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Thursday, June 25, 2020

June 2020 Portfolio Update

S&P 500 Index Fund -4.52%
Straits Times Index Fund -17.95%
Tracker Fund of Hong Kong -10.96%
My Portfolio +0.81%

Transaction made in June 2020:
For mum's portfolio:
No transaction was made.

For personal portfolio:
Liquidate about 64% of Xinghua Port Holdings
Small purchase of OKP

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Earlier this month, rumours abound that the controlling shareholders is looking to sell their stake at about 200m USD.

That worked out, net of debt, to be around 1.1x-1.2x a share. So it was surprising to see the market giving it a sky-high 1.8x valuation just a few days ago, albeit briefly.

Unfortunately, I was not around to see it. Investors are commonly advised not to monitor the market so intimately and closely, but unfortunately this is one of those exceptions. I believe the market was out of wack-- the business, though sound, was not worth the earnings multiple. I have every reason to believe the management is responsible and honest, and the bad news (occupational death of 3 workers a couple of years ago) was the reason why I bet on it.

It wasn't the easiest decision as the balance sheet was not built like a fortress. But I attended the AGM and I believed strongly that my money is in safe hands.

I liquidated my shares at about 1.46-1.49. Optimistically, the take over price should not be anywhere over 1.6x. But that is my opinion.

The purchase of XHP began in 2018 March, and net me 66% in returns. I had the good fortune of buying more stock at 0.73 earlier this year during the COVID-19 selldown. Port business is resilient, having just reported results then. Insider had bought stock at 0.9x, and I trust them.

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When it comes to management integrity, Wirecard is right on the other end of the scale.

News this week was that it could not account for over 2B in cash. That is about as much cash in its balance sheet.

The cruel thing is that investors were, just last week, ready to buy that stock at way over 30 PE, given its place in the DAX30 index. When the news broke, the stock was sold down terribly, and traders bought them up. It was (though low probability) possible that someone could have made a quick 60% that day.

Those who depend on the market for guidance would then lost way more. As I write, the market has sold it down 70% from last evening's close. This is incredible.

The ex-management of Wirecard is subsequently arrested.

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There will be no chance in my investment strategy-- look for beaten down stocks which a nice balance sheet. It would be great if they are under a dark cloud of bad news... as long as the management isn't one of them.

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