Update on PAGS, HOLI and BATS

Closing 2 and reducing 1

I kind of lost my nerve with Pagseguro (PAGS). I had a strong urge to sell when it ticked $13 in May, and I am kicking myself for not doing that. Instead I sold it at an average price of just under $10. Still a profit, but no outperformance. I was a bit worried by STNE’s management comments about PIX taking rapid share in C2M. And overall I don’t feel comfortable enough about figuring out the competitive position of PAGS currently. Honestly 8-9x earnings isn’t cheap enough, and lowering interest rates is going to take longer than I (somewhat naively) anticipated. 

I reduced my HOLI position and cut it in half. Still no buyout, and last Q’s results weren’t that great. I think I am out of my position by the end of September if there is no definitive agreement by then. 

Then I will close British American Tobacco (BATS) as well. Volume declines were a bit higher than expected, and so far revenue growth has also been disappointing. Considering the debt, the stock seems more and more like a high yield value trap. I sold it a while ago, but now I removed it from my tracker portfolio as well. It seems like volume declines will probably stay high, and revenue will likely not grow much. And the perception will stay that at any time limits of pricing power might be reached. So I think a multiple rerating will be increasingly unlikely until the company is close to debt free, or unless volume declines decelerate. 

New categories growth is only in the mid 20’s as well now. Down from 40% in 2022. I guess still a positive return since first mentioning it thanks to the dividends. I want to focus down my portfolio to fewer juicier ideas.

I think BATS is cheapish here. So not claiming the stock is overvalued. But its not cheap enough for me. You can probably outperform the index by a few %, but I am aiming for 10-15%+ outperformance as a hurdle rate.

That will be all for today. As usually do your own due diligence before buying or selling anything and I may buy or sell the above mentioned stocks at any time.