Latest update on 14th November 2020
Updated on 30th August 2020
I started to sell 200 shares 1 day before the results came out at USD 49/share. I think on 19th May, I sold 500 shares at USD 56/share, 500 shares at USD 56.2/share, and 8 shares at USD 56.5/share. On 21st May, I continue to sell 592 shares at USD 55.7/share. On Friday 22nd, I sold the remaining 1400 shares at USD 50.2/share. I sold the shares on Friday in panic. The last 1400 shares are almost free to me, I can take a bet and just leave it in the market to continue its run. This is one of the businesses which I have held through a long psychological ride when I brace through all the drama with JD.com CEO’s alleged lawsuit. At this present, the business is doing better and even surpasses its own estimate for this quarter. Why did I sell JD.com then?
The US approved the Holding Foreign Companies Accountable Act (HFCAA), the bill was approved without objection. One of the key criteria is to certify that they are not owned or controlled by a foreign government. The financial statements need to be audit conducted by the Public Company Accounting Oversight Board. Next, it will pass to the House of Representatives before passing to President Trump for approval.
This requirement will apply to all foreign companies listed in the US. However, Chinese law forbids necessary documents from leaving the country which will prevent the audit.
This will increase the potential for Chinese companies to be delisted from the US stock exchange. Shareholders can keep the shares when a company delists and retain the rights as shareholders but the cash value can become zero. Investors hold on to the shares in a delisted company hopes the entity will list again someday in the future. A delisted company can trade over the counter exchanges (OTC).
I believe it was in 2018 when I thought the trade war between the US and China would not take place and it was a threat by President Trump only. It evolved into a full-fledge tit for tat. My Hong Kong portfolio took a severe beating as a result of a trade war. Hong Kong is a financial hub that allows China to raise liquidity but its position is compromised as China is diversifying this risk as it is moving its financial hub nearer to its capital city. Meanwhile, the US will continue to focus its attention on Hong Kong and attack where it hurts most.
Once beaten, twice shy. It is not a bottom-up approach to company valuation and stock investment. I do not wish to become a victim of the geopolitical tension. I will prefer to sell the US-listed JD.com and bring the money back to the Hong Kong market. JD.com will be listed in early June 2020. This is just one of the risks to invest in foreign markets.
Update on 22nd August 2020
I did not buy JD.com when the company was listed on the Hong Kong stock exchange. I am not going to do the maths but I left a lot of money on the table and switch to something that is losing money. Not smart at all. It could have been my ticket to financial freedom. There are a lot of regrets in life but just too bad. Recently, I saw a lot post on JD.com’s share prices blasting off is rubbing more salt to the wound. Sad.
Update on 30th August 2020
Last seen near USD 80/share …. stop tormenting myself and stop looking.
Latest Update on 14th November 2020
This stock has some history with us, if I remember correctly I bought this company in 2017 and it was around August 2018 when there was a rape scandal when CEO Liu Jingdong was arrested as a suspect in a rape case. It was one of the darkest moments (there are plenty) in my investment journey. I was hesitant to add more shares because if proven guilty he would be jailed and back then there was a lot of drama because he had a lot of controlling stakes and makes most of the decisions. It was a key man risk. I held on and saw the scandal die. Today JD.com is turning profitable and it is just the start. It is like a breakup and I should give my blessing to the stock that I had done all the research and understand the economic moats before I buy into this company. I should congratulate myself that I had picked the right company. This is why an investment system is important and I should not let emotions get the better of me.
To let you understand the money I had left on the table.
3,200 shares x USD 92/shares = USD 294,400
I sold average USD 50/shares = 3,200 shares x USD 50/shares = USD 160,000.
Money left on the table = USD 294,400 – USD 160,000 = USD 134,400
I could work 1 year lesser. It is time to part with this love. Yes, I know the theory, if you know this stock could be worth USD 200/ share or more, USD 92/ share will still be undervalued, isn’t it?