Portfolio is now 95.4% up since inception. 1.9% up for the year.
It was by the end of the month a very mixed month with as many down as up. Heavy lifting was done by LOOK, and MPAC. With the big fallers being $DIS, $MA. and PPHE. Though $MA. probably only gets into the pot because of currency translation effect on top of the falling share price.
Added to my gold position. This is a long term holding that I value at cost not market price. It is part of my “insurance” policy.
Sold POLX. Hit my indicative stop and stayed below it for 2 days. I didn’t see any particular rationale for the fall but I also did not feel confident adding so closed my position for a very small gain. Sub 1%. I do not have many rules. So those I do, I do try to follow.
Sold some $MA. for 169% profit. Sold some $V. for 60% profit. I think the rise of Signal could be potentially a game changer for cross border payments in the near term and this is currently a big part of both MA. and V. business. Whilst there is much they can do and V. is issuing in europe a card to work with Signal to cover payments with merchants that will not accept the Signal app, I think it prudent to reduce my holdings. I also think that Signal is the first firm to go with zero charges in this field but it is only the first and the “highway toll” model of both of these firms is going to reduce. This also links into Chinese digital payments behemoths like Alibaba and the plans by the Chinese government to issue its own digital currency. Visa and Mastercard are priced for delivery in a rapidly more difficult market.
I have also been concerned that India with its “India Stack” and “Universal Basic Interface” points to a world where governments will seek to either eliminate the financial services toll roads or profit from them directly themselves. I am still holding my smaller $PYPL position and may in fact add to it.
Later in the month I made the decision to exit the V. position fully. I bought both V. and MA. as I couldn’t really separate the two and I still cannot, but as such I no longer feel the need to hold both. I marginally prefer MA. and some of it is held in a taxable account so selling will add to my CGT bill. So it is V. that goes. Given the price decline and the $ decline between the 2 events profit on the second sale was only about 55% after currency translation. However about 30% of the revenue was promptly recycled back into $PYPL as a preferred play as we move away from cash. My average in to Paypal is now $214.12.
MA. released Q4 results at the end of the month. They were better than expected but worse than last year. I continue to hold.
I also picked up some more $GOOGL. I made the mistake of selling some a few months ago on legal concerns but with the new Democrat President I feel these were overstated. I note that the judge in the case is not giving the States the time to prepare they wanted and the trial date is not set until Sept 2023. Furthermore in what I expect to be a more regulated digital age I think $GOOGL is relatively well placed. I also note that JPM has a new target of $2,050. Average in is now $1,162.24. I also liked a bit of GOOGL pay to replace V.
I also added a bit to BGCG. Whilst not strictly a digital payments play (neither is GOOGL) there is a bit in the pot of companies it invests in and the more money the US wants to spend the more money China will take in. Average in 480p.
The same is also true of my FCSS position. I made 2 adds to increase my holding with an average in price of 395p.
I also added to my position in CAML as everything I am seeing reinforces my initial buy. Average in price now 233p. The US wall of money will need copper. China is continuing to punish Australia so wants non-Australian commodities but itself is ramping up its economy and an awful lot of the move to renewables needs copper. There is an awful lot of copper in a working wind turbine.
Took initial starting position in RQIH. This looks to be a standard “Value” play. Market Cap £410m and EPV £583m. Key differentiator seems to be that this is a slow burner so requires patience and as such not that interesting to fund managers that report monthly or quarterly. Average buy price 184.9p.
Also added GYS. This looks to be a GARP business to me. The current valuation does not seem overstated given the current half year delivery and the company looks to be growing well and capable of moving past the current valuation. Average buy price 1279.76p. Shortly after there was a trading update, which was positive in tone but not particularly informative.
Sold BLU. For about a 10% gain. This was a holding bought on the basis of what I expected to be a crystalisation event in December. Whilst the event happened it did not lead to the move in BLU I had expected. There are a number of assets in the business that may well be undervalued. But the company is a mismash of its parts and I feel that I have better, possibly more reliable, opportunities elsewhere.
I added to my FXPO holding before the TU. The company continues to perform well. The governance seems to be improving and China’s move away from Australia is to FXPO’s benefit as is the development of the new Silk Road initiative to transport goods to China. Current Average in price is 185.12p. At the TU they have gone from a 2019 net debt position of $282m to a cash position of $4m 2020. On top of which they have produced 11.2MT and sold 12.1MT. One of the issues I had mentioned before was a build up of stock. Management said they wanted some excess to cover maintenance downtime and concentrator replacement and this seems to be the case with these results.
Added to my holding in APP. Rather poor 3rd quarter TU. Lots of % increases but off a low base and too much compared to last month we are doing well and not enough compared to last year. But that said this is a business with a market capitalisation of circa £60m, £30m of free cash and an ability to make £6m a year to cover the (£60m-£30m) = £30m of operational valuation. A valuation of 6* operational profitability and cash seems low. Average in price now 31.2p.
Bought some SIS. I have been looking at this company and reading about trading strategies. As a GARP share I think there is a real opportunity, but clearly there is a management team who are rewarding themselves excessively given the performance. As such I would normally walk away. But with results out soon their does seem to be a momentum trade in a business that management have devalued over a period of time (so limited the downside). Average in 38.12p and these could be sold if momentum not continued. About two weeks after writing this and still in January the momentum dropped and I bailed out for a 10% profit. This was a small position and bouncing in and out is not my plan, though I do have a watchlist of “good” companies that I do review for an entry point.
Added some $BOTZ. This is a US ETF Global X Robotics and AI. I came across it after seeing some of the valuations on larger Japanese robotics firms, which relative to their US cousins were doing more business for more customers at a lower valuation. At the moment a relatively cheap valuation for an Asian company seems good to me. As it is I do not have a platform that allows me to buy these companies direct but did note the positions that BOTZ had and some of their other holdings. It is not a major position but a starter for me. Average in $34.81.
Sold $ABT for about a 10% gain. I think ABT is a good, well run company. But I do not think that it is currently mispriced and I do wanted to put some more money into GSK which I feel has as good an opportunity and a lower business valuation. Both of these are/were part of my health-med tech basket so selling one and buying the other keeps the basket going. Average in to GSK is now £1347.12p
Added to IHCU. Think Biden is going to throw money at Covid and medical care in the US in general. One of the few areas that Americans seem to see as economic rather than racial. And there will be a lot of people picking up the money. Average in 617.80p. Slightly concerned that medical bills a whipping boy for Democrats but happy with the medium term prospects rather than the longer term. Also keeps the health tech basket going.
Sold AENA for about a 22% gain. Whilst this is an interesting company with a lot of local support (tourist towns need airports) it has an increasing customer problem (airlines are poor), the period it will take to recover seems to be stretching out and it is getting caught in governments need for money. I sold the day before a new tax comes in on trading Spanish shares. It is small but every little extra tax hurts. I felt at the first investment that I had 30-40% to gain. So there is probably another 15-20% to be had from this share. But I cannot see that coming for some years and whilst there is a genuine catalyst (Coronavirus recovery), it is also in the new world less likely. As such I had held it for only 6 months. It was under 1% of my portfolio and I did not feel adding was wise, so it did naturally fall into the sell bucket.
Added to my Lithium portfolio with add ons for $ALB (Average in at $140.48), LTHM ($16.65) and BCN (49p). These are all up 75-100% of my first buy and there seems to be a mid term mismatch in the industry. By this I mean there is not sufficient capacity for expected demand a few years out. But until prices increase there is little incentive to increase capacity. China seems to be increasingly dominant in this market so all of these are also assets in the China/US trade war that we will be living in for the next few years.
Sold MNG for about 11% gain. Redeployed about ½ the money into LGEN (average in now 232p) and AV. (284p) as both of these seem better value to me. LGEN is lower valued and AV. Seems to be more active in moving forward.
Added to my holding in MSI. The more I look at the company the more I see it as undervalued. However its controlling family interest and the largesse the family distributes to itself as Directors do mean that some form of undervaluation is deserved. So with a current market cap of £21m, and £11m of cash (there is more cash, but its not all free) I am buying a £10m business that can make £4m a year. On a PE of 5 I get a 50% saving and even with a family discount of 25% there is a decent MoS.
TET hard a very good trading update. However even with this the business does seem to be fully valued. As such I have not sold any of my holding but I did not feel a need to add. Originally this was something of a value play. My average in is 169p. But at best it is a GARP situation as the business has in the last few years been able to grow into a higher valuation.
$EDIT did a share subscription at $66. This was noticeably below the share price the day before and it did cause me to wonder about selling. As per my normal practise I waited 48 hours and by then the price went down to $63 and change. As this was lower than the offer price I decided to pick up a few and rebase my expectations. I am now in at an average of $71.99.
SOM came out with a positive, but not that unexpected trading update. The business is UK listed but largely US based. As such UK based holders can find it hard to realise what is happening in the US. In particular whilst both the UK and US talk about lockdowns the application is very different. Because the business is UK listed there are few US holders. And as the business is small and overseas there is little analyst coverage, though management seem reasonably active in updating. So it is an undervalued company, that has a good chance of staying undervalued but I expect that over time the gap will continue to narrow. Given the delivery I added to my position. Average in now 265p.
Started an initial position in THS. Given most of its income stream seems to be focussed on areas with rising prices I think there is a very good chance that the company will repeat its 2020 results (or do better). It made $55m Post Tax. At a rate of 1.3 that’s £42m. At a PE of 10 that is £420m. With a market cap of £330m that is just above a 20% MoS and with an upside it could deliver even better results. So I have taken a small position at 127.44p. I know there are some respected investors who see the upside as much more than this and I am not so certain that they are wrong but that is rather in the future to be delivered.
I did look at SCS, following a Trading Update, with a market cap of £79m and £92m of cash this does seem to be a value opportunity, though I do note a number who call it a value trap. As it is the service with which I have the position is AJ Bell and when I looked at a buy they just no quoted me. I have therefore parked this for the moment.
$MSFT another excellent set of results at Q2 2021. Broadly the company seems to be proceeding well everywhere and in particular in key areas like Azure. I think this remains within the “Shad Rowe” school of investment as in buy a good company, with good management and hold until you think one of those two parameters has changed. I added bringing my average in to $196.08.
$AAPL also had a blow out quarter. Whilst AAPL does like to underguide and overdeliver the size of the beat over expectations was genuinely noticeable. Whilst the deep value thesis $AAPL also had an excellent quarter. Significantly beating analysts expectations. AAPL has a tendency to underpromise and overdeliver but the size of the gap was noticeable. Whilst the deep value thesis that originally led me into this share has gone I do think it is a genuine GARP situation. The only factor giving me any real concern is that AAPL amongst all the big tech firms has been adamant over user privacy. I can see this being an issue with the current US government who seems increasingly orientated towards making decisions for its citizens. However given that Tim Cook has handled China I have confidence that he can also manage the US. That being said I do note Facebook is preparing a legal case against AAPL in retaliation for AAPL making it harder for Facebook to plant cookies in IOS. I also note that AAPL did not provide forward guidance which a number of analysts seem to be complaining about.
Finally after a number of months LOOK relisted. My thesis going in had been an undervalued company with a very high level of asset backing for the valuation. Plus I thought from what had been disclosed that the dubious accounting issues were not significant. (I was correct in this but not in not seeing how poor the overall accounting was that they could not deliver accounts in a timely manner). So the company would be strongly profitable. In essence I was protected as the company was trading below liquidation. I bought in May and June 2020. However once the company became suspended for not filing its accounts, every time there was an additional announcement the asset backing was being diluted.
As it was on the 29th January 2021 the company finally released its ½ year June 2020 results and they were poor with promises of improved trading going forward. Also to be fair a number of operational decisions had been made and enacted with a number of staff being made redundant. The market seemed to take the relisting and the results well and the shares quickly went up 120%. I sold my holdings for a 90% gain. My asset protection has gone and whilst the company may be fitter and leaner a lot more of the valuation will need to come from profits that it has found harder to deliver than I originally envisaged.
As always what I do is not intended as investment advice and is purely for my own benefit and reflects my own risk levels. Always DYOR research and I hope you have a good February.