Core Value：
Value investing in the best growth opportunities and share with our investors on the way.
What we are looking for:
1, Those with strong competition advantages, especially coming from economy of scale and customer captivity;
2, Those still have great potential to grow;
3, Those with honest, capable management;
4, Those who have not been overly priced for their future opportunities;
In short: BEDROCK seeks out undervalued stocks of growing companies we understand with honest, capable management.
Recent Thoughts:
1, In a low and even negative interest rate environment, everybody is urgently cashing out future stories, making our way of value investing in growth even more difficult.
2, The interest in HongKong market suddently surged during the first month of 2021 with massive inflow from mainland as investors miraculously (as this is the case for years) noticed that HK market is remarkably cheaper than the A share market. Even though, we share some of the views with the marekt, we should understand that most of the sectors and stocks the inflowed mainland capital are chasing at are those hyped growth areas with heightened valuations which might not guarantee satisfactory future returns.
3, The biggest opportunities, as we see, are in those areas the market now choose to left behind as it busy chasing after good future stories with no matter how high the valuation. For us, our strategy is not to anticipate how the market wind will turn, but to analyze the future possible return with how much risk we take and whats the price we pay.
4, All in all, we believe that the tech giants are mostly with feasible though not cheap price tag, probably people are feared of anti-trust movements, and that’s why we still hold some positions in those areas including FB, CRM, TSM, BABA, etc. And we also hold many positions in the modern service providers, for example property management, education, etc, as we believe the market is still greatly under-appreciate their solid future growth opportunities.
5, Forthermore, about the recent sizzling event of Wall street vs WSB (wall street bets), we do not think we should over elaborate. On the one side, it proves again that the money is flooding as the pandemic constrained consumer spending and stimulate saving rate. The money simply has no where to go except the capital market; and on the other, we belive that the so called democratise and de-centralize the money management and the grassroots can beat the established institutions are wishful thinkings and are overblow. In the reality, the decision making of institutions are also decentralized and their past success, even though only a few can beat the market, are not because of some behind curtain insider information, but are mostly belonged to their more scientific, strict, and consistent investment philosophy and mathedologies, which most of the retail investors are lack of (however, they might be misled by someone who claim to properly represent them).
Past performance:
Recent net value/share: 3.32
Focusing on best opportunies in tech and consumer sectors only:
BEDROCK chooses investment opportunties only based on the companies themselves and will not rely on the speculations on the market overall. BEDROCK continued to invest opportunies from those who can generate economy of scale (many in internet, cloud, payment, etc), who with strong brand and customer capativity, and who can achieve localized monopolies.
Major holdings （aphabetical order）:
Past trades and capital allocation tactics:
We reduced our positions in Ever-sunshine lifestyle and Sunac service holdings mainly due to valuation concerns as they quickly reached to a level of 2021 50 PE, even though we still hold our believes in their foundamentals.
In the coming months, BEDROCK will remain largely conservative, be watchful for the “irrational exuberance”and look for long-term opportunities still within resonable valuations.
Further worlds for our investors and partners
1, Our investment choices might be very different from the trending sectors or names the market chooses, because we do not make investment decisions based on anticipating the market preference, thus our results might be siginificant lag behind the market, at least in the short term.
2, Our past performance can never guarantee our future success. The reason that we generated around 38% compounding returns in the past 3.5 years while our criterion of choosing targets is 15% plus compounding returns is mostly from luck that market has been quite volatile in this period that provided good opportunies of buy low and sell high. Therefore, in a market where everybody is so hyped up or the market makes no mistake, we will be difficult to generate a comparable return in the future.
3, As always, we will less focus on the market itself, as the market is so complex and full of variables, making it almost impossible to predict accurately and with the enough certainty we ask for. The path we choose is rather slow and ingenious that we only make investment decisions based on long term valuation creation. Even though we can never isolation ourselves from the influence of the market and other investors, we should keep in mind where the foundations are.
Always stay with the best
It is very easy to be enticed by opportunties as short term sepulations, however BEDROCK believes that not many investors, certainly not us, can always win in a zero sum game. BEDROCK continously chooses to focus on the opportunities of potential great value creation by the best companies. What BEDROCK wants are stocks with satisfactory valuation that are also high quality and growing, with a high degree of certainty about the long-term outlook.
BEDROCK believes that value investing in the best growth opportunities, with a global horizon, would achieve great results.
Thanks for the trust and support!
Happy New Year! And wish you make great progress in 2021!
BEDROCK
2021/02/01
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