2019 Year End Review

 Portfolio returns vs Hong Kong Tracker Fund (HKEX: 2800). Yes, that spike was due to Xinghua Port Holdings, which saved my ass this  year.

Since my last post in https://laymaninvesting.blogspot.com/2019/10/rough-week-colex-lost-jurong-bid.html about Colex losing its bid for Jurong, the stock recover briefly but slumber back to pre-rally prices.

As the stock market rises as a whole, my value-oriented portfolio did not receive any mercy; it lost another good 4 percent since 3 months ago. It was depressing.

3 major stocks are responsible for the loss.
TTJ- down 26%
Colex- down 17%
SUTL- down 10.5%

OKP, LHT, Cosco Shipping International, Qingling, and Mapletree NAC Trust lost 5 percent or less. Some of these were very long term holdings, and dividends were paid. That was how bad a year it was.

As I wrote,

STI ES3 funds returned 8.48%.
Hong Kong Tracker Fund (2800), returned 11.35%.
SPDR SPY delivered a crushing 29.63%

My little portfolio, as a whole, garnered a measly 13.21% (Update: 16.23% as of 31-Dec, Thanks to a surge in a single stock due to a generous dividend policy. This stock, is itself, a dividend play)

While I do not own any stocks listed in America, it is still a humbling result as I think I have failed very badly this year. Who would have thought that REITS, who are priced at book value at the start of this year, will deliver 20-30% capital gains by the end of the year? Tech stocks also rallied in the latter half.

(As usual, I am not part of this blissful ride. I have initiated only 2.42% in Mapletree NAC Trust recently)

Which is shocking since most people invest in REITs for income and not for capital gains. A suitable cycling analogy would be for a road cyclist to be overtaken by a medium-aged man riding a single-speed bike. It doesn't matter if the road cyclist has been pedaling for 8 hours, and the latter, minutes. It is still a sad sight.

Portfolio Composition
23.47% is in Singapore Saving Bonds (here by referred to as bonds)
47.68% is in Singapore-listed equities, and
28.86% is in Hong Kong-listed equities.

There were no brilliant ideas this year, and worse, no profits that were rightly gained from value-investing ideas.
Stock.cafe summary reveals that I have made 26 buys, 12 sells. This is the lowest amount of transactions I ever made since 2016.

What is Next?
The American market is at an all time high. If market movement were to trend higher, I will be looking towards purchasing more bonds and going-private deals. I will not deviate from my investing principles, even though it was lackluster this year. I will not invest in things I cannot understand, or simply popular issues. I certainly ain't a fan of fleecing other people ideas and presenting them like my own.

Rough week + Colex lost Jurong bid

It has been quite a rough week, as my portfolio lost about 4.5% in a matter of 7 trading days.

Colex lost 13% or so yesterday. As I am writing, Colex fell another 9%. TTJ fell another 8% yesterday too. It feels like shit when the index goes up 1+% and my portfolio suffers.

I won't say this is the worst day of my life but every time shit happens, I wonder why I didn't restrain myself and only buy when there is a significant problem. Peace time is the worst time to buy. Saved for the spike from Xinghua Port holdings earlier this year, the portfolio has been underperforming badly, especially against portfolio concentrated on REITs.

If this makes no sense, then it must be horrible to be a value guy during the 2000-3 boom years.

----

Let me dig out my purchase reasons for Colex.

In July, I wrote:
6) Initial position in Colex
Colex has a contract that might end next year, but the value in it is obvious.

Another 2% dividend-er like Stamford Land, it has a very strong free cash flow history-- no red ink for the last 10 years. Market cap is now 33.1m, cash is 19.4m, and it is debtless for a decade.

Free cash flow for the first half of this year is 10% lesser but no cause for alarm. If they were to win the Jurong tender this coming quarter, prices should adjust upwards. Capex requirements aren't too alarming, and there is a sizable amount of book value to protect the downside.

Looks like majority of the investors out there do not believe that there is any form of downside protection from its book value. After re-doing my sums, the conservative side of me will say there is still a bit of downside in the stock.

TR is 11m
Cash is about 19m
Total current assets is about 30m

All liabilities is 12m. So the net current assets is about 18m.


With another half a year of cash flow to come, perhaps 1-2m can be squeezed from the company.
That means the value of company is about 19-20m by the end of this contract.

The market is selling now at 27m.

That means about 7-8m of "shortfall" in value has to come the non-current assets, which is valued at 18.5m thereabouts.

Composition of the non-current assets as follows:
Leasehold buildings: 4.9m
Equipment: 5.6m
Motor Vehicles: 8.6m

Most of these can be sold off at discounted prices, especially equipment and motor vehicle. I suspect there is a 2-3m shortfall in my valuation. Clearly, my purchase was too dependent on Colex winning the Jurong bid. So the market is not selling Colex at a depressed price, unless it is below 17 cents a share.

I am quite disappointed at myself. Perhaps I was in a rush to deploy capital during peace time.... I need to work on the discipline to hold cash during peace...

Sep 2019 Portfolio Review

STI (ES3) returns: 3.087-> 3.126 + 0.12 (dividends) =5.15%
HSI (2800) returns: 25.25->  26.7 + 0.15 (dividends) = 6.34%
S&P (SPY) returns: 254.38 ->  291.12 + 1.43164 (dividends) = 15%
Current Portfolio return: 17.35% (bond, stock and funds invested for mum), 24.12% (my stocks only)

Transactions (September)
Purchase of LHT as prices fell as much as 10% intra-day.
Purchase of TTJ as prices fell to 0.21 a share
Purchase of Cosco Shipping Int, twice (2.25, 2.00), due to it being cheaper
Sale of Chuan Hup, due to LHT and Cosco being cheaper by book value.
Sale of Hotel Grand, due to cheaper stocks

The purchase of LHT took place just hours ago, as the price without news.
This is the problem with obscure little stocks that trade thinly. There could be no news, no earnings report, no hints, and stocks that trade thinly like this will have dramatic price movements. Hanwell moved tremendously since Monday. PC Partners, moved from 1.6x to 2 as I write. Hop Fung, which saw strong insider buying since 0.36, corrected from 0.4 to 0.36 in a single day.

This is what I mean when a certain style of investing becomes a kind of religion, a mental pillar or support which protect you from getting influenced too much by the market.

Aug 2019 Portfolio Review

STI (ES3) returns: 3.087-> 3.126 + 0.12 (dividends) =5.15%
HSI (2800) returns: 25.25->  27.45 + 0.15 (dividends) = 9.3%
S&P (SPY) returns: 254.38 ->  291.12 + 1.43164 (dividends) = 15%
Current Portfolio return: 1% (bond, stock and funds invested for mum), 23.14% (my stocks only)

****

Transactions (August)

1) Increase of LHT due to lowered prices.

2) Increase of TTJ due to lowered prices.

Both companies, being cyclical, did not fare well on the earnings front.

Price movement in the stock market is highly correlated to earnings, and as such, it might be foolhardy on my part to insist on buying based on book value. Yet, balance sheet investing is the easiest, and most reassuring way of all.

LHT

Current Market Cap of LHT (Price: $0.50 a share), 26.62m

Half Yearly results on 8-August-2019 (https://links.sgx.com/1.0.0/corporate-announcements/5S6NEQ21JX7VTPIQ/LHT-Holdings-Ltd-Half-Year-30-June-2019-Results-Announcement.pdf)

Cash: 16.596

Fixed Deposit: 11.21

Total Cash: 27.806

Total Liabilities: 8.792

Net Cash: 19.0m

Supposed I am the majority shareholder of LHT, and given that interest rate is going down, liquidity is bothersome, and I am virtually paying 7.62m (26.62m market cap - 19.0m cash) for the entire company, and the fact that dividends has been on the high side... would listing on the market makes sense? I have no need for easy access to capital...

Hong Kong markets has seen some recovery but my stocks did not rise in sympathy. As such, the portfolio as a whole has underperformed against the HSI recently. I am not expecting to beat the US market, which is a disappointment but largely deserving result.

 

A layman's approach to Yangzijiang (YZJ)

Some weeks ago, after YZJ lost 30% in market capitalization in a single day, more than a few courageous investors figure that it could be an opportunity.

As you can see, it is also the lowest it has been for almost its entire life listed in SGX, saved for the Great Financial Crisis.

Personally, I am not a sophisticated investor, and uses simpler means to determine value.

Market Capitalization of Yangzijiang (as of now, based on 0.915 a share): 3.63B
Share price of YZJ at its lowest during the debacle: 0.755 a share: 2.98B

The easiest way to determine value is to look at its balance sheet. Safe to say, YZJ is a shipbuilding company, so it is not too wrong to use simple balance sheet investing, as opposed to services or software companies.

All figures above in RMB.

The following "discounted" values are used:
Cash: 4108.414
Restricted cash: 17.815
derivative fin. instruments: 2
Fin asset at fair value: 500

Receivables: 2000
Inventories: 1000
Contract Assets: 3000

Total: 10628M RMB

The biggest asset of all, "Debt investment at amortised cost," is 14520.602M. I have no idea how reliable this asset is... only the management will know. I note that there is a similar entry in the non-current assets section that is worth some 4266.881M RMB, but I shall leave it as it is now.

This approach is too conservative but I have always lean towards the cautious side.

All liabilities will not be discounted. As such, the value of 14570M is dervived.

Remember we left this debt instrument asset in the current asset alone. This is where we try to fit assumptions to value:

If Debt Asset is worth…	100%	75%	50%	25%
Debt Asset Value is…	14520.602	10890.4515	7260.301	3630.1505
Adding to adjusted, discounted, current assets of 10628M:	25148.602	21518.4515	17888.301	14258.1505
Liabilities	14570	14570	14570	14570
Net Adjusted Current Asset Value:	10578.602	6948.4515	3138.301	-311.8495
Adjust from RMB to SGD	2071.08	1360.37	614.42	-61.05
If Non-current asset is worth 14.7B RMB (approx. 2B SGD)*	4071.08	3360.37	2614.42	1938.95
…if YZJ is selling at 0.915, market cap is 3.63B	11% discount	7.5% premium#	28% premium	47% premium
…if YZJ is selling at 0.755, market cap is 2.98B	36% discount	12.7% discount	12.3% premium	35% premium

*We are making a huge, huge assumption here. We ascribing a value of 1 dollar for every 1 dollar of non-current asset, which is very generous. Let's not forget that there is about 4B of debt instrument valued in the books, which is about 820M SGD. How reliable is the assets?!

#premium means that we are overpaying, i.e. the value of the company is estimated to be 7.5% lower than the market price.

If YZJ were to be selling at 0.915 a share, and we feel that the debt asset is worth 1-for-1 dollar, then we are ONLY getting a 11% discount from the assumed value of YZJ.

Realistically, it the debt assets is only worth 75% of its stated value, and we were lucky enough to bottom pick at 0.755 a share, we are only getting a 12.7% discount of price to value.

I doubt that is enough margin of safety for the prudent investor. Some of these "investors" were already claiming to be geniuses, and others are fools!

***

Another observation should be noted: Within a space of six months, the debt instruments in the book increased by 29.4% in the current asset section, and 18.7% in the non-current. Should one be concern, given that the management has been less than forth-coming in disclosure (that its founder-director is under investigation), and that the company's main business is after all, shipbuilding?

Or should we all nod our heads in unison, and agree with the market, as it recovered from 0.755$ a share to 0.915$ a share?

The simpler the approach, the better.

July 2019 Portfolio Review

STI (ES3) returns: 3.087-> 3.188 + 0.12 (dividends) = 7.16%
HSI (2800) returns: 25.25->  26.75 + 0.15 (dividends) = 6.53%
S&P (SPY) returns: 254.38 ->  283.82 + 1.43164 (dividends) = 12.14%
Current Portfolio return: 15.74% (bond, stock and funds invested for mum), 22.22% (my stocks only)

****

Transactions (between May to July)
1) Small increase in OKP due to outcome of the legal suit.
I did not expect those charged to be let off so lightly. As a shareholder, it is good news, but I do hope that the family members of the deceased are well compensated.

TBH, purchasing OKP isn't a perfectly moral move. When the day comes, a good portion of it will be donated.

2) Selling of Healthway Medical, to move funds to ... (3)
Healthway Medical is a stock that was deem cheap by insiders who are motivated to turn the business around. With the pressure of the minimum trading price fading, it might be a sound move to acquire stock instead of selling.

HM isn't quantitatively cheap as opposed to companies like LHT and ChangShouHua. It did not have a suitable dividend record. Acquiring a huge block of stock is not prudent. Chances are, I would make money if I held on, but the probability is much lower.

Results were out 2 hours ago as I wrote this post-- earnings have fallen off a cliff. It certainly looks bad short term, but afaik, renovations are on-going, and the prospects of this company is anyone's guess.

An industry insider with a qualified insight on the abilities of the management, has a better chance with this stock.

3) Initial purchase and subsequent increase in ChangShouHua due to lowering prices
CSH is just another value stock with much better figures to account for than most of the value genre.
CAGR, since 2008, as follows:

Revenue: 13.89%
Bottom Line: 14.27%
Gross Margin: from 10.69% to 23.27%
No debts
1.8billion of cash, market cap of 1.4billion
Modest dividend of 3-5% since 2012.
Positive free cash flow of 6/10 years

What is the bad news? Probably market saturation, diworsification by expanding into products that might not sell, and a increase in Days Sales Outstanding of 30% since 2008.The DSO numbers are pretty level in the last 5 years, which bring some comfort.

Cash Conversion Cycle is about the 40 day mark.

4) Increase in LHT due to lower prices
The story with LHT runs the same thread as CSH-- cheapness. It is more cyclical than CSH for sure. It has a pretty decent dividend history, shareholder-friendly management and from the words of my pal, no reasons to doubt their honesty. It has a better free cash flow record. 21.4m of cash, miniscule debt and a market cap of 29.8m means you are paying for about 8.4m for about 2.5m free cash flow yearly.

DSO, DSP and DSI looks pretty stagnant, hence fraud is unlikely.


5) Initial position in Stamford Land
Stamford Land's management is boorish. One of its board member, Danny, is a pretty collected individual and has been acquiring shares. The value, or the public opinion of it, in Stamford Land is pretty well publicized.

Management might make an emotional purchase, but board members are less likely to do so. Hop Fung (a company that was introduced by a pal) have board members exercising their stock options at 42 or so cents. If it is cheap for an insider....it should be cheap enough for someone to buy a token amount of stock in a Graham-Schloss manner.

"If you expect this company to pay high dividends, you are in the wrong investment, said Mr Ow." I agree but at a low-interest-rate environment at present, 2% is bearable.

What would SL do with its assets? I don't know, and quite frankly, I expect a long wait as well, since there are no white knights to pressure the board.

Hotel business in Australia is not remarkable at the moment, and that gives the Ow-s much needed justifications to cap its dividends.

6) Initial position in Colex
Colex has a contract that might end next year, but the value in it is obvious.

Another 2% dividend-er like Stamford Land, it has a very strong free cash flow history-- no red ink for the last 10 years. Market cap is now 33.1m, cash is 19.4m, and it is debtless for a decade.

Free cash flow for the first half of this year is 10% lesser but no cause for alarm. If they were to win the Jurong tender this coming quarter, prices should adjust upwards. Capex requirements aren't too alarming, and there is a sizable amount of book value to protect the downside.

7) Slight Redemption of Singapore Saving Bonds
Short term coupon rate has fallen off the cliff from 1.96 to 1.6x-- this tells you what they expect-- longer period of low-interest rate environment. The redemption of bonds is reactionary to the lowering of prices in the stock market.

I do not subscribe to the theory that the market is leading indicator of the economy.
We are over a decade of low interest rates. People are getting tired of dancing, yet the music kept playing. There will be an unforeseeable problem arising in the world, and valuations will adjust accordingly.

It is not my job to forecast where the problem will be. It is just too difficult to guess where and how. One has to be an optimist and buy stocks when things look pretty bad.

It takes a lot of guts to buy a Chipotle Mexican Grill at PE 50 when it was having the viral crisis... and I don't have it. These gutsy folks deserve the profits of a hefty 80 PE revaluation of CMG by the market.

In theory, when the market is depressed as a whole, this is the perfect opportunity to buy growth stocks.

In theory, that is.I just not that gutsy.

MM2, and the pains of investing

Was reading through InvestingNote and a particular thread-starter wrote that he lost 57% on MM2. Given that I wrote about mm2 last year, I felt enough for the guy to leave a lengthy comment. Hopefully this would be educational to you

I wrote:

Hi @Therone I am so sorry to hear about the amount of losses you incurred as of now. 57% is no small amount.

Please be patient with my answer as I hope I can be of help in some way. I would ask firstly if the amount of capital invested in MM2 Asia constitute a large part of your total net worth. If it is a small part, perhaps you can wait a while. Otherwise, you have to be honest with yourself and ask if you really did your homework and can endure the pain.

If you have a huge holding and you didn't do your homework, I would advise that you reduce your holdings to a point where you don't lose sleep.Unfortunately the stock market is a very cruel place. Assuming you have done next to no homework other than buying based on "story" and not look at the numbers, you are now essentially forced to re-think about your investment.

When the price does rise, the ignorant ones would think that their investment thesis was correct. They remain... ignorant. Luck does not last forever.

If you want long term success in investing, you have to understand basic accounting and do your own valuation. Basic principles: A good company generate good amount of free cash flow, and require low amount of capital expenditure or funds to reinvest into the business. These type of companies are usually priced at a premium in the market, because by and large, investors are not stupid. In the financial world, they would call it "efficient market." Efficiency, by and large, becomes dislocated due to misunderstanding or actual problems. Find out why MM2's price is dropping. And think whether the market is right.

MM2 is a growth stock and to me, it was a high risk, high return stock. What I didn't like about the company was written in a blog post of mine in Sept 2018. https://laymaninvesting.blogspot.com/2018/09/speculative-profits-is-market-fair.html . I hope it would be of educational use. In short, it wasn't generating cash, and subsidaries are getting IPO-ed. By going through the cashflow statements of these IPO-ed companies would suss out whether the mother was casting out its babies because she was desperate.

TBH, I have no idea how much cashflow would the Cathay acquisition give the company. Simply put: if the company acquired cost you 215m, and it brings you 20m of cash, it is a pretty decent investment. If the net result is just 2m, it is a terrible investment. Think about it this way: 215m into SSB yield you more $. I hope you will evaluate the acquisition of Cathay just like how you would for your future stock picks.

I also like to look at companies' ROIC numbers. To me, if a company inherit a huge amount of debt,but the total return based on equity + interest-bearing debt is maybe 12%, it is great.

Compared to a company that returns 5-6% with very little debt, if they are priced the same (based on long term average cashflow multiples), i prefer to buy the former.

One of the comments below suggest that you wait for the annual results to be released. You probably should. Attend the AGM and look out for the tone of the directors.

Money very hard to earn and I feel for you.

Portfolio Commentary: April 2019

STI (ES3) returns: 3.087-> 3.4150,10.63%
HSI (2800) returns: 25.25-> 29.85, 18.23%
S&P Index returns: 2447.89 -> 2945.83, 20.34%
Current Portfolio return: 30.65%

Portfolio return includes only stocks. With bonds included, the return is about 22%.

Transactions made:
-complete divestment of Innotek, at $0.565 and $0.585
-partial divestment of Xinghua Port Holdings, at $1.62
-small amount of Singapore Savings Bonds.

Innotek is now fairly valued at about $0.60 this week. With a low dividend return in mind, it is fair to divest. To be fair, at the price I got, the dividend rate is 4.46%. I believe the dividend would be raise in the future (better profitability and because management has skin in the game). At about 70% capital return, it is fine to sell, I guess.

Xinghua Port is partially divested for a strange but good reason: madness. The price surged from $0.90 to $2.1 at one point. By the time I managed to access my trading website, it was about 1.6-7. Made a mistake in keying in the order (as I was at work, heh) and sold it at $1.62 instead of $1.72. On hind sight, it was a good choice as the price plunged back to 1.2-3 in short order. Estimated capital return was about 55%, and I sold about 2/3 of the stock I had in XHP.

The daily, technical chart explains how crazy it was.

April was an extraordinary month. Never expected it and probably won't not be repeated.

***

Attended the Or Kim Peow (OKP, SGX:5CF) annual general meeting recently. It was a very small affair with less than 20 investors in attendance. A pretty ballsy investor was asking tough questions and the directors did not respond in an overly-defensive manner. Overall, I did not find anything that I have to be worried about.

***

I was surprised to read that S&P has hit an all time, historic high. With the number of worrying news at bay, it was a climb that eluded me. I remember one of my instructors in the past commented that "there is always something to worry about." A proper value investor should never be bothered by the market and just grind away, looking for deals. Some folks at GMO would not subscribe to that, but I do.

Until then..

March Update: PC Partner Plunges; Reflection on Investing

March Portfolio Updates
STI (ES3) returns: 3.087-> 3.331, 7.9%
HSI (2800) returns: 25.25-> 30.1, 19.2%
S&P Index returns: 2447.89 -> 2899.45, 18.4%
Current Portfolio return: 16.41%

The reason why the portfolio returns has "become" better (compared to earlier posts this year) is merely because it is telling a lie: I have removed my SSB holdings from the portfolio to look at how well I am doing in the equities side. HSI and S&P remains very difficult to beat. I don't believe I can beat it this year unless there is a surprise.

Recent purchase: SUTL, first tranche. Stock is on a downtrend and balance sheet makes adjusted earnings very attractive as a private owner. Is it cheap? Yes, but dirt cheap? Not really. There are still possible downsides, but when it goes lower, I will not hesitate to add.

***
(The following was written some time back and I hesitate to publish it for certain reasons. 
Please read it with that in mind.)

Just last month, I wrote about divesting PC Partners. They released results last Friday, and I wasn't aware of it (I don't track stocks that closely, much less those that I no longer hold).

And so I was pretty shocked that it fell 30% today at close, largely due to the abscence of a dividend, as well as pretty shocking numbers... inventory within the balance sheet did not reduce, and increased debt and provision means the equity had become smaller. I felt quite sick to the stomach because one of my mates have it.

I take time to pause and reflect on events like these.

What exactly is investing?

Is it the buying of quality stocks at fair prices (or even better, cheap prices)
Or purchasing dirt cheap, unpopular, troubled companies at fire sale prices, preferably way lesser than its adjusted net current assets?
Or concentrating on special situations, such as spin-offs, restructuring, arbitraging?

Maybe it is a bit of everything. Investing is all about capitalizing on the discrepancy of price and value. Price changes, and so does value. Buying a quality company is very much like cycling with the wind behind your back. But such opportunities seldom come by.

The most difficult thing about investing is that one is never certain that he is
a) right, and
b) the question of when the market rewards him. The only exception I can think of is special situation investing.

The easiest thing to do is to look at a company and say it is cheap. I pretty sure OKP is pretty cheap. But when will things work out? I won't pretend to be a genius here. Nobody knows. Maybe something disastrous can happen and my investment will not work out. But I think my odds are good. That is all it is to investing I feel...what are the odds?

Speaking of (a) right price and (b) time element, consider the case of Cowell. The stock was unpopular at the start of the year, trading at 0.91. It has adjusted current assets of at least 1.2 imo. Yet the news was bad: the main customer, Apple, was not doing so well. Cowell had also report a loss for the first half of its financial year. Yet, it can endure 4 years of cash burn in its books. A decent investor can look at a discrepancy of maybe 10% and probably not act. But we are looking at a discrepancy of probably 33%.

Even if one opt to take profit earlier, a 20-25% profit isn't too shabby. Achieving (a) is easy enough. (b) makes Cowell a great investment.

It is a typical example of bad prospects in earnings, but cheap according to assets. The stock market always love a good earnings story. Betting on earnings, and winning the bet, rewards the investor very directly. But it is a hard game to play.

So a typical value investor will look at its balance sheet and think: cool, it has about 50% of upside on adjusted current assets alone. Maybe I buy some. Hence, the investor fulfills (a), right price, but will have no idea when (b) will turn out.

As luck has it, it is trading at 1.41 today. 55% returns in 3 months. What a terrific investment. But...

Let's be honest here. This isn't something that one can foresee with intellect. The best one could do is to determine the gap between value and price and bet on it. The wider the gap, the better. The investment has to be safe-- in terms of the business as a going concern and the downside of the price. The amount of cash-burn per year shouldn't be too frightening that it will deplete the company within a couple of years. The debt and interest payment shouldn't be crushing.

The time value of money is something most investors are familiar with. The time return of investment is very equally relatable yet it would be hypocritical to assume one can foresee with intellect. Buying and selling with 10% gains and pretending to be a value investor is disdainful.

So how should one approach investing? My personal take is to go for the easy ones. But make sure the gap between value and price is large. It makes the "time return of investment" easier.

Let me shamelessly quote an example from my own portfolio.

About two years ago, I invested a small sum in Innotek. Today the total returns stands at 60%. It was a simple book value play, yet I felt the insider's decision to acquire huge amount of stock, and its well-fortified balance sheet makes the investment pretty low risk. So I added a bit more one year later.

So two years of investment, 30% a year, pretty decent. Is it a result of my intelligence? Not really. But I thought the odds are good.

***
Buying a company with a good earnings story, and hoping that it continues to do so, takes courage. Such an act usually borders on naivety.

Buying a company with problems, but accompanied with a strong balance sheet, takes patience.

I think it is easier to have patience.

Recap: Investing by Numbers

A few months ago, I wrote a post regarding investing by book value, and wonder if this portfolio will be able to beat the Hang Seng Index.

6 months has passed. How time flies!

The returns of this portfolio is a mere 0.79% without accounting for dividends. My calculation told me that HSI returned 1.94%.

As expected, there isn't a significant difference. I wouldn't expect dividends to make much a difference in 6 months.What are the advantages of investing in this manner (by book value)? I believe if one were to invest by index, there are probably frothy years where there isn't a huge Equity Risk Premium (difference between returns by index and bonds). But there will always be companies with temporarily problems. If one is to be more selective, e.g. by investing with a special emphasis in net-current-assets or even sustainable dividends, the rewards are there for the taking.

***

Little Portfolio Returns, YTD: 11.9%
Tracker Fund of Hong Kong: 14.8%
SPDR Straits Times Index ETF: 4.24%

The Hong Kong index is proving to be hard to beat. No significant purchase is made since Feb.

Jan-Feb 2019 Portfolio Updates and Light Reflections on Investing

My little portfolio got a little smaller after divestment of PC Partners at almost break-even price. In our field, we call it "break-even-titis," and I cannot disagree with it after looking at the price.


My sad little pathetic excuse on why I sold the stock was because I think the earnings, adjusted for "cyclical-ness," isn't dirt cheap. The idea wasn't mine to begin with, and so I sold. So I lost out on about 21% gains. From what was published, I didn't think a lot of inventories will be sold. The joint venture sounds a little speculative. But that is my own opinion, and clearly not the market's.

So I guess that is my sad, little, pathetic excuse for selling. On hindsight, the little amount of courage I had in buying the stock as it plunges, prevented me from making huge losses in the end. Investing is very much about luck at times.

For what it is worth, investing has been taking a back seat as other money-reducing hobbies take priority. For a while, I was tempted to buy a little bit of cowell at 80+ cents. I firmly believe this company is worth about 1.2 purely on net working capital, and had about 4 years of cash burn to endure a business down-turn. The only reason why I decided against buying, was the turnover in senior management/directors.

So I decided against it because I do not believe in investing in small amount of money in stocks unless I am dead certain of an idea. Quantitative investing, imo, works, but the minuscule gains over index returns is not worth it.

And so I missed out on about 60% of gains in Cowell as well.
I remember repeatedly buying AA batteries for a very cheap wall clock at my living room, and it became an activity which I must perform every 3 weeks. Eventually, I replaced the clock with a quality, Ikea clock and it has run uninterrupted for maybe a year or more. Buying quality stuff works.

I guess I still looking for the next "Perfect Shape" without the budging trade receivables.

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STI (ES3) returns: 3.087-> 3.237, +4.86%
HSI (2800) returns: 25.25-> 28.7, +13.67%
Current Portfolio return: 7.99%

Current portfolio, in value, is 63.8% in SGX, and the rest in HKEX.
So the portfolio under-perform as a whole against the indices. This is extremely disappointing.

Transactions made:
a) sale of Samudera Shipping to token sizing due to a shift towards quality
b) purchase of more TTJ due to lowered market prices
c) purchase of more Xinghua Port Holdings due to lowered market prices.
d) sale of PC Partners as described above.

As market swings upwards from depression, I remain amused by how it can influence business valuation. It gets depressing for me as certain companies swing from high-end of the fair value to even pricier levels.

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I apologize for this low quality post as I do not have any quality ideas or principles to talk about. Until next time...