Another busy month for me. Overall, not a very smooth month for me. hit a couple of snags at work. Sub-contractors facing cash flow problems and my company have to bail them out a few times. We are still trying very hard to tender for new projects but the construction landscape is so competitive now, most of them are going for breakeven prices and hoping for a better year next year.
Then my car broke down twice in 2 weeks..
Portfolio grew by about 5% this month. Powermatic Data did pretty well over the last few months. UMS’s climb, which I think is due to JEP’s growth, was surprising and it’s a relief for me as I was not really convinced that the diversification plans would do well (which usually dont).
I initiated a pretty large position spread over a few shipping counters. Scorpio Tankers (NYSE:STNG), Scorpio Bulkers (NYSE:SALT), Star Bulk Carriers Group (NYSE:SBLK) and Pacific Basin Shipping Corp (HKEX:2343). I am overall bullish on the shipping industry and I was expecting a few multi-baggers by year end. So far they are doing okay but it can be better. 3Q results for them so far are very good and I expect 4Q to be even better.
I have not sold any of my stocks so far. Some of the companies that I’m looking at are HK related like Dairy Farm and Hongkong Land.
Twitter(NYSE:TWTR) is looking attractive again. The stock price suffered a 20% decline due to a triple whammy of earnings and revenue miss, lower outlook and bugs in their app. but overall, I see growth accelerating in their monetizable daily average users(mDAU), which means that if they can get their ads targeting right, revenue and profit would definitely increase esp next year when we have the US presidential elections and Olympics 2020.
This is the one sector which I spent most of my time on researching and I’ve decided to invest in a few of the shipping counters.
The main reason for my bullishness is the coming IMO2020 which will affect their fuel usage from the 3.5% sulfur content blend to 0.5% sulfur content blend. However, if you install scrubbers on your ships, you can still use the higher sulphur fuel oils.
Currently it is a race to install as many scrubbers as you can to be able to use the cheaper fuel option. The Scorpio brothers and Star Bulk are first movers in this area and have completed more than 50% of their ships and is expected to have cost savings due to the scrubbers. The recent rise in rates, both tankers and dry bulks, would allow them to report even higher cash flows.
You also see ports rushing to stock up on low sulfur fuel oils which will drive tanker rates up.
You can read about my writeups on STNG and SALT in the links below;
Of course, this is my case for longing those shipping companies mentioned earlier, but this is still a pretty risky sector to invest in and there are a lot of other factors in play that could affect the outcome.
Things to Watch in November
I’m interested in the development of the repo market, potential trade US-China trade deal as well as Brexit. These are the top 3 things to watch out for next month.
Jed Powell is the Repo Man
Jesse Felder has written a pretty neat post on repo markets which you can read here. Basically the repo market is in a mess now and there might be a liquidity crises there.
US-China Trade Deal Stage 1
US and China are expected to sign a initial agreement in November but things are still uncertain with news that Nov 16 APEC Summit in Chile was cancelled. Will be interesting to see what are the terms agreed, or none at all.
The Power of Boris Johnson
The Brexit deal has reached a deadlock and it seems like elections will be the way to move forward. Taking a quote from Star Wars The Force Awakens, hopefully “this will begin to make things right”
Currently, I feel that sentiment is on the bull side as S&P 500 notches a new all-time high on earnings and trade optimism and The Fed cut the overnight lending rate by 0.25% to a range of 1.50% to 1.75%, which was expected.
The recent manufacturing and services data are disappointing but retail is still not really affected yet.
While consumers have been spending like it’s their job, companies have taken that extra money and used it for stock buybacks, boosting their dividends, and some merger activity. That helps existing shareholders and top executives, but doesn’t translate into the things that help companies grow, like research and development and capital spending. When those are growing, GDP grows with it. That’s just not happening.
Till then, cheers
Disclaimer: The Moss Piglet is vested in all the companies mentioned except for Twitter.