In the year since Naspers joined the Biznews Share Portfolio, its shares have appreciated 25% – a tidy return from our fifth biggest holding (of 12). But the risk in holding the shares is rising. Were it not for the share price trading at a 40%-plus discount to the value of its underlying assets, we’d be cashing in that profit in tomorrow’s portfolio update.
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In line with Warren Buffett’s advice, the policy of the Biznews portfolio is a holding period of “forever”. The only exception being when there is a fundamental change in the underlying business. This may now be happening at Naspers, or more specifically in the determinant of its share price, that 31% stake in Chinese internet giant Tencent.
By order of the US Commerce Department, on Sunday night Apple and Google dropped WeChat from their US App stores* (see update, below). Given growing US hostility, Tencent’s cosiness with China’s Communist Party is a concern. Especially in the light of the mainland government’s strong reaction to pro-democracy demonstrations in Hong Kong.
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Geopolitical tensions can escalate quickly and with under three months to the US presidential election, this one is set to worsen. That suggests the WeChat ban may be extended to Tencent’s core gaming activities in the US, into which it has invested $20-billion. For Naspers, a gale force wind that has pushed its share price for years may be switching direction. We’ve put our holding on notice.
*UPDATE from Wall Street Journal
A federal judge in California temporarily blocked the Trump administrationās executive order curbing Americansā use of WeChat,Ā upholdingĀ a motion from usersĀ of the popular Chinese-owned messaging and e-commerce app.U.S. Magistrate Judge Laurel Beeler entered an order Sunday for a preliminary injunction blockingĀ the federal ban on U.S. downloads and other functions from going into force as scheduled for 11:59 p.m. Sunday.
The ruling is a victory forĀ WeChatāsĀ owner, Chinese tech giantĀ Tencent HoldingsĀ Ltd.,Ā and the U.S.Ā WeChatĀ Users Alliance, the nonprofit organization representing severalĀ mobile app users that filed the motionĀ against the Trump administration in August. The group, which has said it isnāt affiliated with Tencent, said it consists of users who rely onĀ WeChatĀ for business and personal reasons.
In her 22-page order, Judge Beeler agreed with free-speech arguments raised by the user groups, saying she is convinced that āthere are no viable substitute platforms or apps for the Chinese-speaking and Chinese-American community.ā
For your attention today…
Webinar alert…
– On Tuesday at noon we’ll be making a couple of changes to theĀ Biznews share portfolio in the monthly update,Ā an event also only for Premium members.Ā Register here:Ā https://attendee.gotowebinar.com/register/707564726897634829
For downloading…
* The Biznews Weekly PDF which came out late last week has been very popular. It opens up a treasure chest of additional info – and is real easy to share. Here’s the link: https://bit.ly/3cgLwqo
* Episode Five of The Alec Hogg show features an interview with rags-to-riches financial services entrepreneur Magda Wiercyzka – well worth the investment of a half hour:Ā https://iono.fm/e/926960
* Chapter Eight of the audiobook on the Cyril Ramaphosa biography unpacks the development of CR as a powerhouse negotiator as he created and built the National Union of Mineworkers:Ā https://iono.fm/e/927460
* In case you haven’t yet managed to hear it, here’s the link to Episode One of the newĀ Inside Investing podcast: https://iono.fm/e/926491
