2024 Week 16:
2024 Week 16:
AI on gaming -Netdragon-Tencent, NGE Capital, Delfi, Every mining pitch, YesAsia-Cantonese, AEM, Frencken, ISDN, UMS, Micro-Mechanics
AI on Gaming-Netdragon-Tencent:
I have been thinking of how to capitalize on the AI trend. While most are looking at chips, I am looking at which industry is going to utilize AI effectively at this early stage of AI development.
There is an increasing number of startups tackling these areas.
AI as an employee or AI as a department
Depending on context, both may just work.
If you are looking at AI as an employee, then making games and updating games is going to get so much easier.
That could mean lesser employees and more competition for the gaming industry?
The companies with strong video game franchises (forever games) or platforms will benefit from these AI trends.
Makers of such games such as grand theft auto (take two), war of warcraft (Activision blizzard or Microsoft) should benefit.
It means that they will be able to roll out updates to a game much faster than before.
Netdragon, who has a decent franchise in Eudemons should also be a beneficiary of this trend.
The other will be platform business like the consoles, steam gaming and the minigames platform on Wechat or Douyin.
The acceleration of game development will allow developers to ideate and create a game through a shorter game development cycle.
Tencent seems like an easy pick here since they are the world largest game company in the world and is also universally hated since they are a Chinese stock.
The bad news is that gaming only accounts for 30% of Tencent revenue. The good news is that this is poised to be less of a drag and possibly catch up with the growth in their other segment.
I like the odds of Netdragon and Tencent here.
NGE Capital:
I first got to know of NGE Capital when they were building their position on John Wood.
NGE Capital is one of the few LIC whom I have taken a liking to. The reason is that they are often in situations which I like to be in as well which meant that in the past there was much overlap in our portfolio.
I am in the midst of moving away from special situation investing and that means that NGE could be a good addition to my portfolio?
NGE gives me a special situation portfolio without any active management on my part.
The other reason I am talking about them is that they have a decent amount of their fund in uranium like Yellow Cake and Sproutt Uranium. I still believe that uranium will 10x in the next few years.
Buying NGE capital meant that I am getting a decent fund manager, a bunch of special situations and uranium positions at a discount without much work.
Coupled with buybacks, I will also be getting more of NGE with no additional capital outlay.
LIC usually sells at a discount and that discount will most likely persist.
Delfi Limited:
Delfi is a long term holding of mine, share price has dropped back to my buy level (< SGD 0.90).
Like Hershey, they sell branded chocolate products.
Unlike Hersheys, they sell them in emerging countries like Indonesia and the Philippines.
The long-term good news is that Delfi should benefit from the rising consumption trend of chocolates in these countries.
The short-term bad news is that once again, cocoa prices are rising, and the Indonesian rupiah is falling.
Delfi reports in USD and that means that the next few years will be tough.
If you have followed Delfi long enough, you would know that this is a recurring trend. It is like a curse that Delfi is unable to break or maybe this time it will be different.
Every mining pitch:
I have attended a couple of mining conferences in the past few weeks. One of my friends likened such conferences as a mouse trap.
They “locked” us up in a room, feed us good food and then every companies just gave us the same mind-numbing pitch.
Maybe it is due to the tiredness of attending-hearing the same pitch and/or the abundance of food that poisoned or weakened our mind. Most people leave the conference with a couple more junior mining stocks in their portfolio.
Maybe, it is best to avoid free food in the future or just be there for the food and leave once lunch is over.
YesAsia-Cantonese:
I was on the YesAsia conference call, and the whole call was conducted in Cantonese. After 5 minutes or so, I started to see people leaving the conference. They are leaving the conference because they cannot understand Cantonese?
I wonder if there is information arbitrage existing in the HongKong listed companies run by HongKonger because people just do not want to deal with management who speaks in Cantonese.
AEM, Frencken, ISDN, UMS, Micro-Mechanics:
During a lunchtime stock chit chat session, some of my friends are commenting on how much AEM, Frencken, ISDN, UMS and Micro-Mechanics have fallen and have yet to recover.
I hold a small stake in ISDN which was purchased in 2020.
I know almost nothing about AEM, Frencken, Micro-Mechanics and UMS.
If you force me at gunpoint to invest in either one of them, I will think that AEM looks the most attractive since it seems to have a technological moat and the most amount of negative news of late.
The next two weeks are the AGM weeks in Singapore.
I will be attending a few AGM and will be providing some updates on any interesting tidbits, if any…