Saturday, December 30, 2017

What's Up For T.U.B Investing 2018?

As 2017 come to a close, what can readers of T.U.B Investing look forward to in 2018?

1. Stretch Target of 30% Gain for My Portfolio

In my last post, I stated that I have my overall target for 2018 is 15% target gain. But after a few days, I decide to give myself a challenge. I decided to have a stretch target of an overall gain of 30% in 2018. HUAT Ar!

2. "Ask Us Anything" Meet and Greet Session

While Youtubers have meet and greet, I was thinking if it was possible for financial bloggers to do the same and "why will readers want to meet us?". Nevertheless, Simple Investor and I have decided that in 2018, we will be doing "Ask Us Anything" Meet and Greet Sessions throughout 2018.

Basically we will just stay at a open location (maybe a food court), and if anyone who is interested to ask us anything, do come and find us!

3. A Very Special Workshop

In 2018, Simple Investor and I will also be conducting a very special workshop. It will not be a "sit there and listen" kind of seminar. It will be a very interactive and full of discussion kind of workshop.

This workshop will be in March 2018. If you are interested, do look out for it.

4. Understand More About Investing Fundamentally

In 2018, I hope more people will look towards investing more fundamentally, especially when the market is at a high. Be cautious when you place your purchase!

Eventually I also hope more people will sign up for Fundamental Scorecard Website. It is a website to start to understand about investing fundamentally.

That's all!

Lets' look forward to a prosperous 2018!

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!

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

Monday, December 25, 2017

My 10% Portfolio - End Of 2017 Record

Hi Everyone,

It is the time of the year again, where everyone presents their report card. Even though 2017 has been a very bullish year, but my results has not been as good as many of you out there. Overall my portfolio made 15.62% gain (Inclusive of dividends) only. Nevertheless, I am already contented as I had already hit my initial target of 10% gain. Furthermore, in the last portfolio update post, I was hoping for an overall gain of 15% and I had achieved it.

Now let's take a good to look at the changes in my portfolio.

Once again, let me emphasize on the following:

1. This portfolio review is calculated from the start of the year and the aim is to review the total portfolio gain after 1 year.

2. Some of the counter's initial share prices are their respective share prices at the start of this year (Especially those counters in this post).

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 be including dividends.


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

These are the updates to my 10% Portfolio:

Current/End of 2017
Singapore Telecommunications Limited
Singapore Telecommunications Limited
ComfortDelGro Corporation Limited
ComfortDelGro Corporation Limited
Bukit Sembawang Estates Ltd
Sold All at 30% Gain
M1 Limited
Sold All at 10% Loss
Chuan Hup Holding Limited
Chuan Hup Holding Limited
Hock Lian Seng Holding Ltd
Sold All at 20% Gain
ST Engineering Ltd
ST Engineering Ltd
Ellipsiz Ltd
Sold All at 100% Gain
PNE Industries Limited
Sold All at 30% Gain
Frasers Centrepoint Limited
Sold All at 30% Gain
Captii Limited
Captii Limited
Ocean Sky International Ltd
Sold All at 40% Gain (Based on Average Price)
Tiong Seng Holding Ltd
Sold All at 70% Gain
AGV Group Ltd
Sold All at 10% Loss
NikkoAM-StraitsTrading Asia ex Japan REIT ETF
NikkoAM-StraitsTrading Asia ex Japan REIT ETF
Japan Food Holding Ltd
Japan Food Holding Ltd
Singhaiyi Group Ltd
Sold All at 5% Loss
Yongnam Holdings Limited
Sold All at 15% Gain
Netlink Trust
Netlink Trust
Secura Group Ltd
Sold All at 30% Loss
Miyoshi Limited
Sold All at 30% Gain
The Trendlines Group Ltd
The Trendlines Group Ltd
The Walt Disney Company (USA Counter)
The Walt Disney Company (USA Counter)
VASCO Data Security International, Inc. (USA Counter)
VASCO Data Security International, Inc. (USA Counter)
Textron (USA Counter)
Textron (USA Counter)
Sitoy Group Holdings Ltd (HK Counter)
Sitoy Group Holdings Ltd (HK Counter)
Alco Holdings Ltd (HK Counter)
Sold All at 20% Loss


Additional: Colex Holding Ltd

Additional: TSH Holding Ltd (Only got 1 lot, if I sell now, it is lower than my commission!)

Additional: Far East Orchard Ltd (Yeah, bought again at $1.465)

Additional: Starhill REIT

Additional: ESR-REIT

Additional: HongKong Land USD

Additional: Teckwah Industrial Ltd

Additional: GRP Ltd

Additional: Quarterhill Inc. (USA Counter)

Additional: Win Hanverby Holdings Ltd (HK Counter)

In addition to the above counters, I also bought and sold Sabana REIT within the last quarter and made a 10% loss.

Do note that I restart my portfolio at the start of every year. One of the reason I do this is due to the Rule of 72. This meant that if I attain 10% for 7.2 years, I will be able to double my initial capital.

Anyway since I intend to restart my portfolio for 2018, I will ask myself if I will buy this counter at the current price. If I do not want to purchase the counter at the current price, I will sell all my holdings in the counter. Thus, that is why I sold many counters in the last quarter.

On a deeper thought, the main reasons on why my portfolio gain is not as great as others:

1. Diversify too much - I have been emphasizing that I diversify too much. I believe this affected my gains. For 2018, I will try to keep within 25 counters for the whole portfolio (Including overseas counters) and put in a bigger investment into counters I believe will thrive.

2. Share Price of My Biggest Holdings - My biggest holdings are in Singtel and ComfortDelGro. For Singtel, my gains dropped significantly in the last 2 weeks after the counter ex-dividend. As for ComfortDelGro, the threat from Uber and Grab has cause the price to drop significantly too. Thus, this resulted in a drop in my gains.

Another portion I like to review are the counters I purchased due to my scorecard method. After my launch of the Fundamental Scorecard website, I went on to purchase and also add on a few counters due to The Ultimate Scorecard/Full Analysis recommendation.

These counters are bought mainly due to the recommendation from Fundamental Scorecard website:

- Counter 1 - Bought at $0.635 vs Current share price of $0.730

- Counter 2 - Bought at $0.066 vs Current share price of $0.075

- Counter 3 - Bought at $0.275 vs Current share price of $0.290

- Counter 4 - Bought at $0.450 vs Current share price of $0.460

- Counter 5 - Bought at $0.600 vs Current share price of $0.560

- Counter 6 - Bought at $0.410 vs Current share price of $0.420

- Counter 7 - Bought at $0.425 vs Current share price of $0.440

- Counter 8 - Bought at $0.420 vs Current share price of $0.410

- Counter 9 - Bought at $7.360 vs Current share price of $7.020

- Counter 10 - Bought at $0.465 vs Current share price of $0.475

*Moving forward, they will not be named. But you can subscribe to the Fundamental Scorecard Website to know more!

So far, only 3 of the counters have fallen slightly (withn 10%). But the reminder of them had made gains. In 2018, I should be focusing more on the counters that made the list on Fundamental Scorecard website.

In Short

For 2018, my strategy is protection of capital with concentration of investment in confident targets. My overall target for 2018 is to achieved an overall 15% gain. I am already looking forward to next year!

Finally I just like to wish all the readers Merry Christmas and A Happy New Year! Huat Ar!

Please do your own due diligence before you invest in any of the stocks in my portfolio.

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!

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

Saturday, December 23, 2017

Money Supply And Interest Rate

I just like to remind everyone that money supply is constant unless the governments start printing again.

However, even thought it is constant, it is flowing.

When Fed stop printing, but Euro and Japan continued to print money. It continued to push the economy to the current heights as the money flow into each individual companies' earning.

This will also explain that despite the share prices at a high, the PE ratio of many companies (even STI) has yet to hit a significant high figure yet.

But do note, as interest rate increases, money supply flowing within the economy will reduce. This is because people will save more, buy more treasuries bonds, etc.
Do remember Singapore Government also came out with the Singapore Saving Bonds!

Do also remember the Fed may continue to increase the interest rate 3 times in 2018. In addition, after Fed increases interest rate, China also increases interest rate.

Remember China has a very leveraged country in 2017, as the government has been successful in reducing leverage.

Therefore, with the top 2 economies increasing the interest rate, investors should tread carefully in 2018.

I like to emphasize that I am not writing this to spread fear. Even for me, I will still stay vested. I just like investors to invest more cautiously in 2018.

One way to invest is to invest in companies making profit and not heavily leveraged.

Another way is to invest in companies that are growing fast with a sustainable business model. Its net profit margin should be huge and its business should not be a one-time wonder. This could be slightly hard as not everyone can understand and analyse the business correctly.

The final way is one where I had promoted constantly. It is to use the scorecard method. It allows investors to invest in counters that could be deem undervalued with cash-producing businesses, and also not heavily leverage!

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

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

Watch out for the next post on the final update of my portfolio!

Tuesday, December 19, 2017

To Buy or Not To Buy

Before I start, I must apologise to those that had ask me about cryptocurrency previously. If I told you I am not going to invest in cryptocurrency, I was very sure about my decision then.

Right now, I am not so sure. 

Do note that I have yet to purchase any cryptocurrency at this point as I try to setup my Coinbase account, which could take a while. If by the time I complete my setup and cryptocurrency has gone over the roof, then I will give up on it.

By now, you still do not know about cryptocurrency, bitcoin or blockchain. I suggest you can google, there will be so many articles out there for you to read and understand.

Some of the websites I recommend is:

1. Probutterfly Blog
2. Got Money, Got Honey!
3. bgting post on InvestingNote

Prior to explaining about the reasons that change my thoughts of cryptocurrency, I will like to talk about Cryptocurrency Mining and the Semiconductor Industry (Information that was not explained thoroughly).

Picture taken from Blockgeeks.com
If you still do not understand cryptocurrency mining, you can read this and this article. Basically, in order to be a miner for a particular cryptocurrency, you will need to be a bookkeeper for that cryptocurrency. As a miner, once you verified a transaction and found the special "key", you will be rewarded with a certain amount of that particular cryptocurrency. It is like a mission - accept the quest and race to find the reward!

In order to win the race, a "miner" need VERY GOOD chipsets in its computer/systems to be faster than others. Just look at this farm in Russia and this in China! The requirement of hardware is huge!

Throughout my research of blockchain technologies, many articles recommend readers to buy AMD, Nvdia and Intel. This is because the high profitability of mining cryptocurrency in the initial stages led to the high demand for good chipsets. This affected the whole of the semiconductor industry positively. This is also shown in the companies that are within the semiconductor industry, such as UMS, Ellipsiz and Mico-Mechanics, which had very good earnings over the last few years. So here you go, for those that are still wondering why these companies did so well over the last few years!

In addition, if you think you missed out on the bitcoin craze, don't fret! Because if you have invested in these semiconductor/semiconductor-related firms, you will have made gains as well!

So after knowing these information, why did I change my mind about cryptocurrency?

1. More People Starting To Be More Vocal about not investing in Cryptocurrency

At times, I tried to be contrarian against the norm in order to make more gains than others. Thus, recently, I felt there are more and more negative voices against cryptocurrency. It makes me wonder if there are more people on the sideline than my initial feel. If these people have yet to join in this craze, does it meant that there are still room to grow?

2. The Greater Fool Theory

The person that invested because he did not know anything, or the person that did not invest because he did not know anything. Who is the greater fool here?

I personally felt that if you do not know anything, you can always go and researched about it (I used almost a week to try to research about it). This is because cryptocurrency maybe gone one day, but the blockchain technology seem to be here to stay.

3. Importance of Blockchain Technology

I had a conversation with a friend previously and he said cryptocurrency is a proxy to its blockchain technology. I had researched enough to understand blockchain technology is here to stay. Therefore, the only way to invest in a blockchain technology seems to be buying into its cryptocurrency.

4. Increasing In Usage/Acceptance

Even through China banned cryptocurrency exchanges and ICOs, there are still many other increasing signs of usage and acceptance.

Bloomberg has recently added Ethereum, Litecoin and Ripple to its terminal. This japan company is intending to pay part of its employees salary with bitcoin. Japan has also accepted bitcoin as a legal tender. PWC is accepting bitcoin as payments. The establishment of bitcoin futures and bitcoin ETF also indication of wider acceptance of cryptocurrency. Finally, closer to home, MAS has also yet to reject the idea of cryptocurrency.

5. Cashless Society = Cryptocurrency?

Since we are moving towards a cashless society, doesn't that meant the possibility of using cryptocurrency to pay items in the future is much higher?

6. Uses of Cryptocurrency 

Do note that I am not too sure about this point. If I am wrong, do correct me in the comments below!

Since I concluded that blockchain technology is here to stay, it is important to note that blockchain technology will require miners continue to operate on the blockchain to process each transaction.

Miners will then continue to be rewarded in cryptocurrency. Even if the cryptocurrency runs out, they can continue to each transaction fees (But if this occurs, will it be cheaper for corporates to continue to engage in the use of the blockchain technology? Hmm...).

Furthermore, to facilitate a transaction within a blockchain, it seems that there is a requirement for the transaction to be done in the particular cryptocurrency of that blockchain.

Therefore, it seems that cryptocurrency do have a use mainly because of blockchain technology.

But I am still hesitant due to the risks involved...

1. Misunderstanding of Cryptocurrency

Many people do not understand the uses of cryptocurrency and are only "gambling" on cryptocurrency, by keeping it in hope that the price will go up further in the future. This is possible because some of them do have a limited supply.

However, if cryptocurrency were suddenly widely recognised and used, this could drastically cause the price to fall significantly!

2. Government Regulation

In my opinion, I believe this is the biggest risk to cryptocurrency, but the implementation will be hard and it may not happen within the short term!

One of the reasons I believe is that an arbitrage opportunity will arise if a single country puts a regulation onto the usage of a cryptocurrency.

For example, Country "A" puts a fixed "price-tag" on a certain cryptocurrency and the other countries did not follow suit, an investor could go to Country "A" to buy the cryptocurrency and sell it elsewhere to earn a spread!

For the regulation to have a huge impact, I believe it must come from a united organisation with all the major countries being involved in. Nevertheless, I do not believe this can happen in the short term.

3. Hackers

Recently, there are article stating that North Korean hackers been stealing bitcoins. Furthermore, there have been numerous past cases that cryptocurrency exchanges have been hacked and many bitcoins were stolen or lost.

This is, in my view, the current biggest risk to investors in the cryptocurrency space.

4. Possibility of A Crash Due To Cashing Out

If the current miners tried to sell all their cryptocurrency, there will be a significant downward pressure on the price of the cryptocurrency. If everyone started selling and you are caught off-guard, the liquidity of the cryptocurrency will run out and you maybe stuck with a worthless cryptocurrency unit.

This is akin to investors still holding onto Noble shares.

5. Unable To Scale Up The Blockchain Platform

I have read some articles, like this and this, stating that some of the blockchain platform are unable to scale up further. In that case, if the blockchain platform is unable to scale up, will it "disappear" one day? If the blockchain technology disappear, then the cryptocurrency will be gone too.

There is another possibility of having numerous "private blockchain" as well. Then will "miners" end up being employed just as employees and cryptocurrency disappearing?

In Short
Picture taken from Cardschat.com
I have to admit I still do not know much about cryptocurrency and blockchain. Every new article is like a new reason to buy or not to buy. Every opinion is locked into my mind like a criteria.

But picture say a lot of words. If I ever had the possibility to own some cryptocurrency (If my verification can be completed soon...zzz...), I will be treating my purchase of the cryptocurrency like "gambling". It should only consist a small part of my portfolio, most probably only around 1%.

In addition, do note that I only mention more about cryptocurrency rather than bitcoin in this summary. This is because as a value investor, I try not to buy anything that is just way too expansive.

Nevertheless, I felt that my thoughts are much more organised after writing this post and more questions in my head were answered as I found the answers (Although that could led to more questions...).

Through the writing of this article, I also found other ways to continue to invest in this craze - Companies engaging in blockchain technology and Semiconductor-related companies.

Anyway, 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 the SGX counters now!

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

Wednesday, December 13, 2017

Guest Post On "The Age of Central Banking"

I have never met a quant investor before, or I may have but they never told me they were. But this investor I met recently categorized himself as a quant investor. He is no other than the author of this guest post, Shi Ern.

He was previously working as an investment analyst for Aggregate Asset Management. He has since left his job and is working towards starting his own fund. Maybe it was an ambitious target, but I believe he can do it with his drive and knowledge.

During the whole chit chat session, I am very intrigued by how he thinks and how it differs from us (Simple Investor and I). That night, it was really an interesting exchange of ideas about the economy, the bulls and bears, what might occur in 2018 as well as some many different topics. I could simply write a book based on our whole conversation.

It makes me wonder what will happen if all the bloggers sit down and just chit chat - You can just imagine the flow of ideas and knowledge.

Anyway, that night, I asked him to write a guest post for my blog and he sent me this article he wrote in Sep 2017.

I will say this is the kind of article that will remind you - How our World feed a Bear till it became a Bull - and to be cautious of what lies ahead.

The Age of Central Banking 

by Lau Shi Ern, 2017-09-14

Original article at: https://www.patreon.com/posts/age-of-central-14372675

From 2008 to 2017, many central banks expanded their balance sheets by printing huge amounts of money. This money was used to purchase government bonds to drive down interest rates. As interest rates for safe government bonds fall to record lows, many investors were forced to buy riskier assets like junk bonds, stocks and property to get better investment returns.

However, just like Newton's third law, every action in the economy will have a reaction. Initially, the bond buying program by central banks were going well up to 2012 - 2013. Then, suddenly things changed. First, gold prices started to drop very significantly after a very strong run as inflation did not materialised. Next, in 2014, oil prices dropped very significantly. In 2015-2016, there was a small stock market shock in the U.S. When central banks print money, there is a marginal cost and marginal benefit to the economy. Ideally, the optimal point is to stop printing money when marginal cost equals marginal benefit. Most central banks use inflation to measure whether they are overdoing it. When inflation is high, central banks will stop money printing and raise interest rates. However, in the U.S. and Europe high inflation did not materialised. This signals that we are entering a dangerous age of central banking because the models that central banks use to make decisions are likely not accurate.

So what really happened? What was broken?

How Central Banks Affect Fundamentals

One major theory that I have been considering relates to destructive competition. The main difference between normal competition and destructive competition is that in normal competition, competitors will stop competing if they incur losses for more than 3 years. In destructive competition, cheap loans allow loss making competitors to survive and start price wars to drag everyone down. This is based on observations of real life corporate behaviour and investor reactions to low interest rates.

When interest rates are low, many corporations borrowed money especially in the technology sector, to compete in price. For example, when interest rate are low, many shale oil company issued junk bonds to finance their exploration efforts. This resulted in a strong oversupply in the oil market and when prices drop all players suffered. Since shale oil companies have a lower cost of production than offshore oil companies, many offshore oil companies got into financial trouble. The latest casualty in 2017 is Seadrill.

Likewise, due to low interest rates, many pension funds decided to allocate more of their money into alternative assets like venture capital and private equity to get more returns. This resulted in a sea of funding for new technology start-ups. Many start-ups with no profits like Uber managed to get funding to grow their business to a large scale. Taxi owners who paid for expensive taxi medallions in New York City suffered as they struggle to pay of the debt they incurred to buy the medallions.

Another example will be how Amazon borrows money to acquire Whole Foods and start price wars with offline retailers. Amazon’s strategy has affected the retailing sector very significantly and many retailers are closing down. Similarly, Netflix borrowed money to fund their cash flow investment into new content. This had dealt a great blow to traditional cable television companies.

In China, things are no different. Loans fuelled an over investment in steel factories. As such, they overproduce steel products which cause prices to drop very significantly. In their desperation, these steel factories decide to export their steel below cost overseas and the world wide steel market suffered very significant losses. Some countries decided to enact tariffs to prevent dumping of cheap steel into their country.

Some think that the banking sector is the greatest beneficiary of money printing. While US banks may have benefited by being able to lower leverage, European banks still have high leverage. Low interest rates results in lower net interest margins for banks. Loan defaults from destructive competition further reduce profits. The European banks won't go burst, neither could they generate enough profits to reduce leverage on their balance sheet fast enough.

The consumer and household suffered very greatly in this age of central banks. Low savings interest
rates hurt consumers who save and inflation reduces the value of their savings. Destructive competition results in a loss of jobs and low growth in wages. When wages remain the same for last 8 years, while housing prices go up, many consumers took out loans to buy houses. Low wages and loan repayments significantly reduce the spending power of consumers. As such, many consumer goods companies witness low growth for the last few years as the consumer is squeezed. For non-essential goods like entertainment, consumers have been substituting expensive goods for cheaper options. This drive for cheaper options is partly the reason why Internet companies are doing well.

How New Fundamentals Affect Investment Decisions

As a result of the above, the consumer had chosen to invest in Exchange Traded Funds or property markets. This is because the consumer believes that ETFs and property can provide higher returns than saving rates. This belief is further strengthened by historical trends that ETFs and property have higher returns than the current saving rates. At the same time, encouragement from the financial community that ETFs are the safest way to invest in the stock market solidify the position of ETFs as a must have investment in many consumer’s investment portfolio. This irrational rush caused stock market indices to run up very high despite already high valuations.

Corporations are no better. Low interest rates encourage corporations to do share buy backs. Share buybacks essentially delays the current year’s dividends to increase future dividends and increase ownership. Thus, there is a trade of between current dividends versus share buy backs. When interest rates are on a strong down trend, future dividends in the next one or two years do not decrease much from interest rate discounting but increase more from increase ownership. Furthermore, share buybacks will have a market impact on share prices and will push share prices higher. As such, low interest rates incentivise companies to buy back shares. Many companies aggressively bought back shares during the last 5 years. Some of these share buy backs are funded by debt. Imagine what happens if future interest rates embark on an increasing trend. In that case, the current share buyback spree will stop and stock prices will lose support from share buybacks.

As consumers pile into ETFs, fund managers started to lose out to their benchmarks. This encourage high net worth investors to invest more into ETFs because they are convinced that fund managers are unable to outperform benchmarks. Desperate fund managers start to buy top performers in ETFs which are generally technology companies. Despite that, the bubble in the stock market is small compared to the bubble in the bond market and the bubble in certain property markets like Canada, Australia and Hong Kong. Capital seeks returns. When desperate, capital will pile into asset bubbles to seek return from other capital holders. When desperate, capital will leverage up multiple times to amplify small return into a big return.

Leverage is another way capital take advantage of other capital holders to gain more returns in the short term. The end game is a zero sum game because people that sell takes wealth from people that hold the assets when bubbles burst. Before bubbles burst, buyers look like geniuses.

What now?

In early 2017, the U.S. central bank, the Fed, had started to raise interest rates 3 times in light of higher inflation. This started a race among global central banks to tighten credit markets around the world. China quickly entered the race by imposing capital restrictions on foreign acquisitions and deleveraging the corporate sector. While the Fed had stop increasing rates in the second half of 2017, the damage in the economy is done by the previous three rate increases. More defaults will likely appear just like the recent bankruptcy of Toy R' Us. Expect slower growth or even negative growth. Low inflation is a sign that price wars are rampant in the economy.

The key to identifying the turning point in the stock market may be to observe loan defaults. I suspect more and more industries will face losses as destructive competition is amp up to the next level. Subsequently, more loan defaults will happen when players in the industry are unable to service their debts due to losses. The last time this happened was during year 2015 to 2016 when many Oil & Gas companies finally defaulted after few years of trying to survive low oil prices. What happened to the Oil & Gas companies will likely be repeated across other industries. As such, many industries will suffer long and protracted survival periods before defaults hit hard when people realise that the price war will never end.

As loan defaults spread slowly across the different sectors, the stock market may drop slowly first as investors slowly accumulate losses from junk bonds and liquidate their shares slowly. But the defaults in each sector will not be completed as some companies will be saved by excess liquidity in the financial system. However, when sufficient liquidity has been withdrawn from the system due to higher interest rates, all the companies that were able to delay defaulting, will suddenly be unable delay their defaults anymore. In one go, these companies in different sectors will default together which will cause a dry up in liquidity. A shortage of liquidity will result in a sudden steep drop in global share prices.

After the stock market crashes and many companies go burst, it is expected that oversupply in many industries will be pull out of the market. This will allow many industry players to set prices back to normal levels because the price war has ended. A simultaneous increase in price levels due to multiple price wars ending will likely cause strong inflation. This may force central banks to raise interest rates despite strong defaults. When that time arrives, I will write a new article here to analyse different possible scenarios.

This is not a sponsored post, but if anyone of you is interested in contacting him (especially fund management), you can contact him at askshiern @ gmail (dot) com.

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

Sunday, December 10, 2017

Invest On World Cup 2018

Having been a soccer fan (I play soccer almost every Sunday) for so many years, I have always looked forward to the major competitions such as the World Cups and Euros.

Therefore, when news of World Cup 2018 draws start to appear, I got reminded that the competition is drawing near (14 Jun 2018).

This time round, an additional thought strike me. The investor in me started thinking of “opportunities to invest in” during the World Cup period.

I started thinking of the various opportunities, and then I remembered I had actually found out who are the manufacturers of Nike and Adidas previously when I was researching in the overseas counters.

The 2 companies I found out are:

Win Hanverky Holdings Limited (aka WH)

Founded in early 1980s and listed on the Main Board of the Stock Exchange of Hong Kong since 2006, Win Hanverky Holdings Limited (SEHK: 3322) and its subsidiaries are an integrated sportswear manufacturer, distributor and retailer for international sports brands and have diversified into high-end fashion retail business. We have two broad lines of business, namely the Manufacturing Business and the Distribution and Retail Business, with geographical markets spanning Europe, the United States, Mainland China and Hong Kong.


Eagle Nice (International) Holdings Limited (aka EN)

Eagle Nice's vision is to be one of the major sportswear manufacturers in Asia and one of the major business partners of the international sportswear brands.


From the pictures above, you should know which company manufacture which brands’ clothing.

Before we proceed, it is important to note that I DID NOT FARE WELL (Down 9% as of today) investing in overseas counters since Feb 2017. I am still in a learning mode. 

Thus, I decided to come up with a few factors for me to determine which company I should invest in.

Which Brand Have The Possibility of Selling More Jersey?


There are 2 factors to consider when answering this question:

1. The brand that will produce for more countries will sell more jersey. 

Adidas (WH) - 12 countries, Nike (EN) - 10 countries.

This can become a tie as well if we include New Balance as a brand under EN. This will bring countries under EN to 12 as well!

2. Countries that are able to progress further will sell more jersey. 

In my opinion, for a certain country’s jersey to sell well, it has to try to progress further in the competition and if a country wins, its’ jersey should continue to sell well for a few more months after the event.


Although this could be subjective, but here are the possible winners or countries that should progress further (at least past the group stage):

Adidas – Argentina, Belgium, Colombia, Germany, Russia, Spain, Sweden. 

Nike – Brazil, Croatia, England, France, Portugal, Poland.

Therefore it seems that Adidas (WH) will perform better for this segment!

Financials

Based on the financials above, I observed that WH is bigger than EN. But EN has an increasing EPS, NAV and even Dividend since 2014. EN even had positive FCF since 2013.

For this category, EN wins hand down!

Business Model

WH has 2 lines of business – Manufacturing of Sports Wear and Distribution and Retails of High End Fashion.

On the other hand, EN is only focused on the core business of manufacturing of sportswear. This could be the reason for EN to perform better than WH financially over the last few years.

If you drill in further into WH revenue, you will realise that WH distribution and retail of high end fashion has been very inconsistent (as per the graph below). Many times this business segment also fell into losses.

WH Distribution and Retail Revenue and Net Profit
This is because under WH distribution and retail segment, it can be further breakdown into “High End Fashion” and “Retail of Sports Wear”.

As of 2016, WH has managed to turn High End Fashion into a profitable segment. But the Retail of Sports Wear has constantly made losses and in 2016,it actually made HK50 million losses! It remains to be seem how WH intends to turnaround the retail of sports wear segment of its business.

Therefore, since EH has been more focus on its core business, it is the winner for this section!

Share Price and Ratios

EN Share Price

WH Share Price
Based on the share price of HK1 for WH and HK3.50 for EN as of 11 Dec 2017:

WH: PB – 0.574 (HY2017 Balance Sheet), PE – 23.36 (Last 12 Months Earnings)

EN: PB – 1.575 (FY2017 Balance Sheet), PE – 11.27 (FY2017 Earnings)

The financial ratios seems to indicate that WH has more value. In addition, since this should be more of a short term investment (to be sold maybe within 6 months to 1 year), I prefer to go for counters that is on a downtrend with a high possibility of turning around.

Thus, WH is preferred for this segment!

Short Term Catalyst/Progression

EN intends to shift their factories to Vietnam to reduce production cost. But they are purchasing this factories from a interested party. In future, capital expenditure could be significant too. This may negatively impact its free cash flow and result in lowering of dividend.

On the other hand, WH has already shifted to Vietnam and Cambodia. 70% of their production is already in these 2 countries. In Sep 2017, WH has also sold another of their Hong Kong factory and has a potential to make a disposal gain of HK115 million!

It seems that WH wins!

Innovation

EN 


WH

If you really looked into their respective website, you will really prefer WH's innovation. It look more impact-ful and the presentation of the innovation on WH website looked more professional. EN website looked really out dated.

Therefore, WH wins here as well!

Insider Ownership

EN largest shareholders owned 38.42%, while WH largest shareholders owned 57.9%. 

Again, WH wins!

Overall, WH was preferred in 5 out of 7 Categories.

Before I conclude, I believe it is also important to check if World Cup will really has the effect on WH financials?


I have actually breakdown WH revenue and for its manufacturing segment. the period where World Cup 2014 and Euros 2016 are indicated in the graph above.  

It seems that World Cup and Euros do increase WH's revenue. But the increment in revenue does not seem to translate into increased net profit for WH. 

Nevertheless, this should improve as WH is in its last phase of shifting 70% of its production into Vietnam and Cambodia at the end of 2017. The significant reduction in operating cost should take effect in 2018. 

In Short

As shown above, World Cup event may end up not making any real positive impact on the net profit. But I do believe it will actually support WH's net profit at an reasonable level.

Regardless, another issue that resulted in the share price drop was that the management actually reduced the 1st half 2017 dividend to HK 0.02 for the first time! 

Thus, it is important that for FY2017, the management do not make any further reduction in dividend for the second half of 2017 and their distribution and retail segment have to at least breakeven. Only then will the share price rise!

I am investing a turnaround story and I will be holding on to it till at least Aug or Sep 2018. This is because World Cup event's impact may only be reflected in the 1st half 2018 interim report.

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 the SGX counters now!

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

Thursday, December 7, 2017

An Interview with "Heartland Boy"

This year's last interview for the Interview Series will be with Heartland Boy.

His blog mainly talks about personal finance matters. But once in a while, he will write about his stock investments and his thoughts about them.

I went for his seminar previously and wrote a review on it. Till now, I am still very captivated about including TA techniques within Fundamental Analysis. Nowadays, other than using Fundamental Scorecard Website, I will also use InvestingNote Chart to assess the TA of each counter (Previously I did not even bother much about the 50 days MA or 150 days MA). I am even considering incorporating TA techniques into the Ultimate Scorecard currently (But that is another story...).

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

1. Tell us more about yourself. How did you get into investing?

Heartland Boy: I am a young working adult who took up the challenge of working in Indonesia last year. My stint in Indonesia has allowed me to gain a better understanding of the challenges of working in developing countries. Despite being away from Singapore most of the time, I am a henpecked husband who flies back regularly to Singapore over the weekends. That is now all in the past (not the henpecked part) as I recently repatriated back to Singapore in October 2017.

My wife, who was my girlfriend then, was appalled that my net worth was zero when we got together in university. I was living the YOLO lifestyle and exhausted all my savings on holidays and branded accessories. I wanted to prove in earnest that I can build a secure financial foundation for the family. Besides learning to be thrifty, I wanted to invest to grow a passive income stream. It was a dual pronged approach to grow my net worth.

2. What is your investing style? Any idols?

Heartland Boy: After reading the book titled “Secrets Of A Self-Made Millionaire” by Adam Khoo, I became a self-taught investor armed with the necessary tools and confidence to kick-start my investment journey. I find that his value momentum strategy has worked quite well for me.
Given that I modelled my investment strategy after him, I would think that it is natural to look up Adam Khoo as a role model/investment idol.

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

Heartland Boy: I am guided by the 8 criteria set out in Value Momentum. This forms my checklist and I take down notes on whether the particular company satisfy these criteria. It is a very methodological process that removes emotions from the process.

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

Heartland Boy: My worst investment is in Kingsmen Creatives. I bought it at 97 cents in February 2015 and sold it at 70 cents in April 2016. This is ironic because Kingsmen Creatives was once a darling for the investment community. The most important lesson that I learnt was that growth stocks can fall very quickly in prices when their growth rates do not meet market’s expectations.
My best investment is in Micro-Mechanics. I first bought it at 69 cents in April 2015 and have progressively added it to my portfolio. I recently sold it at $2.00 in November 2017.

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

Heartland Boy: If one is looking for diversification, the portfolio should consist of a balance of assets such as cash, gold, equities, bonds etc.

As an active investor, I never hold more than 10 stocks as I find that it requires too much effort to be able to track their performances regularly.

6. Any thoughts about the current market situation?

Heartland Boy: It is time to proceed with caution.

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

Heartland Boy: My watchlist remains pretty much the same. They can be found in this article which was written in July 2017. Geo Energy and Straco have since been upgraded from my watchlist into my current portfolio.

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

Heartland Boy: Any newbie should base their investment philosophies on proven strategies. Besides starting with a proven strategy, it is equally important to be disciplined to implement the strategy throughout the investment horizon.

Young aspiring investors may not have sufficient time and wisdom to experience the ebbs and flows of market cycles. Therefore, they should build resilience from the mistakes made so as to ensure that the tuition fees paid do not go to waste. Likewise, it is important to stay humble even if you are very successful in the beginning of your investment journey.

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 the SGX counters now!

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

Sunday, December 3, 2017

Review of the Counters I Wrote in 2017

As a blogger, I like to write about my analysis to keep track of what I thought of the counter previously and if the situation have change now. Therefore, I decided to do a general review on all the counters that I wrote in 2017 for this post.

I believe I will be able to pick up some factors that I could improve on next year so that I can eventually make more gains!

*Do note that I will only be doing a review on counters I wrote a full post on. Those that had more than 1 counters in the post will not be tagged in this review.

*Click on the date to refer back to the old posts.

Counter 1: Bukit Sembawang Estates Ltd (23 Jan 2017)

This first article in 2017 is a counter I have been vested since 2016. Bukit Sembawang Estates Ltd is a major property giant with a huge land bank. While all the property firms are busy participating in the current en-bloc frenzy, the company do not need to do anything due to its huge land bank.

Decisions In 2018

I really like Bukit Sembawang Estates Ltd for its fundamentals and consistent 33 cents per year dividend. I will definitely continue to stay vested in them in 2018 unless the dividend amount changes.

Then again, if the dividend drops in the up and coming financial year 2018, the share price will definitely follows. Then I will have to determine at that moment if it is more advantageous to average down or sell all.

Counter 2: Singhaiyi Group Ltd (25 Jan 1727 Jan 2017, 4 Oct 2017)

I had actually wrote 3 articles on Singhaiyi Group Ltd in 2017. During the first 2 articles, I believe I made a great call and Congrats to those that followed!

Even after I divested fully in February, I continued to track the counter. I always felt the company will be much bigger in the next financial year, but I do have some concerns over its management.

In April, I invested on Singhaiyi Group Ltd again, mostly because it reported a much better net profit.

However, in October, I had a realization that the management did not made certain announcements which I deem to be significant. Thus, I divested fully at a small loss based on the 2nd transacted share price.

Decisions In 2018

Even when I believed that 2018 will be great for them, I will continue to ignore them.

Counter 3: Ocean Sky International Ltd (2Feb 2017, 3 Oct 2017)

I purchase Ocean Sky International Ltd after it change its core business from clothes manufacturing to construction. In the first few months of holding the counter, I kept having doubts whether this counter's share price can really rise up, especially after it announces its 1st full year results after it changes its business model.

However, things happened. The JV with Tiong Seng Holdings Ltd resulted in various purchases for re-development and the share price flew!

I have since sold off all my holdings in this counter.

Decisions In 2018

I do not think Ocean Sky International Ltd has the ability to support all its property re-development plans. I believe there will be a possible rights issue or a drop in share price due to weakening of its finances (if it took on significant bank loans). I will only reconsider to purchase Ocean Sky International Ltd if the share price drops significantly.

Counter 4: Captii Limited (25 Feb 2017)

I have been owning Captii Limited since Sep 2016. But the interesting thing is that I seldom see anyone writing about this counter. One of the reasons could be that it only has 31 million shares and I am still waiting for the day it does a share split. 

Nevertheless, it is important that Captii Limited start to explain its future growth plans. If not, I foresee that its core business will not be able to support them in the long term.

Decisions In 2018

I will continue to hold this counter till Captii Limited release its 2017 full year results. 

Counter 5: Samudera Shipping Line Ltd (19 Mar 2017)

Samudera Shipping Line Ltd is the counter I will have said "Why I did not hold on to this counter longer?" 

I purchase this counter in March based on various reasons in the post. But I lack the conviction to hold on to it longer due to the various "noises" I heard. This resulted in me selling off all my holdings in July at a slight loss.

Decisions In 2018

I am ignoring it for now unless it drops significantly.

Counter 6: Falcon Energy Group Limited (30 Mar 2017)

The purchase of Falcon Energy Group Limited is mainly due to its hidden asset in the property sectors. Nevertheless, I quickly sold off all my holdings within 5 days of holding it due to its significant rise in share price.

Decisions In 2018

Despite oil prices recovering slightly, I believe the counter and the industry has been in too much trouble to even consider right now.

Counter 7: Japan Food Holdings Ltd (6 Apr2017)

After I written about Japan Food Holdings Ltd, the amazing thing is KGI securities also provided an initiation report. This resulted in the share price to rising till $0.495 - its current 52 weeks high share price in 2017. I did not sell any of my holdings despite the sharp price increment. This is because I purchase this counter for its stable business and stability in dividend yield.

Decisions In 2018

I will continue to hold on to this counter and believe its share price will continue to stabilize around the region of 40 cents to 45 cents in 2018, unless any major catalyst occurs. 

Counter 8: TTJ Holdings Ltd (3 Jun 2017)

TTJ Holdings Ltd was once a darling of my portfolio, especially when it was giving out extremely generous dividend. After a series of events (such as losing the chance to continue to manage the dormitory, reduction in order book as well as moving into PPVC), I decided to sell off all the holdings.

The main reason is that if I intend to invest in a PPVC company, I will have preferred Tiong Seng Holding Ltd. Furthermore, I believe TTJ Holdings Ltd will require significant capital expenditure in the future and the generous dividend will be reduced subsequently.

The main positive factor is that 72% of the shares are owned by the chairman/MD, Mr Teo Hock Chwee. This will add stability to the counter's share price.

Decisions In 2018

This counter will always be in my watchlist. I will wait for the day it passes the Ultimate Scorecard.

Counter 9: Secura Group Ltd (23 July 2017)

I will describe Secura Group Ltd as the major mistake I made in 2017. I have already divested and made 30% losses!

Decisions In 2018

Lesson learnt is to ignore any Peter Lim's Counter.

Counter 10: Ellipsiz Ltd (21 Aug 2017)

Ellipsiz Ltd is one of the amazing multi-bagger I had. I purchase this counter at $0.300 in March 2016 and I have never looked back. The significant rise in share price of this counter will definitely be one of the highlights this year.

Nevertheless, with all the major changes (Sold off one of its core business that is giving high profit margin) and unknown direction of its remaining business, I decided to sell off all my holdings in return to locking in my gains and holding more cash.

Decisions In 2018

I believe its share price will drop in 2018. Depending on its future plans, I may look to re-enter this counter again.

Counter 11: Tiong Seng Holdings Ltd (14 Sep2017)

I purchase Tiong Seng Holdings Ltd in Feb 2017 for $0.230. The main reasons for purchasing the counter was that it passes the Ultimate Scorecard via the alternative methods and it's focus on technology when it comes to construction business. The company's continuous share buyback has also been a good bonus.

But the construction industry is super competitive and its significant liabilities can be seem as negative as well.

Decisions In 2018

I missed the chance to sell off my holdings when the counter's share price went above 40 cents. As of now, I will most probably hold on to them as my reasoning are still intact.

Counter 12: Challenger Technologies Limited (1 Nov 2017)

Challenger Technologies Limited is a recent counter that I bought in October and a lot of people disagree with. Nevertheless, the counter did passed the Ultimate Scorecard and I continue to hold on to it.

Decisions In 2018

I will hold on to it till at least end of January 2018 - the 4 months period for counters that passed the Ultimate Scorecard.

Counter 13: Trendlines Group Ltd (8 Nov 2017)

50 cents! 50 cents! 50 cents! As I have declared on InvestingNote, I am keeping this counter as a long term theory counter.

Decisions In 2018

I will continue to hold on to this counter. Nevertheless, I will keep a core holdings and trade the remaining holdings along the way to reduce my average share price.

Counter 14: Colex Holding Ltd (19 Nov 2017)

Colex Holding Ltd is another counter I bought recently in November mainly due to its business model, and its ability to passed the Full Analysis Scorecard and the Ultimate Scorecard.

Decisions In 2018

Similarly, I will at least hold on to the counter till the end of March 2018 - the 4 months period for counters that passed the Ultimate Scorecard.

In Short

This exercise allowed me to have a clearer direction of what I should do to each of the counter stated above.

Nevertheless, I also believe one should be flexible as we should always "expect the unexpected". Mr Market is unpredictable. We should be ready to act at all times.

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 the SGX counters now!

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