Risk on again

Period 1st half April 2016, written April 14th


Asset Allocation

The cash equivalents weight has edged down slightly as I got filled in CEF:US as I have discussed, also I topped up a holding of UOS which I shall mention below.

So weights increased slightly in commodities (gold/silver) and property. As we move into the second half of April I may elect to reduce some equities risk by shorting the DOW as we move into a seasonally weak period and possibly the bearish sentiment seen earlier in the year may have seen some capitulation. Also depending on various levels it may even be the case of simultaneously going long in some oil exposures or E.M. and viewing it partly as a long/short trade in isolation. The overweight in commodities, primarily gold, then agriculture and more recently oil is now meaningful in terms of recent ranges.



Previously I mentioned we may see RBA jawboning in the high 70s and this effect was seen with the RBA statement which saw the AUD weaken in the next 24 hours. Above 76 it gave me more comfort to put to work investments in offshore currencies at the moment if they present themselves. CEF:US and UOS in this case did. So from fairly neutral last update I am now underweight AUD by approximate 3%. At the same time recently some data has not set the world on fire, the iron ore price actually eased back as the AUD roared to 77, (well this was the case at the time of these particular trades anyway), and the residential CBD apartment oversupply is lurking in the background. Interestingly Labor is significantly shortening in election betting which is probably not friendly to property prices.

In hindsight if my stuck to my earlier plan of trading AUD from the short side via Yen I would have done much better of late.


Individual Stock Decisions

CEF:US – as previously discussed with the gold price easing back close to 1,200 and silver very much lagging I purchased this at 11.71. It trades in USD and my conversion was approximately when the AUD was 76. If we are at the start of a bull market in precious metals I expect the current discount to NTA of about 7-8% will one day be a handy premium if history is any guide.

UOS – this Property developer seems to trade cheap because of the unusual situation of primarily being involved in Malaysia, but having an ASX listing with the major shareholder having a big slice and thus liquidity is not great. Also management don’t make much of an effort in promoting the company down under. The reason being management are too busy doing a fantastic job growing the business over a very long time! They were trading cheap in relation to where their main subsidiary was trading on the Malaysian market (at the time of trade anyway) and I had been eyeing this as another way to benefit from a falling AUD (against Malaysian ringgit). I upped up my holding at 49 cents. Recently they have been dipping their toes in Vietnam. Very small exposure for them probably not worth mentioning but looks like they have picked that market very well also.

Facebook (SHORT) – I have mentioned ideally I would like to reduce some equites exposure given the rally of late and approaching the seasonally weak 6 months from May. I have also mentioned the poor market breadth of the U.S. bull market. One of the big leaders or “fang” stocks is Facebook that recently approached it’s all time high again but then struggled to break it for the time being. I thought it may be worthwhile of a short, with earnings being reported late April this will play a big role in whether this is a profitable trade. The U.S. market feels like a mini version of 2000 sometimes with the concentration in certain sectors. The Facebook valuation requires huge belief. As user’s audience (“friends”) become so large most people don’t feel comfortable sharing as much. It doesn’t take too long to gravitate to another app and organize with a group of real friends to do your sharing. Instagram and WhatsApp have played this role and I realize Facebook bought both but can they keep playing that game and pay up on acquisitions down the track? This pattern may continue (i.e. advertising gets increasingly annoying, friends or followers get larger and then another app becomes better to share the more intimate day to day events). Put simply I don’t think they have a monopoly over user’s social media screen time. Other apps are also used extensively outside of Facebook in various other countries. Well that’s my theory anyway, I am sure many will disagree! I shorted at 111 with a stop at 136. They have beat expectations 8 quarters in a row and I feel the rally from January now has a lot of investors buying on this fact, meaning beating expectations may not be enough to continue the uptrend.


Individual Stock News

3918:HK Nagacorp – Nagacorp I wrote about in February after their profit numbers, and the share price looked sick. Unfortunately, I didn’t buy more but did say if one didn’t own a lot already they were a good buy. They just released their quarterly numbers on revenue and the stock is now going great guns, moving from about 3.80 when I last wrote to 5.50 now. I think the all-time highs of $7.50 are achievable for Nagacorp in the next year or two.

UPG – UPG announced they will be able to sell their main asset at more than the NTA. I have owned this a couple of times and got in specifically as a wind up play last October. Interestingly I purchased after a news announcement that they were definitely set upon selling the assets and winding up the company. I was able to but at 74 cents with an NTA of $1.05 so the market was actually implying the assets were way overvalued. Looks like the market was wrong. Aside from the NTA there were tax losses that when conservatively discounted back could arguably be worth another 10 cents to a buyer. The NTA from recent news from them now looks closer to $1.20 with some further positive revaluations. After the main asset is sold a small almost shell will be left where already buyer interest has been seen and the tax losses may be useful. Therefore, the stock may return $1.30 from here even so I am not selling as it currently stands with the stock 1.05/1.10. This is an example of the “cash equivalents” investment type I sometimes may own, certainly far riskier than cash but less beta than most stocks and likely to convert to cash at a relatively defined future date.

NGE – the buying here looks sus as I recently topped up at 1.9 cents on this cash box that I wrote about not so long ago. Now with no news announcements went to 2.5 cents on heavy volume. I wonder if will see “coincidently” a positive news announcement soon?

RNY – it’s not all smiles on my property plays like UPG.  After selling half my position on the day of the disappointing profit results in Feb at 18 cents, the stock has since dived to 10 cents meaning my position is quite small now! At the time I discussed fair value around 20 cents so maybe in theory I should start buying back in now. The rising AUD against USD knocks something off the valuation but not 50%! Investing is often a lot about not carrying too many battle scars and right now I don’t feel too bad about this stock, pleased that I could sell half at 18 cents. I also don’t like to buy stocks in free fall as a rule of thumb. Some big holders like Forager and Sandon don’t appear in my mind to be buyers in the next few months. Judging by Forager’s comments in their quarterly and Sandon already buying more after the profit results. I also think the tax loss selling periods of May-June may keep a lid on any potential price jump. For that reason, I am doing nothing right now. Maybe if it stabilizes into June and stops falling on bad news, the AUD is around 75 or lower I could possibly look at buying. Could be more like a speculative option on a large fall in AUD/USD where the stock may do really well from the 10 cents level.

SSM – there was no news on RNY but a big price move so I thought I would provide a comment. Likewise, with SSM but to the positive. I first wrote about this in January when the stock was around 45 cents. I decided to try and stay with the stock whilst above the 200 MDA because often when you find a good small cap winner like this it goes higher than you think and you need some big winners to cover the inevitable duds in the portfolio. It is trading around 75 cents now and I purchased at 26.5 cents in May last year. It is possible I may exit at least some of this stock as we get into late May and it provides a little CGT relief from the 1 year hold. At 75 cents I still don’t think it is expensive (just not cheap anymore), so it would be more from a risk management perspective to consider lightening up.

AAC – reported a solid NTA jump from 1.53 to 1.64.

MEL – good quarterly cash flow report, cash backing around 7.2 cents, trading recently at 5.5 cents.



  • Would probably ideally be happy with some more short term strength in the indices, that may finally frustrate other investors playing too defensively and then need to cover shorts. If so strength in April historically comes into a seasonally weak 6 months that statistics back up over a long time. That may present an opportunistic time to reduce some equities exposure.
  • The oil sector may pause giving me gradual chances to slowly look at some new positions. Or also emerging markets that may benefit for example Russia. I may simultaneously enter and in part view as a long / short position against U.S. stocks.
  • If stock markets gap down be reasonably patient with buying until US indices are at least in bear market territory.
  • In regards to the above I may not be looking for a bear market in the US that runs too deep, i.e. 30% plus. One should note that a small number of stocks are making the US stock markets appear better than it seems. So a 20% pullback in their indices would probably mean the average stock is down 30% plus anyway. Some emerging markets that I have discussed previously may be the better option to buy as they have already experienced a bear market the last couple of years in many cases.
  • If the currency markets further frustrate many who have been long USD recently it may have finally cleaned out those “weak hands” in this market. Long USD speculative positions have already recently shown some cleansing out. On AUD/USD 77-80 range I would certainly consider essentially reversing some of the profit taking trades I made when I benefited from AUDUSD falling to 69 cents. For example, getting back into WIA:US and GVF may be worthwhile if they show reasonable discounts to NTA at the time.



This information should by NO means be taken as financial advice. It does not represent general advice or specific advice, particularly as I am unaware of the personal financial circumstances of readers. It is written purely for the purpose of an investment diary, to look back on, self-reflect and try and improve my own accountability for the investment decisions I make. It is for fun, and I am not a financial advisor. I try to be as accurate as possible but cannot guarantee I avoid mistakes. If making decisions with your own money, please do your own research and seek personal/professional financial advice.

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