Sunday, June 17, 2018

How Do We Measure A "Moat"?

I believe many of you, similar to me, have your minds on World Cup and your portfolio have taken a back seat.

After all, with the trade tariffs news (US and Europe, US and China, US and Canada), Fed rate hikes, and ECB to phase out QE at the end of the year, I have major doubts the share prices will rise back next week.

STI have also fallen from 3,385.71, as of 26 Dec 2017, to 3,356.73 as of 15 Jun 2018. This is the first time in 6 months that STI have fallen below the 26 Dec 2017 level.

In addition, we are also having the "sell in May and go away till November" effect and most probably the World Cup effect.

So in order to sleep well, how should we invest?

I always felt investing in fundamentally strong companies that is constantly able to generate good earnings will generally help retail investors to sleep well. In order to do that, Simple Investor and I created Fundamental Scorecard website.

As of this month, Simple Investor has continued to improve his Full Analysis Scorecard with a "Moat Scoring".

I believe this is the first time someone has tried to measure a "Moat" of a company and I have to say it is quite accurate. I am really amazed!

Anyway here is what Simple Investor wrote on his Facebook:

"Let's talk about moat.

The term economic moat, popularized by Warren Buffett, refers to a business' ability to maintain competitive advantages over its competitors in order to protect its long-term profits and market share from competing firms.

Basically, it's a defensive structure. Some company has it, others, not so much.

With the recent update of full analysis, I want to showcase some examples of moat. Let's take a look at 3 companies.

The first example of a strong moat company is M1. From its past performance, we can deduce that M1 does indeed have a moat. After all, the telco industry was a oligopoly until the recent days. Remember the days where our mobile plans, internet and cable TV only got more expensive? As detected by the moat scorecard, M1 has a long term strong moat - but that is decreasing.

When looking at moat, one should also consider its durability and trend, in addition to strength. As we can see for M1, although things are not looking good, they still have enough power to put up a fight - but we would prefer to invest in a situation where the moat is stable or increasing, since results are unpredictable with moat destruction.

The next example is one with a weak moat. I'm sure Old Chang Kee is a familiar name to most of us, but when is the last time you bought something from them? And did you know a stick of fish ball is now $1.60? As we can see, Old Chang Kee faces some pressure when increasing prices, thus it only has a weak moat. Further inspection tells us this moat is decreasing, and history shows an even worse sign - company has dipped below moat criteria, breaking its historical trend. All these points us towards caution when dealing with the company.

The last example would be one without moat. SIA is a typical company with no pricing power, leading to a no moat scoring in our scorecard. These are the companies we try to avoid, especially in long term holdings.

What about Kimly, Sheng Siong, Ho Bee Land, Thai Beverages and over 700 other stocks? Check out full analysis scorecard at

Full analysis - understand a company in 5 minutes. By the way, what is shown is only the first page of full analysis scorecard. Other pages includes ratio and warning signs, shareholders concern, Net worth analysis, recent insider transactions, insider shareholdings, growth, value and income analysis.

*P.S can you spot our next upgrade? Hint: It's in the valuation column.

*Information in this post are not buy/sell recommendation. Always consult a professional should you need to before making investment decisions."

With that, I hope you will take a short break from World Cup and look at our Fundamental Scorecard website.

We do not expect you to be convinced to sign up immediately, but do ask us questions if you have, we are more than happy to answer your queries!

Please do your own due diligence before you invest in any of the companies discussed above.

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Sunday, June 10, 2018

A Short Short Post

This week, I just have some thoughts.

It wasn't a good feeling when I stared at my portfolio that has been in red since many months ago.

I am still fine with the red portfolio - down about 4.3%.

However after Trump's recent G7 summit's chaos, I really start to believe we are in a bit of a s*** for at least till end of the year. 

In addition, now that we have a world cup coming and more interest rate hike. I believe the volatility will be significant. Or probably a redder portfolio in the next few months.

Now that I have said it, I hope everyone will be prepared for what is coming.

Nevertheless, I doubt we will see a major bear but a continuous playful bear for the rest of the year.

That's all for this short post.

Maybe its time to ignore everything and just focus on what's important - The World Cup!

World Cup 2018
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Sunday, June 3, 2018

Big Idea 4

I bought a new company and announced it on my Facebook Page recently. The overwhelming likes made me revealed the company at that time. Thus, there was a dilemma in me whether I should announced why I bought that company or talked about the other company which I had re-invested in Jan 2018?

I decided that the latter - The company that I had re-invested in Jan-2018 - will be Big Idea 4.

I have written quite a lot about this company and invested in it slightly before April 2016. I sold the last of their shares in Dec 2017 at its peak and almost a 2-times bagger, after the company divested its main business and announced a mega-dividend. After the price came down, I re-invest in the company.

Reasons Why This Counter Qualifies as a "Big Idea"

1. Most "Liquid" Balance Sheet

Based on the above information:

Net Current Asset Value - $0.522

If we take Financial Assets and Other Receivables into account, the Net Asset Value will rise to over $0.648.

This value is 16% above the current share price.

Do note that the Financial Assets is related to their shares in another listed firm, and Other Receivables are related to the remaining amount from the divestment of its main business.

2. Still "Profitable" Business

Despite a drop in Gross Profit Margin, the Q3 2018 losses was due to an exchange loss not due to the current business operations. If this exchange loss was added back, the net profit will be $26k.

However, many people could potentially missed this and sold off this company too early.

Nevertheless, it is important to note that the Gross Profit Margin has dropped and I will continue to monitor the results in Q4.

3. Management 

This is something I am not sure if anyone has picked it up before. The company's current management are the sons of the biggest shareholder.

Rather than "giving a company" to the children to play along, this should be a way the biggest shareholder want a firm control of the company.

Do note that the children had experience in managing other listed firms before.

In Short

Currently the company's share price has dipped significantly. I had continuously added it at various level. This company now contributes to over 8.6% of my portfolio (Remember that these big ideas are supposed to contribute up to 50% of my portfolio?), with a loss of 11.4%.

Recently the company have also made an acquisition and many people, including me, do not reall have positive vibe about this acquisition.

Nevertheless, this is a company I purchase mainly due to the margin of safety above its net asset value.

In 2 months time, it will announce its full year results and more answers on the use of its cash pile could be reveal in its financial report. Therefore, I will decide then on what to do with this company. In the meantime, if the share price continues to fall much more, I may continue to invest more into this big idea!

Please do your own due diligence before you invest this counter (if you knew what it is).

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! Do sign up to get the latest scorecard of all the SGX counters now! Only about $10 a month!

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