Bought Sea Limited And Ordered A Few Tariff-resistant Businesses
After my portfolio health check last week of all holdings, I am selling MIPS to buy Sea Limited and a few tariff-resistant businesses.
After my portfolio health check last week of all holdings (11), MIPS—the Swedish helmet safety leader, was the most exposed to tariff risks, while 10 was well-insulated. I am adding four that have no direct impact from the proposed tariff schedules (just indirect broad-based global economic pressures).
Excerpt from the health check report:
Nine of our sleep-well businesses have minimal direct impact from the tariff; four don’t have any operations in the US, and their competitors will suffer more in this challenging period.
Eleven niche leaders are incredibly resilient. All have been robust during past crises and agile when needed. Ten have a net cash balance sheet to buffer a prolonged trade war.
I see four worthy of addition, one worthy of trimming, and six not at an attractive price yet.
Sea Limited - added at $93/share
The first one I added was Sea Limited (SE). Details on why it is a good addition are here. The valuation was 18x FCF for a business firmly dominating the region’s e-commerce, financial, and gaming sectors. $6B cash net of provisions is aplenty to adapt to downturns. Sea Limited is also blessed with strong tailwinds from the fastest-growing economies still underpenetrated (20% e-commerce vs. 30-40% in the US/China, and 2/3 of the 650M people are underbanked). More importantly, the unfortunate event of higher tariffs will fall harder on its competitors—Lazada, Temu, and Tiktok, affirming why Sea Limited is my favorite business to add.
Sea Limited readings - deep dive, buy alert 2, buy alert 1, Q4’24, Q3’24, Q2’24 update
Other three - order placed
I don’t want to spoil the party, so I will notify you when the other two orders are filled.
I am not bottom fishing, so I will buy when I can raise cash and when I find Mr. Market's offers reasonable.
Selling MIPS at SEK 330 to raise cash
To fund the purchase, I had to sell MIPS. The reason was well documented in the Q4’24 review (high valuation for a cyclical business, yellow marked in the tracking sheet below). The drastic change upon us (thanks, Mr. Trump) has nudged it to a candidate to trim.
I am exchanging MIPS for more resilient businesses, albeit for less upside.
Read more here: buy alert (at SEK 300), earnings reviews, Q4’24 (trim candidate), Q3’24, Q2’24, Q1’24, Q4’23, Q3’23, Q2’23, Q1’23. deep dive.
Here are the current portfolio and transactions
Performance - a huge drop last week from nearly 40% since inception to 22% today vs. 9% S&P500.
Portfolio holdings and cost basis: