Capitalist Roader Fund
As the Capitalist Roader Fund enters a new year, the time has come to bid farewell to the old system which, while staid and resolute, was fundamentally flawed. Picking stocks by following positive macroeconomic trends helped us only to a meager 12% gain in 2009 even as the Shanghai Composite Index gained 80%. Our original goal – to beat the index – requires a more radical approach. And so, while stock picking is surely more art than science, we enter the new year with a new spirit: one in which we embrace 2010 as a year of living (a little) dangerously. Rather than pursuing safe bets and holding on for the long haul, we will instead occasionally pursue strategies in which we will mimic the domestic Chinese investor, forsaking the safe bet and chasing performance and immediate returns. In a market sometimes absent of reason, we choose to be occasionally unreasonable.
Expect the Roader’s picks to be a little more reckless, a little more risky.
So far this year, we have seen China COSCO (601919) regain some lost ground, while China Vanke (000002) remains mired in talk of property bubbles. We will probably begin next week by dumping COSCO for a small profit. After that, a new era begins.
Starting this week, we will also be providing updates from our rival, the Red Dragon Fund, started in 2005 and run by a financial industry professional.
The Capitalist Roader Fund is down 32.8% from June 3, 2008. The Shanghai Composite Index is down 6.1%.
Red Dragon Fund
The Red Dragon Fund recently bought two batches of SAIC Motor (600104). We are now more bullish on the market and expect a first-half rally. SAIC’s share price has experienced a recent slump despite the company forecasting a rise of more than 900% in 2009 net profits from US$96.1 million in 2008. We see this as a short-term trade, as we expect SAIC shares to rebound soon.
We are looking around for new investment opportunities and are quite interested in the Shanghai Expo, set to open on April 30. We expect shares in the companies benefiting directly and indirectly from this event – in transportation, hotels, retail and advertising – to perform well in the first half. Among the stocks we are watching are Shanghai Airport (600009), Shanghai Shentong Metro (600834) and Shanghai Join Buy (600838).