HGL – Like a cancer to be removed (HNG)

After a year’s patience with HNG I’ve decided to sever my relationship with the holding and my book is already thanking me for it. It had a big margin of safety which was unfortunately eroded by multiple businesses losing money, particularly Biante.  If the business had stayed profitable, I could have justified maintaining my holding, but with the group currently booking losses, I’ve decided to exit my position to tally up the lessons learned.


This is not before taking a 60% haircut from what was a fairly large position.  Looking back at what I could have done better, the main thing I could have done to improve the final outcome would have been to take a smaller position so it would have had a smaller impact on my portfolio.


The original purchase had a decent margin of safety, but with the businesses losing money (and only a few small pieces of good news such as from the Mountcastle brand) it was time to SUMO (Shut Up and Move On).

6 thoughts on “HGL – Like a cancer to be removed (HNG)

  1. Hi Leon
    Another step you could use is place a stop under a certain point in the price of the stock.
    You can still take a large position, but your lost is “protected” by the stop.
    Sounds easy in practice but hard to do it reality.


    1. Hi Chris I use stops to manage downside risk in my derivative portfolio however using value methodology when I am long equities I care more about the value of the underlying business rather than price dynamics. Price is only important when I’m buying or selling (ie, buying a dollar for 60 cents, or holding shares in a company whose stock has become overvalued and taking profits is a better course of action than holding). If HNG was still profitable and running well I wouldn’t have sold my holdings.

  2. Are you aware the chairman has bought shares recently? Usually, there is one reason insiders buy.

  3. Well done on reacting to the shifting fundamentals. It can be very liberating cutting off that serial underperformer weighing down the portfolio.

    By the way, have you ever taken a look at EPD? It’s in the general WA managed IT space – so an area you might have some insights in. Appears to have quite a bit of sales momentum and increasing profitability.

    1. Hi Michael

      Interesting firm, the issue with IT services vs telco is earnings can be pretty lumpy, the couple of big services contract wins are nice but their EBITDA margin is only small. Their vendor partners Cisco, MS etc are pretty common so competitive markets compared to more niche vendors. Additional downside if the $7m WA Gov contract goes bad and ends up costing them – they may have found they bit off more than they can chew.

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