Have been sitting on the fence and watching paint dry, while investors make a killing. Yes, even after yesterday drop of 70 points, unless u invested on Thurs, all the banks and properties counters are still way above where they were 3-6 months ago. U would still have made a killing.
I am thinking about how my recent investment thesis work out, the qualitative part of it, and I decided to do a summary here. Some companies I invested, some I didn't.
The ways companies can react in the face of disruption or competition:
1) Wait out the cyclical cycle
Companies like those in the oil and gas, like Sembmarine, and SIA engineering, there is not much there could do.
In terms of cycle, aircrafts orders are still high and increasing, but better aircraft need shorter maintaince and longer period between maintaince. My own personal tracking is in another 2-3 years time, there should be an uptick in major maintaince of all the new aircrafts in recent years. So companies simply just continue to keep.yhe network and forge new alliances in the hope of capturing the upturn.
2) Improve capabilities to find new niche markets.
This is mainly only possible for manufacturing and technology companies. Names that come to mind are Venture, and ST engineering.
3) Buy and consolidate competition
confort-delgro come to mind, after buying Lion City Rental, they overnight become a major player in PHV market, and with Uber as partner, finally relent and has their taxi fleet in Uber flash. But my scuttlebutt research show the taxi drivers do not like Uber-flash because of the low rate and their high rental.
Uber and Grab might be planning some consolidation too, but the awakard position is that Grab might be the buyer in SEA market.
4) Venture into totally new markets
SPH venture into.properties and Healthcare. Unless with the wildest imagination, it is hard to find energy with their media business.
5) Find New markets that has snergy, and existing capabilities can feed on
Singpost logistic business is a good example. However, for 4 and 5, the questions is how low or high is the barrier for new competitiors.
6) Price war to keep market share
Well it has not started, but I am sure it will happen when it comes. The Telcos. The recent new SIM plans if u dissect it carefully is a big yawn. If the new telco TPG comes in with a similar plan, it's going to be another big yawn, which is highly unlikely.
Some companies are doing 1 or more of the above and might see themselves more caught in 1 situation than the other. But it is intriguing to think through all the above before we read the AR to prevent confirmation bias.
Without saying which company, lines like "it will take time for mass adoption" is a big yawn that the new capabilities is not catching on.
In my universe of radar, I saw companies that could turnaround, and this time round, I will remind myself not to let it go with a miserable 40%, unless my thesis is proven right or wrong.
But I am still waiting for the right price for margin of safety. There is also company that with each passing day, the risk simply get lesser as they are in situation 1 too. However, the market might revalue them earlier. The only way the stars can be aligned is u k own they can wait out a cycle (cash rich), is still developing new capabilities for new markets with some results and valuation comes down further because there is negative sentiments in the market.