Wednesday, January 1, 2014

Sold my stake in DeNA Co.

Please read the disclaimer here: Enjoy the article, bitches!

Before I start this article, there’s something I want to get off my chest. Feel free to skip this paragraph. I didn’t party on New Year’s Eve as it’s not my thing and I’m a lone wolf (or social outcast) so I don’t really have a crew of bitches and sons of bitches to go out with. But I have nothing against people celebrating. What piss me off are assholes that get upset with people celebrating on New Year’s Eve. There’s one dude on my Facebook who had 12 status updates on New Year’s Eve, bitching how 2013 sucked and how people celebrating were scum. Honestly, I think jackasses like him are crying for attention. A piece of advice, getting pissed at people for being superficially happy doesn’t make you cool. It just makes you look like a dick.

If you guys remember, I briefly mentioned that I invested in Japan-based DeNA Co a while back. The company generates most of its profits from its mobile games platform. Anyway, I sold the stock a few days ago; I think I barely made enough to cover my transaction costs (maybe even made a small loss as the yen could have weakened since the time I bought the stock). It’s not because I thought DeNA was a bad company (I personally think that the company is very good at making games). I just realized I didn’t have enough knowledge of the mobile games industry to come up with a reasonable valuation for mobile gaming companies.

Right now DeNA is doing really well in terms of returns on capital. The company achieved returns on average equity and returns on average assets of 30.05% and 20.01% respectively for the quarter ended September 30, 2013. The company has lots of cash and a low Price/Earnings ratio of below 7 (I think it was around 6.5 when I bought it). The only problem is that revenue is declining as the company hasn’t released a hit game for some time. I thought that despite falling revenue, the company’s current portfolio of games could still maintain a high level of profitability as the company can keep creating new content (an example is World of Warcraft) or release new versions to get people excited again (an example is the Pokemon series). However, I recently realized that I do not have enough knowledge and data to be reasonably confident of that happening. Maybe someone with a deep understanding of the mobile gaming industry might find that DeNA is a really awesome company and make lots of money investing in the stock. That would be great for him.

There are many industries that I don’t understand. And I just won’t invest in them as the biggest risk of all is doing something that you don’t understand. I will take Warren Buffett’s advice and stay within my circle of competence. So, I sold my stake in DeNA and bought shares in Overseas Education Limited which I discussed in a previous article.

Anyway thank you for reading and happy new year to all of you! I fully intend to make 2014 my bitch. I aim to find some investment gems, build a larger audience and land an awesome job when I enter the job market in about a month. I think I have chillaxed enough since graduation, I just hope the wound under my foot closes up by then.

Watch out 2014, it’s clobbering time!!!

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