Portfolio Changes

A lot has been happening in the markets over the last couple of months but unfortunately I haven’t found much to take advantage of. Partly I have been too busy to look for investments but also most of the carnage seems to be hitting oil companies and mining, neither of which I think are particularly attractive on aggregate at the moment. I have made some changes to my portfolio in the last week however, but these are not a reaction to macro events these are specific adjustments I have made.

Boom Logistics sold

After reading Booms latest set of results and the further write down on equipment I was distinctly uneasy about holding this position. In the best case scenario even if they could liquidate the balance sheet for around book value it would take a number of years and so a discount to book is warranted in my opinion. But the company isn’t liquidating and the book value is steadily decreasing over time. Now with the problems in China coupled with over supply in the mining industry I just do not see the sector as attractive in the medium term. I got a lucky escape when I sold Emeco last year which has since fallen 75%, I thought the investment case didn’t stand up and I am thinking the same with Boom now so have cut my losses. The shares are 25% below where I bought them but thanks to some very aggressive AUD hedging overall I am only down 1.6% on this position.

Cut position sizing of Beximco Pharma

Beximco has been doing well and the latest results show that sales and profits are increasing, yet the shares still trade at a P/E of just 5.7. I think they are worth at least double. But due to the run up in price the position was at around 8.5% of my portfolio which is far too large for a foreign company listing on AIM. They have a bad reputation for a good reason, many foreign companies on AIM are dodgy and while I think Beximco passes my due dilligence tests for a fraud, I still have to accept that this is a foreign company and I could call it wrong. My recent experience with Avangardco, the Ukranian egg producer (which is down 97% from where I bought) has taught me a valuable lesson in the risks with businesses in foreign developing countries. So I have halved my position which is still at a weighty 4.2% but won’t blow up my portfolio if the worst does happen.

Amlin & JD Sports

Just a couple of quick notes on Amlin and JD Sports, which I sold a couple of years ago for 473p and 434p respectively. These examples I think demonstrate why holding onto companies for the long term is a good idea. I cashed in for a quick profit on these but Amlin just had a takeover bid at 660p and JD Sports has continued to massively increase profits and sales and now trades at 879p. A similar thing happened with Ridley Inc last year, with them being acquired for around double what I had sold them for. Good businesses can continue to deliver returns well beyond what conservative investors like me would consider ‘fair value’ and I think in future I would do well to adopt a more Warren Buffett approach of simple buy and hold forever if the company is good enough. Unfortunately I don’t have many of these left in my portfolio as the market has not priced them attractively for a while. The two that I think do qualify are Softbank, Apple and Ubiquiti Networks, but both are so technology focused that I don’t want to hold them forever, I will sell when the price is attractive.

Performance so far

With the recent market turmoil the main indices are down 4-5% since June but my portfolio is holding up well, roughly flat since. After these sales my cash balance is at around 20%.

Founder of Investing Sidekick. Works as a research analyst and is an avid value investor, always searching for undervalued shares.

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