Monday, June 29, 2020

SillyInc 1H review

2020 1H is really a roller coaster ride. In march, the market drops more than 5% consecutive for days. The plan to purchase companies as they fall 20% became 25% to 30%, and towards the end of march become a wait and see move.

There are several questionable coporate actions, the purpose of the piece is to crystallize the thinking process through writing, and please forgive me if I sound incoherence.

1) Moments of freezing in action
But all accounts, Singpost, Hong Kong Land, Capitaland has hit 30% threhold of fall. Yet, I freeze. I have not mentioned Hong Kong counters like 0517 cosco and GA pack. While it is understandable to focus the firepower in the local market where there is high degree of familarity, there is no reason why I let a 30% fall go, and I did nothing.

Reflection: When the market plunge, it is really difficult to keep my nerve. Had I hit all the counters my cash would have gone to 15 - 20 % of portfolio. At the moment where market hits a new low every day, it is rather difficult to keep my steels to continue accumulating. Although there are back up funds that could boost my cash level, I would rather not use it.

When I am holding 15 counters, it is not possible to average down in 3 tranches for all counters. So my orginal plan of buying when counters goes down 25% to 30% is mathematically flawed as I do not have that cash holding.

2) Selling to rebalance or selling in anticipation of further fall
Several counters recovered enough, I remember selling some of FR and CSE at slightly below average price. (Take Loss) The reasoning is if the market fall further, I can take have the ammo to average down or buy other counters

Reflection: I am wondering such trading or buying in and selling out is really what I have in mind. Before this Covid, my reason to sell is simply, my thesis has changed. When Covid hits, my idea is my counters should not go into heavy losses and they should continue to be profitable. It is fine if the entry price is horrible for a few years, becasue if they continue to be profitable, they is no risk of them going under, and I can wait for the sun to be out again to harvest capital gains.

Hence, selling when the price is higher than the lowest entry price to lock in "profits" seem contradictory to my buy and hold plan. This dilemna also came about due to point number 1. If I cannot accumulate all further, this trading action seemingly is the solution to the lack of money to average down. So is this rebalancing of counters that have fired off the third rounds going to be a more permanent feature in my bear investing plan?

It seems that I do have this risk off mindset at the back of my head, as I also reduce my stake in Ascendas Reit, and sold off Pan United when they are profitable to increase cash. The reasons for the above selling is Ascendas Reit is a rather large holding after I participated in their rights, and Pan United growth will not materialized in 2020, and depending on how they resolved their manpower issue, 2021 is also in doubt. Given the low dividend yield, I felt i have better alternatives elsewhere.

So is there any other way to resolve this dilemna so that I could be more decisive in my buy - sell actions? If the buy sell actions are reasonable risk management actions in a volatile market, are the triggers based on sound thinking or gut feel? It seems more like gut feel at the moment.

Perhaps, like business analysis, the amount of cash, and the triggers of buy and sell should also depends on the macro enviroments and the possible impact on the companies' earnings. If I think Bread is going to continue to be staple, COVID or not, TRADE WAR or not, maybe my threshold for holding should be higher.

HKland seems a bit more complicated, because it has to deal with the impact of Covid, and also China Security laws. Also, the level of entry and threshold to take before entry should also depends on the supposedly risk rewards profile. Selling to rebalance, so take into account of the above too.

3) Breaking the 3 rounds rule
Besides Silverlake axis, SCI is a counter that i keep accumulating. I just felt that the price is not justified based on the restructing that it can embarked on (Not talking about the demerger), and the possibility of the Indian Market and UK market turning.

SCI turn out well, SAL did not. So why did I break the rule. It is fine breaking the rules, by the circumstances should be clear. The rule or excuse I gave myself is not more than 15% of portfolio. I would think SCI is rather fine and it is still just 10%, I think SAL is really a over indulgent.

Another reason is I believed such price is rock bottom price. But is there science in rock bottom price beyond 20% of peak, historically for blue chips??

When do we accumulate till we hit portfolio limit, and when do we do 3 rounds AV. Down. For the 2 counters, the price drop beyond the third buy but I believe the drop is not justified. Is there another criteria I could use?

4) Selling off counters that were bought for "growth"

These are counters that are so so in their dividends,but I first bought them because I see growth potential in their overseas expansion (koufu) or the sector recovery (Pan United for Construction) Given that growth will hardly materialize in 2020 and perhaps 2021, it makes me wonder if I should keep them? I have already exited Pan United, and the next in line will be Koufu and Raffles Medical.

So, what should be the percentage of growth stocks as compared to yield? Perhaps if market is "normal", some "growth" counters is appropriate.

Final thoughts:

Inherently if Diversification is going to really effective, it should be 5%, which would mean an average of 20 counters, having the money to buy 3 tranches of the 20 counters is no small sum.

What works out to be a great plan in the head, does throw up a few spanners when we act upon it. There are no answers, but having questions at the back of the mind, is a good awareness exercise. Hope I have an answer soon.

Tuesday, June 23, 2020

Random thoughts: Conversation with friends who are starting investment

2 close friends chatted with me about investment over the past few months. One only started investing recently, another contemplating to enter the markets. Just some pointers and thoughts which I thought might be useful.

1) My friend wanted to start investing somewhere in March. He ask me about my portfolio, my money habits when investment is concerned. I was very mindful not to give stock tips but I did say is a good time to start and learn at market low, but pace himself. I just ask very simple questions like how many months of emergency funds, how much one can afford to lose etc. Some basic ideas on risk management.

From the conversation, it makes me think that market returns really need to be contextualised. Had he enter the market, he would beat me hands down because he enter market low at small amount but I am already 40% vested before Covid 19 wave. Granted my track records is rather dismayed and any serious investor could beat it, but I am happy with my returns without sleepless nights, and I pride myself of having survive the market for a decade. 

So I guess starters should perhaps worry more about risk than returns, I am not sure if the recent robin hood traders are masters who came out of hibernation or just lucky, but I know I am not tempted to do trading or into bitcoins. Please note that I have nothing against traders or bitcoins investors, in fact, I respect those who are able to eked out their niche. I think the lesson really is, whatever u want to do, learn it deeply and apply it. 

2) BUY SCI and sembmarine is free. I made this mistake. I find it cognitively disonancing and check with buddies at valuebuddies. Basically, when the deal goes through, assuming SCM is worth 20 cents, SCI will go to 90 cents. So it is not really free. My friend also thought it is free. It is included and reflected in the shares price.

3) My friend told me he will enter the market at April. He was sort of laughing at me when I told him.i am 60 - 70.percent vested. Had the rate of plunge continue, STI will be perhaps at 1800 at April. 

But my same friend again ask me if he can start buying recently. I ask him why, when he thinks 2300 is high and he wanted to enter now. I told him he can invest anytime, but he just need to be clear and consistent in his plan. He decided to withdrawn his bid (recommended by friend) and he thanks me because the market went further down.

The funny thing is, I keep telling him I have no idea if the market goes up or down, and he doesn't have to thank me. 

From his activities, he seem more like a trader to me than my school of thoughts. So I told him to find a good mentor that suit his disposition. He like to do concentration play, spending hundreds of thousands and sell when he make a few bids gain. I ask him have he ever make more than 10 percent returns, he said no. 

Now the lesson here is not he is a bad investor and I am better. We are quite close friends, we share quite openly. I can tell u he is making outrageous returns from his trades. His win thus far is multiple times larger than my whole portfolio. I must say I have to check my jealousy. But being good friends, I did tell him to go fly kite and dun disturb me since he is making so much money and is making me jealous. The point really is, let's not be judgemental in investments. We should be cynical, stubborn/steadfast but at the same time accept Diversity. Remember, skills is just one component in investment, not matter how u disagree, there is the element of luck. When I say luck, I dun meant dumb luck for gambling, but having people and a council around? Your human capital? We should see returns beyond just a result of our skills, especially if and when our skills are not legendary 

4) Will market break new low? That the question posed by my friend. My honest answer is I dun think so, but I am.not going to burn my last 30 to 40 percent cash without market going near the bottom we had in march or beyond. But I told my friend, I dun really mind not going there actually. But if it goes down, I dun have some money to invest. I think he is still waiting for his hoot the kitchen sink moment. 

5) He ask me when China companies so dirt cheap, I explained that is a risk premium to pay. He told me that was in the past. I ask him to go SGX and look at C and S, and see how many companies starting with China and Sino are suspended. He got scare. I hope he never have to kena. 

That's all folks. Quite a long time since I talk about investment in a long post. Maybe I will do a mid year review after June, since this year is a year of many activities.

Wednesday, June 17, 2020

Random thoughts: Days in school

I must say i really missed the days teaching face to face in school. It is the 3rd week, and I realise there is no other place beyond my home I want to be.

These days, I try to avoid the air-conditioned staffroom, because a "running nose" is big problem nowsaday (I have sensitive airway).  I was looking for an empty class in the afternoon, I strangely just went into my previous form class instead of my current form class. I realised I have not bonded with my new class of 2 months (Redeployed in the middle of a term), and as I sat down in the classroom marking, memories of the FTGP actitvies i did with my pupils flash in my mind. The fun and laughter we had.

I know I sound silly, but I always feel that the pupils in the top class can never appreciate my antics and my lame jokes. You know, when you tried to hype yourself up, performing in front of the kids, trying your best to entertain them with words and actions, you would like the class to respond. Sometimes, I feel out of place, in the top class. I made a joke, became a drama mama, and only a few pupils would laugh. Many just stared at you blankly.  It sucks the energy to "perform" out of me.

I do have a class where we are comfortable with each other. It was fun today. When I start the class, I ask them to take out their homework and complete it quickly over the next 10 minutes, as I believed most of them would not have attempt them. I told them I know their antics too, and ask them to start their work quickly. One of the pupil said "How did you know we have not done our work?" I replied that I think I know them well enough and if 25% of the class actually did my work, I would do push-ups in front of them. Surprised! A few of them did out of the blue moon, completed their work, and after glancing through, there is effort in their homework.

I did my push-ups and we had a good laugh. At the end of the lesson, I could not finish the difficult reading comprehension questions, I asked them to try it at home. Many were asking, if at least 25% of them do it, would I do push-ups in front of us again? I said I need to increase the benchmark to 40%, and they very excitedly reminded each other to do the work. I am very pleased, becasue when you teach the weakest pupils in a particular level, you will realise that many of them actually do not have a conducive learning environment at home. Almost all of them face some neglect and as a result, some of them are addicted to social media. I am happy that they are reminding each other to do the work. Suddenly, one pupil challenged, "what happens if all of us do our work?" I laughed. This homework is not an easy assignment. I replied that if I have 100% submission I would do the push ups first thing when the lesson starts for consecutive 2 weeks

The pupils got really excited and some of them are cajoing the "famous bad debts" to start doing this peice of work. I don't know if my experince sounds ridicilous to you, but I am actually quite happy with my interaction with them

During our staff contact time today, when our principal ask us over google meet what motivates us, within a second, my answer is "pupils" and the image of the "weakest" class pops in my head. They are reall quite a bunch of nice chaps. They always ask some personal questions and we can tease one another without worrying about being nasty. The sweetest part is when you are upset with the level of effort, and you get serious in your tone, they immediately seem able to sense it, and kept very quiet. I would think they have quite high EQ and is rather street smart and independent

Friday, June 12, 2020

Some Genuine questions for my readers, appreciate your inputs

I believe many of my readers are sophisticated investors. I have 2 questions and like your thoughts or links to any articles

First, how is digitalisation of payments for hawkers, mum and pop shops going to help them?

Yes, it will help banking, with more accounts, manufacturing with the production of hardware. How is it helping them in terms of new demand or lowering of costs (I see increase of costs)

Yes, people can order online, but paynow should suffice?

I am not against digitisation, I am just wondering if the papers are screaming "helping hawkers" hypocritally

2) is globalisation and effecient allocation of costs overrated?

Will.redirecting of some supply chains locally for resilience and lesser profits and higher costs, necessarily be a high economic costs? ( Cost, yes, but really to the extend of job displacement, economic ruins, like some papers are suggesting ??)

Appreciate your thoughts on the matter.

Monday, June 8, 2020

Random story: The Divorce of Semb Couple

---------------Story is frictional although based on market events-------------------------

The divorce has happened, Sem Indalecio has formally announced the split with long time wife, Mary. The divorce settlement is 2.1 billion. The couple used to be the envy of the public. It is just years ago that people pay $5000 to $ 6000 just to meet the couple separately in a annual event, where buffet is not even served.

Mary used to contribute a lot to the family, and for a number of years, is the bread winner of sort, having contribute more to the family than Indalecio. Yet, her business has fallen to bad times. Her drinking antics frustrated Indalecio. She drinks so much that she ended up paying for her customers all the time, and the reasons she gave is unacceptable to Indalecio. Drinks are so cheap, that at one point, brewery are paying customers to drink, why not drink to heart content?

Indalecio has tried to help Mary get to her feet, he loaned her 1.5 billon dollars. Now, Indalecio has said forget about the 1.5 biliion, we will go our separate ways, but I will take some properties that are under our joint names.

Indalecio foster dad, Teal, has been engineering this split from behind. Teal has been telling Indalecio Mary is a burden. Teal supported the split and tells Indalecio that he will chips in to fund the reminding 0.6 bio separation fees of Mary, but he wants a cut of the properties too.

Teal has been spreading rumors about Mary, saying that she has loved Kenny, and she is better off having a union with Kenny. Teal says he knows, because Kenny is also his foster son. He told Indalecio to let go, as happiness cannot be forced.

Friends of Mary are worried, believing the terms of separation seems to favour Indalecio and Teal, and Tael particularly, than her. However, Mary is too vulnerable now to bargain.

Friends of Indalecio is secretly happy, yet they are not too sure if 1.5 billion for some properties is really worth the deal. Indalecio said he wanted the split to go amicably. Unknown to the friends, Tael and Indalecio believe the loan is of risk of not returned, so might as well. Now, Indalecio is the eligible bachelor.  

As the Covid19 ravages the economy, is this promininet public couple be the last to split? The couple were once inseparatable, so much so that Indalecio agreed to elope with Mary, only to be stopped by both their friends. Now, in a matter of years, the word is focus on each other lives. The Covid -19 has challenged the connotation of "United we stay, divided we fall". If you look at the couple's lives, nothing much has changed, they simply renounced their marriage, without any tangible changes to their lives, and yet the papers have been talking about how this marriage is going to benefit both of them.