Tuesday, November 24, 2015

Update on the Greedy Dragon Portfolio



Disclaimer: Please do your own research before investing in anything. I’m NOT encouraging you to buy or sell any of the stocks mentioned in this article. Due to the fact that things can change, the reasons I had to buy or sell any of the stocks mentioned in this article may no longer be valid. This article simply reflects what I think at the time this article was uploaded, I could very well be wrong in my thinking.


Greetings value investing badasses and bad bitches. In this article I will quickly go over what I bought and sold for the Greedy Dragon portfolio since my last update in July. Since I don’t have anything in particular to ramble on about today, let’s just get down to business.

Bought

Skechers: I added this stock to the portfolio because the company has been experiencing pretty strong growth recently, it’s earning attractive returns on capital, and I think its stock is reasonably valued. 


Oasis petroleum: I bought the stock because I think it was oversold, and because I think that the company has a good chance to survive this crisis.


Northern Oil & Gas: I added to my position in Northern Oil & Gas for pretty much the same reasons as Oasis Petroleum. You read my analysis of Northern Oil & Gas here.


Fossil: I invested in Fossil because I thought it was undervalued and it was a business that generated good returns on capital. Investing in Fossil (and Skechers) also gives the portfolio exposure to the retail industry which is pretty sweet as I wanted to diversify the portfolio from just banks and natural resource companies. 


Banco Santander: I took a position in the bank as I think it is reasonably valued, and it has a healthy dividend yield (even after the dividend cut this year). The earnings of the bank could also get a boost in the event that there is a recovery in the EU and the Euro, and/or a recovery in the Latin American economies and their currencies. I also welcome the geographical diversification my investment in Banco Santander brings to the Greedy Dragon portfolio as much as I welcome an extra egg in a bowl of instant noodles, which is a lot.


Natural Resource Partners: I added to my position in Natural Resource Partners because I think the stock was undervalued. The stock also has a good dividend yield. However, I won’t count on the dividend as the company has been aggressively cutting its dividend so that it has more cash to reduce debt in this tough environment, a move I completely support.


Maybank: I bought shares in the bank basically because I think it’s reasonably valued, it earns a decent return on capital, and it has an attractive dividend yield. I’m trying to set up the portfolio to generate more cash flow, so I don’t have to sell a stock which I think is cheap just to buy a stock that I think is cheaper. You can read my analysis of Maybank here.

Sold

Sandridge Energy: Had to cut my loss on this stock, unfortunately I sold way too late. A large amount of protection this company got from its hedges will be gone next year. I think the company will have a difficult time making interest payments and funding its capex program to maintain production without using up a significant amount of its cash reserves. It was a bad decision to invest and hold on to this stock for as long as I did. This will be a case study in my “Investment Screw Ups (as in my own screw ups)” series. You can read about it when it’s up.


Mongolia Growth Group: This investment was another damn train wreck. This decision to invest in this company will be another case study in the “Investment Screw Ups (as in my own screw ups)” series. If you like reading about money being burnt to ash, you will probably like the articles in the series.   


National Bankshares: Sold the stock to raise capital. Although I sold the stock below the price I bought it for, I still made money if you factor in dividends and the appreciation of the USD.


Banco de Chile: Sold this position for pretty much the same reason I sold my stake in National Bankshares.


Part of my position in Comstock Resources: I sold some of my shares of Comstock Resources to raise capital to invest in other natural resource stocks.  I didn’t want the portfolio to have too large an exposure to the natural resource sector; don’t want to go broke because I didn’t manage my concentration risk. In hindsight, I should have sold all my shares in Comstock Resources back then. Natural gas prices have fell significantly recently with all the talk of a warm winter in the U.S. This, in my opinion, makes the stock a riskier investment. If I was running a professional hedge fund, I would have probably offloaded this position by now. But since this is my own money, I decided to gamble a little and wait for a rally in the energy sector before selling (The tiny angel Warren Buffett on my shoulder disapproves of this decision).         



Thank you for following my blog despite me not uploading many articles this year. You guys are awesome. Take care and stay rational.

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