Thursday, March 31, 2016

An Investor's Take on Trading

Rather than stating about my thoughts, I decided to tell you my experience today.

Long story short, the night before this fateful day, I read that MFS Tech was going XD (after a capital reduction) the next day and I was tempted to buy into the stock when the market opens the next morning.

A short calculation shows that its value per share is about $0.005 per share. I was prepared to go in at $0.003 or $0.004 per share

The next day, when the market opens, this stock when down to $0.005 then up to $0.010. Then the rollar-coaster started.

At 0.028, I decided to enter into this rollar coaster ride. 

Here is what happened to my trades:

You must be very confused about what was going through my head when I was keying in my Trades... Am I crazy? There were cancellations of buy and sell orders... what really happen?

The main reason was I am unable to put in a price that I was able to justify.

During the whole rollar-coastor ride, I was trying to justify how a $0.005 company can be worth so much more.

As an investor, I am always able to justify my own views of a stock price via either its assets or earnings. 

But a company that is without business and only cash of $0.005 per share, I was unable to key in a price I was satisfied with. Thus, I kept cancelling my trades and keying in new trades.

It was really like buying 4D and hoping that my number is "hit".

I was also unable to understand what is "stop loss" even keyed in a wrong trade and sold accidentally.

Eventually, my 4 trades end up with a loss (that's not too big LUCKILY).

In short, I have to say I have done short term investing/trading before. But as I was able to justify the price I key in, even if the stock price goes down, I felt alright. However, I realise when I was unable to justify the stock prices I key in, I will panic and made rash decision. 

As one of my friend said to me - trading is just not my type of game.

Monday, March 21, 2016

USP Group Limited - My Major Bet On Discount To Net Asset Value Again...

Sorry but I have been extremely busy lately, thus the lack of posting.

Anyway, as you should have read, I am exploring a new way of looking at investing – Deep Value Investing. I will only be allocating about 10% of my portfolio to this portion of investment.

BBR Holding Ltd is one of the examples.

For stocks in my portfolio that pass Triple S Scorecard or of Blue Chip Status, I realise that they are meant for the LONGER TERM. It’s wise to just ignore them for now and not actively monitoring them.

However, for an investor like me, I am always tempted to look at the stock market regularly, especially for news update. Thus, I felt it is better to have a separate account for stocks that are invested meant for active monitoring.

For me, these stocks are my Deep Value Investing Stocks – They are did not pass Triple S Scorecard and do not consist of any Blue Chips, but they are at least 40% discount to its Net Asset Value with a catalyst or a reasonable business model.

So here is the next example that I added recently and NOT REPORTED in my most recent The Value Portfolio post – USP Group Limited (yes I know…it’s another addition!!!)

Profile In Short

USP Group Limited engages in oil blending activities in Singapore, China, Hong Kong, and India. The company operates in three segments: Oil Trading, Property, and Others segments.

It engages in the research and development, engineering, manufacturing, and consultancy for the biofuel industry; processing and selling biofuels; and blending and distribution of diesel and engine oil.

The company is also involved in property holding, development, management, and other related property activities primarily in the residential and commercial sectors; and trading of diesel.

The company was formerly known as Unionmet (Singapore) Limited and changed its name to USP Group Limited in March 2015. USP Group Limited was founded in 1999 and is headquartered in Singapore.

There will be no Triple S Scorecard review.

Why So Good?

Upfront – USP Group Limited has been very upfront about what they intend to do with their announcements. There are updates on corporate actions, business update and even publishing their letter to their associate.

Diversifying Into Property – Although I do not know how the significant drop in Oil price will affect their oil blending business, but I believe their recent acquisition of 2 companies (will be explain below) shows that the company is diversifying into property rental business for a more consistent  recurring cashflow.

Catalyst – USP has recently acquired 2 other companies – Koon Cheng Development Pte Ltd (Read here on the proposal) and Supratechnic Pte Ltd (Read here on the proposal). Basically these 2 companies will increased the Net Asset Value of the firm as both companies have a relatively high number of properties in Singapore and Overseas.

Why So Bad?

Amount of Debt - I hate debts and the increasing amount of debt the company takes on makes me uneasy.

Is my calculation right? - My view of the Net Asset Value maybe wrong. If the discount is not as great as I expected it to be, the opportunity of this investment will be high.

Oil Business - I am still unable to know how a low oil price will affect its main business.

4 to 5 years in losses - The company have been making losses for a significant number of years, can these new acquisitions provide any positive catalyst for the company?

In Short

As per many deep value stocks, I decided to buy USP Group Limited mainly due to its potential increased discount to the Net Asset Value and the increased diversification into property rental business.

A calculation below indicates my view of the Potential Net Asset Value:

>Based on the latest corporate update, the acquisition of Koon Cheng Development will result in USP Group Limited having a NAV of $0.06.

>Based on these 2 announcements (here and here), the acquisition of Supratechnic Pte Ltd will add net assets of $15 Million. USP Group Limited will need to pay $9.69 Million in Cash plus go through a share lending program. Taking in consideration the new number of shares will be 787,753,814 and ignoring the share lending program (assuming it doesn't change the number of shares of USP Group Limited), the additional net asset value is [($15 Million - $9.69 Million)/787,753,814]=$0.0067.

>> Eventual Potential Net Asset Value - $0.0667! Almost 59% of margin of safety!

Please note that I am not requesting my investment to achieve a price of $0.0667, but at least a 20% to 35% capital gain.

Current Price: $0.027 as of 21 March 2016

Please do your own due diligence before you invest in this stock.

Do note the author is vested in this stock/company at 0.029.

So if you are interested in my Triple S Scorecard, contact me through my blog or message me on my T.U.B Investing Facebook Page.

As for the online course, its on! Contact me if you are interested. Furthermore, we are thinking of changing it into a full fledge course (still in the mist of preparing).

Do like our facebook page too...

Monday, March 14, 2016

An Interview with "B"

This is a new series that I will be doing - either to get people to put up guest post or doing interview with bloggers.

Today, I have the honour of interviewing "B", the owner of blog, A Path to Forever Financial Freedom. His blog first caught my eye cause of the way he invests and the goal of achieving financial freedom. We seem to be on the same path but different ways and different methods. At times, he will provide his comments on my facebook posts and his comments are always very insightful.

Without further ado, let's get straight to the interview questions and "B" answers!

1. Tell us more about yourself

B: I am a full time salaried employee working in a logistic industry in the accounting/finance department aiming to achieve financial independence at the age of 35. At home, I am a father of one and I enjoy activities such as reading, traveling.

2. How did you get into investing?

B: The idea of passive income hits me hard to get started and motivated about investing. Even though I may disagree with some of the method in Rich Dad Poor Dad, the concept was extremely brilliant and I fell in love with it immediately. Being able to have money works for you instead of you working for the money intrigued my interests to explore further.

3. Any thoughts about short term trading?

B: It's getting lesser now but I still do that occasionally. The main objective here is to achieve the targeted return within a short span of time but it can get difficult and dangerous. I talked specifically about the one-time, two-time, three-time decision in my recent post here when we come down to short term trading.

4. What your best investment and worst investment since you started investing?

B: I have a couple of very good returns on my investment such as FCT, ST Engineering which I bought back in 2011 during the Euro crisis and managed to divest them at the peak of 2013.

Fortunately, I have yet to suffer a very bad investment decision to date, though on and off there are realized losses to be made when the investment turned sour.

5. How many stocks do you think one should hold for diversification?

B: Anything between 10 to 20 is optimal, both to mitigate systematic risk and also the time required to monitor them closely.

I have currently about 14-15 stocks which I am pretty comfortable in monitoring, reviewing and closing in on their development on a daily basis.

6. What do you intend to do once you achieve financial independence at age of 35?

B: Last year, I did a fun post on my pre and post financial independence activities which can be found here. In the post, I mentioned about how time and flexibility is a luxury which is very important to me and how being post FI it can help a lot.

The more realistic scenario, however, is going to be slightly different. I'm probably going to venture into a small business with some friends, write a book, do some consultation work - work that basically requires me to keep up with times and get the mind not idling. However, one thing stays true - flexibility will always have to be there.

7. Able to reveal which stocks are currently on your watchlist?

B: In the past couple of months, I'm just mostly accumulating the shares I already had in my portfolio, so no much new stocks that are out there for me to explore. My next move would probably involved gobbling shares in FCT and CCT, something which I am still much in the lookout for Fed news next week.

In terms of new stocks, my closest purchase is probably on HK Land and UOL. These are two which I am keen to add to m portfolio if the opportunities arise.

8. Finally, any advice for newbie interested to get into investing?

B: My advice to interested investors (newbie) is don't get rushed in trying to put all your money straight into buying companies which you have followed from a blog somewhere or heard in the news. Try to read and understand as much as possible first before putting your hard earned money in a company which can yield you much greater returns in the future. Remember, all you need is a couple of great chance in your life and it will turn your fortune well. Do this badly and the reverse is much harder to absorb.

"B"'s Blog, A Path to Forever Financial Freedom, is also on the my blog list at the side.

Anyway hope you like this interview - If you do, please proceed to like our Facebook Page, as we always update it regularly. Furthermore if you are interested in my Triple S Scorecard, contact me through my blog or message me on my T.U.B Investing Facebook Page.

Tuesday, March 8, 2016

The Value Portfolio - Recent Actions and Views - Post 7

I guess it is time to update my portfolio after an "action packed" February.

The total number of stocks when from 20 to 25!

There is a number of reasons behind it:
- I started looking at companies with Price to Book Ratio at less than 0.500. For these companies, I am looking more at Net Asset Value with a very big margin of safety. However, these companies most probably will not pass my scorecard or may have huge debt. For these companies, I am expecting "High Risk, High Returns" and I deem them as "Deep Value Stocks".

- Although STI has fallen ridiculously low (prior to the recovery), but how many blue chips can you buy/average down (since our funds are limited)? So I decided to try to find "other stocks". Thus, I started on the journey to find "Deep Value Stocks".

- I realised companies that pass Triple S Scorecard is rather stable and consistent. They will not rise significantly nor fall drastically, especially during this downturn. We may need to wait a while before we see any significant return. Thus, I decided to put aside this portion of the portfolio and "let them sleep". I will be actively monitoring these "Deep Value Stocks" instead.

What I realised after going on a "hunt" for "Deep Value Stocks":
- Many properties (off-shore/onshore developers) and construction firms will appear due to their asset-heavy nature. 

- Offshore developments provide better yield. These investments are normally within South East Asia and has 8% to 10% yield. This could be due to the branding of being a "Singapore Developer" and going to an emerging economy to build homes/business hubs. With at least 50% margin of safety, even if the developments are located overseas and we can't be very sure about its prices, we should be relatively safe from any unforeseen devaluation of the developments.

- Onshore developments may only able to provide 5% to 8% yield, but as Singapore's land is scarce, the property price should be more stable. Even if property prices are going downtrend, the margin of safety will sufficient to cover any fall in share price.

Do note that if you look at my current portfolio, it is pretty heavy on developers and construction firms despite a worse-off property industry in Singapore. However, most of the construction firm I have on hand do have infrastructure structure projects to provide a stable income coupled with development "lumpy" earnings. Most of them are also not high on debt. Thus, I am pretty comfortable with my portfolio. 

However, I do notice this trend and has already adding non-construction/developers firms in the portfolio. You will see them in my recent purchases.

The following stocks are in my portfolio:

5) LHT Holdings Limited
10) Suntec Real Estate Inv Trust
11) Oversea-Chinese Banking Corporation
12) CH Offshore Ltd
14) ST Engineering Ltd
16) PSL Holding Ltd
18) Hock Lian Seng Holding Ltd
19) Fischer Tech Ltd
20) Ellipsiz Ltd
22) LTC Corporation Ltd
23) DeClout Limited
24) Fu Yu Corporation Ltd
25) IPC Corporation Ltd

Sold Keppel Corporation Ltd - The recent rise in price gave me an opportunity to offload this company as I am very uncertain about its future. Furthermore, with this new journey to find "Deep Value Stock", I decided to offload them to increase my funds.

Bought Ellipsiz Ltd - This company pass the Triple S Scorecard and is also a Deep Value Stock. However, the company is has a huge intangible non-current asset. Part of it are licenses. In addition, this is not a property or construction firm. So I bought it.

Bought BBR Holding (S) Ltd - Solely due to its huge discount to Net Asset Value as previously stated in the write up.

Bought LTC Corporation Ltd - A construction firm with $118 Million worth of investment properties. Bought solely for its huge discount to Net Asset Value too. 

Bought DeClout Limited - A punt. Previously, it was announced that there maybe a possible spin off of one of its subsidiaries. With its extensive expansion, it is possible that the company may need the spin to grow bigger. Hopefully if all goes well, the price will shoot up when the spin off is confirmed.

Bought Fu Yu Corporation Ltd - Barely pass Triple S Scorecard. In addition, company has many properties in Singapore, China and Malaysia. Recently it also announced dividend for 2015 and has a huge cash pile. Deem as a Deep Value Stock instead to be more actively managed.

Bought IPC Corporation Ltd - One of the deep value stock with developments in China. 

On my previous write ups:

So if you are interested in my Triple S Scorecard, contact me through my blog or message me on my T.U.B Investing Facebook Page

As for the online course, its on! Contact me if you are interested. Furthermore, we are thinking of changing it into a full fledge course (still in the mist of preparing).

Do like our facebook page too...