Tomorrow April 6 I’m going to sell Softbank Group (SFTBY) out of my Jubak Picks portfolio. The shares are up 21.19% since I added them to this portfolio back on February 20, 2015.
I originally bought these shares because I liked Softbank’s portfolio of young Asia Internet companies. Softbank was, I wrote then, the best way I could find to invest in what was likely to be the explosive growth of all things Internet–from ride hailing to smartphone banking to commerce–in the coming Asian Internet boom.
I’ve watched in dismay in recent months as the company has drifted further and further away from that strategic emphasis. It was already hard to hold my nose at Softbank’s big debt-funded investment in Sprint (S). I understood the logic of investing in a wireless carrier and the idea that there was a competitive advantage for the rest of Softbank’s Internet investments in owning a wireless platform. But I frankly didn’t find the logic very compelling.
But no matter. I was willing to overlook the big undigested  lump that was Sprint because Softbank was an early stage investor in the Asian Internet boom at prices that private stage investors get but that public stage investors can only dream of.
But then came the decision to spend $31 billion to buy ARM Holdings. Again, I understand the logic of the deal–owning the chip company that owns the intellectual property for one of the best low power processors could provide some kind of competitive advantage in the developing world of the Internet of Things. But again, I don’t agree with that logic. If I want to own a chip maker/designer I’d be much happier directly owning ARM or Qualcomm. I don’t need Softbank to pay $31 billion in cash to buy a company with $1.5 billion in revenue in 2016.
The recent strength of the yen gives me a good opportunity–as a dollar-based investor–to sell out of Softbank with a reasonable profit.
The sell will, of course, give me some cash that will go into another vehicle for owning a stake in the Asian Internet boom–as soon as I can identify one. China’s Tencent Holdings (TCEHY) is a possible choice. But that stock is already in my long term 50 Stocks portfolio.
