My Annual Schedule of Investments

A few months ago marks the 9th anniversary of this blog. So it is time to post my largest positions:

Holding	Category	Business	Duration
Senvest Capital ( TSX: SEC )	Canadian midcap	Investment Company	6.5 yrs
Anthem ( ANTM )	US large cap	Health insurance	17 yrs
European Reliance ( ATH: EUPIC )	Greek small cap	Life and Health insurance	7.5 yrs
Kansas City Life ( KCLI )	US small cap	Life insurance	7 yrs
Riken Keiki ( TSE: 7734 )	Japanese small cap	Manufacturing	8.5 yrs
Investors Title Company ( ITIC )	US small cap	Title Insurance	7 yrs
Lewis Group ( JSE: LEW )	South African midcap	Fumiture Retail	6 yrs
IEH Corp ( IEHC )	US microcap	Manufacturing	8.5 yrs
Tachibana Eletech ( TSE: 8159 )	Japanese small cap	Manufacturing Distributor	8.5 yrs
Combined Motor Holdings ( JSE: CMH )	South African small cap	Car Retail	7 yrs
MIND C.T.I.Ltd ( MNDO )	Israeli small cap	Billing Software	1.5 yrs
Philip Morris Int ( PMI )	US large cap	Tabacco	21 yrs
Brimag Digital Age ( TLV: BRMG )	Israeli small cap	Electronics Distributor/Retail	1 yrs
Globrands ( TLV: GLRS )	Israeli small cap	Tobacco	1 yrs
Pacific Healthcare ( PFHO )	US microcap	Worker's Compensation Management	7 yrs
Altria ( MO )	US large cap	Tobacco and alcohol	1.5 yrs
Karelia Tobacco Company Inc. ( ATH: KARE )	Greek small cap	Tobacco	7 yrs
Clientele ( JSE: CLI )	South African small cap	Insurance	0.5 yrs
Nu-World Holdings ( JSE: CMH )	South African small cap	Electronics Distributor/Retail	1 yrs
Hamat Group ( TLV: HAMAT )	Israeli small cap	Household Manufacturing	0.5 yrs

 

I also have a large short position on the S&P 500 index. 

My portfolio has changed a lot since the start of COVID. I have closed or drastically reduced my positions of Seaboard, Mcrae Industries, Installux and the Bruce Fund. I've replaced these with several companies from more developing countries. 

For several years, I believed the the US market was overpriced and I believe it now more than ever. Consequently, I believe that the equity gains of the future will come from developing countries such as China, Israel, South Africa. I invested in Alibaba (BABA), although it was not a big enough position to make the above list.  I have had positions in South Africa for 7 years now, but it has only recently paid off. 

Israel, on the other hand is a odd country. It is considered a developed country because its per capita GDP is US$42,000. But I still regard it as a developing country. The country has long been hobbled by hostility in a volatile region, but that is recently changing. Its population is growing by 2% annually. And many stocks in Israel appear to trade at multiples more typical of developing or stagnating countries. For example Globrands, the second largest tobacco distributor in Israel has a 13.5% dividend! And Brimag, another Israeli stock that I own, has a PE of 7.5 and a 9.7% dividend yield!

Looking at this portfolio, it is not surprising to know that I lagged the US market over the lifetime of this blog. Yes, I would have matched the S&P 500 if I didn't have the short. But the fact that my short was a hedge allowed me to go as long as I did.  So my longs and short positions must be considered together in their entirely when evaluating my investment acumen.

Nine years ago I set out to apply Ben Graham's value principles with the goal of beating the "market". Over the last nine years, the S&P500 index returned 17.3% annually, with dividends reinvested. So, comparing to the US market, it appears I failed at my goal.

Basically, I suck.

After realizing this, I will no longer strive to beat the market. Instead, just getting a reasonable real return for my passive investment role is enough. By this I mean something like 5% return after inflation, taxes and fees.

So moving forward, this blog will reflect a very passive, conservative and long term view of things.  It will be boring, but I will still write for a number of reasons. First and foremost, I write to improve my writing which helps me tremendously in my job and many other aspects of life. Secondly, I write to give back information and ideas from my long investment journey to the internet community. I have benefitted so much from information on all sorts of topics from other people on social media, internet forums, blogs and the like. They are almost always free, and I generally do not donate to charity. So, writing this blog is one way to give back some knowledge to the free internet community. And lastly, I write to help me think through my ideas.

Click here for last year's positions.

Senvest Wins Big on Gamestop

Anyone following Senvest recently knows that the company made a huge bet on Gamestop (GME), and it paid off big! Management finally divulged the details in the Q1 report just released.

The company accumulated 5.05M shares of GME stock over the fall and winter of 2020. That is 7.24% ownership in GME. The company hovered below $20 for all of 2020. In January, the only positive news was that Ryan Cohen, a big investor with lots of retail creds, announced three of his people were now on the board. But then, in late January, Wallstreetbets forum and Keith Gill really got into touting the stock and the 140% of stocks short. And the rest is history. We saw an epic short squeeze that only happens once a decade.

The following chart shows the meteoric rise of GME in late January. Based on the Q1 report, Senvest sold all of its holdings between Jan 22 and Jan 28, also shown in chart. Senvest's timing was almost perfect and the company managed to sell a portion at the very top of $380. Remember they had 5M shares. Depending on their exact selling price they could have made USD$1B. That's billion, with a captial B!

Senvest really did its homework on this. They even spoke with Ryan Cohen. Well done Senvest. I had no idea all this was in the works, but I am glad to come along for the ride. Senvest stock has quadrupled from the lows around when the company was building its GME position.

Today it trades at CDN$342, which is still only 52% of the book value of CDN$647!.

Why I Sold Installux

In my earlier Installux post, I said I was on the fence about my Installux holdings and I would wait until annual earnings report before doing anything. Three weeks later I got cold feet and decided to dump all my shares.

My rationale was mainly the price support. The following chart shows that the current price is at a recent high. But I found that the company in 2020 bought back 5452 shares and the entire year's volume of trading was only 8534. Therefore, the company bought back 64% of the total shares traded in 2020! In 2019, the company began its buyback program with a cap of € 410. I just sold all at € 390 because I figured that's as high as it will get. There isn't enough support from the open market to ever go above the € 410 cap. As I have shown in an earlier post, the company's revenue and income numbers have shown mediocre growth in the last several years. And the stock price has justifiably never surpassed the 2017 high.

Installux was one of the first stocks I bought since writing this blog. In 8 years the stock has returned 14.5% including dividends. In USD, my functional currency, the stock has returned 13.5%. My gut says that's a resounding success. But after pondering about it for a while, I am a bit disturbed. If 13.5% is a resounding success, then I am expecting most of my other holdings to perform worse. What is average? Maybe 9-10%. What is bad? Less than 4%? Then by my admission, my methodology may only be able to get about 10% total returns. Now I have never disclosed my overall returns, because I simply don't know. But when I started this blog the back of my mind was saying I could do 12%. I am kind of disappointed that I clearly cannot.

Why I Bought Grigeo AB

For much of my investing career, my approach has been based on some basic value investing principles. Firstly, I look for cheap, well managed companies in good industries. This has been called GARP (growth at a reasonable price). Secondly, I would concentrate in relatively few companies — around 20. I would eschew investing in multiple companies in the same industry and geographical location. This avoids diversification, which Buffett has often called di-worsification. Thirdly, I would focus my investments mostly in the US. As this where the most famous and successful investors all focus on. The US has been by far the best market for the average investor in the past decades. Plus, its laws and regulations are very shareholder friendly. And fourthly, I would focus on small caps, the purpose is to avoid the space of the better and more knowledgeable professional investors.

But the investing environment is changing all the time. One reason for this is that others are learning the same lessons as me. I always want to maximize my gains by increasing my edge. As a result, in the last few years, I have begun to modify my investment strategy in some major ways.

Looking for good companies that fit some greatness critieria and holding for a long time is one of Munger's favourite advice. That's great and all if you are one of the smartest and most experienced investors on earth. But what about us little guys, I do not have an accounting or finance background. I am not as worldly as Munger, and I am not a great reader. If I want to outperform, I cannot rely on more insight on well-known large or mid-sized great companies. And looking around in the small cap newsletters, blogs, and internet forums, I see some global markets with very little coverage. For small developing regions in the world with unique cultures, the biggest companies there may not be anything but small cap. This is my experience with South Africa. The companies that I invest there are well known by the local consumers. But their market cap may "only" be USD $100 M. But I consider this still small cap because it would be overlooked by large global investors with deep pockets. This fact is also very convenient at a time when the US market is simply too crowded with professionals and Robinhood investors. At this point, no rationale is strong enough to justify the valuation for US equities, it cannot go up much farther.

From my experience in the last few years, I have learned it is too hard to predict the unknowable. It is much better to take positions in decent profitable undervalued overlooked companies, and wait for something good to happen. To do this consistently to improve my results, I would need to expand the number of stocks I own, and pay less attention to each, and also be very patient.

So recently, I have been digging deeper to find more stocks from hidden away markets. One I just started buying is Grigeo AB from the Vilnius stock exchange. Vilnius is the capital of Lithuania. Lithuania is a Baltic country that used to be part of the Soviet Union. The other Baltic countries are Estonia and Lativa. All the Baltic states are part of the EU and therefore use the Euro. They are also part of NATO, which is very important since they share a border with Russia.

I consider the Baltic countries as part of a developing region. From my past experience investing in Japan, I've realized that demographics is a very important factor. Countries with rising populations and therefore a rising consumer market will have a strong economic tailwind. Companies in countries that do not, like Japan, are discounted. Unfortunately, the Baltic countries have a dwindling population because of a declining birth rate and a restrictive immigration policy. The three Baltic states have a total population of 6 million but it is expected to decline by 10% in ten years. Japan's population is only expected to decline by 4% over the same period.

Therefore, I am careful not to invest too much in the area, and I am also more focused on companies that don't just cater to the local markets.

Grigeo AB (TLX:GRG1L) is a vertically integrated pulp and paper producer. The company makes toilet paper, cardboard and other paper and wood products for Lithuania and other European countries. It sells 30% to its local market, and 45% to the Baltics including Lithuania.

The company has a long history. The company originally started in the current form as the Gregiskes factory in 1923 making paper and cardboard. Through the years it was nationalized by the Soviets and then became private again in 1990. In the years since then it has modernized and also acquired other paper and cardboard companies. The following shows the chart of the stock price in the years against the backdrop of the US dollar against the Euro. As one can see the stock price growth has been respectable and somewhat consistent.

	GRG
Price (Apr 6)	€ 1.34
Marketcap (M)	€ 88.04 $ 103.8
ROE (%)	14.70
PE	6.67
PTBV	1.02
Div Yield (%)	4.48 (2019) 0 (2020)

Grigeo also has great valuation metrics. It has tremendous return on equity and has negligible debt. The company didn't pay divdends this year due to covid, but has regularly done so in the past. The following chart shows this. The chart also shows how well revenue has climbed. It has steadily risen by 10% per year! And the earnings and dividends have grown even faster. This is a reflection of greater profitability over time. Please note that I have multiplied the dividend and income by ten to better illustrate. The company has a few commercial or promotional videos on youtube, and they show extremely modern and automaticed plants. I think this confirms why the results have been so good. So given the company has grown steadily and is so cheap at present, this is a serious mispricing. Imagine in the US a company performs like this. The PE would be 20x instead of 6.7x.

I think it really is true when many investing gurus mention opportunities in the developing markets. I have noticed quite a number of good ones just with the tools I have. This is the second one I have written up in as many months. I have bought several others actually and hopefully will get to write them all. So, stay tuned......

Why I Bought Clientele Ltd

Clientele Limited (JSE:CLI) is one of my newest holdings. The company is in South Africa and is primarily in the business of providing insurance to individuals of modest means. Clientele provides life, health, funeral, legal, and estate insurance. It also provides annuities. Other than financial products, it generates 10% of revenue as a mobile services provider.

The company's business model is unique. Most insurance companies do not serve the low-end demographic because the policy premium is not worth the cost to acquire it. But Clientele has thrived in this area.

Clientele manages its costs of acquiring policies by outsourcing the work to francisees, called Independent Field Advisors (IFA), who themselves buy the company's products. The company does a lot of its advertising using late night informercials. In this way the company has kept the cost of acquisition at just below 50% the cost of the policies.

Clientele started its business only 23 years ago by the Enthoven family. The low-profile Enthoven family built its wealth in South Africa specializing in the insurance sector. The family owns 80% of the company through a holding company and they also own the Hollard Group of insurance companies. The Hollard Group in turn owns 9% of Clientele through a subsidiary. So, the Enthoven family has indirect control of almost 90% of Clientele.

Clientele has had phenomenal growth, as the chart below shows. While the company has grown steadily through the years, it has done so without losing underwriting discipline. The company's loss ratio — the money paid out in claims to the total premiums — has actually been falling. The loss ratio for the years 2017 to 2020 has been 23%, 22%, 20% and 20% respectively.

	CLI
Price	R 9.49
Earnings TTM	R 329.00 M
Marketcap	R 3182.00 (US$212 M)
ROE (%)	32.50
PE	9.67
PTBV	3.27
Div Yield (%)	10.01

Being such a good performer, one would think the company's valuation metrics are high. But that isn't the case, as the side table shows. This stock yields 10% earnings and dividends! A look at the price chart below gives some indications why. The stock has dropped precipitously through the COVID crisis even though the company's earning power has not been drastically affected. In the last three fiscal years, from 2018 to 2020, the net income did drop. The drop from 2018 to 2019 was mainly due to a large drop in investment gains. The drop from 2019 to 2020 was mainly due to odd tax accounting. The EBIT was actually rose significantly from 2019 to 2020. Furthermore, I've noticed when the Rand falls in value South Africa stocks fall also. So when the Rand vs the USD curve rises in the chart, it means the Rand is getting cheaper. And one would expect Clientele price to fall. And vise versa. But in recent weeks, the Rand price has been falling and yet Clientele is not rising. So, unless I am missing something this is a big mispricing.

For the last several years I have held a strong belief that the US markets are overvalued. I believe this more than ever now. I believe we may be at an inflection point for the emerging markets. The value of the Rand as shown in the previous chart may be a good proxy for this. Note how it rose for pretty much the last ten years but it has handily recovered from the all time lows of the COVID crisis. There is no more room for the US stockmarket to grow, and emerging markets is where the stock growth will come from in the coming decade. Clientele could be a very good illistration of this.

We shall see.

Some Updates on the First Full Year of COVID

COVID hit most of the world starting in March 2020. So, many companies have (almost) had a year of impact from COVID. Many Japanese companies end their accounting year in March and thus their year coincides almost exactly with the start of COVID. So, their annual results will be able to tell us a lot about the true extent of the world's business slowdown.

Tachibana Eletech (TSE:8159) year end revenue is expected to fall 6.2 % to ¥ 160.0 B (2020 ¥ 170.5 B). Year end EPS is expected to fall 26.0 % to ¥ 128.8, (2020 ¥ 173.9), which implies a 13.0 x earnings multiple.

Riken Keiki (TSE:7734) Year end EPS is expected to fall 19.4 % to ¥ 150.5, (2020 ¥ 186.8), which implies a 20.4 x earnings multiple.

Takamatsu Machinery Co.,Ltd (TSE:6155) year end revenue is expected to fall 38.7 % to ¥ 13.4 B (2020 ¥ 21.9 B). Year end EPS is expected to fall to ¥ -12.7, (2020 ¥ 130.8).

Installux SA (PAR:STAL) H1 revenue fell 26.6 % to € 52.5 M (2020 € 71.5 M). H1 EPS fell 73.7 % to € 4.4, (2020 € 16.6). Their year ends in December.

In H1 2020, installux experienced shutdowns in their Spain and France locations and therefore revenues fell significantly. They were still profitable though. However, the company provided no guidance for H2 2020, so we don't know what happened in the last 7 months.

Installux is conservative, well-run, and highly profitable. They expand opportunistically and thus do not overpay for acquisitions. Their expansion has mainly focused on control of the supply chain. Their niche aluminum product offering remains unchanged. Still their sales figures are respectable. It has consistently risen by about 3.5% per year for the last dozen years. And of course they have no debt!

The company currently trades at 13 times 2019 earnings, the last full year of data before COVID. While this PE is not super cheap. The company looks much better when using the EV to EBIT ratio because it has no debt and ample cash. The company's EV is 7.2 times 2019 EBIT.

The coming challenges for the company is how to put its cash to use. The following figure shows the cash and equity buildup through the years. Note that in 2018, cash dipped and PPE rose by the same amount because of the acquisition of a factory in Spain.

The simplest way to get rid of cash is to pay generous dividends but management indicated it prefers not do do so to show solidarity with stagnant employee wages. I suppose this can partially explain why the company recently began share buybacks. So far the company has bought back 2% of the shares. 

Right now, I am really not sure whether I should hold Installux for the longer term, or reduce my position. At € 390, it is probably fairly valued. So, I'll just wait and see. Their annual report should out by April, then I'll decide.

New Century Group HK: My Worst Performer

New Century Group Hong Kong (HK:234) has been a sad performer for a long time in my portfolio. I bought it initially around HK$0.13 and today it is at $0.06!

New Century operates in several segments in primarily Hong Kong. Formerly, they were cruise lines, hotels, rental properties, and securities (i.e., stocks) trading. Besides the rental properties business, all the other segments are becoming less prominent on the company's bottom line. In fact, the company sold it's last hotel and exited that business several years ago.

The company's cruise lines wasn't doing all that great before covid came along, and understandably its revenue dropped considerably during this time.

The company has a security trading business because of an unique feature of Hong Kong tax laws. In most other countries a company must pay capital gains taxes on realized securities gains. But Hong Kong does not. So effectively Hong Kong encourages companies like New Century that have ample cash to engage in securities trading.

In the place of the under-performing segments, the company added a money lending business two years ago, called ETC. This business was completely owned by the same family trust that owns the majority of New Century. And New Century acquired 60% of the lending business in exchange for the cash equivalent of the equity acquired.

Assets (HK ¢ )	2020	2021 H1
Cash	7.59	7.13
Stocks	0.24	1.12
Receivable	2.14	1.15
PPE	5.85	4.98
Rental Property	9.54	9.28
Private co.	0.03	0.04
ETC loans	11.88	12.47
Repossions	0.24	0.63
Liabilities
Payables+Dep	0.35	0.73
Misc liabilities	0.35	0.42
Debt	1.93	1.93
Minority Interest	6.91	6.57
Shareholder Equity	27.98	27.15

The company usually has had a lot of very liquid assets and I always wished the company would distribute it to shareholders, either with stock buybacks or dividends. Unfortunately, the company used the available cash to buy a company from its owners. The company paid HK$480 mil for the money lending business. That's $0.08 per share.

New Century's investment property business consists of high-end retail and office real-estate. Their rental occupancy has consistently been 100%. And the real-estate value on their books is not an illiquid asset that is held indefinitely. In 2011, for example, the company sold a large chunk of their property for HK$485 mil. On the right is the company's balance sheet with values divided by the number of share and expressed in HK ¢. As the table shows, their real estate value is only about a third of the companies equity, so it is not overly exposed to a housing bubble.

I liked New Century because of the company's huge and liquid balance sheet. I feel showing the value per share can really put a perspective on the attractiveness of this stock.

Note that the minority interest ownership is almost entirely a claim on the money lending business.

Note also that the company debt are monies owed to related parties paying little or no interest.

Other than these two items, pretty much the rest of the company belongs to the shareholders. The following chart shows the company grew its equity consistently throughout the last 16 years. The chart also shows the company paid out more than HK$0.07 per share in dividends over that period. That's pretty good considering the current price of $0.06 ! Please ignore the spike in book value in 2019, that is only due to an accounting quirk that requires the company to recognize the money lending business one year before the money is paid to acquire it.

On the face of things there isn't much justification for the stock to trade at $0.06. But the narrative on such an obscure Hong Kong stock can deter the market. Namely, Hong Kong is experiencing a slowdown due to the political turmoil of the last few years. There may be a long term exodus from the island which will make it less of a financial hub of southeast Asia. In addition, the stock is of the foreign and small cap value variety, which has suffered terribly in the last 10 years.

The company's owners also haven't done much to help the stock price. It hasn't been paying regular dividends last few years. And it siphoned off a huge chuck of the company's cash to buy the money lending business. Initially, I was extremely worried when New Century acquired the lending business. Are the owners enriching themselves at the expense of us minority shareholders?  Recently, I am less worried because I see the lending business become a big contributor to income.

So all-in-all New Century has become the worst holding in my current portfolio, but I still use the logic of analysis and I feel the stock is still good enough to hold.

My Annual Schedule of Investments

2020 has arguablly been the wildest year in the history of the stockmarket. As is the annual tradition, I post my largest positions.

Click here for last years positions.

Company	Category	Business	Duration
European Reliance ( ATH: EUPIC )	Greek small cap	Life and Health insurance	6.5 yrs
Kansas City Life ( KCLI )	US small cap	Life insurance	6 yrs
Senvest Capital ( TSE: SEC )	Japanese small cap	Investment Company	5.5 yrs
IEH Corp ( IEHC )	US microcap	Manufacturing	7.5 yrs
Tachibana Eletech ( TSE: 8159 )	Japanese small cap	Electronic Distributor	7.5 yrs
Installux SA ( PAR: STAL )	French microcap	Manufacturing	7.5 yrs
Riken Keiki ( TSE: 7734 )	Japanese small cap	Manufacturing	7.5 yrs
Investors Title Company ( ITIC )	US small cap	Title Insurance	6 yrs
Lewis Group ( JSE: LEW )	South African midcap	Fumiture Retail	5 yrs
MIND C.T.I.Ltd ( MNDO )	US small cap	Billing	0.5 yrs
Philip Morris Int ( PMI )	US large cap	Tabacco	20 yrs
Altria ( MO )	US large cap	Tobacco and alcohol	0.5 yrs
Karelia Tobacco Company Inc. (ATH:KARE)	Greek small cap	Tobacco	6 yrs
Combined Motor Holdings (JSE:CMH)	South African small cap	Car Retail	6 yrs
Seaboard Corp ( SEB )	US midcap	Food conglomerate	15 yrs
McRae Industries ( MCRAA )	US microcap	Footware	8 yrs
New Century Group HK ( HK: 0234 )	Hong Kong microcap	Hotel,cruise line	6 yrs

We all know there was a huge crash in March followed by an amazingly fast rebound. Like almost all investors, I've been busy repositioning my portfolio. What I did this time was like in past corrections, I have opportunisticly added to some formerly small positions and initiated a few new ones.

ITIC was a large position that I regrettably reduced five years ago. Now I have added back sufficiently that my position is the same as back then. The same story goes for PMI, my position now is the same as before. A similar story goes for MO. I closed my position 9 years ago, and my position now is the same as before.

I have also added to EUPIC, SEC, IEHC, KARE.

The only completely new stock that I own is MNDO. This is an incredible dividend payer that I've followed for several years. To get into it, I will have to make a writeup sometime in the future.

The only position that I reduced is SEB.

I still own S&P 500 shorts. In fact I have added to it this year! And this has been the big drag on my portfolio performance. I am down slightly for the year, but the bright side is that my long positions are up by single digits percentage points.