Buying and Selling

I have been selling and buying over the past week. Out goes my position in SP Chem, and in comes a HK stock, additional positions in Global Test and China Precision, and a new stake Shanghai Turbo.

SP Chem was sold mainly to finance my purchases. Maybe I may buy it back again if it falls to $1. Earlier on, I have also sold my largest holding, C&O Pharm as it seems to have recovered fully from the inventory problem.

I shall not reveal the HK stock as the stock idea is not mine. The addition of Global Test was more of an emotional reaction to the rising price of Global Test. Despite the knowledge that I wa reacting to the price rise when I am buying, I did not cancel my purchase as I did not wish to suffer any regret if Global Test continued to rise. However, I did know that my purchase price of Global Test was still at an acceptable range and Global Test, to me, is a play on semiconductor recovery. Recently, I have seen reports that the semiconductor sales recovery this year may not be as strong as predicted. I may have to wait longer for my stake in Global Test to bear fruit.

My addition of China Precision was due to the price fall to around 6.9 historical P\E. Besides the sufficiently low valuation, this addition was done partly also due to my preference for stock to cash.

My new stake in Shanghai Turbo is rather speculative as it is done more based on gut feel than valuation. My purchase of Shanghai Turbo was prompted by a Westcomb report hinting at the likely recovery of Shanghai Turbo sales. Shanghai Turbo produces vanes for steam turbines used in power plants. Its business was badly hit last year as its main customer decided to in-source the production of vanes and the expansion of power plants in PRC was reined in by the government. In buying Shanghai Turbo, I am betting on the odds that Shanghai Turbo sales would recover due to its expansion into new products (vanes \ components for gas turbines) which would be sold to international customers.

I suppose that international customers would tend not to in-source outsourced components as they would not enjoy the same cost advantages if these customers do not have production in PRC. Nevertheless, as the odds of a recovery in Shanghai Turbo sales remain uncertain, my stake in Shanghai Turbo remains small relative to other stocks. In the worst case scenario, I may lose up to one-third of my stake in Shanghai Turbo. Whatever the outcome is, my stake in Shanghai Turbo will be a good learning experience for me.


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