Friday, March 6, 2020

Buy on a story, sell when plot turns bad

This will be a short post.

I believe in investing, we need the connect the numbers to a story to make better sense of a business. U can call it growth modeling or revenue projection, but I feel both u can't really make it buy or sell call without both.

For a stock that I owned, I usually sit up when it falls 20 percent. I will ask my self to do 3 things. 1) Buy more, 2) Sell some or all, 3) find out more so that I can do 1) or 2) within days or a week.

This approach has mix results but it keeps me sanity and allow me to sleep well. I will share examples and what I have learn from them

A few examples. 

Sembcorp Industries, SIA engineering etc. Both I have been accumulating as they retreat. SIA engineering has rebound from a low of near 2 dollars and to a high of close to 3 dollars before this covid 19 wreck havoc on the aviation industry again. My story then was, supply of planes has been increasing year after year, although new design of planes lengthen the time before a D check is required, it is cyclical and the market demand will return, as long as SIA Engineering is competitive enough in the demand side of the equation. ST engineering aviation seem to turn earlier than SIA engineering, but I kept faith as long as they dun go into loss. If there is no loss, where is the chance of permanent loss? 

Sembcorp industries as a whole is still profitable. O and G has reached bottom although no one knows how long the bottom will last. Recently there is some question mark on the competency of management having gotten the UK electric demand wrong. But since Sembcorp is a cyclical play story, and that the story is intact without high risk of  permanent loss, I am still accumulating. The story of Sembcorp industries is it has skins in both traditional and renewable utility business capability. Wind farms, solar, coal fired plants, etc... The question is whether the management will continue to dig holes for themselves. I am also still waiting for a potential catalyst to spin off their mature utility business into a trust which will usually yield better valuation than the holding company itself. At 0.5 to NTA now, I dun see why white knights will just let this company go the way to the dodo.

Net link
The story is that their growth will offset the 40 Mio loans taken to push up their dividends, and I am happy to sit of a 6 percent yield for a defensive business. 

There ahould also be more demand due to starhub cables being phase out, and 5G innovations ( longer term ) 

When the growth didn't materialize, I sold at a 10 percent profits. On hindsight, that 10 percent will.have become a 40 percent capital gain have I hold on to it.

SLA
From a low base in 2018, I correctly projected it earnings could double in 2019 and is sitting on almost 40 percent gain at one point of time. I did sold some to locked in profits but the 40 percent gains has  turn into 30 percent loss.

In 2020, I no longer expect doubling of profits but I am expecting around 10 percent growth. Yet the last 2 quarters disappoint. Given that SLA project earnings could be lumpy, I waited for clarity and the price continue to slump.

Recently SLA trigger that 20 percent fall decision time. The story of high demand for digital platform for fintech and existing financial companies is still intact, but it seems the good year sof SLA is over. They do not seem to be able to capture the market, and the injection of Goh companies did not improve topline. 

Yet, SLA is still highly profitable. The mix signals that affect my decision is that SLA is on a shares buyback spree for quite a while and since GOH owns more than 65 percent of the company, I am.also speculating if he intent to bring the company private. 

I did make another bid to accumulate the shares but I didn't manage to get any. I seem to be quite luckless with this counter as the counter rebounds after that failed bid. I would think the next quarter will be decision time to really halve the investment or even divest completely if the company still do not show that the plot of story has not done bad, by either showing they can get good contracts or that their lumpy recognition is at work and next quarter is much better than previous. 

QAF, HK land, Koufu, DFI, Cosco 517, GA pack

All these are recent buys for the month of Feb or March. They all have turnaround story to tell. I shall not go into individual companies but cash flow is good and except QAF, they are all sold down due to a event, back swan or not. As someone said, events pass. Covid 19 will not be a structural disruptive event. People are not going to stop taking cabs or visit restaurants once this is over.  All have maintain their dividends and if their balance sheet and cash flow continue to hold up, I will accumulate as they fall. The only counter nearing the 20 percent fall threshold is DFI, the rest are holding up well or are already above purchase price.

Conclusion:
1) always continue to look forward the next story, SLA after the doubling, does not have a projection number although the number is intact. When the quarter is bad, they should have been some aggressive trimming of position. While I gotten Netlink wrong, my portfolio is not hurt in anyway by my quick decision. Have I been equally decisive in triming, I could have gotten out at break even price and collected dividends for free. 

2) the stronger the projection of numbers, the better it is to guage whether the plot has turned bad. Pan United is just like SLA, having already double its earnings, and increase its dividends. However, what is different is the 9 billions construction demand from IRs is still not in the picture. I believe Pan united can have a good 2020 given RMC price is on a roll. I should have the same level of story to tell when I make my decision about SLA.

3) Its damn dumb luck.
Hahahahahah the best anticlimax of the story. Could I have guess what will happen? I already said, I connect story (frictional) with numbers (a pack of lies) and hope to do well. This is because I simply enjoy doing it. I have not the slightest idea that QAF will turn this quarter. I just feel that their bakery business is still doing very well and Riviera should turn given beconan prices have improved and feed price has stabilized. 

9 comments:

  1. I agree with your SCI take. Price keep dropping doesn’t make any sense at all. The energy and urban are profitable, even with impairments. Only marine is the deadweight for now, albeit there is always the M&A route. This is the advantage of being a state owned firm. The know how and expertise of the SMM is still valuable and strategic to SG maritime sector. The only white horse I foresee will be TH to take over SCI. Thereafter, there are many ways to extract value; (1) utilities into a trust/ipo, (2) SMM to merge with KC n ST marine; and even (3) urban into industrial reits.

    ReplyDelete
    Replies
    1. Hi Anon,

      Yup these are the possibilities. Seem like u are a fellow investor. Hope we are right and have the sizing to cope with us being both right and wrong hahaha

      I had bought 1 lot at very high price of 3.8. buy I think the AV. Price is quite low now.

      Delete
  2. Hi SI

    I don't think you should be over influenced by the maniac-depressive nature of markets. You are right if your facts are right and the reasoning is sound.

    Just stick to your thesis and designated holding period when you first bought the stock and gauge if there are changes to the thesis. Keep your spirits up as you tide through this volatile period!

    ReplyDelete
  3. My name is Mrs Aisha Mohamed, am a Citizen Of Qatar.Have you been looking for a loan?Do you need an urgent personal loan or business loan?contact Dr James Eric Finance Home he help me with a loan of $42,000 some days ago after been scammed of $2,800 from a woman claiming to been a loan lender but i thank God today that i got my loan worth $42,000.Feel free to contact the company for a genuine financial service. Email:(financialserviceoffer876@gmail.com) call/whats-App Contact Number +918929509036

    ReplyDelete
  4. BITCOIN, BINARY OPTION: Please everyone should be careful and stop being a victim by all these brokers and account managers, they scammed me over $ 140,000 of my investment capital, they kept on requesting for extra funds before a withdrawal request can be accepted and processed, in the end, I lost all my money. All efforts to reach out to their customer support desk had declined, I found it very hard to move on. God so kind I followed a broadcast that teaches on how scammed victims can recover their fund, I contacted the email provided for consultation, I got feedback after some hours and I was asked to provide all legal details concerning my investment, I did exactly what they instructed me to do without delay, to my greatest surprise I was able to recover my money back including my profit which my capital generated. I said I will not hold this to myself but share it to the public so that all scammed victims can get their funds back,  Notice: If you are looking for a professional hacker to provide hacking solutions on Recovering Scammed funds, increase your Credit score and top up your Credit Card to any amount,  Bitcoin Lost funds recovery, Social media hacks  Bitcoin mining, DMV database and a lot more, search no further.  hire them now by 
     Email: wizardcharles1@gmail.com

    WhatsApp: +1 (385) 273 0329

    visit their website to read more about them:  https://wizardcharlesgrouphackers.com/.n/

    ReplyDelete
  5. CHIEF DR LUCKY HERBAL THERAPY 
    Thank you very much for curing my Human Papillomavirus (HPV) totally. You are really a Godsent, I promise you that I will always recommend you. and to share your testimony to people. Contact him now thanks all. 
    CHIEF DR LUCKY HERBAL THERAPY CAN AS WELL CURE THE FOLLOWING VIRUSES :-
    1: HIV/AIDS
    2: HSV
    3: LUPUS
    4: ALS
    5: HEPATITIS B
    6: DIABETES
    7: HUMAN PAPILLOMAVIRUS (HPV)
    8: CANCER
    9: PAD
    10: PENIS ENLARGEMENT 
    11: THYROID ETC..  
    WhatsApp him on +2348132777335 or email (chiefdrlucky@gmail.com). 
    Website: https://chiefdrluckyherbaltherapy.wordpress.com/

    ReplyDelete
  6. Do you need to increase your credit score?
    Do you intend to upgrade your school grade?
    Do you want to hack your cheating spouse Email, whatsapp, Facebook, instagram or any social network?
    Do you need any information concerning any database.
    Do you need to retrieve deleted files?
    Do you need to clear your criminal records or DMV?
    Do you want to remove any site or link from any blog?
    you should contact this hacker, he is reliable and good at the hack jobs..
    contact : cybergoldenhacker at gmail dot com

    ReplyDelete