End of Q2'18 update

In a regular end of quarter update, I tend to summarize my thinking on current/past holdings, so here they come:

• GM: I continue to see this as a great opportunity thanks to Cruise. It was somehow validated during the quarter by SoftBank investment, but I still feel it undervalues Cruise and the business opportunity in front of them. I did not immediately follow-through on my plans to buy much more stock options for GM. The stock went to $44+, but recently retreated, and I bought a bit by adding to my Jan'19 45 calls. I mostly ignore Trump-related volatility, as I assume the outcome will ultimately be quite reasonable or there will be ways to mitigate negative impact.
• BRK: I substantially increased the stake as the stock was relatively weak. Even if Q2 earnings are hit by unrealized investment lossess, the overall value proposition is still very sound and it will continue to be quite close to 120% of book value. I feel like the underlying value of major holdings (APPL, WFC, KHC) is attractive compared to their current prices, and couldn't be more happy than to hold them thorugh Berkshire, at the current prices.
• GOOG: I kept it relatively steady, trading a tiny bit on ups and downs, but still consider the price attractive. If Google continues to grow revenue & earnings at 20%+ pace for a few more years (which I expect) the current price will be deemed very reasonable.
• VRX: As Valeant continues its turnaround (and soon rebrands as BHC) I feel good about their prospect, even in the context of relatively pricey bond issues or delays in approval of key drug. Absent some storm the risk of bankruptcy is likely gone, especially with their move to more steady product categories.
• FB: Not much change here, holding to the original stake - not adding, reducing nor trading on ups/downs. I still think it's undervalued, but I'm hesitant to buy after the stock price recovered. I might consider buying calls or selling puts, but this requires more thought.
• VER: Not much to say here - even though there was some price recovery lately, I'm keeping it relatively steady to balance portfolio which grew elsewhere. The yield is still attractive and reduces mutual correlation of the overall portfolio.
• KHC: I tried to fish for the bottom in KHC and it seems like it mostly worked. I already took some profits and while not spectacular, it should prove to be an OK way to benefit from volatility. I do not see enough of return potential to hold it for a very long time and will be happy to take modest profits sooner than later. Should market further discount it, though, I'm OK to add back what I sold and then some, unless better opportunities arrive elsewhere.
• APPL: I traded it a bit on ups and downs, but overall increased the stake. The effects of compounding returns, stock buyback and tax changes is very solid, with limited downside. The service businesses and the wearables space provide for upside that is probably not yet discounted in the stock price.
• WMT: Beyond pure intrinsic value calculation of the current business, my assumption was that Walmart will be able to become more efficient in the ecommerce space by finally leveraging their existing assets and customers. It does not necessarily seem to be happening, and recent acquisitions (Flipkart by Walmart and innovative online pharmacy by Amazon) make me more and more doubtful in Walmart's future, especially that the current price is not low. I was able to reduce the stake by almost half at roughly my cost. I will be happy to dispose of the rest soon, and will probably not look back unless their actions show that they can continue to create new kinds of value for customers, in addition to what they undispudedly did already.
• EPOL: With weaker PLN and not much advancement in polish stock market I bought back a bit into the cheapest index fund I could find for Polish stocks. I treat this mostly as a way to hold some PLN, with market growth, not as source of alpha.
• PCG: I disposed all of it at very modest gain. I would have held it for longer, but the developments related to wildfires were worse then my (perhaps too optimistic) expectations and I felt that it's probably better to stick to other California company I know much better.
• GILD: Continues to be a marginal position, as the rate of business decline was worse then I anticipated it seems like the upside is quite limited.

Tesla progress in ramping up Model 3 was better than I anticipated, but nevertheless I consider it very overvalued. I shorted a bit more as it rallied and already (by August 3rd when I'm finishing writing this) I bought back a portion after stock price tanked. The short thesis is well alive, but I'm less confident in timing now.

I just reread Adam Smith's "The Money Game" and was again impressed by it. I'm revisiting in my mind two important questions - the use of margin and potentially managing other people's money. This requires much more thinking, though, and certainly warrants a separate post.