Portfolio Updates – 23/08/2016

Divestment of 70,000 shares of Dutech Holdings

This was done just yesterday at $0.51. I still own 500,000 shares of Dutech. This in no way, reflects any bearishness on the company’s prospects. (I still own 500,000 shares anyway)

I felt compelled to divest partially as the share price has risen almost 100% since I first vested less than 18 mths ago.

191) Dutech Holdings share price 23082016.jpg

I felt that the rise has been too rapid, and that part of the rise has been attributed to the latest analysts’ reports. I do agree with the analysts’ reports and their target price of $0.61 is fairly close to my own fair value estimates.

As always, I’m always reminded that there are many other participants reading the same reports as me, and while my fair value is a tad higher, I’m happy to take some profit now.

Holding 500,000 shares reflects my optimism about the long term prospects of the company. It also reflects the lack of opportunities for me to deploy capital. Having divested several of my major holdings, I am holding a disproportionately high amount of cash while looking for a home for this capital.

A gain of 85.5% in 16 months (first vested in April 2015) is one of my best ROI thus far. Hopefully, in time to come, I’ll be able to report figures even higher than that. Again, I’d emphasize that all investment returns have to be time weighted, so hopefully it won’t be too far away.

Hock Lian Seng & Metro Holdings

Since my divestments, the share price has hovered below my divested price (Even after accounting for dividends paid), and thus far, my decision to divest seems to be correct.

(Post-mortem of Metro Holdings DivestmentPost-mortem of Hock Lian Seng Divestment)

In addition, I predicted that HLS’s share price would likely hover around $0.35, and thus far, that has been true (+- $0.02).

I don’t take any particular pleasure in being right though, since it doesn’t add an iota to my returns. I’d rather be wrong and HLS crashes to $0.2, giving me an opportunity. Doesn’t look like that’s going to happen though.

I’ll keep my eye on these 2 divested companies though, and hopefully  maintain a level of awareness about these 2 companies that’s higher than existing shareholders.

Valeant

WOW. In the past 2 weeks, Valeant single handedly added approximately 47%, and generated a quantum of close to $80k.

I’m pleased with how it’s doing, but I still think the true value is far far far FAR away from the current share price. I’m still in the red in this, but selling of both call and put options have brought my break even much closer.

The one lesson I’ve learnt last year (see my disastrous return in 2015, caused single handedly by Valeant), is that in the US markets, once a company loses the confidence of the general markets, the fall can be quite crazy. Volatility is certainly much higher than in SGX.

I’m still highly confident of my research though, and am sticking to my guns. Going forward, I think the risk is on the upside rather than the downside, so I’ll be only selling far out of the money call options, while being comfortable selling closer to the money put options.

Chesapeake Energy

Another great performer these past couple of weeks. Lawler is still performing magic, and their productivity is the top of the industry. They’re drilling the longest laterals amongst all comparable peers, while cutting costs to the bone.

I was somewhat disappointed at their recent divestment for $0, but it did cut their future obligations greatly. I can only trust that Lawler knows what he’s doing.

SPY Shorts

This has not worked out thus far. I shorted at around the 217 mark, and have watched it trudge higher on a daily basis. It’s almost ridiculous to me.

Company earnings have been terrible, yet the S&P 500 adjusted PER is currently 25.15 as I type this. All because of money printing.

I really wish I knew how it is going to end, and how to capitalize on it. I only know that someday, all this is going to hell and we’re going to have to pay for it. I still cannot figure out how best to capitalize on it.

Shorting is only good if you have an idea of the time frame when it might occur. I have no idea when the chickens are coming home to roost.

I’m still holding my shorts as I believe the Fed will have to raise rates at least once this year, and going by the bullishness, when they do, it might take the  markets by surprise.

Miscellaneous

2H2016 is shaping out to be a monster half for me in terms of ROI for my portfolio. If this keeps up, I’m likely to beat my benchmark this year (STI ETF) by a healthy margin.

Thus far, my limited experience in deep value investing is exactly how I envisioned it to be: Huge volatility marked by periods of extreme under performance, and  at other times, periods of extreme over performance.

Having hunted for opportunities for the past 2-3 months (Ever since divesting HLS), I think I’m close to finding one. I’m currently working on one of the ideas, having narrowed it down from a few. It’s going to take some time to complete though, and yet longer to accumulate a sizable position, so I won’t be writing about it here anytime soon.

I intend to engage management on this with some suggestions.

On a personal note, I’ll be off for a long trip to Europe in 2 weeks. (The recent terrorist activities is starting to make me a tad worried). While I’ll still be connected, it’s unlikely I’ll be putting up any in depth analysis during this time.

Thanks for all the emails, TTI always strives to reply all of them promptly and to the best of my knowledge. Honestly, sometimes, answering your questions also helps me to consolidate my thoughts.

As always, I always welcome counter arguments (politely please), ideas that you may have and any suggestions to improve. Cheers.

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4 comments

  1. Hi TTTI,

    How you calculate the AUM? I sum up your portfolio and the current value is close to SGD 2.2 mils at a cost ard SGD 1.96mils. However, your AUM in 2015 is only 788k? Do I miss out anything? Just curious….

    Like

    1. Hi Desmond,
      The portfolio holdings is updated as of last mth (I think), but the AUM is not updated in 2016. I am just lazy to keep calculating AUM. I’m more interested in the ROI than the AUM per say.
      The difference, in 2015, is due to leverage.
      AUM is net of leverage, meaning I back out the loans to get a true picture of what I own. I wrote about this in one of the posts.
      The AUM has also likely risen substantially in 2016, and currently I have eliminated pretty much all the leverage, and am unlikely to utilize any leverage in the near future.

      Like

  2. Agreed with the macro view that the prices seems to be irrationally going up w the divergence from actual earnings and all fuelled by debt (and printing) .. Recently came across some writings by Satyajit das and they were honestly pretty good reads for me.

    Mmm, do you think China is on a similar path as the US? I mean obviously a lot of parallels have been drawn, debt driven growth and all + moving debt to state banks now much like the central banks before. Do you think China can successfully de-leverage? It seems like they have a bit more willpower to come up with policies to tighten capitals and stuff, amidst the need to hit GDP growth targets heh…. Asking this because I have a fair amount of shares in the HKEX(but mostly china stocks) that I inherited and am thinking pretty hard if I should liquidate them now to keep cash around for when the opportunity to buy presents itself again. Side question do you buy gold as a hedge?:P

    aranair

    Like

    1. Hi aranair
      Thank you for your comments.
      I do not spend much time looking at global macro events, so may not be able to comment wisely on that. But China’s problems are well documented. Everyone knows about them. When everyone knows about them, they are unlikely to be the cause of a systemic, large blow up. In any case, the structure of China’s leadership is such that they are more resilient, and IMO, better able to deleverage and control any fall out, compared to most other developed economies. This may run counter to popular beliefs, but IMO, communism works best for China’s economy, regardless of what the Western doctrine thinks.
      I don’t buy gold as a hedge currently, and never did. Neither do I intend to. I’m not saying it’s a poor investment, it’s just that the nature of such investments is a little bit different. It’s a “Greater fool’s theory” of investing, basically one buys gold hoping that someone comes along in future, to buy it at a higher price. The higher price has to account for storage costs, time costs, opportunity costs and of course, inflation. I am not sure how to analyze a situation like this. It is just not my cup of tea. There are no earnings, or market position, or management to analyze and dissect. I guess supply and demand would be the key, as with all commodities, but the demand side is practically impossible to predict and that the weightage of the demand side far out strips the supply side.
      The global macro view I have, does seem to point towards having gold eventually, but I am still reluctant for the reasons mentioned.

      Liked by 1 person

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