When I was invited to the Invest X congress and do a review on the event, my first reaction was:” Wow, do I get free admission?” Kenji laughed and replied: “Yes”. After the whole event, I was a bit loss of what to write, as I was “paid” to do this review, I thought I should put in some serious thoughts and efforts in this review. I ponder on what to write, in the end, I guess they invited me for my candid view, so here goes, hope my candid views do not offend or disappoint anyone. View expressed are purely my personal.
The first thing I did when I reached the place was to scan the profile of the audience. It was 80% male, age group range from late twenties to perhaps early sixties. The majority should be in the forties. When the speakers were speaking, I keep observing the audience, from their body language and actions, I could guess the audience has very varying prior financial knowledge. Some folded their arms and listen, some just nod their heads in approval, and some were frantically taking photos and copying notes of some rather basic knowledge. As such, I guess it is very difficult to pitch the whole seminar at the right level, but the organisers did well, in the sense they have a little something for everyone.
The first speaker, Victor, did an introduction of his investment quadrant, made up of 4 components: Numbers, Valuation, Business and Management. He also did a practical on how he apply his investment quadrant in his stock selection. The quadrant is nothing new, the concept can be easily found in investment books, but Victor took pains to explain the concepts slowly. The framework was later used by the last speaker Rusmin too.
Numbers and Valuation are the easy part, just google it, and you will find what you need. In the case study, Victor show how he looked at peers from the same sector, and ask why they did badly, what are the mistakes made. He then show how his choice of company, could escape the fate of his competitors/ peers because of the slightly different business model. When I compare competitors, I usually just compare numbers, Revenue, Growth, Margins, ROE, etc. He show a qualitative comparison of business model, which I found highly enlightening. I was a little disappointed when the management part of the analysis did not go beyond remuneration and dividends.
Victor did not have very complicated valuation method, he used historical industrial PE range for strong business he identify, and he quantified the growth range that should materialized, and show the potential gains.
The next part of the presentation is about fraud detection. I can’t remember the Speaker’s name. Coincidently, I was reading about fraud detection from a book, and I found what the speaker says, overlap quite a bit with the book. “Why fraud takes place? How can fraud or cooking of the accounts be done?” are some of the questions addressed by the speaker. I was getting a bit impatient and was hoping that he tell us how to detect frauds than going through the background knowledge. When I got what I wished for and it blew my mind! The Beneish Model to detect funny accounting business looks like university Mathematics. I really feel like I am taking exams again. True to be told, I only understand 30% of what is said, it really is quite technical. But well, guess, they have a little something for everyone, for the advanced investors. But I think that model is really a bit over the head for most people. I though some simpler ways of red flags detection would be good, or if they really want to show that model, show us how to insert the various variables from the financial report into the equation, would help me remembered better. If Tok from The Aggregate Value Fund, the following speaker, claim he cannot understand it too, I guess less than 10% of the audience get it.
After lunch, we had Tok from The Aggregate Value Fund sharing with us. The initial part of it was rather repetitive, as it already appeared in the papers, but I guess a refresher is good for everyone. Given that Tok needs to pitch it in such a way that it does not sound like canvassing for funds or trumpeting his funds’ performance, he did a very good job in introducing the concept of withdrawal rate for retirement. The figures used by him were mind-boggling for me. He used 10K per month for retirement, and show how it is achievable with compounding interest of 12% and the number of years and initial capital needed. Frankly, I was a bit demoralized, and I thought I can’t never attain the level. But, just for fun, I used a 2K per month withdrawal rate for retirement, and I think I can get at least 1K from CPF annuity. 3K per month do not seem comfortable, but I guess I need not go hungry. Assume 6% return, I need at least 400K at the point of my retirement. I did not use his 12% return, but a 6% return, something I think I can achieve. I am surprised that assume I do not add on anything to my portfolio of 50K now, with compounding effect, my 50K should become 200K in 24 years’ time, and before I turn 59, several of my endowment policies would have matured giving me another 150K to invest. Hmm.. Look likes my future is not that dark after all, if I stick to the compounding effect and do not get distracted so easily. I am also quite sure, I will be able to add to my portfolio as my savings grow. That talk in particular, really set me thinking since I invest mainly for retirement, and it answered many of my internal questions of how much to keep for warchest, when and what to invest and divest.
After Tok, we have our most entertaining segment of the show, AK’s segment. I think AK’s presence is not so much intellectual than inspirational. During the toilet break, I heard one participant telling his friend that knowing someone who is just like him make it is really motivating. Hey AK, pardon my candidness, but I agree with you when you say:” readers of my blog, you can go for your extended toilet break now, as what I am going to say now, you would have read it anyway.” I thought you could zoom into the inspirational part, how you cope with your lifestyle, how discipline made it work, etc. As I said, I think the audiences has varying prior financial knowledge, and you did not emphasized on the risks of reits investing. (Capital loss, Dilution, refinancing risk and interest rate sensitive), I was a bit worried when the lady beside me jolt down “invest in Reits”, “rental income”, but missed the most important, yet funny part of “take a look when there is blood on the street”.
The last speaker,Rusmin, talk about the importance of recurring revenue and predictability in business model. The counter he shared is interesting, beside the quadrant, he also emphasized growth, moat and risks. Just find the businessmen quote in his example unscrupulous. But this is just my personal view.
In conclusion, it is worthwhile day spent. It is value for money. If I could give my 2 cents worth, I think the concept of risk can be further emphasized. Also, they could be a theme stringing out the whole talk. Perhaps, “anyone can build a comfortable next egg” is one such possible theme. Start off with Kong, talk about how attainable is that 12% since most of you did it. Show how even with 6% compounded over time, it work magic. Used that to emphasised discipline, risk management and stock selection skills. The discipline part, can be covered by AK, a living example of “I can do it, so can you”, Victor can share about his skills of stock selection and business analysis. Thereafter, preventing complacency in pursuing growth, be wary of the “golden boy” of stock market, when everything is too good to be true, check for fraud (That is when the HSBC guy can come in). I think with a theme and better coordinating and sequencing of the various speakers, the sum of its parts can be greater than the total.
Lastly, this is my personal opinion only, do not throw eggs at me, or hack my blog, with message like “AK forever, down with Sillyinvestor”