I currently hold positions in 35 different companies. That's a lot given that I had to do at least some research on each company before opening the position and that I monitor each position once it has been opened. So far it seems to be working - no doubt helped by the fact that I enjoy it as a hobby and that the markets have been favourable to me for the last two years. Given the wish to avoid meaningful company specific risk, holding a large number of companies is a necessary part of my investment strategy and I anticipate continuing to hold 30+ positions going forward. Once I retire, I will take a little "diworsification" in exchange for a corresponding reduction in risk levels.
I have broken the 35 positions into three groups based on the current market value of the securities.
Group A (the largest positions): these 8 shares represent about 45% of my directly held equities. Each of them is valued at more than twice the "standard" amount I look to invest in each position. In no particular order:
Hutchison Whampoa (HK:13): this is my biggest holding, valued at more than twice as much as the next largest position. HWL is essentially a turn around (3G) and global recovery situation. I am happy holding but probably should reduce the weighting given the large exposure and the fact that it is starting to look a little bit expensive on fundamentals;
China Construction Bank (HK:939): One of China's big four banks. It offers a nice yield and recently completed a rights issue (rather than a value destroying placing) to increase its capital base. Tightening monetary conditions are not of concern at this stage;
Sichuan Express (HK:107): Sichuan Express is a toll road operator. I expect this company to benefit from China's inland/western provinces playing economic catch up, rebuilding efforts after the Sichuan earthquake and the general increase in private car ownership. Pays 4% dividend;
CNOOC (HK:883): one of China's big three oil and gas companies and the one most focused on upstream assets. Given the company's track record in growing its asset base and production levels and my long term views on oil prices I am comfortable holding even though the trailing multiples look a little high. The strong debt free balance sheet is also a positive factor;
Hua Han (HK:587): a pharmaceutical company. This is an industry which is expected to grow rapidly in response to demand from China's growing middle class. The only negative is the rather anemic 1% dividend yield;
Sinopec (HK: 386): another one of China's big three oil and gas companies and the one most focused on downstream operations (refining and distribution). Although often marked down to reflect state imposed price controls and vulnerability to margins being squeezed, it is still cheap and offers upside through growing its distribution network;
Westpac Bank (ASX: WBC): one of Australia's big four banks. This is one of only two shares to remain from a small portfolio I had during the 1990s (prior to taking a job where I was not allowed to deal in shares). It has been a steady performer for well over a decade offering a growing dividend (more than 4%) as well as share price appreciation;
Yanzhou Coal (HK:1171): one of China's largest coal producers. I continue to like this company which offers exposure to the continued consolidation of China's coal mining industry. The trailing earnings multiple is a bit high and the dividend yield is low, however both metrics are expected to improve substantially over the next few years.
When reviewing my positions, I try not to look at the cost of each share as that should be irrelevant to decisions to hold, sell or buy more. However, I do keep the records and it is nice to note that all of these positions are currently valued at well above my entry cost.
The most noticable feature of the Group A list is that I failed to invest in one of the best performing sectors in 2009 and 2010 - PRC retail. This was a noticable bad call on my part.
As a side note, it is worth mentioning that China Gas (HK:384) was firmly in Group A prior to the share price falling ahead of the announcement that two senior executives had been arrested. The shares have been suspended for several weeks with no further announcements from the company which is source of concern. It is disappointing that the company has not seen fit to keep shareholders informed of developments.
I will deal with the Group B (21 companies with close to a standard weighting) and Group C (7 companies with materially less than a standard weighting) in separate posts.