Updates and rebalancing #1

Closing 2 positions and adding 2 others

It seems like the market hasn’t taken its meds again, and is in a somewhat hysterical mood right now. So time to do some rebalancing!

I did some more thinking on Master Residential Fund (URF.AX) and decided to sell my shares. I don’t think the margin of safety is large enough. If you factor in renovation costs, transaction costs and cash burn, it kills a lot of the upside from here. It is not clear to me these costs are factored into their NAV number. Just a small downwards movement in home prices kills the rest. So with shares being up about 12% since posting it a month or so ago, I am closing it. Especially now that I see so many bargains elsewhere due to this SIVB nonsense. 

I will close the Tim S.A. (TIM) position as well. I mentioned I owned  this stock in October last year. Return so far has been about 30% including the dividend. But margin compression has been a bit more than I expected in the latest quarter. I find it kind of hard to estimate normalised earnings, and again too many other cheaper stocks around now.

I also greatly reduced my Toya (TOA) position to speculative. I think there might be further margin compression, and I am only keeping a small tracker position. 

I added to my Halyk Bank (HSBK) position. Management has given guidance for 2023 for about $1.5 billion in net profit. This means the stock trades at about 2x earnings, which is pretty crazy. Only a 25% payout would mean a 12.5% dividend here. Given the very high ROA and ROE this bank is generating, this might not be sustainable? But still, 2x earnings, is 2x earnings right? Hard to ignore, especially with a double digit dividend yield. 

Petrobras (PBR.A) management has given strong indication in the recent conference call that the company will spend no more than a few billion $ a year on renewables. And basically in the short and medium term it will stick to their 60% of FCF dividend formula. So I added some yesterday right before the shares fell another 5%. @#$%&!

I also bought back into British American Tobacco (BATS). I had forgotten about this stock, and it is still in my active ideas list. There are some fears the Menthol cigarette ban will significantly affect profits, but I think those fears are overblown. Stock is trading at a 13% NTM FCF yield and a 8%+ dividend yield. I expect with the cancellation of their buyback, this is soon added to their dividend? Check out this recent write-up in case you are not familiar with the stock.

Tobacco stocks always periodically sell off, as the news flow is usually bad. I think just focussing on the numbers and collecting those large dividends is the winning strategy. 

Then I got 2 new stocks, one of which I already finished an article on, which I will send out soon as well. 

As usual, do your own due diligence, and I may sell and buy any of the mentioned stocks at any time.