Moss Piglet’s 2Q2020 Review
What an unbelievable first half of 2020! After a disastrous 1Q, we have seen some sort of recovery in the markets this quarter and now we are currently seeing mixed performances as the markets begin to digest the numbers coming out from 2Q2020.
Countries all over the world are starting to open up their business and trying to implement fiscal policies to jump start their economy. I myself received quite a generous payout from Singapore’s government which almost half of it has already been spent on my wife’s anniversary present, food deliveries and Fathers’ Day celebration dinner.
My Portfolio Performance
Unfortunately, I’m still in the red for the year. Despite the gains in stocks like Aercap (NYSE:AER), Uranium Participation Corp (TSE:U) and Union Gas (SGX:1F2), my portfolio performance remains flat due to Straits Trading (SGX:S20), BRC Asia (SGX:BEC) and Boustead (SGX:F9D).
New Long Term Additions
Liquidity Services operates a network of e-commerce marketplaces. Its online auction marketplaces include: Liquidation.com, GovDeals.com, Network International, GoIndustry DoveBid, IronDirect, Machinio, and Secondipity.com. Basically it offers businesses a one-stop service to clear/sell their unwanted assets to recover some value from it instead of just disposing.
My investment thesis is due to A) Counter-cyclical business that should do well in this economy downturn. B) HUUUGE share buybacks by their CEO (about $4–5mil).
There is a well written bull case for LQDT here: https://paretos-contrarians.com/2020/06/04/liquidity-services-ridiculously-cheap-and-at-an-inflection-point-giant-insider-buying/
2. Maxar Technologies (NYSE:MAXR)
Maxar is a satellite imagery company that has 2 business segment; data generation and analytics through its Earth Intelligence arm and building Space Infrastructure.
What I like about Maxar is that they are starting to deleverage its debt pile through the sale of its lumpy space infrastructure businesses and instead focus on its high margins Earth Intelligence business which are largely recurring, multi year contracts.
Another catalyst is their next generation constellation of earth observation satellites called WorldView Legion, which will supercede their aging Worldview 1 & 2 satellites. WorldView Legion is slated for launch in 1Q2021.
This company is not without baggage, their debt load is very high at 3.95 and there is also the risk of its WorldView Legion project failing (Read: https://spacenews.com/digitalglobe-loses-worldview-4-satellite-to-gyro-failure/) . However, what I like about Maxar is that it is fundamentally getting better while share prices remained depressed.
3. Nordic (SGX:MR7)
I have written about Nordic last week. The link can be found below
https://themosspiglets.com/2020/06/28/nordic-sgxmr7-will-contract-backlog-will-push-nordic-up-again/
I feel that it is a good long term hold for me as its business, although affected by the pandemic, is not going to go obsolete and its potential synergy cost savings among its different business segments are not fully appreciated by the market.
What I Sold
There were some hit and runs this quarter like ExpressSpa (XPSA), Gan Ltd (GAN) and Remark Holdings (MARK). These are small plays (gamble?) which is attractive based on its narrative but not on the fundamentals.
I have also trimmed about half my tanker holdings during the run-up in April/May. At this point I’m still overall green for my tanker stocks.
Closing
I am expecting some volatility in these coming months. Given the surge in global equity markets since late March, many investors will be making some adjustments and rebalancing. While the recovery appears strong in its early days, a resurgence of the virus and high unemployment remain the biggest risks.
Fiscal policies will provide a safety net for those companies and their investors, but what they really need is demand. Demand is a function of both business and consumer confidence, and they are inextricably linked to a slowdown in the spread of the virus.
Since that seems elusive as economies reopen and relax social distancing guidelines, the challenge facing investors in the coming quarter, and for the rest of the year, is pretty obvious.
Meanwhile, stay safe and wear masks when you guys go out.
Cheers
Originally published at http://themosspiglets.com on July 4, 2020.
