Investment Ideas: February 2020

Many asset classes around the world are overvalued right now, but I recently watched a video with Mike Maloney and Ronald-Peter Stöferle (of Incrementum AG) with the latter showing a chart we may be back to 2000 valuations for commodities.

The chart above represents the ratio between the SPGSCITR commodity index (aka S&P GSCI) against the S&P 500. It just shows stocks are really expensive compared to commodities.

And if we look at the long term chart of the GSCI commodity index courtesy of trading economics, commodities are indeed back to price not seen since the end of the 90's.

Great! Let's find a GSCI ETF tracker and we should get a nice return you may think. But not so fast, as you may remember commodity ETFs are usually terrible investments due to the contango effect. But let's double-check as in the US, there are two ETF's tracking GSCI: GSP and GSG.

Those are down around 70% since May 2016. The GSCI index is also down since that time, but only about 60%, It's not that bad considering the ~15 years time frame.

However, my brokers won't let me invest directly in ETF's in the US. So instead, I looked at mining stocks like BHP and Rio Tinto listed in the US.

While both stocks are well below their peals in 2006 or 2011, they have recovered a lot since the bottom in early 2016.

So I went looking for other opportunities in the Hong Kong stock market (Hang Seng). There aren't any commodity ETFs anymore apart from Gold based ones. So we can look at the charts, earnings, dividends and P/E of some of the commodity producers. It's always more risky to selecting individual stocks, especially those depressed, as they may go bankrupt, so I personally prefer to focus on larger companies.

Petrochina 0857.HK

We are back to the year 2014 price. The company is still making profits (0.33 HKD EPS), and paid a 4.6% dividend last September. With a one trillion market capitalization, it's one of the biggest companies in the world. There may be more downside, but patient investors will be rewarded by the dividend and potentially higher price in a few years.

Sinopec Shanghai Petrochemical Company Limited (0338.HK)

Sinopec is another large Chinese oil company back to 2014's prices. The dividend yield stands at 13.49% according to Yahoo (I suppose this will be revised down), and the company is still making a healthy 0.561 HKD profit per share. Market capitalization: 37.30 billion HKD.

China Coal Energy Company Limited (1898.HK)

Still a large (57 billion HKD) profitable (0.387 HKD per share) company, but probably more risky if the Chinese government really decides to scale down on coal-powered power plants. The company also pays a 3.28% dividend. The share price is really depressed well under the IPO price in 2006.

Sinofert Holdings Limited (0297.HK)

If you believe in the long term potential of agriculture, Sinofert looks promising. The company specializes in Potash which shot up in 2007/2008, and came down hard since then. The stock is really depressed at 0.80 HKD. But Sinofert is one of the largest fertilizer producers in China, is still making money (.075 HKD per share), and pays a dividend of 2.8%. The same could have been said in 2012 however, but the longer the undervaluation remains, the more the stock may gain when the market reassesses.

All those companies also have a price-to-book and price-to-sales well below 1, and they are very unlikely to go bankrupt. In the worst-case scenario, the stock price goes nowhere, but you still get paid to wait thanks to the dividend.

Do you know of any other HK listed commodity stocks that are paying dividends, depressed, and profitable? Let us know in the comments.

You may have read in the news that fairly large private companies like AirBnB and Virgin Hyperloop One may consider launching an IPO (Initial Public Offering). Some scammers have decided to make a buck and launched several websites, opened companies across the world in 2019, and set up call centers.

[Update June 2, 2020: The scammers have also diversified their stock offerings with scams now also involving:

PRMW - Primo Water Corporation
ZM - Zoom Video Communications, Inc.]

How Does that Work?

The scammers manage to get your phone number, name, and email address from sources that may include a website where you have expressed your interest.

A person speaking perfect English and that sounds knowledgeable with financial matters then calls pitching the unique opportunity to invest in Virgin Hyperloop One IPO (actually Pre-IPO), for instance. Most people will be wary, but then they provide you with a credible company website, including registration numbers from the Bank of Ireland that seem to match, and some information about the IPO. They let you some time to think about it, and then come back the next day where they can complete the deal.

You'll then receive an email with account opening documents, online account access, invoice for the amount you want to invest in, and of course, the W-8 form since the IPO takes place in the US. You'll talk to another employee/scammer to confirm your details. Note that we were told you'll never be asked your passport, a clear red flag.

You'll notice the company where you're asked to pay the invoice to is different from the company promoting the pre-IPO, but they'll tell you it's safer to use a third-party as Escrow to confirm payment for both sides. It's also in a different country.

Once payment is received, you'll get an official receipt, and can log into your account, and your shares will be visible. They'll then call you from time to time, maybe once to twice a month to explain everything goes well, and the IPO should occur in Q1 or Q2 2020 as expected. One day, a call is different, as they'll pitch another stock with a unique opportunity of a positive liquidation scheduled to close in about 45 days. You'll buy some shares now, and in 45 days you more than double your investment. This is a unique opportunity, does not happen very often, and is basically risk-free.

If you decide to invest again, and then be contacted from time to time to keep you updated, and when the time to sell has come, they'll call you to inform you there are some options to purchase for a fraction of the price, and you'll quadruple your initial investment. If you refuse, they'll come back a few days later, saying the sale is complete, and provide with an obviously fake NASDAQ receipt (PDF generated from Excel file) saying you need to purchase mandatory preferred shares to release the funds.

Fake Companies/Websites/Names, Real Companies, and Bank Accounts

So who are those people? We don't exactly, but we do know they are using possibly fake companies, fake names with the phone scammers having some heavy turnaround, as well as real companies that opened last year and are used to funnel the money.

"Fake" companies & websites used:

Van Gossum Consult (“VGC”)

Singapore: One Raffles Place, Tower 2, 1 Raffles Place #27-62 S048616 London: 110 Bishopsgate, London, EC2N 4AY Hong Kong: International Finance Centre, 8 Finance Street, Central, Hong Kong

St Johns Asset Management (“SJAM”).

website: www.stjohnsasset.com

Office#: 386-385-5915
Address: 601 St. Johns Avenue Palatka, FL 32177, USA

Crest Security Contracts Ltd

The company was related to the two other companies listed above and has now alledgedly closed due to a lawsuit.

Brookfield Investment Funds Plc

website: brookfieldinvestmentfundsplc.net
main email: accounts@brookfieldinvestmentfundsplc.net

Office addresses:

Others

You'll find many others companies related to AirBnB pre-IPO scam. Luxstar Asset Management, based in Luxembourg, specifically asks payments to Kaloca Inc, for which we have more details below.

We know of three companies and bank accounts used to transfer funds, but there may be more:

Account Name: VIPCO Holdings Pte.Ltd.
Account address:
11 Keng Cheow Street
No. 02‐11 Riverside
Piazza
Singapore 059608
Account Number: 503 534 950 301
Bank Name: OCBC Bank Singapore
Bank address:
65 Chulia St.,
OCBC Centre,
Singapore 049514
Swift Code: OCBCSGSG

Incorporated in February 2019.

Account Name: Law Office: John Jennings
Account Address: 40213 Duesseldorf, Germany
Account Number: DE34 7001 0080 0097 3868 04
Bank Name: Postbank
Bank Address: Essen, Germany
Swift Code: PBNKDEFF

Very hard to find information about that one. It looks like an individual, instead of a law office.

Account Name: KALOCA INC.

Account Address:
2177 Buckingham Rd.,
Suite 567,
Richardson, TX 75081
Account Number: 4880 7336 0881
Bank Name: Bank of America
Bank Address:
100 N. Tryon St.
Charlotte, NC 28255
USA
Swift Code: BOFAUS3N
ABA/Routing Number: 026009593

The company was incorporated in 2019.

Some of the (likely) fake names and positions of the scammers include:

Mr. Jason Taylor, Investment Adviser
Carl Bryce, Director of Finance
Damian Williams, Director of Mergers & Acquisitions
David Billington, Accounts Department
Keith Armitage, President
Greg Ellis, Account Services.

Ian Simms, Senior Market Strategist

David Scott, Finance Manager

Daniel Parker, Investment Advisor
Melissa Keating, Accounts

Some of the phone numbers used to call victims: +35314126374, +35314124540, +44(0)1702623754, +442076601459, "private numbers", and local phones numbers which all have called barring enabled meaning they can call you, but you can't call back

I've been scammed! What can I do?

First, stay calm, and if they call you again just pretend you are still interested, just in case the police need more information. You could also install call recording apps such ACR call record provided it's legal in your home country.

Then fill a report to your local police station. You could also fill a report to the authorities of the country where you transferred the funds.

For VIPCO Holdings Pte. Ltd. in Singapore, you can fill a report online to the Singapore Police Force using their iWitness website. Alternatively, you could call the Commercial Affairs Department directly: +65 6325 0000.

For "Law Office: John Jennings" in Germany or other countries in Europe, you can follow the links from Europol website.

For KALACO Inc. in the US, you could contact the FBI in one of their offices in the US or overseas.

You could also contact a lawyer, but this would likely only work if the amount is really significant. Working on international cybercrime is a complex and slow process with the involvement of the authorities of multiple counties, certified translations, bank records, lots of documents and so on.

SafeorScam website also reported on such scams, and they offer services to help to recover the funds. However, we never worked with the company, and can't vouch for them, just make sure not to throw good money after bad.

To be honest, the chance of recovering funds is slim, as the money probably left the country where the money was transferred and spent on third parties. But it still worth a try, and the people responsible for the scam must be held accountable and spend a few years in jail. This will also prevent more victims.

Investment Ideas

Sunday, February 23, 2020

The Case for Investing in Chinese Commodity Producers