I started to reduce the number of shares in my portfolio, as described in my last blog. First, I decided which 4% positions to top up to 5% and which 1% positions to double to 2%. To finance these top-ups, I sold all the remaining positions where I did not feel comfortable to top them up. I already described a bunch of earlier sells. Here are some more shares that didn't make the cut.
Sold: Tong Ren Tang Technologies Co Ltd (HKEX:1666), Tianjin Pharmaceutical Da Ren Tang Group Corp Ltd (SGX:T14), Guangzhou Baiyunshan Pharmaceutical (HKSE:00874)
These companies are Chinese state-owned enterprises (SOE) that make and sell traditional Chinese medicine (TCM) products. I bought all three simultaneously to diversify the risks because I do not have the sector knowledge to select specific companies. I do not speak Chinese, and I don't have access to sales channels like WeChat and Taobao. I can't evaluate which of the three companies is doing best. I changed my vision on portfolio management since these buys. I abandoned this basket-type strategy and started focusing on companies I can study in detail. It was time to sell off this TCM basket to make room for this new approach. I booked a good overall profit thanks to Tianjin Pharmaceutical Da Ren Tang Group Corp Ltd.'s significant share price increase. It was more luck than wisdom.
Sold: Natural Food International Holding Ltd (HKEX:1837)
This company sells healthy food and snacks, mainly breakfast cereals. This food category is still a small and fragmented market in mainland China. The sector holds a promising future with an increased focus on health by consumers. Natural Food International is backed by PepsiCo Inc., with all its knowledge and experience, as a minority shareholder. Yet, Natural Food's revenues and earnings have not grown much during the last few years. The stock has been a value stock all this time with a P/B below 1 and a P/E of currently 6. Dividends were cancelled in 2022 and 2023, although the company had and still has plenty of cash in the bank.
The company's market cap of 129M USD violates my minimal market cap rule for Chinese companies. At the time, I decided to allow this rule violation because of PepsiCo's involvement. However, it is possible that I obtained too much trust from that involvement. The value of the participation is small potatoes for a global corporation like PepsiCo. It could be a venture capital type of investment for them.
All considered, I did not dare to top up Natural Food from 1% to 2% in my portfolio reorganization. I see some red flags, and I do not have much information to ease those worries.
Sold: PT Uni-Charm Indonesia Tbk (ISX:UCID)
Uni-Charm sells paper diapers under the name MamyPoko. One year ago, I bought this share as a long-term bet on a rising Indonesian population. A rising middle class should create a growing demand for higher-quality household products like diapers. The diapers that Uni-Charm Indonesia sells have been developed by Japanese multi-national Unicharm Corp. Pulp and paper are the main commodities used for the production of diapers. The market prices of these commodities are much more volatile than I had realized when buying the share. As a result, the margins of Uni-Charm fluctuate a lot too. The company is not as financially boring as a typical consumer staples producer. In addition, the stock price keeps going down.
Uni-Charm Indonesia is a joint venture between Unicharm Corp and PT APP Purinusa Ekapersada, an Indonesian paper & pulp manufacturer owned by Sinarmas Group, a vehicle of the Widjaja family. A combination of a multi-national company and a local family enterprise is perhaps not ideal. Both joint-venture partners are also suppliers to Uni-Charm Indonesia. This creates an opportunity to siphon off Uni-Charm's profits by charging supply prices higher than market prices. Should this ever happen, it will be almost impossible to detect. In summary, I did not have the confidence to top-up this share and sold it off.
Sold: Kotra Industries Bhd (0002.KL)
I recently bought this share, also known as Kotra Pharma. As you can read in the blog post, I already wondered whether I truly understood their prescribed medicine division. The pharmaceutical business can not be analysed in the same manner as the over-the-counter Appeton product division. I lack insights into factors such as pharmaceutical development pipelines and regulations. I did not have the conviction to top up Kotra, so I decided to sell it.
Disclosure: No more positions in the shares mentioned.