Thursday, December 27, 2018

Big Idea 12

This article contains PORTION of the information from the 4th Scorecard Newsletter written on 27 Nov 2018 for my Moat Scorecard subscribers. Full disclosure was provided for the Moat Scorecard subscribers. 

This new Big Idea was stated in both my previous 3rd and 4th quarter reporting. But it has not been revealed yet. For the last post of 2018, I will be talking about this final Big Idea in my current portfolio.

As I had already sold 2 big ideas previously, I currently have 10 big ideas that is based on my Big Ideas Investing Theory.

Big Idea 12 is a new company in my portfolio since I only purchased it in October this year.

Reasons Why This Counter Qualifies as a "Big Idea"

1. Great Balance Sheet

Big Idea 12 Balance Sheet

If you look at the balance sheet, you will be able to understand that the company has high cash, high current ratio, low leverage and low gearing. This just simply shouts that this is a very good balance sheet.

2. Free Cash Flow Generating

For many companies, profits do not necessary generate into cash flow. But for Big Idea 12, its profits have constantly been able to generate into Free Cash Flow since 2015. This has increased its cash holding from S$136 Million in 2015 to S$203 Million in 3rd Quarter of 2018.

However, it is important to note that since a high amount of the company’s business operation is in China. There are restrictions in bringing the cash out of China. As of Annual Report 2017, over S$139 million of cash are subjected to China control regulations unless it is for normal dividends.

With that, this brings me to the next point...

3. Dividend

Since capital controls in China only allow the company to export these funds out through distribution of normal dividend means, this meant that Big Idea 12 will probably keep paying its dividend on a regular basis.

In my opinion, I have come to realise that dividend or special dividend could be a double edge sword. Too much of it will push the share price up to an unsustainable level.

Since the company is able to generate free cash flow consistently, this should not be too much of a concern. In addition, dividend is another form of return for me in order to reward me for holding on to a good company.

In Short

This is definitely not the full article that I wrote for the Moat Scorecard subscribers. In that article, there are more positive pointers and I also commented on some negativity on Big Idea 12.

From the above reasons, you may see that I purchase this company due to many of its positive financial reasons. Nevertheless, if you come to realise which company it is, you will have also knew about Big Idea 12's competitive edge.

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! 

We have also released the Moat Scorecard with InvestingNote. Do take a look!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Tuesday, December 25, 2018

My 15% Portfolio - End Of 2018 Record

I released my 2017 record on last year Christmas day. So I decide to release my 2018 record today.

It has been a year. But what a year it has been! It was fantastic last year, but it is very bad this year. Basically since December last year till now, it has been a roller-coaster ride.

This is how I feel
As I was reading Simple Investor's review for 2018, it made me feel like "what have I done all these years"! He should have been the front for Fundamental Scorecard!

In my view, he is someone whom is super discipline and thoroughly follows his own method - the Moat Scorecard.

Nevertheless, I have to say I still prefer my current method of diversification through methods.

Without further a do, lets take a look at my current stocks holdings...

Prior to taking a look at the changes in my portfolio, let me emphasize on the following:

1. This portfolio review is calculated from 26 Dec 2017 and the aim is to review the total portfolio gain after 1 year.

2. The counter's initial share prices are their respective share prices on 26 Dec 2017.

3. The gain and loss stated is just a simple calculation of the difference in share prices, ignoring the transaction fees.

4. At times, if stated, the gain could include dividends.

5. This review will include my overseas counters in USA and Hong Kong.

End of 3rd Quarter 2018
Current/End of 2018
Singapore Telecommunications Limited
Singapore Telecommunications Limited
Chuan Hup Holding Limited
Chuan Hup Holding Limited
Japan Food Holding Ltd
Japan Food Holding Ltd
The Trendlines Group Ltd
The Trendlines Group Ltd
Starhill REIT
Starhill REIT
HongKong Land USD
HongKong Land USD
Singhaiyi Group Ltd
Singhaiyi Group Ltd
The Hour Glass Limited
The Hour Glass Limited
Powermatic Data Systems Limited
Powermatic Data Systems Limited
APAC Realty Limited
APAC Realty Limited
Tiong Seng Holdings Ltd
Tiong Seng Holdings Ltd
New Big Idea (Yet to Reveal)!
New Big Idea (Yet to Reveal)!
The Walt Disney Company (USA Counter)
The Walt Disney Company (USA Counter)
Quarterhill Inc. (USA Counter)
Quarterhill Inc. (USA Counter)
Facebook, Inc. (USA Counter)
Facebook, Inc. (USA Counter)
Alibaba Group Holding Limited (USA Counter)
Alibaba Group Holding Limited (USA Counter)

Additional: A.Plus Group Holdings Limited (HK Counter)

Additional: Norbord Inc. (USA Counter)


Before I continue, I will just reveal my overall portfolio performance is negative 11.16%! (Now you know how I feel after reading Simple Investors Review).

The main difference during this quarter and last few quarters are that there are lesser changes now in my portfolio. With 2 addition overseas companies, I have about 18 companies in my portfolio. My Big Ideas Investing Theory, which consist of only Singapore companies, have resulted in minimum changes within my portfolio as it contributes about 65% of my overall portfolio.

My Plan for 2019

1. Continue my Big Ideas Investing Theory for the Singapore Companies and do not allow it to fall below 60% of my portfolio. There should be less than 10 companies within the Big Ideas Investing Theory.

2. I intend to expand the total companies in my overall portfolio to a maximum of 20 companies. But the new companies should consist of only overseas companies. The reason is due to the following post. After backtesting my theories for the overseas market, I decided that I want to get MORE involved in the overseas market especially 2019 when all indexes have came down. But despite investing in the US and HK market for about 1 year, I still consist myself a newbie. Thus, I want to diversify more in terms of the number of companies for about 20% to 25% of my overall portfolio.

3. Think thrice before investing, think thrice before selling. This is a reminder to myself and do not make a rash decision.

4. Must have an intrinsic value. This is another reminder to myself. Recently, I made a purchase on A.Plus Group Holdings Limited and the price flew after a week of holding! But at that time, I do not have any fair value of the company so I was very confused of whether what I should do. Luckily, I held on to it and the price is at HK$0.810 as of today.

In Short

Although I really envy Simple Investors' returns, but I also understand my own way of investing. As per my returns post, I do understand that my track records will only appear after a longer holding period of more than 2 years.

After being an investor for so long and already having my own investment method, I do still believe in my own way of investing. At the end of the day, invest in companies that (1) produce free cash flow consistently, (2) owns little debt or even few liabilities and (3) have significant margin of safety.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! 

We have also released the Moat Scorecard with InvestingNote. Do take a look!


Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote

Saturday, December 22, 2018

Who Let The Fed Out?

I woke up this morning to realized that the US market has fallen for 3 consecutive days.

I seriously felt fine since I anticipate the drop in a post stated in November.

But this time round, it hit me quite hard because I was going to do my review for year 2018 soon. Since my portfolio has consist of some US counters, my paper losses will be more huge.

With that out of the way, I guess I felt really great moving into 2019. Whenever I look ahead, I felt kinda of excited and believe opportunities will arise especially for fundamental investors like me.

For those that are still in the dark, I felt it is time to summarize what had happened in 2018:

1. Since Fed hired Jerome Powell as the Chair, he has been on track to increasing interest rates.

2. As interest rate increases, fixed deposit interest rate becomes higher. Investors started to move their funds into safer haven with some many crisis calls. Less traders were in the market. Banks also increased their fixed deposit interest rate, such as CIMB giving 1.9% interest rate for fixed deposit.

3. Furthermore, Singapore Government also continued to increase the number of ways to save via Singapore Saving Bonds. Over $3.7 Billion has went out of the market and into Singapore saving bonds.

4. On the other hand, interest rate increases also caused companies and individuals to have a harder time in borrowing. Debt becomes more expensive and many companies started finding alternatives to finance debt.

5. For many individuals having floating interest rate on their existing mortgage, they also find it hard to even make monthly instalment payment. There are articles with headlines such as "High-end auctions on the rise in Singapore" and "One in four properties for auction in January to October is a posh asset" in the news recently that amplify the seriousness of the situation.

Basically, interest rate increases cause liquidity to exit the market. As safe haven yield becomes higher, the market starts to cool down and companies also start to slow down.

All these are happening as we see trade tensions around the world happening - US-China Trade War/Technology War and even our every own Singapore-Malaysia Ties.

Lets' also not forget that quantitative easing around the world is stopping.

In Short

If you are worried about everything that is happening around the world, may I suggest you re-read what I wrote previously:

Steps To Take In A Market Correction
More Thoughts From This Market Correction

I shall end of this post with this quote:

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! 

We have also released the Moat Scorecard with InvestingNote. Do take a look!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Sunday, December 9, 2018

Ultimate Scorecard Will Have A Revamp!

This follows my previous post on back-testing.

Ever since I started back-testing and read this article, I kept thinking about how I could further improve Ultimate Scorecard.

Some of the improvements I feel that Ultimate Scorecard should achieve:
- Too many choices may not be able to give the users the best choices
- Different combination of criteria may not result in the best choices

Furthermore, for such a year like 2018, the probability of choosing a company that will make a gain, after keeping for at least 4 months, has dropped very low to below 50%.

In addition, I believe the timeline to keep the companies has rise from 4 months to more than 1 year.

Imagine you bought the company on Dec 2017, there is a high probability you are still "out of money" after keeping for almost 1 year.

So how do I intend improve Ultimate Scorecard?

Before I proceed, it is important to note that I will keep Ultimate Scorecard "as it is". This is because other than providing the value score, Ultimate Scorecard breakdowns the company into different areas as stated in this post. Thus, it will also highlights the area which the company is lacking.

The first improvement will be call "The Top 5 Criteria" test.

This test reduces the number of Criteria to only 5 different ones. This test will eventually pick companies that are able to produce free cash flow constantly with a very low gearing ratio, that are undervalued at that moment. Dividend not taken into account.

A back test is done to look at the probability of choosing the right company rather the total gain. 

Do note that there are 2 different versions to "The Top 5 Criteria" test.

HK Market

JAPAN Market

SG Market

US Market

As you see from the picture, do note the following:
1. These 2 tests significantly limit the number of companies that pass.
2. Although years 2008, 2009 and 2010 are taken out, but some years are still missing from the pictures. This meant that there are years that no company will pass the test!
3. Holding period is deem to be at least 1 year.
4. The possibility of choosing a company that pass the test and make a gain after a 1 year holding period range from 0% to 100% for any particular year (This sound super stupid but it is important to note this!)
5. The "Top 5 Criteria" test only works for SG Market and Japan Market.
6. For SG Market, the possibility of choosing a company that pass the test and make a gain after a 1 year, and keeping to this strategy for a period of over 7 years, is significantly high at 73% to 80%!
7. For Japan Market, the possibility of choosing a company that pass the test and make a gain after a 1 year, and keeping to this strategy for a period of over 7 years, is significantly high at 86% to 100%!
8. The amazing thing is the Top 5 Criteria Test Version 1 achieved a 100% for the Japan Market in choosing a company that will pass the test and make a gain after a 1 year!

The second improvement is TUB Score, which I mention in the previous post.

Do note that there are also 2 different versions to "TUB Score" test. 

HK Market

JAPAN Market

SG Market

US Market
As you see from the picture, do note the following:
1. This test will be used for Hongkong, Japan, Singapore and USA Market. 
2. TUB Score Version 1 allows more companies to pass than TUB Score Version 2.
3. Although years 2008, 2009 and 2010 are taken out, but some years have no company that pass the test!
4. Holding period is deem to be at least 1 year.
5. The possibility of choosing a company that pass the test and make a gain after a 1 year holding period range from 0% to 100% for any particular year.
6. TUB Score Version 2 does not work for US Markets and HK Markets.
7. Excluding the above, the possibility of choosing a company that pass the test and make a gain after a 1 year, and keeping to this strategy for a period of over 7 years, range from 57.65% to 89.47%!
8. TUB Score works especially well for Japan Market ~ over 70% for both version.

In Short

With these improvements, the ultimate scorecard will eventually have a few tests:
- The Value Stock Scorecard
- The Estimation Valuation
- The Top 5 Criteria Test Version 1 *New and Only for SG and Japan Markets
- The Top 5 Criteria Test Version 2 *New and Only for SG and Japan Markets
- TUB Score Version 1 *New and for SG, US, Japan, HK Markets
- TUB Score Version 2 *New and for SG and Japan Markets

Thus, just imagine if a company passes all the test, it will definitely shouts "BUY ME!". 

Eventually, I believe a good scorecard provide only the best choices for its users, especially those "In the face" choices!

But at the end of the day, I must emphasize that any company that passes the scorecard must still go through additional due diligence by the user, such as understanding the business and reading of annual report.

This upgrade will be in Ultimate Scorecard next year!

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! 

We have also released the Moat Scorecard with InvestingNote. Do take a look!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.

Tuesday, December 4, 2018

10 Years Of Back-testing on Different Investing Strategies

The whole of last week I have been back-testing my fundamental scorecard theories.

This exercise allows me to review my scorecard and give me more confidence in my scorecard theories. This also give me additional confidence to address my subscribers and readers about the fundamental scorecard theories.

I have broken down the scorecard theories into the following:
  • Easiest to Pass Ultimate Scorecard Criteria Strategy
  • Cash Strategy
  • Value Investing Strategy
  • Moat Strategy
  • Growth Strategy

Do note that this back-testing is based on at least 1 year of holding period.

These are the findings of the back-testing exercise:

1. Regardless of which strategy you choose, your portfolio will reflect a loss in 2008, and a huge gain 2009 and then a slight gain in 2010. Furthermore, this will be the same regardless of where you invest (Singapore, Hong Kong, Japan or USA). The interesting perspective is that the strategy with the smallest loss in 2008 is Value Investing Strategy.

2. With the above findings, years 2008, 2009 and 2010 will be taken out as they seem to be outliers. Only years 2011 till 2018 are taken into accounts for the pointers below.

3. Scorecard theories works for Singapore market. The lousiest strategy will still at least register at 6% gain per year. It works especially well for cash and value investing strategy, registering at least 10% of gain per year. For Cash Strategy, it is also noted that it will take 2 years to make a gain.

4. For Hong Kong market, it mainly works for Cash, Moat and Growth Strategy with a over 10% gain per year. But it does not work for Easiest to Pass Ultimate Scorecard Criteria and Value Investing Strategy.

5. As for Japan market, Easiest to Pass Ultimate Scorecard Criteria Strategy does not work for them. But everything else create at least a 20% gain. This is a very interesting perspective. We all knew this is probably due to many companies in Japan has been undervalued for the longest time. This signal me that it is time to take a look into Japan companies.

6. Sadly, all strategies except Cash Strategy, does not work for US market. Many people told me US market is a different creature and this probably explains why. A further understanding is that for US market, it seems that it will be hard to make a reasonable gain if we do not consider companies taking on leverage. I will take note of this in future when assessing US companies.

7. For each strategy, it is important to note that there are companies making losses as well as making gains each year. I also realize the lesser criteria I inputted, the better the gains. This is because there are more choices. This is bad in a certain way because you may end up picking the wrong company despite a good strategy. Therefore, fundamental scorecard theories may restrict choices, but I guess it is for the better as it tries to allow the user to choose the best companies.

In Short

Regardless of the amount of back-testing that was done this week and the indication of the gains I could achieve, I will also like to express that there are limitations in all back-testing. Back-testing is mainly based on an ideal situation that the investor will act in a certain way however the market changes. However, for the average investors, this will not happen.

As investors, we are always affected by our emotions and experience. For example, some of us believe a major crisis will arrive soon and has went 100% cash. For me, I do not like leverage and avoid high leverage companies. This is based on experience and each of our investing theories.

The most important factor is that we stick to our investing strategies. In time, you will be able to achieve good returns.

As per Simple Investor once said, it is better to be “roughly correct than exactly wrong”.

Finally, I had also created a new scoring system which I deem as TUB Score. It is still under testing and will probably be revealed in due time.

If you are interested to know more about The Ultimate Scorecard or Full Analysis, do visit the Fundamental Scorecard website for more information! 

We have also released the Moat Scorecard with InvestingNote. Do take a look!

Oh... and do remember, please like our Facebook page (T.U.B Investing) and follow me on InvestingNote.