We may have given our readers reason in the past to think we would never live up to the fierce red-blooded image of capitalist roaderism. Yes, we cast aside Hubei Guangji Pharmaceutical (000952.SZ) many months ago, but aside from that, nothing in our investment decisions would indicate the kind of take-no-prisoners approach suggested by our fund’s name.
Well, if you have doubted in the past, doubt no longer. We officially severed our ties with Anhui Conch Cement (600585.SH) on Friday afternoon. The stock was down around 41% from when we bought it on June 3, 2008. Why sell now?
Amid talk of imminent economic doom, the SCI has been rising quietly. As of today, it is up 27.46% from the beginning of the year. Economists are downgrading their predictions of economic growth, and yet the markets seem to be pinning their hopes on a huge stimulus boost.
The stimulus package will help, but as we’ve said here many times before, we don’t think it will help that much. Furthermore, it’s worrying that the company seems to be basing its hopes for profits this year solely on government stimulus.
It’s possible the market and Anhui Conch will see some more gains over the next few weeks, but we just don’t think it’s sustainable. We’d rather get out now and free up a bit of cash for some much-needed flexibility.