Best. Mar……….. You Know The Drill!

Oh Boy. I really could get used to this.

1 post every mth, “Best ____ Ever” everytime.

I’d let the stats do the talking:

With yesterday’s massive rise, a huge 15.61% portfolio gain in a single day, the ROI has shot up to 37.76% YTD.

NAV sits at USD 606,056.73, crossing the USD 600k mark for the 1st time (For US portfolio), with no capital injections too.

Taking into account a withdrawal of USD16.90, the total net capital gains YTD is… USD 165,001.13! 

EDIT: Did math wrongly. With a withdrawal of USD 16.90, the total net capital gains should be USD 165,018.20!

Obviously, the ride hasn’t been 1 way up though.

The 1 day spike yesterday masked a period of a few tough weeks when the ROI kept dropping (see in chart)

The reason for that is my US portfolio’s huge exposure to Wirecard.

Best. February. Ever.

With the latest report by the esteemed Rajah&Tan, the markets’ fears were proven wrong, and my wirecard positions jumped a cool 26% in a single night.

The numbers being thrown around prior to this were confirmed in the report, and they are puny. A mis statement of 2mil euros ++ for a company with over 2bil euro in revenue….

That’s 3 decimal places. I don’t even know how they are going to restate that in the financials.

But those numbers haven’t changed. What really happened is that the markets are now reassured that this is just a small insignificant event, and not the worst case scenario of widespread fraud that some doomsayers were forecasting.

Since the position is worth 6 digit euros, it added strongly to the outperformance.

37.76%! I mean, I honestly would’ve taken half of that number and closed out the year if you made me that offer at the start of 2019.

37.76% beats almost every professional US fund manager I track. Even Bill Ackman is a tad behind at 31.9%

https://www.channelnewsasia.com/news/business/ackman-s-fund-zooms-ahead-as-he-casts-himself-as-corporate-helpmate-11379398

I’ve sold several calls yesterday to take advantage of the spike in volatility, but the nett position remains a long one. Very much so in fact.

My take is that the share price will continue to rise (it’s slightly red today as some jittery shareholders take profit after yesterday’s rise).

Yet, it’s not smooth sailing. There’s still 1 hump ahead, and I think that relates to Wirecard’s acquisition activities there. I don’t think that has as much coverage as the supposed few million euro restatement, which is curious, cos if anything, that’s potentially a bigger worry to me than this few million euros worth.

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In any case, I’ve been keeping busy by looking for the next idea to put some serious capital to work.

As I’ve said before, it usually takes several weeks, or even months, of due diligence, before I start allocating capital, for large, core positions.

That means that in any given year, I’d probably have only… perhaps, 3-4 core, big ideas and I only need to get these right and it’d be a massively good year.

My next idea though, really comes from a reader of SG TTI. No credits yet, as I haven’t asked the said reader, and also, cos I’m still accumulating. It’s going to be a looooong position though, and it’d take time.

It’s definitely not your typical “value” play here, or rather, I think it is, but the numbers would certainly scare away most “value investors”.

Here’s a teaser.

Would you buy a company that reports these numbers?!

Losing money year after year, and more and more too!

Balance sheet is even more horrendous!

Negative equity! My god.

Don’t even get me started on the cashflows. It’s negative operating CFs and negative FCF and negative any parameter you can think of!

Scared enough?

Everybody’s running far away from this! Even Hyflux in it’s current form, looks better! LOL.

But TTI’s accumulating gradually, and I’d continue to do so over the next couple of months until it reaches a sizable position, as long as the investing thesis doesn’t change.

Yes, it is atypical for sure.

But just like Wirecard and GDS holdings (11% Returns In A Single Day. Thank You Blue Orca Capital!) and Shinsho Corporation (Divestment Of Shinsho Corporation & Kobe Steel – TTI’s Post-Mortem), the greatest rewards lie in the most atypical situations.

#Ballsofsteel.

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Best. February. Ever.

OK, not exactly. It’s more like best YTD ever. And that’s only for US/Global portfolio.

But I wanted a title for this post that’s a continuation of:

Best. January. Ever.

You know… kinda like how some stamps come in a set or a series.

A picture speaks a mod-zillion words:

I’ve said at the 22% mark that I’d be happy to close the year with that sorta returns.

Then, I’ve said at the 28% mark at end Jan, that I probably should close out all positions and do nothing for the rest of the year.

Yet, as of end Feb 2019:

US/Global Portfolio ROI is a very pleasing 29.50% YTD.

NAV gain YTD till end Feb 2019, taking into account a withdrawal of USD 22,088.60 made, is USD 128,387.87.

As seen in the chart above, the benchmark indices’ ROI are all hovering just below the 12% mark, with EFA being the worst and SPX doing the best amongst the 3.

So the outperformance is an amazing errr 17-18% or so.

And let’s not even bother to talk about the perennially under performing STI (which is like <5% I think)

I always prefer to look at SPX since that’s the broadest barometer of the US market and is pretty much the index itself (it’s an ETF of the S&P 500 index).

I’ve already previously discussed about my positions that have resulted in this outperformance:

Best. January. Ever.

The 1 bugbear that hasn’t done well is CTL, and it continued to underperform and drag onto my returns. The position is sizable, so the other guys in there must’ve done so amazingly well so as to mask CTL’s drag.

I continue to hold onto that position, and continue to sell CTL options on both sides of the equation, depending on the market conditions.

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As seen in the chart above, it hasn’t been 1 way up.

There was a period where there was a massive drop from a +27% or so, down to a +10% or so, in pretty much just a couple of days. 2 horrible days specifically.

The reason for that lies in a new position I’ve initiated: Wirecard.

You see, I’ve been taking profit in most of my positions, and as of the end Jan 2019, held a substantial amount of USD. Since then, I’ve been looking out for stuff to deploy capital into.

Yet I’m cautious, cos the markets have rallied relentlessly thus far in 2019. Everybody seems to have forgotten the world’s problems. China’s data hasn’t been great, US employment numbers are worrying, and their debt numbers aren’t even starting to improve despite Trump’s promises. Volatility and VIX have been trending down down down. Everybody’s happy.

I’m happy too. But it’s more like errrr happy-skeptical.

After looking long and hard enough, I decided to deploy a substantial bit of capital into Wirecard, with their recent troubles.

And as always, I don’t always get to buy at the absolute lows, and as Wirecard shares continued plunging, it dragged down the overall ROI.

All’s well ends well though, and the subsequent recovery provided a significant boost to bring the overall ROI to the all time YTD high of 29.50%.

Now, when I talk about Wirecard shares here, I’m really talking about a direct equity position in the germany DAX listed company, not the ADRs of the company. So it’s listed in Germany, and there’s currency exposure risks to Euros in this instance.

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Now, I continue to hold onto a sizable long exposure to WDI (Wirecard), but I’ve already started selling some far OTM calls on those positions, taking into account the strong recovery.

I’d have really wished to have a Cinderella fairytale ending here whereby the allegations are completely false, FT reporter goes to jail or something, and the price shoots up to 250 euros (the target price for some analysts).

Yet, I’ve SOME reservations.

I do think the next earnings release on the 4th April will surprise the markets and provide a further catalyst/boost to the share price. And I’d normally have the guts and capital to plonk down for the long run (or however long it takes for a recovery)… but in this instance, I’ve my reservations cos of the…

Singapore Police Force.

Yep. When the CAD department of SPF is involved, it lends a lot of weight to the short side.

And as always, I don’t say this or put undue emphasis on this without having done the necessary DD and having some real concrete data to back up my thoughts.

In this instance… what better way to understand the thought process and how it works…. than to check with someone within the CAD itself?

I reached out to a friend who’s sufficiently high ranking enough within the CAD:

There’s other info like the approximate duration of an investigation and the processes etc but that’s not going to be shared here.

Basically, I do have faith in the way CAD conducts an investigation and this kinda puts a dampener on my wirecard long thesis.

I might be right in my long thesis, but I can’t be sure how the markets react to new developments when CAD probes deeper.

As mentioned, I’m currently still deeply long as I think the odds are still in my favor. Any investigation of wrongdoing, would more likely impact on the individuals involved, rather than the company itself.

In any case, if you’ve been following, BaFin (which is Germany’s equivalent of MAS), has stepped in to ban short selling of wirecard, putting the German authorities firmly behind Wirecard’s management.

We’re only in the early innings of a long drawn out battle, so it’s interesting to watch.

Already, wirecard has added almost 10k in euros to  my portfolio (paper profits), and I expect this to further increase in March and April.

Yes, it’s not a plain vanilla straightforward long case here, but…. well, if I wanna add any further to the 29.5% ROI this year, I figured I’d have to find really unique situations and take concentrated positions and come out the better of it.

Also, I’d like to give a shoutout to Southern Investigative Reporting Foundation, for their amazing investigative journalism. OK, they did a negative piece on Wirecard, and that places them on the other side of the equation from me… but it’s still amazing work.

Check it out:

http://sirf-online.org/2018/01/23/wirecard-ag-the-great-indian-shareholder-robbery/

Plus, I think they can be right… and I’d still be profitable in my investment due to the option premiums arising from the volatility created from their work. LOL.

OK, that’s about it. I’d have written more about my wirecard DD, but others before me have done similar if not better work, and I thought the only thing I have to add is my understanding and investigations on the CAD side, since not 1 wirecard report/post/analyst report/journalist’s piece has spoken about that. And it’s understandable why, cos these ang mohs don’t even know what’s CAD to begin with.

(Plus I’d like to keep some aces up my sleeves myself. Heh)