Rebalancing June 16, 2021: Buying Goodbaby International Holdings Ltd
This position rebalancing was a bit special. Actually, I held Waddell & Reed Financial (WDR) in this slice of the portfolio. However, I did not have to sell the stock. Instead it was liquidated with a 69.7% pre-tax gain because WDR was acquired by Macquarie Asset Management end of April.
I left the pile of cash untouched for the last 2 months and used it now to buy Goodbaby International Holdings Ltd. Goodbaby International Holdings Ltd is a Chinese manufacturer of baby and youth products. The four main comapny segments are:
Strollers and accessories (highest revenue source),
Car seats and accessories,
Non-durable products
Others.
Goodbaby International generates the majority revenue from Mainland China but also operates in Europe, North America and ither countries. Its brands include Evenflo, Cybex, Happy Dino, and gb Global brands. Here some ranks and gernal information from my latest screening process:
The stock is my first Chinese position and was bought on the SEHK. It was a good opportunity to test the trading on Asian Exchanges. The stock has to be bought in lots of 1000, which was surprising but no big deal. The order was filled instantly without fees or spreads bigger than on European or US exchanges. So if more Asian stocks make it into my screen in the future, I will be prepared.
Here are the current valuation multiples according to gurufocus.com.
The stock currently offers an 1y earnings yield above 10% and a 10y earning yield of over 9%. The FCF yield might be overstated due to a recent boost in the cashflow per share.
The company’s revenues declined over the past years and the financial health of the company is comparable to that of its peer group, however, not particularly “safe”. Nonetheless, none of my cross-sectional red flag criteria flashed for the stock (even though it is borderline), so I will trust my system on this.
Piotrosky F-score, a cornerstone of my accounting and quality composite is strong with 7 of 9 points and well above industry average.
Regarding the stock performance, Goodbaby International shows a very promising setup. A strong long-term reversal signal (bad performance over the past 5 to 1 years) and strong intermediate momentum (stong recent 3- to 12-month performance):
Maybe with the recent COVID related baby boom and the Chinese Government “allowing” its citizens to have 3 children now, the stock will gain some traction. It still is not the savest investment of course. The latest value rallye made it very hard to find good opportunities, so unfortunately also the subjective quality of the top-ranked names deteriorated. There are no no-brainers in June 2021.
Kind regards,
Your Non-Prophet