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  • Writer's pictureIshfaaq Peerally


Another bad day for the markets $SPX500 with more fears about the coronavirus. As for our portfolio, Concho Resources $CXO and Parsley Energy $PE fall by 3.2% and 2.6% respectively as ExxonMobil $XOM reports disappointing earnings and $OIL prices fall. Polymetal $POLY.L is the best performer today and is up by 1.5%.

The month of January 2020 has been the worst for our portfolio since November 2018. So what happened? GameStop $GME fell by over 30% after lowering their guidance for this quarter. The coronavirus affected Skyworks Solutions $SWKS which draws 10% of its revenues from China, as well, as Parsley Energy $PE and Concho Resources $CXO as $oil prices fell. I'm not delighted that we had a bad month but this is part of being in this game. I had nearly a +6% return in December. If we are happy with this, we need to expect the months with a -6% return as well. The key is to focus on the long-term. Let's take GameStop and Skyworks Solutions as examples. Both these companies are expecting higher sales in the coming years with new gaming consoles and 5G smartphones respectively. Short-term falls mean nothing when you're thinking for the long-term. Sometimes, they do provide us with opportunities to take.


1. GameStop $GME

GameStop had a disastrous January with the stock falling by nearly 40% after announcing lower guidance. This is the opportunity to take and buy GameStop. GameStop is the largest gaming retailer in the world with over 5000 stores in 14 countries. The problem with GameStop is that they have big competitors such as Amazon $AMZN , Best Buy $BBY and Walmart $WMT . Besides, gamers choose the download the games instead of buying them in physical form. This year will be a bad year for GameStop but next year will be better because the new consoles are coming out in November 2020, the Xbox from Microsoft $MSFT and the Playstation from Sony $SNE . They may not have as strong sales as before but looking at the current valuations, this is a real bargain. This is not the first time that this is happening. GameStop stock is cyclical and the same thing happened when previous consoles were launched. GameStop stock price is about a third its book value and they have more cash than their current market cap. They are using this cash to buyback shares and last quarter alone, they repurchased 35% of the company. GameStop can repurchase an additional 71% of the shares at the current stock price. GameStop is the prime example of a cigarbutt stock. There is still some money to be made with this company. GameStop is not the next Blockbuster and is not going bankrupt anytime soon since they have a really good balance sheet. A failing business can be a good investment if bought at the right time and right price.

2. Polymetal $POLY.L

This is the second largest gold $GOLD miner in Russia. It is also the third largest silver $SILVER miner in the world. The current AISC (All in sustaining cost) of the business is $861, which gives them a margin of about $700 per ounce of gold as cash flow. That's one of the highest in the industry. However, they can go even lower than that in the future since they are building new mines. Polymetal could be the largest Silver miner in the world with the new mines and among the top 5 gold miners. Most probably gold prices will go up in the coming years but nobody knows when. That's why it is important to invest in a gold miner which is not going to run out of gold soon. Polymetal is investing in the future and that's why I invested in this company.

3. Travelers Companies $TRV

The stock price of Travelers Companies has been falling in recent months because of increased expenditure related to Asbestos claims. But what I like the most about Travelers Companies is their bond portfolio. Any insurance company will use their cash to buy other securities. For example, Berkshire Hathaway $BRK.B buys stocks. Travelers Companies has been buying bonds and they have a $63 billion bond portfolio, of which 98% is investment graded. If you're investing in Travelers Companies, you're buying these bonds at a discount.

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