I started as an emerging market analyst in 2002, and one of the biggest best stocks at the time was Petrochina. It was listed in Hong Kong in 2000, and had done nothing for years, before stating to move in 2003, and rising 1,000% by 2007, before entering a prolonged bear market.
In 2003, Warren Buffett bought 7% of Petrochina, and then slowly began exiting in 2007. The final spike happened after Berkshire Hathaway has sold out fully, and the market believed the overhang was gone. Markets were getting very bullish on emerging markets as the Federal Reserve was beginning to cut interest rates as this was seen as the catalyst for emerging markets in 2002.
The problem with this view was that in 2002, Emerging market bond spreads were very wide, and commodity prices low. By 2007, emerging market spreads were tight, and commodity prices high. Even though the Fed cut rates, emerging markets and Petrochina were not the place to be anymore. However, by early 2009, Emerging market bond spread were attractive again, but as of today, look unappealing.
I was reminded of this by seeing Warren Buffett continuing to reduce his stake in Apple. Buffett has done very well out of Apple. He started building a stake in 2016, and kept increasing. Average cost in USD 37, versus a price today of 225.
Is there any similarity between Apple and Petrochina?
