Portfolio Update - 2018 July

This month I accelerated my portfolio changing towards my target of 50% oversea equities.

Sold (from end of June to July):
Sunpower @ $0.605
Memtech @ $1.29
portion of Alliance Mineral @ $0.375
Yanlord @ $1.49
GSS energy @ $0.141
Manulife REIT @ $0.865
portion of Venture @ 17.3

Added:
Nexteer (HKEX:1316) @ 10.92
Ping an Insurance (SHA: 601318) @ ￥58.65
ND paper (HKEX:2689) @ 9.2
Jinma Energy (HKEX:6885) @ 4.66
New Chine Life Insurance (HKEX:1336) @ 34.35
Luye Pharma (HKEX:2186) @ 8.38

Together with Xiwang Steel and Wanhua Chemical that I purchased in June, I have 8 HK & China stocks which make up close to 40% of my portfolio. In terms of valuation, industry prospects and  growth potential, they are simply better than my local stocks. There are so many bargains that makes  combination of wonderful company at fair price and fair company at wonderful price possible.

Here is how I classify them:

Sector	Company	Reasons of buying	Rough Target
Finance - Insurance	Ping an	Wonderful company at fair price (at the moment)	Profit CAGR of 15%
Finance - Insurance	New China Life	Fair company at wonderful price - 0.4 pev	Valuation goes back to 1.0 pev
Chemical	Wanhua	Wonderful company at fair price	Earnings could double in 3-5 years
Manufacturing - Automotive	Nexteer	Industry top player that is growing at PE 10	50% increase in earnings in 3 years
Materials - Paper	ND Paper	Industry alpha at great price - PE 4
Materials - Steel	Xiwang	Fair company at wonderful price - PE2.x, 10+% dividend yield	Collect fat dividend and/or revaluation
Materials - Coke	Jinma Energy	Fair company at wonderful price - PE2.x
Pharmaceutical	Luye Pharma	Growing company with possible star products coming out	Profit CAGR of 15%

As compared to my local stocks that I will keep but with lesser weightage:

Manufacturing - T&M	AEM	Good company at fair price. Potential in more star products
Commodity - Lithium	Alliance Mineral	Fair company at wonderful price. How wonderful depends on EV boom progress
Manufacturing - EMS	Venture	Top 10 EMS of the world, current price is quite fair or slightly undervalued
Shipbuilding	YZJ shipbuilding	Industry alpha at undervalued price, collect 5% dividend until industry recovers

Using the same subjective lens, I view the rest of my local stocks as fair company at discounted but not wonderful price.

Back to my foreign holdings. The major risk with these low PE stocks like ND paper, Xiwang, Jinma is their sustainability relies heavily on the continuity of China's structural reform policy that aims to reduce excess production capacity, to consolidate the industry, and to allow debt-ladden companies to earn and pay down their debts (which could be the actual driving factor).

There are other reasons too why I prefer oversea market. Firstly, I could build a more diversified portfolio with the abundant varieties of industries available; even though that mean I have to ditch the idea of focus investing. I don't know any industry or company deep enough to embrace this strategy, especially at a turmoil times like this where any sector could suddenly be hit by tariff. As a newbie I guess it's better for me to expose myself to learn about various industries and businesses models to have a greater grasp on macro economies and also better sense of what is a bargain. Secondly, with trade war worries looming, our local economies will suffer first. When two gigantic elephants battle, its the ants get stamped first.

I will continue to reduce my local holdings and add more HK & China stocks beyond the 50% limit. There are simply attractive bargains right now. Here is my watchlist (some are bargains at current price while some are not, just compiling for my own reference):

Environmental (Undervalued sector):
China Everbright International (HKEX:257)
Beijing Enterprises Water (HKEX: 371)
Citic Envirotech (SGX:CEE)
Sunpower (SGX:5GD)
China Jinjiang (SGX:BWM) - Although at current PE of 5, it seems greatly undervalued, but I have doubts on its oversea expansion and intense competition it faces domestically.

Finance:
AMC - China Cinda (HKEX:1359)
Banks - Major banks looks very cheap but needs to have deep understanding on its assets to have faith in their figures
Brokerage firms - Price at suppressed level but their earnings rely on sentiment.

Investment Conglomerate: 
Fosun International (HKEX:656)
China Everbright Ltd (HKEX:165)
Value Partners Group Ltd (HKEX:806)

Consumers:
WH Group (HKEX:288)
China Agri (HKEX:606)
IGG (HKEX:799)

Chemical:
Dongyue (HKEX:0189)
Kingboard Chemical (HKEX:148) [Also the world's largest laminate manufacture]
China Sunsine (SGX:CH8)

Materials:
Cement & Building Materials - China National Building Material (HKEX:3323)
Glass - Xinyi Glass (HKEX:0868)

Manufacturing: 
Motor and motion systems - Johnson Electric (HKEX: 00179)
Mold - Lung Kee (HKEX:255) [Also listed in SGX but poor liquitidy]
Wind turbine - Xinjiang Goldwind Science & Tech Co Ltd (HKEX:2208)
PVC pipe - China Lesso (HKEX:2128)
Injection molding machine - Haitian International (HKEX:1882)
Optical fibres - Yangtze Optical Fibre and Cable (HKEX:6869)

Pharmaceutical: 

Tianjin Zhongxin (SGX:T14) - Even though price here is much cheaper than A-shares counterpart, its movement mirrors counterpart, and so far I don't see BBs here intends to close the valuation gap.

Beijing Tong Ren Tang Chinese Medicine (HKEX: 3613)

Commodity:
Coal: Yanzhou coal (HKEX: 1171)
Coal Conglomerate:  Shenhua energy (HKEX:1088)

Ports & Shipping Companies: (Suppressed sector, watch out for turning point as some shipping companies are turning profitable. How soon the turning point would come largely depends on the outcome of trade wars)

Automotive: (Generally a lot of car makers have low PE, but its hard to guess which auto maker would be the top ones)

There are also countless Graham net-net stocks in HK but thats beyond my knowledge and also interests. The proportion of scam stocks are also higher, so it's best to equip myself with useful tool. There is one useful compilation on black list and white list of HK stocks, compiled by a user called greatsoup in Xueqiu. Need to be careful with those with a rating of 5.

https://docs.google.com/spreadsheets/d/13Ac9TXVHQHnoJnjt15O3JMIum19Jw8e7vimTz95cymY/edit#gid=705361020

As a conclusion, my overall portfolio are still in deep water due to the last day plunge of AEM, or else I could have regain few % this month, uplifted by my eight oversea knights. Apart from Luye Pharma which took a knock due to recent negative sentiments on Pharma stocks triggered by fake vaccine scandal, the rest of them are all in positive territory.