Eat - Sleep - Invest - Exercise

Due to the pandemic, I got the chance, unwillingly, to experience the 14-day quarantine in a hotel. There are still differences in terms of freedom and space as compared to staying at home with constraints to move around freely.

Hotels are badly hit by the pandemic, hence I can understand when they are used as quarantine centre, it is not national service, they are very cautious on cost control with the hope to make small profit from it. For example, no tooth brush and tooth paste provided until you request for it. There are 4 bottle water provided upon check in and any additional bottle will be charged. Reason being tap water is safe to consume.

The meals provided are all right though I expect something more from a 5-star hotel. A friend commented the meals look pathetic and I responded with "that is the price to freedom". It is perfectly ok for me as I am eagerly waiting to be united with my family, after separated by more than 11 months.

So what can I do with the 14-day uninterrupted life in a hotel? ESIE : Eat-Sleep-Invest-Exercise.

As there is zero interruption in a quarantine place, I have the peace of mind to reflect on the past 11 months when I was arranging the funeral for my dad and mum, sold the house that me and parent had been staying, found some precious stuff while clearing the house, learnt more about what my parents had gone through, etc. I have never been so convinced that nothing else matter when a person lost his mobility/health.   

 I have been allocating more to ETFs lately, especially overseas market. Based on my reading about this instrument, it attracts lots of inflow from actively managed Mutual Fund and will become the main stream of stock investment for many investors or public who do not wish to pick stock on their own. the obvious reason is actively managed fund with higher fees do not necessarily beat the return from  passive ETFs. Furthermore, it provides sufficient diversification to my portfolio. Also, the risk of picking a look like sure winner that fall badly (eg Alibaba) is also mitigated through ETF diversification. Investment is made easier with ETF and we need not to study too much of individual stock, hence more time for other activities (well, I still enjoy doing analysis on individual company).  

The more I read about ETFs, the more I am convinced it is a very good instrument for working family to invest via ETF as they may not have the time to study individual stock. Just be careful that not all ETFs are created equal and there are different type of ETFs eg inverse, leveraged which we need to be aware what it means if we choose these ETFs. There are lots of write up or youtube on pros and cons of ETF investing. For me, 2 of the most compelling reasons - need not worry about cash call and individual company not performing. So, not much action required.

Investing is so interesting as there is continuous learning about investment options, market etc, most important of all, about our own character/style/risk appetite/greed and fear tolerance. Another 12 days to go before I get to breathe in fresh air - yes, freedom to do what you enjoy is very precious in life. 

 

Contrarian investing during bad times??

Once a while I will check on the price movement of stocks in my portfolio to see if there is something unusual happening. The price and volume in Daibochi last Friday triggered my curiosity who is buying or selling.

Daibochi has shown good progress in financial performance after Scientex acquired a controlling stake in it and has gone on expansion mode. After the latest quarterly results, the price has spiked but selling pressure were mounting when approaching Rm3. Profit taking is expected when price moved up fast but when I checked on the announcement, I noted a substantial shareholder ( Samarang Asian Prosperity Fund) is off loading slowly. It has bought the stake in 2017 at around 2.10 to 2.20. 

While searching for more info about this fund, it surprised me when I saw the fund keep accumulating shares in Coastal Contract, Latitude and Chinwell, all with substantial shareholdings ( eg it already has position in Coastal few years back and now keep accumulating more). I noted these few companies have something in common. 

1. Profit on downtrend and most recent quarter is loss making or insignificant profit (Latitude is small profit)

2. Net cash position (cash + short term investment more than debts)  

3. Share price at least 50% discount to NTA

Is this contrarian investing strategy?? I am so keen to find out more about this fund- its holdings, past performance so as to evaluate if it has been very successful in this approach and may be I could learn about this approach more. I tried to search online but could not find the answer I am hoping for.

We all know that contrarian investing will bring very impressive return if we are right, but it needs lots of gut to be contrarian. To me, the confidence lies in our knowledge and insights about the company and industry. If you know these companies well, you are in a better position to see if this is an opportunity or just another value trap (big discount to NTA!!). Dont assume the big fellow is always right.

Daily Trading Ideas

I subscribed to some research houses' Market Newsletter, daily report etc with the purpose of getting some ideas what or where to look for good companies.

In a recent report by a local brokerage house which cover regional stocks, I saw an ETF in its Daily Trading Ideas and just out of curiosity, I did some reading about this ETF. Well, its an inverse ETF - which means you make money if the market drop, not the ETF which hold a basket of securities where the ETF will follow the collective price movement of the underlying securities.

Obviously in all the research houses report there is fine print on disclaimer and one should be responsible for his own investment decision. Knowing there are many new investors coming on board during the Covid 19 pandemic, I am sure many are totally new to stock investment. I would think many are totally lost when come to inverse ETF or leveraged ETF. So, they may not be fully aware of the risks they are exposed to if they start trading these ETFs. 

As stock investing and trading are made so easily accessible to all via Apps, one can easily get into some securities which he doesn't even understand. Searching for ideas is so easy and convenient as they are readily available everywhere with the help of internet, but at the same time, we are also exposed to higher risks of getting into something we do not understand. 

Good ideas may turn out to be big trouble if we do not equip ourselves with good knowledge on the securities we are investing.  

     

Some losses are just inevitable

Year 2020 starts as a really tough year for most investors if not all. Of course it also created lots of buying opportunity for those who are not heavily loaded with equities yet. The number of new account opening during the last 2 months shows many are rushing in to take advantage of this once in a decade buying opportunity. 

Unfortunately in my case, the timing could not be worst, not because I suffered paper loss of my investment which is painful, I have also missed an opportunity to buy when there was panic selling. But all that is not important as I have a much bigger loss that is permanent - the loss of both my parent in the last 2 months (no, not due to covid 19). That is the biggest loss to me so far even though I have prepared my self for it few years back.

My only consolation is that I have spent some really memorable moment with them in the last 2 months of their life. This chapter of my life make me appreciate the wisdom of my parent, which I have not paid enough attention before theirs' departure. 

Though most of us know no one is immortal, but I believe not many of us keep reminding ourselves that it may strike us anytime, till something happen that is close to our heart. Yes, the loss of my parent strikes me hard and I am still coping with it and keep reminding myself to accept the reality of life. But it's just too hard especially after spending a good 2 months taking care of them, watching them slowly becoming immobile and letting go of things as hope of getting back to normal life diminishing by the day.  Eventually they felt sad to fully depend on someone to take care of their daily life. All these pictures of moment keep lingering in my mind, for those who have similar experience, I believe you know how it is felt.

But life goes on and I believe for many of us , especially after this pandemic of covid 19, we will appreciate life more than ever. Hope for better days going forward is the driving force, continue to appreciate life even though some losses are just inevitable. The same goes for investment, some loss are just inevitable, but there is always light at the end of tunnel as long as we invest well - buy good companies when they are selling cheap. Happy investing.  

Success of BIMB Restructuring - Minority warrant holders have significant influence??

I am a BIMB warrant holder and keen to know more about the Proposed Restructuring announced recently. 

Firstly, I wanted to evaluate whether my 10 to 15% return within 9 months can materialise?

Secondly, what are the chances I can get even more return eg BIMB offer a more attractive price if the restructuring could not get warrant holders' buy in?

Lastly, if the Scheme of Arrangement fails (not buying back all outstanding warrants), what will happen to warrant price?

  

There is a long list of approval required for the Proposal which include BNM, Ministry of Finance, SC, Bursa, shareholders, warrant holders, High Court and creditors. Yes, it needs warrant holders approval ( If I am not wrong, Scheme of Arrangement under S366 of Companies Act requires no less than 75% approval).

Looking at the warrant holders list as at 31/3/2019, Lembaga Tabung Haji & ASB only have 27.54% & 7.02% respectively. Top 30 warrant holders only hold 59.47% of warrant outstanding, so it is rather scattered and many individuals with significant portion appeared on the Top 30 list. So, in order to get majority (75% if I am not wrong), the offer price must be attractive enough. But the challenge of valuing warrant is complicated ( I am not good at Black Scholes Model), hence, what is the fair price then?

In the Announcement under para 4.2, I noted it mentioned the 5-day VWAP of warrant up to Latest Practicable Date (LPD) as at 15 Nov 2019 is 29 sen but Para 2.2.1, the price is fixed at 26 sen being the 5-day VWAP of warrant upto 10 Dec 2019. That is 11.5% down ( I could be looking at 25 to 28% return within 9 months if it is 29 sen....).

For those who bought at higher than the offer price of 26 sen, my bet is they would not vote in favour of the SOA and rather bet for another 3 years plus hoping the warrant price can go higher instead). Of course, it all depend on ones' opportunity cost holding on to the warrant or take the 26 sen.

That probably also explain why some are even selling it for 23sen now or this portion of warrant are just too insignificant to the sellers' portfolio eg few funds on the list or for those who believe they can recycle the capital for higher return than the 10 to 15% within 9 months and of course, those who don't believe SOA will be approved and price will drop further after that.

Yes, looking at the offer price of 26 sen, this SOA may fail and I would not be able to realise my 10 to 15% return within 9 months. Would I suffer huge loss instead?? As the warrant is currently selling at only 11% premium and there is another 4 years to go, I would take my chance. Furthermore, I am sure BIMB has already considered the likelihood it may not get sufficient warrant holders approval at 26 sen offer price. But what is their Plan B to ensure sufficient approval? Started to buy now to gain more control ? Counter offer at higher price***??

Anyway, this is an allocation of my cash reserve for potentially better return, it is not significant and yet, I take it as I do not want to miss an opportunity that is reasonably certain.

Or we may be able to demand for more by writing to them prior to the meeting....hahaha.

Please do your own evaluation before buying even if you agree with my view.   

*** Final Offer Price under restructuring - 38 sen

Potentially Better yield than FD - would you take it??

I have taken more prudent approach in 2019 in view of the higher uncertainty on US China trade war, Hong Kong protest, anticipated economic slowdown, bull run for more than 10 years in US. I have stayed between 50 to 60% invested through out the year and allocated more towards dividend stocks including S-Reits while maintaining a high cash level.
Yes, there is always opportunity cost in holding cash, especially when there were opportunities to buy good stocks at dirt cheap but I did not act on it. I missed the plantation stocks rebound though I kept an close eye on a few counters. My only consolation, I managed to catch SOP but have cashed out too early.

Moving into 2020, I probably would stay prudent too but will definitely act if opportunities to buy good stocks at dirt cheap arise. So, I noted there is opportunity to buy into BIMB-W** now that will give 10 to 15% return in approximately  9 months later (highly likely, as always, nothing is guaranteed).  That is a much better yield than all the dividend stocks I am currently holding ( yes, there is opportunity cost here as there may be capital gain for my dividend stocks - again, no guarantee it will be capital gain, it could be loss!!).
If I compare with the yield from Fixed Deposit (cash reserve), 10 to 15% return in 9 months is 3 to 5 times more. Of course, there is a potential opportunity cost if market crash and I can allocate the FD to buy good stocks that are selling cheap instead. For me, the highly likely scenario with 10 to 15% return is just too hard to ignore. What about you??


Hope this provide you with an alternative to your FD in bank too. Happy New Year and happy investing.



** Under the Proposed Restructuring of BIMB, all outstanding warrants shall be bought by company at 26 sen. Should the Proposed Restructuring fail and warrants remain listed, the 10 to 15% return will not materialise. Market price then may be higher or lower. Do take note this is warrant, expiring in Dec 2023.

 

Follow Fund Managers a better investment approach??

Lately I heard some said the best strategy in stock investment is follow the big guys - fund managers. Study the stock pick by fund managers and invest in the same stocks as them could be a better strategy. Well I have reservation on the above approach, not only that, we have to exercise extra care when doing so.

It has been almost 2 years when I first wrote about Lafarge.

Lafarge - mispriced?

I was puzzled for a while when the price continued to scale higher even I thought price then was way above its intrinsic value. Not long later, the price plunge (more than 60%)!! The last few days saw some strong rebound as there are rumuors on revival of mega project, to me, it did not change my view on Lafarge as its financial position as well as cashflow looks real bad. If the only reason to buy is because it has dropped a lot, I think it can drop even further when it turns out -- just rumuors. 

Sometimes overvalued or undervalued  stock can continue to be wrongly priced , more so if they are tightly held by institutional investors until some of them started to accumulate/offload, it will then trigger a spinal effect and its true value will emerge.

Of course Lafarge is an easy pick for obvious case of overvaluation due to its poor financial performance and cashflow. 

There are other bluechips that appeared to have been overpriced for a long period of time. Eg Nestle, DutchLady, QL but their business are highly profitable and with sound financials, they remained overpriced for a long long time.. 

I have no question about the sustainability of its business, quality of its management and financials, however, I am just puzzled on its valuation (whether its PE, PB, P/CF or dividend yield, except their ROE is exceptionally high) on what kind of return could we expect from investing in such overvalued and low yield stocks. Well, institutional investors have a different perspective, firstly they have a really long term holding power, secondly, especially in time of volatility, small return is better than negative return and as long as none of them started to offload ( still not yet), everyone is happy with holding on the 2 to 3 % yield  overly priced bluechips. Well, if one of them start to offload when they realised the market is more stable and they could go for higher yield on undervalued stock, it may be too late for us to sell especially most of them are highly illiquid.  

For me, following the fund managers to invest in these bluechips may not be a wise idea when the stock appears to be over valued.