Another year has gone by…

There has been a lot of mental activities, yet not so much portfolio activities.

In 2018 both the global and Vietnamese stock markets have gone through a correction following double-digit increases (as high as 53% for the latter) in 2017. Statistically speaking the US stock market, a reasonable proxy to the health of the global stock market, is reasonably priced. While the 10-year US government bond yield is at 2.7%, or a PE of 37x with an E that can’t grow, there seem to be an abundant number of companies priced significantly less than 37x whose earnings look sure to grow.


  • Mistakes
  • Activity
  • Performance
  • Book recommendation
  • A letter from the hero


Viet portfolio: is it really cheap?

Early 2018 I made a decision to establish a sub-portfolio consisting of what I thought back then, significantly cheap stocks. These are stocks, on a net cash, net long-term investment basis, traded around 0-3x.

While establishing this sub portfolio, I was thinking to myself, regardless of the core operation, the 0-3x valuation should offer me significant protection, since you know, it means the entire core business is given away for free or it only takes 3 years to recoup the investments.

As 2018 progressed, this sub portfolio costed me at least 3% portfolio return. Some of the stocks in this sub portfolio suffered a steep 30-40% decline. What went wrong?

Well I paid literally no attention to the core operations. Some of these companies then appeared to have either dishonest management, extremely poor core operation or just straight-up fraudulent.

So much for statistically cheap stocks…This will be my final goodbye to them.

“Investment is most intelligent when it is most businesslike”. There is nothing businesslike in owning a batch of statistical cheapness.

Global: Harley Davidson (HOG)

Around mid-July 2017, I was lured into Harley Davidson by following Nick Train blindly into unique brand assets.

The company possesses an extraordinary brand in its category. It is the only heavyweight motorcycle that represents America on the planet, with a 100+ years of heritage. That is an extraordinary brand asset.

However, I paid little attention to the management behind HOG.  For almost 4 quarters of owning them, management kept repeating that HOG was facing industry headwind. What kind of industry headwind is it when you own 50% of the market? I believe that it is not the industry that experiences headwind, it is the brand that suffers from no-passion with little skin-in-the-game management.

Had I hold on to it, a total -40% would have been realised.


Global: Concentration (Alphabet, Berkshire and Unilever)

There has been little activities in the global portfolio. However I made a decision to concentrate 60% of my net worth amongst the 3 companies that command most of my business and investment understanding. These represent 3 extraordinary enterprises, conducting significant business across the globe, with management of unquestionable ethics and standards, trading at a very reasonable price and have good long-term tailwind.

The remaining 40% has about 10-15% in cash and the rest concentrated amongst Fanuc, Apple, JP Morgan and Visa. I feel good owning shares of these great businesses.

Small companies: Noted that these are relatively very large businesses. I don’t want to kid myself pretending that, at 24 years of age I am able to understand smaller businesses. Whilst I’m agnostic about size, I understand that the skills needed to pick extraordinary small businesses are quite different to that of picking large businesses. There are a great amount of materials on all of the businesses in my portfolio than there are on much smaller businesses. Such great amount of materials enable me to understand in-depth the large businesses that I’m owning shares in. The small business space requires much scuttle butt and businessman-type skillset that are currently out of my reach. Yet over a long period of time, I must develop these skill sets.

I continue to feel enthusiastic about the large enterprises I’m currently owning shares in, yet I am also looking to build the skills needed to find “that one gem” that is small enough, with massive tailwind ahead of it and run by an extraordinary owner-manager entrepreneur with extreme integrity. Over the next 20 years I really do hope I will bump into one.

Viet: Coteccons

40% of the Viet portfolio is currently residing in cash, which demonstrates my poor capital allocation skill in 2018. The group of great businesses in Vietnam are currently trading at around 20x, which is equal to the Vietnamese 10-year government bond yield. To us, this is not overvaluation yet it commands significantly less margin-of-safety. We continue to be on the sideline cheering for the great Vietnamese businesses to realise their dreams of conquering the demand of 95m Vietnamese.

That said, one significant blue chip that we think is under-priced is Coteccons (HOSE:CTD) – the largest and most well-run Vietnamese contractor. Coteccons is run by an outstanding then-CEO and now Chairman – Mr. Nguyen Ba Duong whose views regarding using debts struck us as very intelligent and rare: “If you borrow debts now at 7% interest rate, you are just slave to the banks”. 7% seems very high, yet there are many contractors out there, lured by the big promises of promoters, continue borrowing at 7% to fund construction projects, during a time when the country has been 8 years into the up-cycle of real estate.

Coteccons has done things that are akin to what the great Kiewit Corp has done. It makes sure to enter projects that are priced appropriately, it leverages existing relationships with project owners to win more businesses, it diversifies away from residential construction to constructing industrial parks and infra-related projects, taking advantage of the industrialisation tailwind, it manages cost very well, and it maintains what Mr Jamie Dimon would call “a fortress balance sheet”.

Coteccons entered into our portfolio at a 5x earnings net of cash. Management announced a share buyback amounting to 4% of the shares outstanding. At the announced 5x-7x earnings, the buyback makes great sense to us.

Performance – 2018

During 2018*, the Global portfolio increases by +3.99% compared to +0.76%, -2.34%, -3.46% of the S&P 500, MSCI World Index and FTSE All World, respectively, and compared to -0.41%, -3.32%, -12.37% of the ETF equivalents**.

Since inception (November 2015), the Global portfolio has compounded at +10% p.a vs +16% of the S&P 500 and +13% of the FTSE all world (no data for MSCI World GBP, no idea why…), and compared to +15%, +13% and +5% p.a of the ETFs equivalences (incld. MSCI World).

Note * and **: All indices performances are based on total gross return (GBP) and all ETF performances are based on dividend-adjusted share price of the following ETFs: LSE: VUSA, LSE: IWRD and LSE: VWRD.
Every index and ETF’s performance is sourced from capital-IQ for the period 27 February 2018 to 28 December 2018. From 01 January 2018 to 27 February 2018, I was changing brokers. The first date when I had my funds in the new broker (Interactive Broker) was 27 February 2018.
Performance is based on Time-weighted return which disregards cash inflow and outflow, measured by Interactive Broker.

The Viet portfolio decreased by -4.5% compared to a decrease of -10% of the VNINDEX. Since inception (November 2016) the Viet portfolio has compounded at 7.5% vs 17.5% of the VNINDEX

The learning continues…

Books recommendation

  • Softwar – Larry Ellison and Matthew Symonds
  • Inside Apple – Adam Lashinsky
  • Roller Coaster – Moira Johnston
  • Steve Jobs – The man in the machine
  • Super Mario – How Nintendo conquered America – Jeff Ryan
  • Jamie Dimon letters

A letter from the hero


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