Enclosed you will find the first batch of revised investment cases and valuation spreadsheets of Nintai Investment portfolio holding companies. These are for the first half of 2020. Some of these you may own, some you may not. We have included all of them, so that you might get a better sense of understanding of our methodology and selection process.
An issue too large to ignore is the COVID-19 pandemic. Dependent on where you or your portfolio companies reside, you might see little impact to significant disruption. Worldwide there have been 13.8M confirmed cases through July 15 2020. Roughly 7.74M individuals have recovered with 591,000 confirmed deaths. Here in the United States where Nintai Investments is headquartered, there have been 3.53M confirmed cases along with 178,000 confirmed deaths. Basic math shows the US has been hit particularly hard. Regardless of your political persuasion, these numbers show that American business has taken a very real hit.
So what does this mean for your portfolios and impact on returns? A couple of things. First, the type of holding we seek at Nintai Investments has the financial and business acumen to withstand very hard shots to the system. Company’s have little or no leverage so there is little pressure for debt servicing. Second, competitive moats are very broad and deep assuring both strength against competitors and continued demand from customers. Additionally, valuations are as likely to go up as come down. We see this playing out in Q2 2020. Finally, prices are far more stable and will likely recover more quickly. Again, we see this playing out in Q2 2020.
Some of the companies in our portfolio are taking longer to report their returns or it is taking longer to generate reports because we can’t talk to customers or vendors. An example is FANUC, located in India where the country has been swamped by over 1M COVID cases. We also have not been able to chat with over 50% of the customers and vendors that assist us in better understanding the company’s results. Consequently several reports will be delayed. On a more personal note, two individuals we’ve known for decades and who have been both tremendous sources of data and teachers, we lost to COVID-19. Things like that put it all in perspective. We will miss Sanjay and Billy tremendously and send our love and prayers to their families and loved ones.
Enclosed you will find three of the first investment cases and valuation spreadsheets - Biogen, F5, and Check Point. Fanuc has been delayed due to company issues and the loss of Sanjay. Next week’s batch - Biosyent, SEI Investments, Guidewire, and Novo Nordisk will be delivered on Friday, July 24 2020. Please don’t hesitate to contact me with any questions. My best wishes.