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%
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