When do i sell my shares?

(1) When the Revenue Drops significantly for 1 to 2 Quarters, will divest all my shares.

(2) When the Profit Drops significantly inline with the Gross Profit Margin & Net Profit Margin.

(3) When the PEG > 1.2x (PE ratio to profit growth rate is more than 1.2x)

(4) When the PE > 10x and trading > 120% of NAV.

(5) To rebalance my portfolio.

Portfolio Value as per June 2019

No.	Counters	No of Shares	Market Price per Share (SGD)	Total Value (SGD)
1	AEM	50,000	$1.04	$52,000.00
2	Centurion	50,000	$0.410	$20,500.00
3	Innotek	250,000	$0.525	$131,250.00
4	SingMedical	250,000	$0.385	$96,250.00
5	Sunningdale	50,000	$1.370	$68,500.00
6	Tat Seng Packaging	50,000	$0.500	$25,000.00
7	Ani Pharmaceuticals	280	$105.590 (US$77.64)	$29,565.20 (US$21,739.20)
8	Cash			$39,883.10
			TOTAL:	$462,950.30

(1) Divested all my Best World at about @$1.35 per share.
(2) Received total dividend of $7,700.00 for FY2018.

My portfolio value has dropped significantly from March 2019. The main drop were AEM, Tat Seng Packaging, and Best World. I am not too worry on the drop, since i am investing in small cap so that is the main risk i have to bear with it - the volatility of small cap stock. 

I managed to divest all Best World shares. Now Best World is in suspension, i think it could take some time to conclude the findings. I do not think i will ever go into Best World again if it resumes its trading.

I have set not to do any more buying to the end of 2019. So now more to holding and trying to add more fresh fund into the portfolio.

I will continue to learn more and improve my system to be better!

My 1st Growth Stock from Nasdaq

I have started to search for growth stock from Nasdaq a few weeks ago.

I was particularly zooming my target to Pharmaceutical companies for the following reasons:

(1) Pharmaceutical companies tend to have high barriers to entry business, especially in United States due to high research and manufacturing startup costs, time to build and maintain functioning capital requirements, brand recognition, and long process of legal requirements with a few cycles of approvals by relevant authorities.

(2) Market size of pharmacy industry is very wide and growing.

(3) High gross and net profit margins.

(4) High operation cash generator.

(5) Is not a seasonal market.


I selected ANI Pharmaceuticals, Inc as my 1st Growth Stock from Nasdaq.

ANI Pharmaceuticals, Inc., incorporated on April 11, 2001, is an integrated specialty pharmaceutical company. The Company is engaged in developing, manufacturing and marketing branded and generic prescription pharmaceuticals. The Company focuses on areas, including controlled substances, anti-cancer (oncolytics), hormones and steroids, and complex formulations.

Below are few short summaries for ANI Pharmaceuticals:

(1) Basic data:

My purchase price is about US$71/share with market capitalisation of about US$842mil.

No of common shares: 11.863mil

Revenue 2018: US$201.6mil (increase of 14% from 2017)

GAAP net income 2018: US$15.5mil

Adjusted Non GAAP EBITDA 2018: US$84.4mil

Current ratio: 0.9x

Debt/equity: 0.93x

Net leverage: 1.5x

Gross profit margin 2018: 63.8%

FCF 2018: US$61.3mil

Number of employee: 304


(2) Projected 2019:

Revenue: US$231mil - 245mil

Adjuted Non GAAP EBITDA: US$95mil - 105mil


(3) Raising of capital:

1. Public offering of common stock: US$46.7m

2. Convertible debts: US$143.8mil

3. Credit line with Citibank: US$265.2mil


(4) Acquisitions:

1. Acquired 75 total products,

2. WellSpring Pharma Services Inc,

3. The NDAs (New Drug Application from FDA- Food and Drug Administration) for Cortrophin gel,

4. The NDAs for Cortrophin-zinc.


(5) High barriers to entry:

1. Formulation complexity: manufacture complex products and also low dosages products.

2. Patent status: products whose branded bioequivalents do not have long-term patent protection or existing patent challenges.

3. Market size: strong market share position: top 10 products has average approximately 50% market share as of February 2019.
ANI's pipeline consists of 75 products, addressing a total annual market size of $4.5 billion, based on data from IQVIA.

4. Profit potential: high profit margin.

5. Manufacturing: own facilities to have quality control and maximise profits.


(6) Industry Peers Market Capitalization:

1. Amgen, Inc: market cap is about US$120b.

2. Gilead Sciences, Inc: market cap is about US$85b.

3. Celgene Corporation: market cap is about US$66b.

4. Vertex Pharmaceuticals Incorporated : market cap is about US$48b.
5. Biogen Inc: market cap is about US$45.5b.


(7) Risks:

1. Two of their products are marketed without approval from NDAs. (Esterified Estrogen with Methyltestosterone (EEMT) & Opium Tincture) which made up to 12% of their total revenue 2018.

2. Three wholesalers are the main contribution of their revenues which made up about 77%: McKesson Corporation (21%), AmerisourceBergen Corporation (33%),and CardinalHealth, Inc. (23%).

3. Possible risks derived from products, customers, consumers, suppliers, raw materials, management team and employees, rules & regulations, etc.


(8) My Strategy:

1. Invested 200 shares for the first time purchase.

2. To allocate budget of SG$50k in total for this company.

3. To add when the share price drop to about US$64/share.

4. To add when the share price drop to about US$56/share.

5. To add when the share price drop to about US$46/share.

6. To keep monitoring their 10-Q, 10-K reports or any other reports relating to their business.

7. If their business continues to grow with double-digit rate yearly as well as their bottom line, will hold it for a minimum of 3-5 years.



Above are only my personal views and it is solely for my personal references/case study. The accuracy or completeness of the information provided in this blog cannot be guaranteed. Readers should carry out independent verification of information provided.

Portfolio Value as per March 2019

No.	Counters	No of Shares	Market Price per Share (SGD)	Total Value (SGD)
1	AEM	50,000	$1.19	$59,500.00
2	Best World	15,000	$2.54	$38,100.00
3	Centurion	50,000	$0.415	$20,750.00
4	Innotek	250,000	$0.525	$131,250.00
5	SingMedical	250,000	$0.455	$113,750.00
6	Sunningdale	50,000	$1.370	$68,500.00
7	Tat Seng Packaging	50,000	$0.610	$30,500.00
8	Cash			$38,513.25
			TOTAL:	$500,863.25

(1) Sold 10,000 shares of Best World @$2.34 per share.
(2) Sold 10,000 shares of Sunningdale @$1.51 per share.
(3) Bought 50,000 share of Innotek @52cts per share.
(4) Injected fresh fund of $10,010 into the portfolio.

Year	Capital Injected (SGD)	Capital Accumulated (SGD)	Dividend Received (SGD)	Portfolio Value (SGD)
2010	$2,000.00	$2,000.00	--	--
2011	$0.00	$2,000.00	--	--
2012	$34,200.00	$36,200.00	--	--
2013	$34,200.00	$70,400.00	--	--
2014	$34,200.00	$104,600.00	--	--
2015	$34,200.00	$138,800.00	--	--
2016	$34,200.00	$173,000.00	--	--
2017	$26,414.00	$199,414.00	$14,865.00	$402,954.00
2018	$21,452.00	$220,866.00	$11,200.00	$442,543.00
2019	$11,960.00	$232,826.00	--	$$500,863.00

My system to Best World

Best World shares was halted for about 5 days from Monday 18th Feb and opened for trading again on the following Monday 25th Feb. The reaction of the management in order to respond to a Business Times article written about Best World was the trigger of the trading halt. Best World responded with 15-page response. Since then Best World shares price has dropped from its peak abt $3.33 to about $2.01 in 2 weeks time. Its share price has since stabilized and been up a bit to about $2.55 after Best World said it has appointed Independent reviewer PricewaterhouseCoopers Consulting (PwC) to examine its franchise mode.


How is my Investment System reacting to this situation?

After a couple of years in the market, with some changes made into my system from time to time, i am more prepared now to any situation happening or will happen to my portfolio.

When i decided to sell 8,000 & 25,000 shares of Best World last year, i had decided to make some modifications to my system based on my Selling Criteria.

I also sold 10,000 shares of Best World early of this month at an average price of about $2.34 per share.


Why did i sell my Best World shares? Was i worry about Best World situation? Did i think that Best World market valuation has reached its full valued?


My reason to sell some of my shares last week was i thought with the market capitalization of about 1.3B, Best World is definitely not my cup of tea anymore. It is out of my capability to understand the business to be exact.

However, i am still comfortable with the key managements leading the business and their business prospect, i have decided to keep 15,000 shares for the time being. It only takes about 8% of my total portfolio and i am comfortable in holding them.

Emotions play a big role in investing or Investing is an emotional game which can lead us to make terrible financial decisions. To be kind and able to control my emotion, i will slowly employ my investment strategy in divestment of a business.

Portfolio Value as per February 2019

No.	Counters	No of Shares	Market Price per Share (SGD)	Total Value (SGD)
1	AEM	50,000	$1.02	$51,000.00
2	Best World	25,000	$3.25	$81,250.00
3	Centurion	50,000	$0.405	$20,250.00
4	Innotek	200,000	$0.475	$95,000.00
5	SingMedical	250,000	$0.445	$111,250.00
6	Sunningdale	60,000	$1.560	$93,600.00
7	Tat Seng Packaging	50,000	$0.630	$31,500.00
8	Cash			$16,375.82
			TOTAL:	$500,225.82

(1) Bought 10,000 shares of Innotek @46cts per share. My average cost for the second time entry is about 40cts per share.

(2) Injected fresh fund of $1,960 into the portfolio.

(3) Reporting season for FY is here, so will be a very busy month for me.

Investing is a very tough job

I first got to know about stock market and registered my trading account with Phillip Security in July 2010. At that time i did not know anything about stock market. Two years had passed, i only bought 2 S-chip counters which were recommended by my friend. I did not read any financial reports of the two companies.

The first two years i did not really know how to start trading with my own stock selection. There were about 1000 companies in SGX. How could i select which company to buy? There was a time i tried to check on the stock which had a very big jump down from the historical highest price to the lowest price. The stock i ever considered to buy at that time was Advance SCT. At that time, the share price of Advance SCT had dropped to about less than 5% from the historical high. I was hoping the share price would run back to its highest price, then i would made 20 baggers from that stock.

I asked my friend if i could buy Advance SCT and he told me that it is actually a technically bankrupt company. Thanks to my friend i did not buy into Advance SCT.

In September 2012, i had found my way to do my own stock screening. I started to browse thru the financial reports of all companies which were announced via SGX. However, i would eliminate few criteria like blue chip (simply because i am not able to interpret the reports), S-chip, and some other criteria.

I think that moment could be considered as i first went into stock market with my own way to do it. Now 6.5 years have passed, i am still in my learning journey. If i measure my performance so far, i think it can be considered as 7 out of 100 or 7%. Meaning there are still a long way for me to go and learn more about investing in stock market.

I have gone thru a few years of my investing journey. I find it is not an easy job at all. In fact, it is a very tough job. I think anyone wishes to be part of the journey, he/she has to spend at least 5 years to get to know the basic thing about stock market. It will need about 8 - 10 years to measure our performance and sustainability.

I am glad i have found investing journey as part of my life. Special thanks to my friend who introduced me into stock market. I feel this journey suits me the best and i am going to go through it until i get old. 

Am i a Dividend Investor?

I am not a Dividend Investor but will go for Growth Stock for the time being.

However, it does not mean that dividend is not an important element in my stock selection.

My investment focus are:
(1) High growth:
      -  good balance sheet
      -  companies with annual growth rate > 15%
      -  net profit margin > 15%
      -  most likely traded at multiple its NAV
      -  assets light/intangible assets value to be appreciated over time
      -  no dividend or little dividend as profits will be used for growth
      -  potential to be multibaggers in future

(2) Mature growth:
      -  good balance sheet
      -  companies with annual growth rate 3 - 6%
      -  net profit margin 3 - 6%
      -  must be traded below its NAV (<70% NAV)
      -  must distribute at 40 - 55% of their profit or free cash flow as dividend
     
(3) Turnaround growth
      - good balance sheet
      - trading below its NAV (<70% NAV)
      - have show some significant improvement since new management has taken over with good strategy
      - low portion of their profit/free cash be distributed into dividend
      - expect dividend distribution to be at 40 - 55% of their profit or free cash flow once its business performance has stabilized

Short, Short Term Trading, Contra, Margin, Blue Chip, S Chip - SKIP ALL!

There are many forms of strategy or trading pattern in the market.

I used to do short term trading and contra in the past. Some times i lose money, some times i made money. I still remember i made 5 figures from a short term trading of SBI Offshore in the past. I used a catalyst to buy and held for about a month then sold them. But does this kind of strategy suit my personality and is able to deliver a good return for me in a long run?

Recently i was very tempted to buy Singtel when it dropped to $2.86. Then i asked myself "What is my purpose to invest in Singtel? As it is trading near historically recent low? Do i plan to have dividend income from Singtel? How much do i value Singtel's business? Do i think that my portfolio value is high enough for me to change my investment strategy? Do i hope it will bounce back to a higher price then i can sell and profit from it? How much do i plan to invest in it? What is my strategy going forward?"

There were many more questions popped out from my mind at that time. I have been trying my best to discipline myself to stick to my own investment strategy which i think it is heading in the correct way so far? Maybe i can speed up my portfolio value by adding in a variety of trading strategy, but is it what i want to have in my investment journey? It is clearly the answer is "No".

What i am working towards is having a good & reliable system and is able to deliver a consistent return in a long period of time (maybe in bull or bear market).

My investment journey is not about having a race to have a faster finishing line, in fact i hope to have a longer finishing line so that i can learn more along the way.

I want to eliminate many kind of thing which is irrelevant to my main strategy now.

To have a simple system in a very complex market is the best strategy for me so far!

I will keep learning and maybe i will have to change my system along the way, but let it be baby steps!

The Little Book That Still Beats The Market - for my own references....

I just finished reading "The Little Book That Still Beats The Market" - by Joel Greenblatt.


(1) Buying a share in a business means you are purchasing a portion (or percentage interest) of that business. You are then entitled to a portion of that business' future earnings.

(2) Figuring out what a business is worth involves estimating how much the business will earn in the future.

(3) The earnings from your share of the profits must give you more money that you would receive by placing that same amount of money in a risk-free 10-year U.S government bond (for US market).

(4) Stock prices move around wildly over very short periods of time. This does not mean that the values of the underlying companies have changed very much during that same period. In effect, the stock market acts very much like a crazy guy named Mr. Market.

(5) It is good idea to buy shares of a company at a big discount to your estimated value of those shares. Buying shares at a large discount to value will provide you with a large margin of safety and lead to safe and consistently profitable investments.

(6) Paying a bargain price when you purchase a share in a business is a good thing. One way to do this is to purchase a business that earns more relative to the price you are paying rather than less. In other words, a higher earnings yield is better than a lower one.

(7) Buying a share of a good business is better than buying a share of a bad business. One way to do this is to purchase a business that can invest its own money at high rates of return rather than purchasing a business that can only invest a lower ones. In other words, businesses that earn a high return on capital are better than businesses that earn a low return on capital.

(8) Combining points (6) & (7), buying good businesses at bargain prices is the secret to making lots of money.

(9) Most people and businesses can't find investments that will earn very high rates of return. A company that can earn a high return on capital is therefore very special.

(10) Companies that earn a high return on capital may also have the opportunity to invest some or all of their profits at a high rate of return. This opportunity is very valuable. It can contribute to a high rate of earnings growth.

(11) Companies that achieve a high return on capital are likely to have a special advantage of some kind. That special advantage keeps competitors from destroying the ability to earn above-average profits.

(12) Although over the short term Mr. Market may price stocks based on emotion, over the long term Mr. Market prices stocks based on their value.

(13) If you truly understand the business that you own and have a high degree of confidence in your normalized earnings estimates, owning five to eight bargain-priced stocks in different industries can be a safe and effective investment strategy.

Poor Charlie's Almanack: Investing Principles Checklist

(1) Risk - All investment evaluations should begin by measuring risk, especially reputational:

1. Incorporate an appropriate margin of safety

2. Avoid dealing with people of questionable character

3. Insist upon proper compensation for risk assumed

4. Always beware of inflation and interest rate exposures

5. Avoid big mistakes; shun permanent capital loss


(2) Independence - "Only in fairly tales are emperors told they are naked":

1. Objectivity and rationality require independence of thought

2. Remember that just because other people agree or disagree with you doesn't make you right or wrong - the only thing that matters is the correctness of your analysis and judgment

3. Mimicking the herd invites regression to the mean (merely average performance)


(3) Preparation - "The only way to win is to work, work, work, work, and hope to have a few insights":

1. Develop into lifelong self-learner through voracious reading: cultivate curiosity and strive to become a little wiser every day

2. More important than the will to win is the will to prepare

3. Develop fluency in mental models from the major academic disciplines

4. If you want to get smart, the question you have to keep asking is "why", "why", "why?"


(4) Intellectual humility - Acknowledging what you don't know is the dawning of wisdom:

1. Stay within a well-defined circle of competence

2. Identify and reconcile disconfirming evidence

3. Resist the craving for false precision, false certainties, etc

4. Above all, never fool yourself, and remember that you are the easiest person to fool


(5) Analytic rigor - Use of the scientific method and effective checklists minimize errors and omissions:

1. Determine value apart from price, progress apart from activity; wealth apart from size

2. It is better to remember the obvious than to grasp the esoteric

3. Be a business analyst, not a market, macroeconomic, or security analyst

4. Consider totality of risk and effect; look always at potential second order and higher level of impacts

5. Think forwards and backwards - Invert, always invert


(6) Allocation - Proper allocation of capital is an investor's number one job:

1. Remember that highest and best use is always measured by the next best use (opportunity cost)

2. Good ideas are rare - when the odds are greatly in your favor, bet (allocate) heavily

3. Don't "fall in love" with an investment - be situation-dependent and opportunity-driven


(7) Patience - Resist the natural human bias to act:

1."Compound interest is the eighth wonder of the world" (Einstein); never interrupt it unnecessarily

2. Avoid unnecessary transactional taxes and frictional costs; never take action for its own sake

3. Be alert for the arrival of luck

4. Enjoy the process along with the proceeds, because the process is where you live


(8) Decisiveness - When proper circumstances present themselves, act with decisiveness and conviction:

1. Be fearful when others are greedy, and greedy when others are fearful

2. Opportunity doesn't come often, so seize it when it does

3. Opportunity meeting the prepared mind: that's the game


(9) Change - Live with change and accept unremovable complexity:

1. Recognize and adapt to the true nature of the world around you; don't expect it to adapt to you

2. Continually challenge and willingly amend your "best-loved ideas"

3. Recognize reality even when you don't like it - especially when you don't like it


(10) Focus - Keep things simple and remember what you set out to do:

1. Remember that reputation and integrity are your most valuable assets - and can be lost in a heartbeat

2. Guard against the effects of hubris and boredom

3. Don't overlook the obvious by drowning in minutiae

4. Be careful to exclude unneeded information or slop: "A small leak can sink a great ship"

5. Face your big troubles; don't sweep them under the rug

Portfolio Value as per 31 December 2018

No.	Counters	No of Shares	Market Price per Share (SGD)	Total Value (SGD)
1	AEM	50,000	$0.825	$41,250.00
2	Best World	25,000	$2.630	$65,750.00
3	Centurion	50,000	$0.415	$20,750.00
4	Innotek	190,000	$0.415	$78,850.00
5	SingMedical	250,000	$0.400	$100,000.00
6	Sunningdale	60,000	$1.440	$86,400.00
7	Tat Seng Packaging	50,000	$0.610	$30,500.00
8	Cash			$19,043.50
			TOTAL:	$442,543.50

(1) Sold 25,000 shares of Best World at $2.43 per share.

(2) Bought SingMedical to have the total of 250,000 shares with an average cost of 42.40cents per share.

(3) My portfolio has grown from $402,954.15 (as per end December 2017) to $442,543.50.
Capital injected in 2018 is about $21,452.30.
Portfolio value has gone up by $39,589.35 including capital injected.
Portfolio value has gone up by $18,137.05 or about 4.5% in 2018 (excluding capital injected).

(4) Started to read Poor Charlie's Almanack book since last week.
Hopefully can gain some wisdom from the book.

Singapore Medical Group (SingMedical)

I bought 112,000 shares of SingMedical at average price of about 43.71cts per share.

My projected minimum guaranteed yearly net profit of SingMedical going forward (at least 5 years):

(1) Ciputra Eye Indonesia: $60,000.
(2) Astra Women Clinic: $4,615.000.
(3) Cancer Centre: $2,400.000.
(4) Kids Clinic: $2,300.000.
(5) Baby & Children Specialist Clinic: $1,000.000.
(6) Pheniks: $500,000.
------------------------------------------------------------------------------------------------- Total: $10,875,000.

Below might have some contributions going forward:

(1) CHA (Vietnam & Australia market).
(2) Novena Radiology & Lifescan Imaging.
(3) New dental clinics.


What am i buying into SingMedical?

(1) SingMedical aims to be a Medical Disruptor in medical industry, especially in Singapore:
- to provide one stop solution for women & children's segment.
- to bring down the cost since they want to have centralised and owned imaging centres.

- to have tele-medicine platform that both local and patients across the region will use to consult with their specialists throughout their treatment cycle.

(2) They are in the women & children's segment which is one of the biggest market in medical industry.

(3) Most of their doctors/specialists who joined them through acquisition, have some shares in SingMedical.

(4) SingMedical wants to grow through "acquire & grow aggressively" strategy.

(5) They have a wide pool of medical specialists network.

(6) My purchase price of 43.71cts per share, market valution is about 210mil. 

With a minimum guaranteed yearly net profit of $10,875,000, PE is about 19.3X.
1H2018 net profit = $6,827,000. With straight line projection, FY2018 net profit will be $13,6mil, FY2018 PE will be about 15X. Medical industry averagely has PE of above 20X.

Portfolio Value as per October 2018

No.	Counters	No of Shares	Market Price per Share (SGD)	Total Value (SGD)
1	AEM	48,000	$0.820	$39,360.00
2	Best World	50,000	$1.490	$74,500.00
3	Centurion	50,000	$0.435	$21,750.00
4	Innotek	190,000	$0.420	$79,800.00
5	SingMedical	112,000	$0.455	$50,960.00
6	Sunningdale	60,000	$1.510	$90,600.00
7	Tat Seng Packaging	50,000	$0.670	$33,500.00
8	Cash			$11,670.27
			TOTAL:	$402,140.27

(1) I have skipped to post my portfolio value for the month of August & September as there were not much buying/selling.

(2) Cleared all my Chasen holding, even though the company seems to be good and has prospect to run up, i will just stick to my own stock criteria.

(3) Bought 2 new counters: Centurion at the cost of about 42.75cts per share & Singapore Medical Group at cost of about 43.71cts per share.

Business Valuation

What is Business Valuation and How do i value the business that i am holding?

The fluctuation of my portfolio value from one month to the other has been forcing me to think hard and thoroughly about my valuation method in valuing businesses.

Sunningdale's share price had reached its peak of about $2.40 per share a few months ago and has dropped down to $1.40 per share as per current price (my paper profit has also dropped down by $60k).

AEM'share price had reached its peak of about $1.90 per share a few months ago and has dropped down to $0.83 per share as per current price (my paper profit has also dropped down by $50k).

Have i been wrong in valuing the businesses i am holding so that i have missed out the opportunity to take profit earlier? 

Have my portfolio management and allocation been wrong so that i have less cash to add more to those businesses that their shares price have been hit down tremendously while the business fundamental remains strong?

Have i selected the wrong businesses which are not suitable to my personality and i do not understand them?

Have i been not knowing enough that i do not know a lot of thing about the businesses i am investing in so i have failed to act correctly?

Is my current strategy correct and i just need to make some adjustments to it?

These questions have been running around in my head for minutes....hours.....

days.....nights.....weeks.....months..........still .....I do not have the answer yet.

I am still searching......trying to fix the puzzles.............

I think only time will be able to tell. 

Investing is a journey, it is a process. 

Investing is Not a destination. 

I have to keep thinking, improving my investment system with on-going experiences in many business cycles.

In this post, I will only talk about Business Valuation which is related to my First Question above.

Have i been wrong in valuing the business i am holding so that i have missed out the opportunity to take profit earlier? 

Recently i read an article about the Interview between Forbes with Prof Aswath Damodaran about business valuation. 

The link of the article is here:
https://www.forbes.com/sites/kevinharris/2018/07/17/professor-aswath-damodaran-on-valuation/


Below are few important points i have noted them down:

What is Valuation?

1. Digging through a business,

2. Understand the business,

3. Understand its cash flow,

4. Growth,

5. Risk.

And try to attach a number to the business.


Risk is a very important part in valuing a business.


In today's market, we have to think the Risk of:

1. Risk premium of the market we are in,

2. Risk premium of the rest of the world,

3. Risk currencies and how we use them in valuation,

4. Risk in business life cycle which has shortened in today market, e.g. Yahoo has started from a small startup to a successful company and to no company in 25 years.


In investing:

(1) Philosophy is more important than technique,

(2) Self introspection,

(3) Build our own investment philosophy,

(4) Think through what we think about the market,

(5) Try to figure out why companies are doing what they are doing rather than what other people think about companies or what other people think about investing.

To always keep our eyes on economic growth, as long as the economic growth is solid and able to backup the valuation of US or market equities, the valuation is still ok.


I also have signed up Investment Quadrant with TheFifthPerson recently, and i noted them down a few Valuation Models from TheFifthPerson:

(1) Fast Grower (Unstable Cash Flow): PEG (PE to Growth rate)

(2) Predictable Earnings: PE

(3) Asset Heavy: PB (Price to Book)

(4) Cyclical Industry: Price to Sales

(5) Predictable Cash Flow: Discounted Cash Flow

(6) Earnings Distorted by Depreciation/Amortization: Price to Cash Flow


To be continued..............................................................

My Investment System Reflection - 2

What kind of Selling Strategy should i implement in my BSPA?


Before buying into a company, i should do my homework to read the company's quarterly & Annual reports to derive my Intrinsic Value of the company for 4 years ahead.

How do i do that?

(1) I am buying this company for it falls into which category of my Investing?
1. Value Growth?
2. Deep Value?
3. Dividend?

(2) Which industry does this company falls into?
1. Food & Beverages?
2. Consumer Products?
3. Manufacturing?
4. Semi-conductor?
5. Information Technology?
6. etc

(3) What is the industrial PE for the past 10 years?

(4) What is the average PE for her peers?

(5) How is the historical Revenue and the projected growth going 3 - 4 years forward?

(6) How is the historical Profit and Profit Margin and the projected growth going 3 - 4 years forward?

(7) How is the historical Cash Flow and the projected growth going 3 - 4 years forward?

(8) How is the historical Dividend yield and how many % of the Net Profit be converted into dividend and growth, and the projected growth going 3 - 4 years forward?

(9) What is historical ROE for the past 5 years and the projected ROE growth going 3 -4 years forward?

(10) What is the intrinsic value of the company going 3 -4 years forward? 

One of the way to calculate the intrinsic value is to use Buffet Intrinsic Calculator from:
buffettsbooks.com/howtoinvestinstocks/course2/stocks/intrinsic-value-calculator.html#sthash.jEhBZTtD.dpbs

(11) At how many % discounted Intrinsic Value should i divest my shares?

(12) Divest partially or fully?

(13) Different category of Investing will have different Assessment of Selling Strategy.

(14) Will i buy back the share once divested?

(15) Will i average down when it drops to certain %?

(16) How many will i average down and how much cash i am holding?

My Investment System Reflection - 1

My portfolio value had reached its peak at about $530k mid of April and fell all the way down to about $380k mid of June. It was just 2 months away, my portfolio value had been up and down in 30% variation.

This tells that investing in stock market will never be easy. It involves human emotion: greed, fearful, daring, worry, eagerness, willing and unwilling, and all macro issues around us.

As for me, i am doing my best to create a System for my Investment - will call it BSPA.

A system that is able to work well and make me sleep well at anytime in the market: bull or bear.


How does BSPA work?

BSPA stands for Buying Selling Portfolio Allocation.

These 3 things are very important in order to create and maintain a Sustainable Portfolio.
I just want to focus on BSPA - the things i can control.

(1) Buying Strategy:

I should allocate a specified percentage of my portfolio to every counter. 

Case Study (example):

I am 35 years old and holding 500k in cash.
I wish to buy Tat Seng Packaging as it meets my Buying Criteria from the System.
(1) List down all the criteria in buying Tat Seng
(2) Set an intrinsic value for Tat Seng: e.g $1.20 per share.
(3) Will allocate 10% of my cash into this company.
(4) First time i will buy 50% of my allocation: (50% X $50,000 = $25,000 ) = 31,500 shares at $0.80 per share.
(5) If the share price continues to go up to $1.00 - do nothing.
(6) If the share price falls about 10% ($0.72) from my initial cost, i will add 10% of my remaining (10% X $25,000 = $2,500 ) = 3,500 shares at $0.72 per share.
(7) If the share price falls another 20% ($0.56), will add another 40%: (40% X $22,500 = $9,000)  = 16,000 shares at $0.56 per share.
(8) If the share price falls another 20% ($0.40), will add another 40% : (40% X 13,500 = $5,400) = 13,500 shares at $0.40 per share.
(9) If the share price falls another 20% ($0.24), will add all the remaining amount ($8,100) = 33,750 shares at $0.24 per share.


(2) Selling Strategy:
Before buying the company, i should set a target selling price based on the last FY reports, quarterly reports to derive:

(1) I am buying for which category? ValueGrowth? Deep Value? or Dividend?
(2) Intrinsic Value of company based on all the numbers including dividend.
(3) Maybe i am more comfortable with intrinsic value of 4 years going forward.
(4) PE, Sales Growth, ROE, Free Cash Flow, and Dividend are major components in deciding when to sell.
(5) How should i partially/fully divest the shares? --- will cover more on this in my next post.


(3) Portfolio Allocation:

1. How many % of portfolio in every company?

2. How many % of cash to deploy at 1st time buying?

3. How many % of cash to deploy to average down? 

4. How many % of cash during bull market? when the valuation of my companies reach high market value? - cash holding should be high here.

5. How many % of cash during bear market? when the valuation of my companies are undervalued? - cash holding should be low here.

My Sytem Modification 1

1. Investing is a PROCESS, a Journey and it is NOT a destination.

2. NEVER add/average UP a company with ROE lower than 15% (low ROE)!

3. Do NOT let GREED taking over our calculation based on data.


Buying a Company:

The 1st thesis of investment:

(1) Value Growth? - good balance sheet, good business model, good management, ROE > 15%

(2) Deep Value? - good balance sheet, good management, stability of business/revenue, ROE < 10%.

(3) Asset Value? - good balance sheet with undervalued price to asset value.

(4) Dividend? - good balance sheet, good business model, good management, ROE is very low .


When the share price has been up tremendously, i should periodically check back with my 1st thesis in purchasing this company:

(1) Am i buying for value growth? deep value? asset value? (this is not my criteria) or dividend?

(2) When i invest for value growth, i should hold longer term.

(3) When investing for deep value, should tabulate the numbers in terms of ROE in a systematic model year by year based on the past 5 years to derive the historical ROE, comparing the PE with historical PE in the industry, and its peers' PE.

(4) I should always set a target price every year after financial reports are out.

Portfolio Value as per July 2018

No.	Counters	No of Shares	Market Price per Share (SGD)	Total Value (SGD)
1	AEM	48,000	$1.100	$52,800.00
2	Avi-Tech	100,000	$0.380	$38,000.00
3	Best World	50,000	$1.310	$65,500.00
4	Chasen	300,000	$0.076	$22,800.00
5	Innotek	190,000	$0.400	$76,000.00
6	Sunningdale	60,000	$1.360	$81,600.00
7	Tat Seng Packaging	50,000	$0.690	$34,500.00
8	Cash			$24,556.80
			TOTAL:	$395,756.80

(1) Bought back Chasen after some considerations.

(2) I have been doing some self reflection for these past few weeks to restructure my strategy again. My buying - selling - buying Chasen acts have not been really pleasing to my Investment Strategy.

- Reading "Rich Dad's Prophecy - Why The Biggest Stock Market Crash In History Is Still Coming" by Robert Kiyosaki.

- Listening to Webinar of TheFifthPerson.

(3) Going forward i really need to improve the following areas:

1. Portfolio Management - portfolio allocation (including % in certain sector, cash portion).

2. How to value a company and to divest partially when the business is in discounted valuation (maybe 80% from my target valuation?)

3. To read more in detail of company Annual Report.

4. To explore more in my analysis, found out from TheFifthPerson's webinar to use www.marketft.com/data/equities to know more on the peers comparison, etc.

Warren Buffett's Gems

Some of Buffett's gems which i wish to keep reminding myself:


"If you buy things you do not need, soon you will have to sell things you need."

"Do not save what is left after spending, but spend what is left after saving."

"If you don't find a way to make money while you sleep, you will work until you die."

"You only have to do a very few things right in your life, so long as you don't do too many things wrong."

"I don't look to jump over 7-foot bars; I look around for 1-foot bars that I can step over."

"The most important investment you can make is in yourself."

"Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble."

"Predicting rain doesn't count. Building arks does."

"Time is the friend of the wonderful business, the enemy of the mediocre."