OAM Letter, India Trip, Other Links

OAM 2019 Letter
The latest shareholder letter for Overseas Asset Management’s Asian Recovery Fund is out. You can access and download it directly from their website. Desmond Kinch’s letters are always an interesting read. Some highlights (mostly direct excerpts, with some paraphrasing):

Added to investment in COSCO Shipping International. Net cash per share is HK$4.15 and its operating business is worth more than HK$1.00 per share, versus current share price of HK$2.00 [at time of writing]. The company has been consistently profitable and has paid a dividend every year since 2004.
New position in Swire Pacific Class B shares. Trading at a 69% discount to the equity attributable to shareholders in Q4 2019. Average discount over the past 30 years has been 30%. The only other times within the past 20 years when Swire Pacific’s B shares reached a mid-to high-60’s discount to equity value was in late 2001, following which the share price doubled over the next two years, and late 2008/early 2009. 5.5% dividend yield. One risk is that equity value is overstated, particularly at Swire Properties.
Outlook – over the past decade, a number of longer lasting factors hurt returns, namely US dollar strength, the polarisation of stock markets in favour of a small number of growth stocks while ignoring a large segment of value stocks, and a general shunning of emerging markets by portfolio managers. Today, the right thing to do is to sell most US equities which have done stunningly well, and buy non-US equities, particularly the orphaned value stocks and the shares of small and medium sized companies where valuations are cheap and the prospects for future returns are favorable. Doing so is difficult, however, because it means selling what has done well during the past few years and buying what has done poorly.
Liquidity risk – the travails of Woodford Investment Management [should be] a wake-up call for the fund management industry. This is a risk that many investors, fund managers, and fund directors are not paying sufficient attention to. The key point is to ensure that the liquidity of a fund’s underlying investments is aligned with its redemption terms.
Geopolitical risk – concerned by the overreach of the US Treasury Department and their penchant to impose enormous fines and in some cases expropriate assets that they say are derived from foreign regimes that they don’t deem friends of the US. US financial institutions are terrified of the powers of the Treasury and effectively do their bidding in some cases. In the past, they have not needed to pay much attention to plumbing of the global financial architecture, but the world is changing and need to monitor this risk carefully.

Other Investing Links
Scottish Oriental Smaller Companies Trust’s latest investor update note. Good read.

Oasis Capital Management recently increased their stake in the Tokyo Dome Corporation (up from 5.4% to over 9.6% of the company). They believe the company can meaningfully improve its performance, increase profitability, and enhance the fan experience. You can view their full investor presentation (“A Better Tokyo Dome”) here.

Couple of interesting short reports recently – Blue Orca on China Medical System Holdings Ltd (link here) and an anonymous write-up on Luckin Coffee (shared by Muddy Waters on Twitter, link here).

Howard Stevenson – Building A Life
I really enjoyed this talk by Howard Stevenson. Lots of practical insights and wisdom. For more, see his conversation with Sal Daher, covered previously on this blog, and his book Wealth and Families.

India Trip Photos
I recently got back from a tiger safari trip to Madhya Pradesh, where I visited the Kanha and Pench national parks. The Kanha forest is probably one of my favourite places in the world (see here for the tiger photo from my last visit in 2016). This time around, we managed to get permits for about 30 hours of game drives and got lucky with a few minutes of tiger spotting in Pench. I have included a video and a couple of photos below.

For anyone interested in visiting, I highly recommend the Shergarh Tented Camp (near the Mukki gate) in Kanha and Pench Tree Lodge (near the Karmajhiri gate) in Pench.