Consensus holdings

One of the hardest things to learn about researching stocks is that a good stock call is against consensus. We talk about the wisdom of the crowds, but to make real money, you need to go against the crowd. Another hard thing to learn is that it doesn’t matter how good the company is, if it is too expensive, don’t buy it.

All of this is extremely hard if not impossible for the normal investor (like myself), that’s why I recommend just putting money in an index fund and forgetting it through the ups and downs. Twenty years later, you should have a nice nest egg.

It is actually kind of hard to find out the consensus. You can look at the list of companies by market cap, you can look at analyst recommendations, you could look at trading volume.

But I saw this article today on Vietstock, and I realized another good indication of consensus would be to look at what the “smart money” is holding, at least as of the end of February. So today we are analyzing the holdings of five funds with a collective investment of $2.9bn: Vietnam Holding, Tundra Vietnam, PYN Elite Fund, VOF (Vinacapital), VEIL (Dragon Capital).

Surprisingly, only five stocks that are really consensus among these five funds. For consensus, my cutoff is that at least three funds hold them. These are:

PNJ: Phu Nhuan, the jewelry company, which is owned by 4 funds. For Vietnam Holding, it is its largest asset.

MWG: Mobile World Group, which I like a lot and is also well held.

KDH: Khang Dien House, the real estate company focused mostly on HCMC.

HPG: Hoa Phat Group, which does steel and other pipes.

FPT: An IT company.

A few things that I found interesting:

There is very little that overlaps with the VNM ETF. For example, only Tundra holds Vingroup, which is the largest stock in the market, and VIC is just 3.9% of its overall fund. Tundra surprisingly owns Vinhomes, which is a subsidiary, so it is actually double investing in Vinhomes. It also owns Masan, which recently bought some of Vingroup’s assets. [I am on the record for liking Masan, but I am worried that my call might not work out.]
For most funds, real estate is the biggest sector held. The only exception is PYN which holds 29% of its assets in financials, and only 6% in real estate.
Industrials vary from 5% of holdings to 15%, with steal (Hoa Phat and Hoa Sen) well-represented.
“Other” in the chart (above to the right) includes a fair amount of retail and self-manufacturing by retailers (like Phu Nhuan or Thien Long).
I was also surprised by the love for a few ag companies: The Pan Group, Vinamilk, Quang Nai Sugar. Masan fits in here too.

I get flashbacks to my time in the Middle East, when there was pretty much the same mix. The only thing that it is really missing is telecoms, with the big three operators owned by the government.

Finally, I was really surprised by how small some of these companies are. Four of the companies that are held by at least 2 funds have a market cap of less than $1bn. That’s low. Vinhomes is the only company above $10bn held by at least 2 funds. More than 60% of the stocks held were below $2bn.

Owning stocks with smaller market cap isn’t that big a deal, but it gets harder as the fund gets larger. Say you have a $882m fund like VOF, then investing even 3.84% in QNS is riskier, because this equates to $34bn or 8% of the ownership of QNS. That’s a big bet and harder to get out of, if you wanted to.

I would say within a context of emerging markets overall, the holdings here would represent a clear bias to small cap stocks. Within the Vietnamese context, it still seems like fund managers (at least these 5) are willing to ignore the bigger stocks and go further down the market cap ladder to find value. Even for the biggest funds.

VietEcon

Consensus holdings

VietEcon