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Selling My Cheung Kong ADRs

Yesterday (Wednesday) I dumped my stake in Cheung Kong Holdings (I owned the ADRs trading in the US on the OTC). The price was $11.96.

I first bought Cheung Kong in late 2008, and added to the position in the early part of 2009. My average cost was $8.58, about 70% of book value.

I decided to sell for a variety of reasons. The company is now trading just under book value, the ADRs had risen about 39%, or more than 23% on an annualized basis not including dividends.

With concerns of a property bubble brewing in Hong Kong, and worries of uncertain things in the Greater China region, I chose to lock-in a decent gain and add some cash to the portfolio.

Overall, Cheung Kong is a great company with great assets and top-notch management. Its finances are rock solid and, since Li Ka-shing has been adding shares, I may look back on this with regret. Yet the company isn't the bargain it was in late 2008/early 2009. Not much out there is.

More McElvaine

Tim McElvaine ranks among my all-time favorite value money managers. His just posted his "We Are Here" letter for the quarter ended June 30 (you can get it going here).

McElvaine reports not owning any gold, unlike yours truly. He's owned gold mining stocks in the past, but thinks owning gold today is too much "investing with the crowd." I think there's more to gold than that, but agree with him about the gold advertising on TV. What's more, I suspect many gold dealers on TV are ripping people off with outrageous fees and the like. Many but not all. That said, Tim lives in Canada and the gold-as-insurance play applies much more to those of us in the US. Though my last point on this particular subject is the most important one: McElvaine is the real deal and way, way, way smarter than I'll ever be.

One area we have in common is small caps -- even micro caps. My recent purchases include Geeknet (LNUX), Unifi Inc. (UFI) and XETA Technologies, all of which qualify as micro caps. McElvaine points out these types of stocks increases volatility. Very true and something anyone in that area must understand. And have a strong stomach for at times.

Be sure to read the linked report. And if you've never done so before, take the time to read the other reports listed on the McElvaine Investment Management site.

Geoff Gannon interviews Jon Heller of the Cheap Stocks blog

Man-oh-man, we're talking serious ear candy here, folks. The Investor Questions Podcast with Geoff Gannon has an in-depth chat with Jonathan Heller of the Cheap Stocks blog.

This interview is really long -- not sure how long but REALLY long. Yet it contains zero puffery. Well worth every minute of your time.

If you've been reading Controlled Greed over the recent years, you know this blog is a big fan of Cheap Stocks. The way it covers net/nets and spots stocks with significant real estate and/or water assets has been a unique approach in the investment blogging arena.

Truly a standout in a crowded field.

This interview details Jon's take on many stocks as well as his thoughts on blogging (like yours truly, he hasn't been blogging as much over the past few months). For me, Jonathan's thoughts on blogging and writing about stocks was perhaps the most interesting part of the interview. Why? Because I've been thinking about what I want my blog to become -- if it even stays a blog -- and what was said in the interview provided me with even more food for thought.

More about that later.

Another key point in the interview was when Jon said investing in net/nets should not be a core part of someone's investing portfolio -- because most of these companies are losing money, are very small and often provide little or no information. He said he only owns a handful of these stocks at any one time.

I may have missed it, but I'd like to hear his thoughts on what he does/recommends for core portfolio positions -- value mutual funds? Anyway, again, I may have missed that and apologies to Geoff and Jonathan if I did.

And it in now way at all detracts from an otherwise GREAT interview. Between now and over the weekend block out some time and listen to this. Beats anything you'll get on CNBC, that's for sure.

Controlled Greed Portfolio Performance: Mid-Year 2010

For the year through June 30, 2010, the portfolio lost -2.9% including dividends. The S&P 500 lost -7.6%.

Here's how the portfolio positions looked at the end of June:

Gold Mining Holdings    23.0%
SPDR Gold ETF              12.0%
Fairfax Financial            7.3%
Unifi Inc.                        5.6%
Microsoft                        5.3%
Superior Industries          5.3%
BCE                               5.2%
Cheung Kong ADR           4.9%
Capital Southwest          4.8%
EGI Financial                 4.8%
Geeknet                        4.8%
King Pharmaceutical       4.5%
XETA Technologies         4.4%
NKSJ Holdings                 4.2%
Cash                        under 3%
Media General          about 1%
3i Group                   about 1%

Some notes. These figures are not audited, just my calculator and me. So if I'm off a bit, sorry.

The portfolio stretches over three accounts: my regular brokerage account and two retirement accounts. The VAST majority of my liquid net worth is in the positions above. The "Controlled Greed portfolio" isn't some little portfolio on the side. It is real money. I’m working like the dickens not to lose it all and live out my life in soup kitchens.

The gold mining holdings listed above (and grouped as a single position) include Newmont Mining (NEM), Goldcorp (GG), Agnico-Eagle Mines (AEM) and the Market Vectors Gold Miners ETF (GDX).

I’m holding my SPDR Gold ETF, the double-sized position established in the summer of 2009. This means that my gold ETF and gold mining stocks together account for 35% of my portfolio.

Fairfax Financial is a nice-sized holding. Remember that I've sold enough of this stock a while back to get my original capital out of it. The holding is a free ride.

I'm mostly content with all these stocks, except for Media General and 3i Group. MEG has been a disastrous investment and represents money lost.

Let’s see what the second half of 2010 has in store. The “will we or won’t we” debate on a potential double-dip recession is interesting, but also baked into the cake. Much more interesting is the probability that the Fed will resume massive money-printing it calls “quantitative easing” -- also known as QE2 -- this fall.

Deleveraging

Stephanie Pomboy of MacoMavens is someone I discovered over the past decade by reading Barron's. They've done at least two interviews with her that I can recall, Alan Abelson frequently mentions her in his column, and Barron's sometimes includes her commentary in its Market Watch feature. I also recently caught her on Pimm Fox's Taking Stock program on Bloomberg TV.

She strikes me as interesting and smarter than I'll ever be on my best day. I like her "big picture" take on things -- pretty much the way I enjoy Felix Zulauf, Marc Faber and Jim Rogers.

In this week's Barron's, Alan Abelson writes of Pomboy's take on consumer deleveraging in America (scroll down):

There's no way, she says firmly, that households can seriously deleverage overnight. The task is truly humongous: To return to those halcyon pre-Greenspan days when the ratio of debt to income was about 65% would require, she reckons, debt to decline by $6.3 trillion (or, just as daunting, income to increase by $9 trillion).

That would mean a massive reduction in spending, year in, year out, spread over six to 10 years. But, she sighs, there's virtually zero chance of that happening, if only because the bottom 40% of households spend every last dollar they make—and then some—just to keep their heads above water.

Of the $14 trillion in household debt, she notes, $10.5 trillion is mortgage-related. And, as Stephanie puts it, since stiffing your banker is now "socially acceptable, deleveraging needn't entail the pesky inconvenience of foregoing consumption," and she predicts more homeowners will exploit this opportunity "to accelerate balance-sheet repair."

Food for thought, for sure.