Stocks recently bought and sold

Bought: Haleon PLC (LSE:HLN)

Haleon provides over-the-counter consumer healthcare products such as Sensodyne, Centrum, Panadol, Advil, Voltaren, Theraflu, and Otrivin. Such products will always be bought to relieve pain or increase health. The business seems suitable for my Coffee Can approach. Haleon is a spin-off from pharmaceutical company GSK (GlaxoSmithKline), whose current management wants to focus on its prescription medicine business. The IPO of Haleon was in July 2022, so there is no annual report yet. I had to piece my information together from the prospectus, two quarterly reports and analyst call transcripts. While the share price doesn't represent deep value, Haleon is relatively inexpensive.

Bought: Reckitt (LSE:RKT)

This is the company formerly known as Reckitt Benckiser Group. It has a healthcare division comparable to Haleon with health-related products such as Clearasil, Strepsils, and Durex. In addition, they have hygiene-oriented products such as Dettol, Vanish, Air Wick, Calgon, Lysol, and Harpic. Then finally, baby and children's nutrition products Enfamil and Nutramigen. Like Haleon, the demand for these consumer products should be mostly non-cyclical. Reckitt is a much older company than Haleon. Its share price has been going nowhere for years because the company made some expensive mistakes with its acquisitions. The CEO responsible for those has left the company. I expect that the company has learned from these mistakes and will move forward more carefully in the coming years. 

Bought: Haw Par Corporation Limited (SGX:H02)

Another personal healthcare company with only one brand name: Tiger Balm. I use this product myself after visiting the gym. Not so much for 'pain relief' as advertised, but more to emphasise the 'after-glow' feeling following a good workout session. Tiger Balm is trying to expand its product range to plasters, lotions, and even mosquito repellents. Besides the Tiger Balm business, Haw Par runs the Underwater World Pattaya aquarium and owns four commercial properties in Singapore and Malaysia. Its passive investments are a 4.5% share in UOB Bank Singapore, an 8.5% share in UOL, a developer in Singapore, and 600 mln in SGD cash on the balance sheet. If you analyse this collection of assets in detail, you will learn it is organised around the Wee family from Singapore. Family holdings like these are standard in Asia. Such shares will not give you quick profits through share price movements. The thesis rather lies in the safety of the assets and a decent dividend. 

Bought: Tianjin Pharmaceutical Da Ren Tang Group Corporation Limited (SGX:T14)

My final new buy in the consumer healthcare sector is a TCM company. A small position at not even 0.5% because the data I could collect about this business was minimal. The company is based in China. Unfortunately, its English 'Annual Report' is nothing more than the answers to the questions that the Singaporean Exchange provides as a framework for reporting. The answers provide a bare minimum of required data. It is hard to detect any tone of voice or indicator of mood from the management. Da Ren Tang is a 3 billion USD large-cap company, listed in 1997 and providing dividends all that time. Therefore, it is unlikely to be a fraudulent S-Chip. The goal of fraudsters is to collect money, not to distribute it. Finally, Da Ren Tang has no debts and a high ROIC. Its valuation seems decent, even low.

Sold: Okamoto Industries Inc (JPN:5122)

I sold Okamoto, a manufacturer of condoms. This company does not publish financial reports in English. Since I don't master Japanese, I always used Google Translate to gain insight into the views and strategies of the management. I did not get the gist of the limited comments they made. I am unsure whether the Google translations were poor or the words did not have much substance in the first place. While preparing my blog about family-owned companies, I discovered that the Okamoto family only holds 13% of the shares. That seems a relatively small commitment to support the 'skin-in-the-game' argument for family-owned companies. In summary, my conviction in Okamoto disappeared, and I sold it at a slight loss. 

Bought: WH Group Limited (HKSE:0288)

Another share where I only have just enough conviction. WH Group Limited engages in the production, wholesale, and retail sale of meat products in China, the United States, Mexico, and Europe. They have known meat brand names in all these regions. What are the advantages of such a worldwide approach? However, both the business and the share price are stable over time. 

Sold: Yum China Holdings, Inc. (HKSE:9987)

Yum China is the franchise holder for Pizza Hut, KFC, Taco Bell, Lavazza Coffee and a few local restaurant brands for Mainland China. Business is going well, and the share price has soared. When I bought this share, it was already priced high, but it has reached an extreme valuation by now. Just as an indication: the P/E is around 60. It is too optimistic. Let's consider that even when the expected growth occurs, there will be enormous workforce challenges. A restaurant chain does not scale up quickly and will need many workers. I decided to take my profits for now. I have put Yum China back on the watchlist and might purchase it again if it drops to an attractive valuation. 

Partially Sold: Luckin Coffee Inc (OTC:LKNCY)

My Luckin shares had a fantastic run. I bought my position for 9.95 USD per share, and it's nearing 30.00 USD now. Management is solving the issues related to the earlier fraud one by one while simultaneously growing the number of shops at a high pace. Let's hope they can soon re-list the shares on a regular exchange. Despite all the good news, I sold about 40% of my Luckin shares. The current share price represents a total market cap of 7.5 billion USD. The share may have reached a fair value by now. By selling 40% of my holding at almost 300% return, I am locking in my purchase price for the total holding plus some profits. Wherever Luckin's share price goes, I already made an overall profit. I will hold on to the remaining 60% and wait for a re-listing event before I decide on further actions.  

Shares in the most prominent Chinese coffee chain belong in a portfolio called Coffee Can APAC. However, at this stage, I am worried about the over-the-counter status of the stock. I also suspect that the meme-stock crowd is partly responsible for the recent share price rally. Luckin was mentioned on the WSB Reddit. Stocktwits and regular Tweets about Luckin are mostly meme pictures and hollow phrases cheering on the share price without providing any analysis of its fundamentals. That is all fine and well, but such uninformed investor herds can drop a share at a hat's tip again. 

Bought: Oriental Holdings Bhd (KLS:4006)

Oriental Holdings runs dealerships for Honda cars in Malaysia, Singapore and Brunei and for the Mitsubishi brand only in Malaysia. It also holds a 15% stake in the Malaysian assembler and distributor of Honda cars. In addition, it makes plastic products to support car manufacturing. The second most significant activity of Oriental Holdings is owning and managing oil palm plantations in Indonesia and Malaysia. Furthermore, it owns nine hotels which are marketed under the Bayview label. It also built and runs a hospital in Malacca, Malaysia, and trades building materials. Yes, it is a conglomerate entering my portfolio again, violating my checklist a few times. Yet, the long-term vision behind the management's approach gives this share a Coffee Can vibe. Oriental Holdings holds a lot of real estate and land, which seems undervalued on its balance sheet. This will be interesting to explore in future blogs. The stock is locally considered 'sleepy', but occasional announcements prove that the management is actively developing the business. Recently, some plantations co-owned with the Loh family, the majority owner of Oriental Holdings, were sold to the holding, which now has full ownership. This should raise revenues and profits in the short term.  

Sold: Suntec Real Estate Investment Trust (SGX:T82U)

I did some rethinking about my REIT holdings; let's call it REIThinking. Interest rates have been rising recently, which prompted me to look at the debt levels of my current REIT holdings. Suntec has a Gearing Ratio of 43.7%. The Interest Rate Coverage is 2.6, while only 53% of its debt is financed with fixed interest rates. As a side note, I rely on the excellent blog REIT_TIREMENT for financial summaries on all Singaporean REITs. Suntec was the weakest among all my REIT holdings on debt indicators. I don't think Suntec is in distress in any way. Nevertheless, it is my preference to switch to other investments.

Sold: ESR-Logos REIT (SGX:J91U)

A similar story to Suntec. Gearing is 41.8% with an ICR of 2.8. At least, ESR-Logos secured 72% of debts at fixed interest rates. The weighted average debt maturity is 2.9 years. Besides the leverage, I am worried about the involvement of ESR Group Ltd in several of my REIT holdings, as I expressed in an earlier blog. The fundamentals of ESR Group itself do not look rock-solid to me. Of course, it is just the sponsor and manager of my REITs, but with deteriorating financials, there might be an impact on the REITs they own and manage. For my own peace of mind, I will cut some exposure. 

Sold: Sunway REIT (KLS:5176)

Sunway REIT is Malaysian and not covered by REIT-TIREMENT, so I had to go out and collect the relevant data myself. Unfortunately, the leverage picture was not pretty. Gearing 41%, ICR is 2.8, with only 32% of the debt on fixed rates. On a different note, I don't like it when a REIT has one dominant party as its tenant. I recently wrote a new checklist item on that. In this case, that predominant tenant is Sunway Berhad, albeit through different legal entities. Can you really negotiate rents freely with such a dominant tenant? Again, there is no sign of immediate distress concerning this REIT. It's just me following my checklist rules.

Sold: Camellia PLC (LSE:CAM)

As I described earlier, this company violates three of my checklist rules. The business is commodity-based, organised as a conglomerate and primarily located in India and Africa. It is a problematic business sector, and the company needs better management. Lately, they have shown some willingness to dispose of non-core activities. They also vacated its posh headquarters to re-develop it for residential purposes. But it is too little, too late. I sold most of my holdings and will sell the remaining part when I need liquidity for another share purchase.

Sold:  JD.COM (HKSE:9618), Alibaba (HKSE:9988), Tencent (HKSE:0700), Meta Platforms (META)

I sold all my online platform shares, some of them at a considerable loss. I recently concluded that I find it impossible to truly understand these businesses. When I started my Coffee Can portfolio in early 2022, I defined three pillars to distinguish my shareholdings: 1) Consumer Staples 2) Infrastructure 3) Large online platforms. I came up with these buckets because most of my existing shareholdings were within these categories already.  

During 2022, we learnt that political developments strongly impact the profitability of large internet companies. Chinese government interferes in different ways than the US government, but government actions are hard to predict in both countries. Adding to the complexity, we also need to foresee whether the companies remain relevant from a technological and marketing perspective. For example, I read dozens of articles, tweets and blogs on the Metaverse, but I am still unsure whether this will pan out in any usable way. Following online businesses and thinking about the technology sector proved time-consuming and impractical. I opted for simplicity and dropped bucket 3) altogether. I should have a 'too hard' basket if Warren Buffett has one too.

Sold: Sun Art Retail Group Limited (HKSE:6808)

This sell trade is linked to the Alibaba sell-off mentioned above. Alibaba has a majority share in Sun Art Retail. Management is combining the operations of both entities. The share price movements of both listings correlate strongly. There will likely be a take-over offer by Alibaba for Sun Art at some point. I see no particular value in holding on to Sun Art.

Conclusion

As a buy-and-hold investor, I did an awful lot of trading. I chalk this up to the startup hurdles of the Coffee Can project. First, I sold some existing holdings that do not conform to the Coffee Can idea. Later on, I made the strategic decision to drop the technology bucket 3). This resulted in five sell trades as described above. Then I made some improvements to my buy checklist. I added requirements, such as a diversified tenant base for REITs. In addition, I sold off some weaker REITs in response to rising interest rate levels. Then finally, I took some profits with Yum China and Luckin. 

I held 75 shares at some point. I reduced this to 64 holdings, which is still too much to keep track of. I will likely sell some weaker shares to bring the total down. Furthermore, I will keep taking profits when share prices soar to ridiculous levels. Even with these two reasons to trade, I expect to slow my overall trading activity.

Disclosure: I hold Tianjin Pharmaceutical Da Ren Tang Group, Reckitt, Haleon, Luckin Coffee, WH Group, Oriental Holdings and Haw Par Corporation at the time of this writing