Usual end of year review here. It hasn\u2019t gone well, overall +0.8 (excluding Russian frozen stocks) or +5.4% including Russian frozen stocks. If Russia goes back to normal will be up far more as there are a lot of dividends waiting to be collected, not included in the below.<\/p>\n <\/p>\n Linking back to last year <\/a>I was pretty much wrong about everything.\u2002I was heavily into natural resource stocks (c57% weight vs 41% now), not the best sector in 2023.\u2002Some of the fall in weight is due to me mildly cutting weights as stocks didn\u2019t go my way \/ though quite a bit is due to price falls. I had moments of good judgement \u2013 saw the possibility for political change in Russia \u2013 which very nearly came about with the Prigozhin mutiny, got into financials late in the year. Broadly things haven\u2019t worked. There is a mild positive element to this \u2013 if I can be pretty wrong on almost everything and still not lose *much* money it\u2019s not too bad \u2013 but it\u2019s far from ideal given time I put in \/ potential returns.\u2002It\u2019s also positive I havent gone off the rails after the large Russian loss last year \u2013 its easy to chase \/ raise exposure, which is something I don\u2019t think I have done. There is an argument around stops \u2013 which I don\u2019t use \u2013 going to be a little more careful with stocks bought at highs \u2013 particularly Hoegh Autos.<\/p>\n Weights are below:<\/p>\n Figures are as at 23rd Dec \u2013 so a little approximate \u2013 but a generally accurate flavour of where I am. (some very illiquid stocks like ALF prices are incorrect\u2026<\/p>\n Not inclined to change sector weights too much, less precious about stocks. I have also been quite badly hit by production problems, AAZ had tailing dam issues, PTAL \u2013 issues with the natives, JSE \u2013 production problems.\u2002Not sure if this is just dumb luck or some of these problems were in the price \u2013 I certainly knew PTAL had problems with \u2018community relations\u2019.\u2002JSE\u2019s problems with their FPSO (floating production ship) could have been forseen if I had researched better \u2013 important to look into age of vessels, didn\u2019t know\/think to do it at the time however.\u2002These few hundred million market cap stocks are much more vulnerable than I thought- cash piles can evaporate very quickly if they hit issues.<\/p>\n Moves in some of my larger weight resource co\u2019s that I continue to hold have been unfortunate \u2013 CAML -27%, KIST -61%, TGA -53% and THS -32%.\u2002Whilst gas and coal are down substantially copper is about trading at the price it was at the start of 2023, Tharisa\u2019s basket isnt down that much.\u2002CAML is trading at a PE of 8, 9% yield, THS PE of 3.5, 1\/4 book, though marred by a management who insist on growth capex whilst trading sub book.\u2002They may get lucky if prices rise but it\u2019s luck, not judgement.\u2002TGA, also very, very cheap 7% yield, low single digit PE, again, irritatingly, investing rather than returning capital.\u2002These large falls are not wise from a capital preservation perspective, one needs a 100% rise to counter a 50% fall.\u2002But if we do get a pick up in the economy \/ resource prices these could easily get back where they were. There may also be an argument these can just rerate with the market, though at present they just seem to be disliked. PTAL seems to be doing well with decent prospects and a 10%+ yield, with buybacks \u2013 all depends on the oil price. Downside to all this is being commodity producers they only have so much control over their fate \u2013 why many investors dislike them.<\/p>\n A stock which has had production issues is GKP \u2013 Gulf Keystone Petroleum it\u2019s issues concern the legitimacy of it\u2019s production contract \/ pipeline access.\u2002It\u2019s the only one I have added to rather than reduced over the year \u2013 averaging down.\u2002The whole Kurdish oil industry has a question mark (depending on who you listen to) regarding the legitimacy of it\u2019s contracts.\u2002But, I can\u2019t think of an example where a whole industry was seized \/ nationalised \/ expropriated.\u2002Everyone \u2013 Kurdish govt \/ Iraqi govt and oil companies have said that contracts will be respected \/ discussions are ongoing.\u2002It is far from risk free \u2013 I suspect biggest risk is that one company is punished \/ seized to encourage a deal to be made by the others.\u2002Huge upside on this \u2013 it\u2019s a very large field with very low extraction cost \u2013 even though the oil isnt the best quality, if made legitimate depending on the exact deal.\u2002They are more than covering their costs so in my view worth a look if you have risk tolerance for a substantial loss. If this works it is a 3x-5x or more, but it is one where the outcome is largely outside management\u2019s control \u2013 for reasons other than commodity prices.<\/p>\n One of my best performing investments is JEMA \u2013 formerly JP Morgan Russia.\u2002It is an odd one \u2013 trading at 48p \u2018official\u2019 NAV with a share price of c \u00a31.30 and a MOEX NAV at about \u00a35-\u00a36. JPM have marked all the Russian holdings to about 0.\u2002I am up about 55% and have trimmed the position \u2013 selling about a third already.\u2002There is growing talk of seizing Russian assets to pay for the next round of Ukraine funding. Not entirely sure what to do on it \u2013 upside is still huge but I already have 30% of the portfolio value in Russian, sanctioned stocks.\u2002I dont really need an extra weighting to turbo charged Russian exposure with the same risks \u2013 going to have to cut this to manage risk but somewhat reluctant to, given the upside\u2026 I believe a lot of the frozen Russian assets are held by Clearstream in Belgium , but unsure to what degree Belgium really makes the decisons on that one. Russia appears to have \u2018won\u2019 at least to some degree militarily \u2013 they are making gradual progress, however they are keen to have \u2018peace\u2019 \/ cease fire talks.\u2002I suspect this is because their wins are not sustainable, human losses\/ financial cost is too heavy to be sustained. Ukraine lacks the manpower and potentially arms for an ongoing attritional fight but Russia lacks the motivation.\u2002My view is Russia cracks first and we see more mutinies in 2024. <\/p>\n Uranium trade has gone well \u2013 KAP\/URNM up 43\/53%.\u2002Have switched a little bit of money out of URNM into YCA \u2013 maybe the metal will continue to outperform the miners for quite a while.\u2002I am somewhat skeptical of YCA \/ SPUT buying Uranium to tighten the market \u2013 as an industrial commodity \u2013 it only really has value if it\u2019s used \u2013 so implied price of spot \/ spot -% means one day it will be used, and if it will be used then tightening of the market probably shouldn\u2019t happen.\u2002Not how people are looking at it at the moment though.<\/p>\n Financials have done well \u2013 despite me adding Nov\/Oct so they haven\u2019t had too much time to contribute.\u2002October prices for lots of investment trusts \/ asset managers etc. (mostly UK based) looked very depressed, 10% yields 40% etc discount to book values.\u2002Startling how quickly things have bounced. Not entirely sure best way to handle these longer term, they could be a nice solid income play, bought at high yields or if I find something better then time to sell .\u2002I wrote about these recently in this post<\/a>.\u2002I am a bit concerned about them as a longer term hold \u2013 the upside is very much limited, though high probability.\u2002I prefer to be in the \u2018real\u2019 inflation linked economy, hard assets rather than the financial economy.<\/p>\n A financial I bought after that post is PHNX \u2013 Phoenix Group \u2013 this is a large closed life insurance manager it\u2019s trading at a decent 9% yield. The dividend is \u00a3500m for a company which is generating\u2002\u00a31.3-1.4bn pa in cash and which has \u00a33.9bn solvency 2 surpulus \u2013 it should be sustainable.\u2002As ever with hyper large-cap insurers as an amateur you are never quite sure what the regulator will come up with which will ruin your day.\u2002You are also betting against the new weight loss drugs increasing lifespan \u2013 though of late expectancy has been falling unexpectedly<\/a>. Not one I will hold for too long \u2013 I am thinking about a year or two, but I think it is under-priced. Seeking alpha write up here<\/a> (not by me).<\/p>\n Sold out of AA4 and DNA2 \u2013 decent profits on both (+100% on some tranches, held since 2020) but I think there are better places for funds now.\u2002I may be missing out on a bit of upside if the A380 finds more of a market \u2013 perhaps if another airline starts using it, though I doubt it is logistically simple. There are now better opportunities out there, though AA4 may have more upside but at higher risk.<\/p>\n Fondul Proprietea is now a tiny weight \u2013 after tender offers \/ returns of capital.\u2002Its a little sad to be saying goodbye.\u2002I came up with this idea back in 2012<\/a> and have benefited from a closing of a 50% discount and growth in underlying investments \u2013 it\u2019s really the ideal investment.\u2002It has had a 962% rise since inception (2011) and I have owned it since 2012 \u2013 though on occasion have had to drop it due to broker issues. Time to sell this \u2013 as there isn\u2019t too much upside left now. Really struggling to find things with this level of quality \/ cheapness \/ ongoing compounding opportunity. <\/p>\n Having said this, one which may fit the bill is Beximco<\/a> (BXP) this is a Bangladeshi Pharma, trading at a PE of 5, doubled revenue since 2018 (in BDT, but even in USD it has grown impressively) and it has substantially increased earnings (my 2019 write up here<\/a>).\u2002It is currently trading at half where it is in Bangladesh but there is no arbitrage opportunity. Frustratingly, I had to cut my weight as my broker wouldn\u2019t allow it in a tax efficient ISA account, this didn\u2019t hurt me as the price fell.\u2002My broker has changed their mind so now I can put it back and raise the weight. Brokers here seem to rely on large screening firms and drop \/ add firms to the list of what is eligible \u2013 not depending on the rules but how they feel at the time.<\/p>\n Walker Cripps is very much the worst kind of value investment \u2013 the one where nothing happens.\u2002Walker Cripps is cheap on an AUM basis but hasn\u2019t moved since I bought it in 2015. Possibly I have given this too long, then again there is consolidation in the sector and this would be perfect for it\u2026 The FOMO of knowing the day I sell it an offer will be made at 3x the current price keeps me holding, my not insubstantial patience is running out.<\/p>\n I still have some leverage \u2013 but that\u2019s cheap mortgage \/ unsecured debt at 3\/4% rates.\u2002Its a relatively small amount vs portfolio \/ portfolio + property assets \u2013 about 20%\/11%.\u2002In effect, as in prior years leverage is being used to buy gold \/ held on deposit at a higher rate\u2026<\/p>\n In terms of life \u2013 no change, still living in the UK, rather unhappily employed (low\/mid level data analyst) three days a week, doing investments \/ little bit of property the rest of the time. Really looking forward to life starting properly when I am no longer employed \/ ideally leaving the country.\u2002Was somewhat distracted by a pointless court case during the first half of the year and didn\u2019t see much opportunity so didn\u2019t do much. Second half has been better, particularly after October.\u2002I still think a big move in many of the resource co\u2019s I hold is likely, so really dont want to move before that happens \u2013 as a country move will entail pulling quite a bit out of stocks. PE\u2019s of under 5 are not likely in my view to be sustained, though there is a risk a sustained recession \/ depression shrinks earnings and share prices further\u2026 I\u2019d like to get more copper \/ tin \/ silver exposure but haven\u2019t yet found any stocks I like, and ETF\u2019s are not without their problems\u2026 <\/p>\n Think this year has suffered from me mostly being in decent stocks in terms of yield \/ valuation but not stocks the market cares about \/ likes which is why they are cheap. I could go more mainstream but I\u2019d rather stay where I am and wait for the market come to me rather than chase\u2026 Not wedded to particular stocks but the weighting to the resource sector needs to remain \u2013 they have been under invested in they are cheap and unfashionable \u2013 very much think they will have their day in the sun. Plan to switch back from some of the finances to resources once the financials get back to closer to what I anticipate is their fair value.<\/p>\n Stocks I plan to look at next are tobacco \u2013 BATS\/IMB probably \u2013 if I can get comfortable with legal risks \/ debt levels, they are yielding well and are not highly valued.\u2002When I can buy mainstream stocks at single digit PE\/ EV\/EBITDA there is no need to go too far into exotic territory. Not the most popular \u2013 they do kill their customers after all, but vapes, cannabis etc may provide an opportunity to actually buy growth at a low price \u2013 particularly if regulation cuts out dodgy Chinese imports. Still want to rebuy Royal Mail at the right price. Longer term I want more Latin American \/ Asian listed stocks.\u2002China looks cheap but I am very wary of avoiding a repeat of the Russian situation.<\/p>\n Best of luck for 2024 \u2013 as ever comments\/views appreciated.<\/p>\n \t\t\t<\/p><\/div>\n\n","protected":false},"excerpt":{"rendered":" Usual end of year review here. It hasn\u2019t gone well, overall +0.8 (excluding Russian frozen stocks) or +5.4% including Russian frozen stocks. If Russia goes back to normal will be up far more as there are a lot of dividends waiting to be collected, not included in the below. Linking back to last year I […]<\/p>\n","protected":false},"author":1,"featured_media":56123,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[96],"tags":[3767,1636,32046,11237,3749],"dealstore":[],"offerexpiration":[],"class_list":["post-56122","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-investing","tag-blog","tag-deep","tag-dissapointing","tag-investments","tag-review"],"yoast_head":"\n![\"\"](\"https:\/\/deepvalueinvestments.wordpress.com\/wp-content\/uploads\/2023\/12\/long-run-performance.jpg\")
<\/a><\/figure>\n<\/a><\/figure>\n<\/a><\/figure>\n<\/a><\/figure>\n<\/a><\/figure>\n