After reading about Investment Moats latest post on Swiber Holding Ltd and his comments on Deep Value Contrarian Investing, I made a comment:
If an investor is using Deep Value Contrarian style (like me sometimes), he must be able to understand it is “HIGH RISK, high return” – note the capital letters.
He must also have experience, able to endure the ups and DOWNS (mostly downs) and understand financials as well as the business model.
He must also be able to exit when something goes wrong.
Only by understanding these factors, then should the person go into deep value investing.
Looking forward to your next post!
Therefore I will emphasize again - Deep Value Contrarian Investing is a high return but also HIGH RISK style.
I have been engaging in some of this investment style since March 2016 and the results have some far been slightly better than average. But it should have been better.
Other than the factors I stated above, deep value investing requires investor to assume certain factors and if you get the assumption wrong, you lose.
Here is one of a recent example that I made losses in:
Krisenergy Ltd was another one of the deep value stocks that I purchased recently. My main purpose of purchasing this stock was its deep discount to book value and I wanted a stock that was a direct proxy to oil prices. My assumption was that I expect oil prices to rise in future.
Krisenergy Ltd was a oil rig operator and its revenue is a directly linked to oil prices.
When Swiber Holdings Ltd announced its winding up decision, I was suddenly smacked with the facts of just how bad the oil industry is in (I already knew its bad but not this bad). This winding up will cause a ripple effect within the oil and gas industry and Krisenergy Ltd will definitely be affected.
Since my purchase of Krisenergy Ltd was on the assumption that oil prices will rise in the near future, and in addition with all those news of oversupply of oil recently, I decided to give up on Krisenergy Ltd. I sold off all my holdings and made some losses.
Despite this incident, I will like to say that I still believe in Deep Value Investing style. This is a style that has been used effectively since Benjamin Graham days. The main factors to excel in this method is to understand the business deeply and have faith and belief in your catalyst assumption.
*Do note that even when Swiber Holdings Ltd withdraws its decision on winding up, I will still sell Krisenergy Ltd at a loss. This is because withdrawing the decision does not mean it is in a better position. It is just delaying its death only.
If you are interested in deep value investing methods, do come and hear about it in My 2nd Sharing Sessions with T.U.B in August!
Another contrarian method is my Triple S Scorecard investing style. If you are interested, do give my initial Triple S Scorecard a try. It's still a good tool!
Do note that I will only be releasing the Enhanced Triple S Scorecard for those that attend My Sharing Session with T.U.B. If you are interested to attend the next Sharing Session, do not hesitate to contact me directly.
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