As of today, I have added Suzuki Motor Corporation (the Japanese one) as a new position (5% position size). Today’s price drop seems to be because of raids by German prosecutors for alleged use of devices to manipulate emission readings (link). This can be a serious risk if allegations are proven.
As a business, Suzuki is a cyclical and is currently facing business headwinds due to semi conductor crisis which is reflected in their margins (at cyclical lows). Additionally, they are trading at lower end of their valuation range. Company largely trades in the 10-20x P/E band and is currently trading at ~11x P/E. On a P/B metric, they trade b/w 1-2x P/B and current multiple is ~1x. So, I have valuation comfort + business is currently in downcycle, both are required for my cyclical investing framework.
Given my very good experience in cyclical investing in 2020 (see here), I am broadening my approach to global markets. The idea is to buy cyclicals which are trading at lower end of their valuations during a business downcycle. I then wait for a couple of years, let the business cycle turn and (hopefully) sell at a good profit. Lets see if it works out with Suzuki. Updated folio is below.
| Companies | Weightage |
|---|---|
| AB InBev | 5.00% |
| Berkshire Hathaway | 10.00% |
| Disney | 2.00% |
| Fairfax India Holdings | 10.00% |
| Markel Corporation | 5.00% |
| Philip morris | 2.00% |
| Uber Technologies Inc | 2.00% |
| UBS ETF CH-SMI | 5.00% |
| Vanguard Emerging Markets Stock Index Fd | 10.00% |
| Dropbox Inc | 2.00% |
| Netflix Inc | 5.00% |
| Suzuki Motor | 5.00% |
| Cash | 37.00% |