|Joy Global||Mining Machinery||USA||9.5|
|Western Union||Money Transfer||USA||8.6|
|Wheelock & Co.||Real Estate||Hong Kong||5.3|
|Hang Lung Group||Real Estate||Hong Kong||5.2|
|Henderson Land Development||Real Estate||Hong Kong||4.4|
Our INTERNATIONAL managed portfolio follows a long-only, buy-and-hold, equities-centric value strategy. It is intended for investors with at least a 3 to 5 year investment horizon and who seek capital growth at below-market risk.
To maintain our long-term view we put most of our efforts into monitoring our holdings’ operational performance, while also watching for clues from industry that might either support or disprove our arguments. We noted the following during April:
Retail sales in Hong Kong have fallen significantly as fewer mainland tourists each spend less. It is noteworthy that Wheelock & Co. has generally held up in price, possibly a reflection of the high quality of its subsidiary’s premier assets – Harbour City and Times Square, and the very steep discount its shares trade at in the market.
A Japanese utility recently paid a premium to the spot price of Australian thermal coal in an annual contract. This would appear to be a favourable sign for coal miners (being customers of Joy Global) and perhaps an early indication that the supply/demand balance is shifting in favour of producers. Also, bankruptcies are increasing amongst US E&Ps, as banks reduce loan financing following the oil price decline and a decline in the value of reserves collateral. This could lead to lower natural gas supply, higher gas prices, and hence higher utility demand for thermal coal.
Finally, there are increasing signs of pragmatic and distress driven consolidation in the container shipping industry, as well as the formation of a third mega-alliance. Together with two large mergers between container leasing companies, this should bode well for Textainer, which will benefit from stronger customers, and more rational pricing.
Pessimism continued to decline in April, and this affected our positions favourably. However each remains deeply undervalued and we are not inclined sellers at these prices.