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Taxi drivers are often seen as one of the most dependable observers of societal conditions. Citing his conversations with them, from Beijing to Suzhou to Shanghai, OCBC economist Tommy Xie concludes that China’s atmosphere is “notably pessimistic”. “All taxi drivers I interacted with believed they were earning less this year for various reasons. One common element cited was the increasing competition from new drivers, many of whom turned to driving as a last resort after losing their jobs,” relates Xie in a recent report.
Following the mid-year performance review for The Edge Singapore 2023’s global virtual portfolio last week, we are publishing the updated figures and transactions this issue.
To recap, our virtual portfolio was incepted on Jan 24, 2020 with 10 stocks that returned 98.1% for the year (Issue 917). The virtual portfolio’s starting value of US100,000 was equally allocated among 10 stock picks.
Acquiring businesses for a premium is likely to hurt short-term financials but if done for a strategic purpose, it can create value well beyond the additional capital spent on the purchase.
Sometimes, businesses may be subjected to headwinds that are unlikely to persist and have their share prices beaten down due to marked differences in financial results from previous comparable quarters. This may happen even though the company might be taking the right steps in dealing with these challenges.
Missing analyst expectations and management guidance can sometimes have an adverse impact on the share price, especially if the business is seasonal. This may explain NCSoft Corp’s underperformance of 34.7% losses compared to the benchmark Kospi’s 7.4% returns. However, we think NCSoft’s business fundamentals and prospects are well above its current trading price of KRW302,500 ($313.83). Based on our updated in-house valuations, we believe the intrinsic value of the company is around 45% above its current share price.
Being cash-flow-positive while having a strong balance sheet is something attractive and good-quality businesses generally have, and JD Logistics is one such company. Despite losing 20.8% and underperforming the Hang Seng benchmark which lost 7.8%, we believe that the stock is trading cheaply and is undervalued.
Usually, companies that miss earnings estimates in volatile market conditions would see adverse near-term movements in their share price. This was what happened to The Walt Disney Co, which also explained its underperformance of losing 15.1% against the benchmarks Nasdaq and S&P 500 which gained 20.6% and 10.5% respectively. Disney currently trades at US$91.32 ($122.53) and we think this stock is undervalued. The intrinsic value of the company based on our updated in-house valuations is roughly 35% above its current price.
