Quite a few readers and viewers have asked me on and off this year if I’m adding to my investment in Willmar.
I think more people have asked me when Wilmar’s stock price dropped to $3.20 and $3.10 per share.
I kept saying I was waiting for $3.00 per share.
For a brief period in August, I thought I might get it but it didn’t happen.
Well, it finally happened.
My buy order was executed overnight at $3.00 per share.
Wilmar International is undervalued if we consider the sum of its parts.
YKA is majority owned in China and has a larger market capitalization than Wilmar in Singapore.
So, by buying Wilmar today, we get the rest of its business for free.
This is something I’ve said for a long time.
Of course, the stock can remain undervalued for a long time as well.
Those of us who keep track of the counter know that insiders are constantly adding to their positions.
Historically, at a price of $3.00 per share or lower, we have seen more insider buying.
Wilmar’s business in China is not performing as well as it used to, as the Chinese economy is still suffering from the collapse of the real estate sector.
Consumers are still cautious and do not spend as freely as before.
Historically, Wilmar has also bought back stock during times of declining earnings, with its stock price being punished as a result.
At current prices, the downside may be limited.
I also like that Wilmar has been consistent in paying dividends through good times and bad.
They did not suspend dividends during the pandemic, for example.
A dividend per share of 17 cents isn’t asking much as earnings per share are expected to reach around 30 cents in 2025.
Buying at $3.00 per share gives me a dividend yield of 5.66% and a dividend yield of about 10%.
Of course, readers who have been watching my YouTube videos about banks will be familiar with the concept of dividend yield.
Wilmar remains one of my largest investments and fits my core strategy of investing in real income producing assets that will pay me in good times and bad.
I thought I would end 2024 without buying any stocks, but after starting a position in Alibaba Group last week, I added to my position in Wilmar today.
Many regular readers were curious about why I invested in Alibaba Group last week.
I made videos about Alibaba and how I thought it was trading like a value stock.
However, I was not willing to jump on the bandwagon due to the political risks in China.
Alibaba also didn’t pay a dividend, but not long ago, it started paying a dividend, very little in dividends.
The dividend yield is less than 2% with a payout ratio of about 20%.
Therefore, it is a very sustainable return.
Alibaba has a very healthy cash flow and a very strong balance sheet.
Instead of paying more dividends, Alibaba decided to buy back shares.
I have to agree that doing stock buybacks at such low valuations is probably a good idea.
Alibaba has already bought back about 10% of its outstanding shares, if I remember correctly.
All other things being equal, share buybacks will accrete earnings and we should see the P/E ratio decline.
Paying HK$80 per share today is a better deal than paying HK$80 per share two years ago.
Having said that, Alibaba is a small position in my portfolio, and although I could add to my position if the share price falls another 5%, it will likely remain small.
Why 5%?
There is some support for a moderate uptrend if we correlate all of the stock price lows we have seen this year.
Even if there was another 5% decline in its stock price, this moderate uptrend would remain intact.
If the support continues, the worst may already be over for Alibaba.
When a viewer asked what Alibaba’s stock price would be like in the future, I said I didn’t know how the price would move.
However, I know that the average P/E ratio over 13 years is about 30x, which means that if Mr. Market decides to like Alibaba again, all other things being equal, its stock price could double from here.
Well, I won’t hold my breath.
It can remain undervalued for a long time, and that certainly seems to be the case for Alibaba.
Whether it’s stocks or socks, just like Warren Buffett, I like to buy when their prices are low.
Merry Christmas!
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Wilmar: Free stuff!