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YTD(2021) I have made a total profit of S$40,366.60 from my equity
investments(predominantly in HK) with an XIRR of 85.56%(XIRR is annualized).
From my 6 years of tracking, I have made a total of S$140,009.26 from
this portfolio alone.
In terms of benchmarking with STI, HKSE and World index. There was a
substantial pullback recently due to inflation and interest rate worries. The
large difference between my XIRR and TWR is due to XIRR being annualized in
nature and the price appreciation of some of my stocks recently.
Portfolio composition(4 index etfs and 26 stocks):
Transactions:
Sold all Haw Par(SG:H02) at 35% gain
Sold all Great Eastern(SG:G07) at 21% gain
Sold all Swire Properties(HK:1972) at 13% gain
Initiated a 2.35% position in Xinyi Energy(HK:3868)
Initiated a 2.67% position in ZA Online(HK:6060)
Bought back JXR(HK:1951) to 3.46%
Added more Kingsoft(HK:3888) to 5.34%
Added more C-MER(HK:3309) to 3.98%
Added more GDS(HK:9698) to 4.48%
Added more Vobile(HK:3738) to 6.32%
Commentary:
Market is currently unkind towards Chinese innovation. As US prints more
than 25% of their total USD float to sustain their recovery(haven't include
infra bill and stimulus), bond traders are pricing in an accelerated
inflationary scenario. I feel, there are numerous argument against this.
Asset inflation is true, due to low rates, property prices will go up. This
kind of inflation is temporary as more builders in the US will come in the
equalize it. Hence I feel asset inflation which result in commodity
inflation(steel, cement etc) are short term spikes. Capitalism will
normalize this.
While the eurozone is still at negative interest rates, US treasury yield
will have a cap due to arbitrage. This can result in a short squeeze in the
bond market. Technology innovation is another deflationary force. Ecommerce
has brought down the price of groceries and daily necessities. EV prices are
going down due to cheaper batteries overtime. Dvds and entertainment cost
are going down drastically due to direct to consumer channels like Netflix
and Disney+. Intense competition will also cause factories to take losses
instead of hiking prices too much to drive away customers. Mobile data subscription cost is
going down due to intense competition from telcos and government policies. Despite the excessive printing by the Fed, there is a high chance that inflation will still be in control.
Hence I feel the current strategy is to buy the dip for tech and not to swap
to recoveries as much. I might be wrong but that's what I think.
Xinyi Energy(HK:3868) owns and operate 16 large scale solar
farms with an approved capacity of 1514 megawatts. They have never had a
power limit in the history of operation. Renewable clean energy is currently
being pushed and supported by China.
One of Xinyi Energy's solar farm |
Short-term positive factors such as the expected earnings rebound of 47%
this year under the normalization of sunlight resources. In the long term,
the company's production capacity is expected to grow at a compound annual
growth rate of 34% from 2020 to 2023, and 62% of the company's solar farms
will achieve market price by 2023, so the company's cash flow will not be
affected by the subsidy policy. At the same time, the company has a strong
balance sheet and a high increasing dividend yield.
ZA Online(HK:6060) ZA Online's road to subvert the traditional
insurance industry has been laid at the beginning of the company's
establishment in 2013. The unique Internet gene made the company different.
It is the only Insuretech that has joint stake by three giants:
Tencent(10.56%), Ant(14%) and Pingan(10.56%).
ZhongAn's online business is mainly divided into two categories. One is the
online insurance business empowered by Internet technology. Divided into
four major ecosystems: Healthy ecology(Enjoy e-life), Digital life
ecology(Return freight insurance), Consumer financial ecology(Guarantee
insurance), Car ecology(Car insurance)(Main insurance products in brackets).
Different from traditional insurance companies, ZhongAn Online does not have
offline outlets. About half of the employees are engineers and technicians.
Technology and Internet genes are ZhongAn’s first technological moat. Rely
on technology, the company's business can scale rapidly in the Internet era
and maintain rapid growth. Without offline outlets and with much lesser
staff, their margins alone are already very disruptive towards traditional
insurers.
Last year, it has about 524 million insured users of ZhongAn Online
Services. Over 7.9 billion total insurance policies. One out of every six
insurance policies in the country comes from ZhongAn. ZhongAn Online broke
the top ten ranking in the property insurance industry in China. Became the
ninth largest property insurance company in the country. Its app is also one
of the highest rated among online insurers.
ZhongAn's rapid growth is not blinding, but high quality. The company has
verified the business model of Internet insurance by taking the lead in
profitability among global peers. Technology is the key to profitability.
Valuation wise its cheap. It can be seen from the table above. ZhongAn
Online's 2020 sales is 23-3x of these three US online insurers. It is also
the only one that has reached profitability. But the market value these
three loss-making insurtech companies equivalent to 56.84%, 56.86% and
32.95% of ZhongAn respectively. The Price to sales ratio multiples also far
exceeded ZhongAn(example Lemonade price to sale is 54.3x vs ZhongAn's
4.19x).
Will go deeper into these counters later on.
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