Originally Posted by
hardt
Similar with Citi's big fat sell rating at $2 early last year, if you don't agree with the approach taken to come to the negative coverage, don't follow or act on their insights or recommendations.
Devon funds had a rough year to say the least.
6.5% weighting in FBU construction -27%
5.7% weighting in GTN broadcasting - 36%
While selling out to a 33% weighting in cash
I somewhat agree with their 7.4% weighting in VGL
They are claiming Daigou are scary, unpredictable creature and have sent 2 analysts to China to study them in the wild...
They have also never owned a position in A2 milk as per their update at the end of CY17 below... - Why would Lego Man say that they did.
The other side of the story of our performance versus the market has been the stocks we haven’t owned, the most important of which has been A2 Milk. This stock has rallied over 190% in the past year and although it has been disappointing to not have been exposed to these strong returns, it does provide an example of our focus on capital preservation and risk management. We have known and followed A2 for a number of years and our experience has been that the company’s ability to execute on ambitious growth plans has been very mixed. They have built a successful fresh milk business in Australia but forays into the UK and US have not (yet) worked well nor did the company’s attempt to sell infant formula in China by way of direct distribution with a joint venture partner delivered the results expected. The company’s dramatic earnings growth over the last couple of years has been driven by sales via the informal “daigou” channel i.e. principally Chinese nationals in Australia purchasing goods to re-sell into China. The dangers with this channel are many and varied – visibility of the end customer is extremely limited, buyer behaviour can be very divorced from underlying demand, the distribution chain is long, complex and expensive and is always prone to “channel stuffing”, and finally most of these sales are technically illegal and subject to enormous regulation risk. We may well be wrong about A2 and they may continue to rapidly grow sales and earnings from infant formulas sales into China but we simply could not get sufficient comfort in the risk profile of the business to expose our client funds to it.