Wednesday, February 8, 2017

An Interview with "bgting"

This is the continuation of the interview series. For the month of February, I will be interviewing "bgting" as he is known on InvestingNote platform.

As many of you knew, I am also an active user on the InvestingNote platform. Through my many conversation with the users on the platform, I have made friends with many established investors on the platform.

"bgting"stands out as one of the established investors. I am always able to gain new insights from him during our conversations. He has also been able to provide many pointers and information, which further enhanced my theories and views.

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

1. Tell us more about yourself.

bgting: I am a remisier with Maybank Kim Eng.

2. How did you get into investing?

bgting: I opened an internet trading account when I was in university. I traded for a short while but stopped as I decided I did not know what I was doing. Luckily. After I started working, I dabbled in the stock market a few times. I remember buying SIA at $12.50 using CPF, some months before 9/11. As the amount was not big, it was left in the account for around 10 years. The best thing that got out of it was probably the distribution of SATS shares. With hindsight, switching out of SIA into SATs would have done very well.

I remember having bought StarHub at maybe around $1.20 and selling around $1.90 after some months. With hindsight, holding it throughout till now, despite the recent headwinds, it would have proven to be a wonderful investment due to the dividends and capital distributions.

I only started thinking more seriously about investing after several years working.  With total ignorance, I borrowed books from the library on the topic. One book, which title I cannot remember, highly recommended "The Intelligent Investor" by Benjamin Graham. This book made the most sense to me. Then, I followed up with "Security Analysis". Armed with the new knowledge, I started picking some stocks using quantitative measures such as low PE, low P/B and low debt. I remember stocks like UOL at $2.20, Metro at $0.480, Pan United at $0.330 and Sim Lian at $0.330 before stock split into 2. This was back in 2005 when stocks were generally cheap. Unfortunately, I was not experienced enough to sell out all before the GFC although I knew stock prices were too high then. I held UOL through the crisis. It fell shockingly to a low of $1.50.

Perhaps due to beginner’s luck, these initial stock picks would have worked out quite well even if I had held them throughout till now despite all the ups and downs, including through the GFC. A lesson learned is that for most people, it is better to just occasionally buy stocks of some good companies at reasonable prices using savings from their income and hold them. Avoid buying when prices are too high. Things learned on hindsight.

After becoming a remisier about 5 years ago, I went full time into investing and trading.

3. What is your thought process when it comes to investing? 

bgting: There is a story behind every company. I read up on a company and try to understand it. The past financial figures provide an idea of the nature of the business and what are the possibilities. By following a company long enough, I will be able to form a rough story line in my mind and what to expect moving forward. When the opportunity arises, I will then be prepared to act. I am now a bit more forward looking and qualitative than quantitative.

If I am right, I hope to make some meaningful gain out of it. If I am wrong, I hope not to lose too much.

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

bgting: I am not too sure what is considered best investment - in terms of percentage gain, absolute gain, perfect timing, best risk / reward ratio? I just hope my next investment will be a better one, in one way or another.

I had several easily identifiable worst investments though - stocks that went to zero, such as S-chips. What could be worse?

As an example, which is your favourite song by Angela Chang (张韶涵 )?

She simply reminds me of Beauty China. Her full face portrait fronts its last annual report. (Interestingly, we can still find links to old annual reports on SGX website by searching.)


But luckily, I do not have huge positions in any one stock and so I am always able to make it back. However, “Don’t lose money” does echo loudly.

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

bgting: It depends. For investing in large cap companies that are already diversified in their businesses, such as JSH, JMH, Berkshire Hathaway, conglomerates that are operating like funds, there is less need to diversify. Most people are better off investing in low cost index funds for equity exposure as less time will be required to monitor individual companies.

For picking individual stocks, especially small and mid caps, I believe there is a trade-off between the amount of due diligence and diversification. To hold a more concentrated portfolio of say 5 to 10 stocks, one needs to be sure the basis is right and limit the downside. With less detailed analysis and for higher risk stocks, a larger number can help to spread out the risk. "Diversification is protection against ignorance." Ultimately, the overall portfolio return in the long term is what matters.

Currently, I hold around 30 stocks - larger positions for those that I am more comfortable with, smaller positions for those I am less sure of, to which I may add on when I have more confidence.

6. What do you think of short term trading? 

bgting: I suppose this means speculating for profits on short term price changes. There will be winners and losers, so this is closer to a zero sum game. In contrast, long term investing is not zero sum as companies exist to make profits and pay dividends.

I think short term trading is not an appropriate activity for most people. For full time traders and the pros, they are making a living out of it. It won’t be easy to beat them. For others, it is probably more like an interesting and exciting pastime. To be serious in it, need to become proficient like the pros.

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

bgting: I’d say too many to list as I keep watch on many of them. For me, it is identifying the companies I like and waiting for prices to drop, or keeping watch for opportunities due to some events, which may pop up anywhere. For example, recently, Sabana REIT price dipped due to rights issue. A year or so ago, there was ARA and Jardine C&C rights issues.

Unfortunately, with limited funds, it is a game of guessing which one moves fastest within a certain timeframe.

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

bgting: It will be good to start early. I started rather late. The earlier one starts, the more time the returns can compound. It is also better to make mistakes early in life using smaller sums of money. Larger sums can then be managed later in a breeze.

Even if one is not interested in the topic, one still needs to know enough to understand what financial advisers are talking about to make investment decisions. I believe the knowledge on investing and finance could also prove useful at some point for many people’s careers.

I recommend reading "The Intelligent Investor" by Benjamin Graham, which is written for the laymen.

As Warren Buffett said in its preface :
“To invest successfully over a lifetime does not require a stratospheric IQ, unusual business insights, or inside information. What’s needed is a sound intellectual framework for making decisions and the ability to keep emotions from corroding that framework. This book precisely and clearly prescribes the proper framework. You must supply the emotional discipline.”

There are now many good websites and blogs on investing. It is not difficult to gain the knowledge to avoid having to learn it the hard way.

Hope you like this interview series and please do remember to like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

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