The Portfolio Gone a Little Crazy

My portfolio continues to astonish me since two weeks ago, giving me gains that surpass the STI for the first time (3%) in as long as 1 year 10 months. Much of it had to do with advances in Wee Hur, BBR, Chuan Hup, Samudera and some recovery with Innotek, Mermaid Maritime and Comfortdelgro (which I continue to be modestly hopeful for).

TBH, I have expected results to remain poor this year, given that I hold some ugly (and more importantly, safe) stocks.

It is every active investor's wish to beat a passively-managed instrument like the index. 2 years down the road, I never expected this task to be so difficult. I hope to remain steadfast in investing by value. Hopefully I will continue to view stock picking as an intellectual exercise (and one of emotional control) because I have seen many people around me being blinded by profits. I remain doubtful that I am right unless a stock gives me at least a 20% return; and a portfolio, compared to the index over a long period of time (3-5 years at least).

There are more than a couple of stocks which ascent I missed. They belonged to the "not sure" pile which I convenient forgot after some time. Hock Lian Seng, whose sky-rocket after special dividends were announced. Chew's Group, which I thought was cheap based on solely PE, but have a huge capex in the near future due to relocation. I would have got almost 100% return, but I still think the Market doesn't know what it is doing. GP Batteries, which is quite a safe arbitrage, sneaked past quietly. I know many here had been richly rewarded by AEM, Best World and MM2 etc, but they are not my kind of stocks...

Guess I am only intrigued by "trash."

2 Years of investing

It has been exactly 2 years since I start investing. Like most rookies, I did short term trades and inherited some losses. Fortunately, none of them destroyed my savings, and I learnt something from every single loss.

I would like to thank Sembcorp Marine (bought 1.9x, sold 1.8x and 1.7x on the rebound) and Imprimis Pharmaceuticals (bought at 8.6x, sold at 6.x, now only $3.4 after accounting for splits) for leading me to value investing. Turquiose Hill Resources taught me that a cheap stock can get ridiculously cheaper (bought at 2.5x, went down to as low as 1.55, sold at 2.6 after it rebound, went back up to 3.4 after selling it) and book value plays should be largely diversified because you never know if one stock will implode. Transit Concrete taught me that it is nefariously difficult to value stock based on earnings. Noble, that I should always read the short seller’s reports (because they are usually well researched and these short sellers had skin in the game); and lastly Starhub: hopefully I will stop being such a lazy bastard!

In this bull market, many of my friends who traded blindly made a lot more money than I did. Plenty of investors in InvestingNote has also shown me crazy single-year returns (40%-60%). While I do envy their good fortune, I will stubbornly stick to my guns as a value investor because it is in my nature to be one. I don’t mind standing alone in a corner and generally avoid crowds. I know some “value investors” who have lost their way because they are only in the game for the money (in short, they are just plain greedy). It is pretty easy to steal ideas from eminent blogs or forums and earn a decent return. For me, stock picking is an intellectual exercise. 

I am only interested in cheap stocks. Financial gurus quipped that if a mall runs a major discount, products get sweep off the shelves. But they lament that the crowd does not behave similarly during a stock market correction. I am going to play devil’s advocate; companies are a lot more complex to inspect than apples. Most of my companies are genuinely in some kind of trouble. My job as a stock picker is to invest in companies that are cheap and can turn things around. When will that happen? Well, it is not my job and neither am I capable of such a feat.

The market has been extremely kind to me for the last two weeks. The ultimate test for any active (or enterprising, a term coined by Benjamin Graham) investor is whether she/he beats the market in the long run. Given that all my stocks in my portfolio are less than a year old, my portfolio under-performed versus the market until only recently, pipping it by 2%. The late Christopher Browne of Tweedy Browne wrote,

“Value investors are more like farmers. They plant seeds and wait for the crops to grow. If the corn is a little late in starting because of cold weather, they don’t tear up the fields and plant something else. No, they just sit back and wait patiently for the corn to pop out of the ground, confident that it will eventually sprout.”

Most of the time, my stocks are sleeping or falling. Good news doesn’t always arrive immediately. Wee Hur, a company that I purchased about 140 days ago, barely moved. However in the last 2 days, it advanced by 20%. I recalled purchasing some shares of Innotek because they fell 20% the day before, and right after my purchase they fell another 8%. It is very normal for my stocks to have paper losses of 10-20%. Value investing is an arrogant act because you are literally standing in front of a mob and telling them that they are wrong, doubling down your stake as the price get lower (and more attractive). 

Let me conclude this post by summarizing my investment strategy. My portfolio is largely diversified into cheap and safe businesses with little to no debt, and are run by management which are shareholder friendly. 

Some corns that has sprouted (thank you very much):

·       Chuan Hup 42.51%

·       Wee Hur 21.47%

·       Samudera Shipping 14.50%

·       Teckwah (sold) 26.1%

·       Ascendas Hospitality Trust (sold) 32.9%