Sold part of holding in HSBC at HK$ 34,9 net of charges and added to my holdings in Prosperity Reit at HK$ 2,30, Link Reit at HK$ 58,95 net of charges and Akamai at US$ 107,8. Dividends from Bank of China Hong Kong and CNOOC received – stock portfolio page updated.

I switched part of my HSBC holding to my other existing Hong Kong dividend stocks for income.

I find equity based Real Estate Investment Trusts very simple to understand since they are similar to owning property but without the headache of actually being responsible for repairs and tenants. Given we are in a severe recession caused by the pandemic, along with the geopolitical uncertainty of Hong Kong which has become a political pawn; such listed property stocks are at depressed valuations.

It is important that when investing in such real estate trusts that their gearing is low ie below 30%, that there is stable tenant demand for their properties, that their management has an established track record of acting in the unit holders’ interests and that there has not been any corporate governance issues.

Both Link Reit and Prosperity Reit fit into the above categories and are arguably, the best managed Reits in Hong Kong.

While selling HSBC at a depressed valuation appears to be akin to selling low, I reduced my fund weighting to what was my biggest fund holding given the inability of the British government to support HSBC in its tangle with the politics of China and the USA.

I added to Akamai after their earnings results yesterday where they continue to grow their revenues, earnings and cash flow. Akamai are part of the ecosystem of the continuing digital transition to e-commerce and video streaming. Their valuation is still at a reasonable level, in my opinion and I plan to further accumulate if the stock price weakens further in the short term (unless a fundamental industry change occurs which materially weakens their business advantage).

One of the lessons that I learnt in managing my own fund is to sell your stock laggards while holding onto your stock growers (as long as the growers are in a secular growth sector). Stocks in cyclical sectors such as commodities are simply there to be traded as they lack earnings power and can see their cash flows wiped out very quickly. An expensive illustration of that can be seen with my former holdings in Shell and BP.