Saturday, October 22, 2016

A reflection of my investing approach

For quite some time, I found it hard to explain my approach. Value investing? Dividend investing? I am not going to pull my hairs over the words, but I realized I have many unanswered questions as I reflect on my investing journey.

First of all, let's go into the buy side of investing.

I am definitely not pressing the "buy" button using numbers as the only decision. Not that numbers are not important, but no way am I going to base an decision by some ratios like ROE, P/B, PE etc. The numbers are never static, and it is the future numbers that are more important, and the future numbers are determined by growth, and the current numbers determine the margin of safety.

Now, I think I have 2 approaches to finding "growth" in stock, and 1 approach in finding "safety"

1) Buying alpha cyclical stocks, wait for reversion to mean, and for "growth" to take place in the form of "recovery"

Those counters that I have bought using this approach include Golden Agri, Yangzijiang, Sembcorp Industries.ST engineering, and most recently M1

I would say my track record for this approach is horrible, as I usually bottom fish too early. Of all the counters listed above, I did average down for all except for M1 (too recent), I usually average down when a counter is down another 15-30%.

It works well for me for Yangzijiang, ST engineering, I made a decent profits from YZJ (The previous round of buy-sell net 30% profits is 2-3 years ago) Averaging down for ST engineering allowed me to reduced stake at break-even price, and stayed above water.

But I was "burnt" for averaging down for Sembcorp Industries. It had fallen some 40% from my average price at its trough, and I have cut loss at 30% for half my stake. 

Taken in totality, including dividends, capital loss and gain, both realised and unrealised, it would be a nett-loss of about $300. 

Verdict- Failed. 

At highsight, I could have improve this approach in 2 ways. 

Buy later. Whatever I have wanted to buy at first salvo, wait for another 10% fall. 

Sell earlier when average down fail. 

2) Find potential growth drivers that is likely to materialize, but with stock price yet to be chase up. 

Those counters that are brought under such approach include MIT, SingShipping, Ascendas Reit, SingPost, Lee Metals, Cogent and APPT

Of course, the key words are "likely to materialize", and I could still get it wrong. With the exception of Lee metals, I have no need/chance to average down, although I did bought back after selling, which I think is different from averaging down.

There are plenty to reflect on in this approach. 

Lee metals' growth is AustVille TOP. It did happens, and I was sitting on 20% gains excluding dividends. However, when as Austville is an opportune one-off windfall, the "story" of investment then become that of cyclical play and also the third approach which I will talk about later. 

APTT growth are Taichung penetration, cross-selling of products and also broadband market. It didn't work out and my wife exited with capital loss. I was lucky that exited earlier due to the need of cash, and I exited earlier.

Now, taken in totality, even without taking into consideration dividends, it was a gain of $3400.

That is taking into consideration that APTT did not have the growth materialized. 

However, the gains would have been much lower, have I not offload A-reit and SIngshipping when market is at 3300-3400. The irony is I also sold Cogent too early, it will be muti-bagger instead of a 30% gain.

Verdict- Passed with a stroke of luck. 

On hindsight, how could I have done better? I am not sure if I could have hold on to Cogent longer? Perhaps I could have done staggered profit taking instead, like I did for Singshipping? I would have missed the opportunity to sell A-reit all at once, but nett-nett, it would still be more profitable. I am also not so sure about selling on confirmation of good news. If I have waited for Cogent to confirm its Jurong development project, I would have also waited for APTT super drag feet entry into Taichung, and like my wife, exited with capital loss.

I should not have change the story from growth drivers to cyclical plays, in the case of Lee metals. When the story changes, the actions should have been different there and then

The third approach, I was not looking so much for growth, but stability and attractiveness of yield.

3) Stable companies with attractive yield

Those bought under this approach include LMIR, Sabana Reit, Silverlake Axis, Venture, HPHT, Accordia Golf Trust, Parkson Retail. Putting them together suddenly make me realized with the exception of Venture and Sabana Reit, all of them have their operations overseas. LOL

One need not agree with my choice but I considered LMIR stable then as Indonesia retail scene is booming, and Accordia Trust has survived Japan Quakes very well in terms of distribution. 

With the exception of LMIR, again, none need averaging down.

Again, taken in totality, I seems I have make a good profits on $2300 without taking into considerations dividends again.  

Verdict- Passed with a stroke of luck. 

How can I improve? I am not so sure about this group. Venture I sold and bought again, LMIR I just endure the capital loss and receive dividends and it is recovering well with the rest of the reits. (I think I am in the money now, with dividends.)

FSL- The odd one - Catalyst play.
Expect resumption of dividends to boast share price. Exited at 5% profits. At one point it was a 35% paper loss, but I didn't average down nor cut loss. I kinda of loss with this. So I will say bye bye for this for the time being. 


Cyclical plays should be treated with utmost care, I will bear this in mind in dealing with Yangzijiang, and to a lesser extent, Lee metals. Yield, if sustainable, does provide some support to falling prices. 

Profit taking should be staggered. 

One cannot mixed growth drivers investing with cyclical plays, such as in the case of Lee metals and perhaps to a certain extent, ST engineering. 

My results would be better have I stick to approach 2. In fact, Capital Commercial Trust fit nicely into approach 2, but I stopped short because of the lame excuse of "over-exposure" to leveraged instruments
This is a personal reflection on entry and exit, and is meant for my personal consumption. How well researched on a company business model and track records is still first and foremost the most basic trail of thoughts. 

Wednesday, October 19, 2016

Has the fundamentals of M1 and SPH caught up with valuation

I doubt anyone would disagree with me that the fundamentals of these 2 companies are being affected by competition. M1 by a highly possible 4th Telcom player and SPH by alternative news digital platforms.

But that is only half the question, a better question would be "has the challenging outlook being reflected in the shares price, and has it overshoot to the downside?"

Personally, between the 2 companies, I would go for M1, notwithstanding the fact that its latest quarter results sucks. It blames the fall in net profits to higher depreciation and ammortization costs, but there is more than meets the eye.

If you look at 9 months result, there is indeed a significant increase in amortization and depreciation from 86,1mio to 93.3 mio, but if you look at 3Q results by itself, the difference in YoY depreciation and amortization is a mere 1.3 mio. The real cause is the reduction in ARPU. The lower handset sales while affect revenue will also cause higher cost of sales, so in a while, it will offsets one another.

Is reduction of ARPU worrying? You bet, since the competition has not even started.

I have assume the following in the face of a 4th Telcom.

1) It costs a 10% fall in ARPU to the price competition
2) It manage a 10% market share within 2 years, and cause 25% reduction in M1 mobile's market shares.
3) M1 continues to pay out 80% of earnings.
4) M1 is able to maintain its NP before the "war" begins

I expect a 5% dividend yield with the reduced earnings in 2018, and the price should be $2.2 I made a bid for today but did not get anything. But I will not bid anymore tomorrow.

Because as you can see, assumption 1 should be worse since without competition, it had already worsen by 10%.

Since I gave a damning report, why did I still say I chose M1 over SPH. 

Any real fight with the 4th Telcom will only starts in 2018 earliest (10% market share), I assume of the 10% loss, half of it comes from M1. It might not be too bad.

I do think with a reduced earnings, M1 can sustain its operations albeit at a lower earnings. There are also 2 silver linings in M1 report, cash flow is still strong, and they are still growing their subscribers base. However, it is due to a higher penetration rate, and I suspect Singtel and STarhub will both report an increase in subscribers. 

With SPH, it is not going to easy. It has already increase ASP, but its reduced dividends of 18 cents is already above 100% payout. 

I do not think print will go the way of the dodo, but I seriously do not know the "bottom" and hence I cannot predict what price is a fair price since I cannot predict future earnings and hence yield. 

However, SPH shares price's fall is not as bad as M1. If you ask me, SPH competition is 2 folds. One is direct advertising competition, such as google and other online platforms. Next, readership. If readership of papers continue to fall the attractiveness of advertising through print is going to be even lower. 

SPH is in news business. Beside speed of updates in news, there is another issue of news print. I get news alert from 4 different news apps on my phone. If I want my finance news, I go for reuters and bloomberg, there is no need to wait for Straits Times to reproduce their news. 

Then why is the price holding up relatively well. I think its due to the speculation of timing of injection of Seletar Mall into SPH reit and the possibility of special dividends. 

However, I will watch M1 closely. 

Thursday, October 6, 2016








Friday, September 30, 2016

Random thought: That feeling of being young

That feeling of being young?

Having a hell lots of fun, enjoying every single part of company, fussing over the wrong words said.

"Torn" the night as I used to say it.

Saying nothing and listening, trying to make a good impression.

Feeling free to do whatever one like, and yet felt important to make an impression.

So excited that I keep blabbering rubbish. 

Screaming and shouting over a scoring of a game. Feeling tired yet wishing the day has not ended. Wanted to take it cool but also wanted very badly to win. 

That was a camp, I felt younger by 20 years. 

The nice rainbow yesterday mark the start of a feeling forgotten since a decade. 

Reliving it again, a blessing. 

Saturday, September 24, 2016

Doing company prospecting is risk management rather than prediction

This is somewhat triggered by B's post on swiber and the issue of hindsight commentary.

It is not difficult to find what's wrong with swiber, MPM, etc. but personally, DYODD is more about self-accountability and comfort level rather than anything else.

I remembered MPM had a price surge when it first announced its foray into Rig, if u have exited then, MPM is still a profitable (perhaps very) for some. I didn't because I am not comfortable with the rig being built without a charterer. Does that mean I am a genius? No la, just that I am uncomfortable with that fact. Similarly, I thought oxley will blow itself up sooner or later, but it's properties keep selling like hot cakes and it's going places, and those overseas projects are also generally successful. But I am still uncomfortable, it's not about whether we are right or wrong, but how u think of its risk reward profile. And if can u forgive yourself if you are right and uncomfortable about the risk but went in nonetheless. 

Cases of I am wrong about the companies earnings and still make money:
2) Gaoxian (exited when dual listed)
3) Venture (growth drivers did not come from 3D printing and Penang cost control ,rather it's from life sciences) 
4) ST engineering ( AIMs and LSG did provide the growth, but offset by MRO) 

Cases of being right about the companies' earnings but still lose money:
1) Lee metals

Then there is many cases of being right about the earnings but sold too early:
1) CES
2) Cogent
3) Silverlake axis

So all in all, I agree with B that "I told u so" is rather meaningless.

We need to get BOTH the earning forecast right, as well as the entry and exit right.

But the fun part is "reading the industry and management", equally fun as making money. 

Friday, September 16, 2016

Random thoughts: Weekend musings

Gold is worth 200k or a million?

The explanation years ago, by minister/ minster or state is the level of competition, meaning the number of competitors are vastly different. One go through the heats, semi finals than finals, while another went straight to the finals.

I felt for someone with an inherent disadvantage, the heats and semi finals are in his/ her life stages, and it may not be any easier. 

I was just amused until my colleague told me its "unfair" and the disparity is too big.  It means me wonder if the public miss the point. 

Recognition is good, important in fact. But can be measured in dollars? Ask the parents if there is no prize money, will they send him to USA? I dun know, I am not them, but I think they will. 

Then the issue of "signaling", what are we teaching our young kids with this disparity? 

I think we are teaching "reality". At the same time, the winners and the winner wannabes, they are trying to prove to others and most importantly to themselves what they are made of, value is intrinsic, less extrinsic, and when it is extrinsic, it is hardly monetary. "I do not wish to let down those who supported me so much in this journey", rather than "shucks, just 0.4 seconds and it's a quarter million"

Of course, there is nothing wrong tangling carrots. But u catch rabbits when u tangle carrots. There is a difference between scavengers and hunters, although they are not mutually exclusive. T-Rex is also a scavenger at times, but a pure scavenger can never be a hunter, and a rabbit never a eagle. 

Work and Tacomb   

I read plenty recently about "dog eat dog", office politics, etc. while I am glad my sector is relatively tamed in "politics" and basically no real "back-stabbing" (since our pay has nothing to do with targets and sales, at least not significantly ), I wonder if those who complained about "politics" are part of the politics.

I realize how much people take things "personally" and do not "speak their mind" and they claim its for self-defense.

Ya, blame the world, they made me who I am. While defintely, survivability will change a person, how many decisions you made is really a "survivability" decision? Will doing what u believe is right or refraining from doing what is wrong cost you your job? Seriously? 

Now, one more level, will that decision cost you that performance bonus? Seriously? Seriously, u think your boss is really blind that he/she will take whatever bad mouths about you at face value, or is that what your boss observed and hear overlapped? Or are you just afraid that it might cost you your performance? 

I am a male prositute, I want money and need my income, I am not an contender for FI, but I still do what I believe, whenever I could, say what I think is right, whenever suitable. Did it cost me my job, my promotion, my performance? 

No, maybe not yet. My boss hint I "low EQ", I am ok. I know where she is coming from. My RO told me to toe the line when a decision is made, that I agree. I dun seek to "change the rules", 
But I am not helpless within the rules, there can be so many creative interpretation of rules? How about being shameless and live in your belief as long as possible until it is not possible (power taken away, or warning given) and be ready to say "I am sorry". That is how I cope... I felt horrible when I failed myself, but less when I am reprimanded for not toeing the line that is counter to my belief. 

My staff sometimes ask me, "like that how? Can meh, sure a not", I tell them do what u believe is the best for your pupils, as long as you can. Then I will apologize on you behalf. 

I know I am the odd one and weirdo. That's why I am planning my succession. I think my organization can only take my harming/ toxic for 5-6 years, before the system caught up with us. So I am passing my helm over slowly, and when the time is right, I will extract myself to poison another place ... LOL.

While, I am not at odds with myself over my core beliefs, I do think my capacity to grow the unit is really limited. Always ready to pass on to the next better player. 

Saturday, September 10, 2016

Random thoughts: "beautiful souls"- a thought-provoking book

"Beautiful souls" is a wonderful book, it is cognitively stimulating and emotionally disturbing. It contains 4 true stories about  the courage and conscious of ordinary people in extraordinary times.

Just 1 story, and it stirs me. The story about the police captain who falsified papers so that Jews can stay in Swiss. 

It is not just a recount of what happens but also explanations of why it happens, with modern explanations why people do what they did. 

I remembered LP and I were talking about neutral good/evil. We weighed our options before committing. 

I found that this weighing of options, would properly mean I would have done the opposite, if I was in his shoes. Sending the Jews back to Austria. 

I had a break before reading the whole chapter, (waiting for my wife to finish her facial) and I thought to myself, if everyone is like him, wouldn't the place be swarmed with Jews and become a obvious target of hilter, who already annexed Austria? 

The author addressed this point, the "delegate" or shifting of obvious responsibilities to higher "doctrination", it also attempt to explain why the Nazis were able to do systemic killings. In short, they hid behind "were told to so", "others were all doing it" and there is a "greater reasoning" for all these.

The 3 factors applied also to the other side, who simply followed orders to send back the Jews to Austria. 

There is also one explanation that the "proximity" to the refugees, is why the police captain couldn't say no, while other captains "afraid of moral dilemma" simply delegate the duties of sending teh Jews back to more junior officers. 

The explanations are backed by modern experiments and not just by theories. There is this experiment of effect of "carrot and stick" but the test  was just carrot, and someone need to press the button to send electric shock of various intensity to a actor who will pretend to be uncomfortable, protest, shriek in pain and pass out. There are various variables introduce for the experiments but a high 60% of people would just continue to administer pain even if the actor is at the verge of passing out 

After the police captain was caught breaking the law, not only was he dimissed, experince hardship, but also had his reputations smeared that he was corrupted and receive monetary and sexual favors from those he helped. 

I shall not go into details, but the book classify those with moral courage into 2 groups, one who simply did what is right within his power, and others with conviction to lead opposition (change the world), the police captain belonged to the former.

While I was marveling at what moral courage he possessed and thinking he was angel on earth and happy they history has finally returned his name, the author wrote that the "glorifying" of his deeds decades after he died is yet another example of how he is extraordinary, gave the masses the excuse to delegate responsibility to be good to others within our power. We all could have done the choice under his circumstances, we need no superpower. It was like a big slap in my face and I felt ashamed. It's a bit like how my centuries, China has abused "Confucius" to confuse and enslaved the masses. 

A book that is worth reading. I am glad I picked the book. My paraphrasing of the content might not be accurate, just feel really like blogging about reading it. Pardon me.