Since inception, I’ve had a good run investing in large capitalization stocks in the United States. However, the recent and sustained run up in prices has left few opportunities. It’s hard to imagine now that you could purchase well run blue chip stocks trading at less than 10x PE, and companies like Bank of America and AIG at 1/3 of book value.
BAC & AIG were our biggest holdings, and I am happy to say that they have worked out well since taking stakes in them in 2011. While pockets of value still exist, they are much harder to unearth, and I’ve taken the decision to wind down the US equities portion of the portfolio in the coming weeks.
I will be launching a new site later this year with a focus on Asia. Hong Kong and Singapore are filled with the same bargains that I saw in 2011 in the US, and in my opinion, offer a much better return with lower risk attached. However, Asia is a much different market, and certain principles must be adapted.
One prime example is how investing in companies trading at low price-to-book ratios or net-cash companies has led to permanent losses of capital on S-Chips in Singapore.The problem is not unique, and investors investing in China companies listed in the US have come to realize that accounting standards in China are not what we are normally used to.
This project has been in the works for a long time now, and I am excited to see where it will lead to. There are over 2,000 companies in Singapore and Hong Kong alone, plenty without any form of analyst coverage whatsoever. There are plenty of stocks waiting to be unearthed by the hardworking investor with the right framework.
Notable companies in the past year which we have covered include Vicom, Popular Holdings, ABR and Challenger. One company which ticked all the right boxes for me was Old Chang Kee which traded at 30 cents. Alas, I did not pull the trigger then (I kick myself at night when I think about it everytime), and was recently quoted at 96 cents (without including dividends distributed).
While we may have missed that train, there are plenty of other companies that have similar characteristics as Old Chang Kee trading at the same valuations in 2011. I look forward to talking sharing some of these ideas with you in the coming months.
The final quarterly report for the US Fund carries with it some sadness and a sense of satisfaction. Time flies, it has been close to three and a half years since I started this site. It’s been a journey both personally and professionally, and I look forward to the launch of the new site in the coming year.