Aug 2021 Portfolio Update

SPDR Singapore Straits Times Index Fund (ES3): 10.75%
Hong Kong Tracker Fund (2800): -3.04%
SPDR S&P 500 ETF (SPY): 21.61% 

My little portfolio: 41.81%

Transactions Made:
-Wrote 43000HKD worth of ICBC put, 4.3 HKD strike, at a premium of 669.99 expiring 30-Aug. That represents a yield of 1.5% in just over one month.

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This represent my modest foray into the world of put option writing. I still have mixed feelings about selling puts. It has a touch of "I let God decide" moment... if I really feel that a stock is cheap enough, I should outrightly buy the stock and wait. Of course I could buy the call options but how far out (OTM) or in the money (ITM) should I purchase? 

Timing is impossible. I thought OKP would have recovered by now (it is by far my biggest position), but it was year after year of waiting. So I don't think I have much luck with call options.

If the stock do advance, I got nothing about a theoretically nice annualised yield about 12%. But if the banks were really as cheap as it is, the upside is at least 20%, without dividends considered.

So I still do not understand the lure of options. Perhaps it would make sense to add an OTM call option on top?

Not too sure if I should pursuit this.

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Other transactions include:

- a pretty dumb trade on Douyu, which was already divested at a slight loss.
It seems cheap on valuation but it isn't selling below cash per share. This is one of my moments of ill-discipline and I am not proud of it. Ironically Douyu sounds like trembling fish, which was exactly what I was (trembling) when I saw the decline in book value.

- small increase in OKP for my mum's portfolio
OKP is cheap. No other brilliant ideas, so I will continue to add a little considering the increasing cash hoard.

- purchase of Central China Management (special situation)

CCM saw a 33.94% decline since IPO on 30-May.

Controlling share holder and its CEO had bought shares around the $2 region. 
They have also announced results recently.

So back the envelope calculation looks like this:
it has 2.2B RMB of cash.

It has about 560m of liabilities, so net cash is about 1.6B RMB (est 1.92B HKD). Market capitalization is 6B HKD. So you are paying for about 4.08B HKD for this company.

Its net profit is about 362M RMB for the first six months, which is 434M HKD.

So it looks quite cheap. Spin-off have a natural sell-off effect during its initial periods of trading.

8.6 cents HKD of dividend representing a yield of 4.7% for 1.83 HKD per share as I am writing.

I think this company is quite cheap.

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That Tencent vs Alibaba debate

I love how many Youtubers are out there advocating the stock and breaking down the business operations of both companies. Quite honestly, I could never have the patience to look at big conglomerates, and they spare me a lot of heart pain.

All I could offer is my opinion after looking at the numbers plug into my humble little excel worksheet.

BABA offered us 3 years of financial data, whereas Tencent had publish over 10 years of annual report data. I am just going to use the last ten years for the latter, and the following do not consider the recently announced results for both.

Firstly, both are tremendous growth companies based on their revenue. BABA's top line grew at 42.05% (Jesus Christ...) and TC at 36.95% (pretty fantastic considering it was over ten years).

Net margins for both companies are sufficient, although BABA experienced a slow decline from 24.5% to 20% for the last three years, and Tencent's 33.16% last year was good.

My favorite metric is looking at the net working capital and it seems like BABA has a growth of 20.3% over Tencent's 14.53%. BABA is also cheaper than Tencent. My calculations tells me that at today's price, Baba cash yield to a business owner is about 6.354%, whereas Tencent is at 4.7%.

Both are wonderful cash conversion companies. Tencent's CCC is a negative -172 days, versus BABA's -91.3 days.

I think the Ant Financial issue has somewhat died off. It could still be another piece of bad news for BABA. Otherwise, I do feel that Alibaba is cheaper. Alibaba has a greater cash to debt ratio for sure.

I love buying companies when they are in trouble, especially when the trouble isn't from management, but politicians. I am just not sure if I am comfortable buying big growth businesses at an OKAY price. Munger seems to believe it, and so do Bill Miller, Monish Prabai and Guy Spizer. But I am not that kind of investor (I just like to buy cheap stuff).