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. 

Conclusion

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.