Friday, September 20, 2013

Avoid over-concentration risks



In our research for value companies, we usually do a lot of peer comparison and reading on the sector news. As a result, we might overexposed ourselves in a particular sector or country, or even classification of company.

Under my radar of companies, I have SGX, Singarmas Land, LKH, Acendas Reit, SATS and QAF. With the exception of SGX, SATS and QAF, buying any of the rest will results in over-concentration either in Indonesia or the property sector. SGX look fairly valued at $7, I was hoping to get it below $7, but alas, it was not meant to be, it briefing traded at 6.95 a few months back and the never look back. QAF has a weak pig rearing business segment, and I would need a good margin of safety before I get into this.

In terms of classification of companies, I am hoping to buy into a "slow grower" and find a potential "super grower", but till the fact that the SIngapore Market is so small, it is very difficult to apply Peterlynch method of using local knowledge to find great products that are selling well, but still have low market penetration rate. (If a product is highly successful, it doesn't take long to have a big market presence in SIngapore, then where is the potential growth?)

Of course, we should not diversify for the sake of diversifying, and knowledge & research is still the best hedge against risk, but to reduce risk, I do hope to find a SIngapore Company that is Cyclical, or slow grower. Property prices are at their height, but I am not sure about property cycles for developers. Actually, I believe SATS might fit into the description of a slow grower, but the price is just too high.

Anyone has an SIngapore Company to share?? =p =p

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