Posted by: donmihaihai | August 27, 2021

Join in the fun

Whether it is “Once bitten, twice shy” or “Is the local market dead” plus my “STI lost decade”, none has good things to say about local stocks, which is the current view for local stocks. So, I think I am an outliner since I believe that the future is bright for local stocks.

Isn’t stock market is a place where majority, including the professional underperform the market and quite a big percent lost their money actually. A small percentage of the investors outperform the market over time. So, doesn’t this tell us that Stock market is not a place for group think, and yeah, and the current group think is Singapore stocks suck.

Let use back the same comparison, copied.

Out of the 4 indexes, STI and HSI are in the same situation, gone nowhere since GFC. So it is not surpurising at all that both markets are being ignored current. But let not forget that both markets went through a short bull from low point of 2003(around SARS period) to hit ATH(all time high – current cool words to use) before GFC. Currently, China tech stocks is the saving face of HK market but who is talking about the old economy stocks listed in HK?

From the low point of 2003, Nasdaq failed to recover to while S&P matches ATH  during tech bubble just before GFC. None double from their low point. What happened after GFC, is still eye popping. How many times in history has S&P and Nasdaq been performing like this? It is just like the first time the world see how Usain Bolt broke 100M world record in Beijing. Unbelievable.

still remember WB quiz?

You see lot of US companies in the world biggest companies list in 2021. Well in 1990, Japaness companies topped the list. The Bull was in Asia during 1980s and early 1990s. Nikki wasn’t the only bull market. When Asian Tigers was coined back then. Taiwan and South Korea markets while not as big as Japan, experienced the same kind of bubbles. Singapore market, also enjoyed bull market in the late 1980s till 1993. That bull followed the late 1970s bull market should be the top 2 bull markets in STI, the 3rd and 4th should be the late 1990s after AFC till tech bubble burst and the one right after SARS. Something that is being forgotten.

For HK, there was a 1987 black Monday and another in 1989 Tiananmen. So HK was in bear market or the beginning of the bull that popped during AFC.

To start trading locally in 1990, what is the chances that he was lured by on-going bull market?  Bull market suck people in, bear market throw people out.

S&P and Nasdaq at 1990 was at the mid point of one of the longest bull market in US, started around 1980 and ended in 2000. Certainly not exterme valuation.

I wish there are more researches, stories and books on the history of Asia stock markets.

Posted by: donmihaihai | August 22, 2021

Invest in China

I have always invested in China since the start, not day 1 but close. Either directly in China companies listed in SGX or indirectly through Singapore companies that operate in China or managed funds.

Managed funds is still being called Unit Trust I believe and those funds were called Greater China Fund back then. How things changed. So I was an early believer of China and put some money into it. I last add in 2016 and actually sold a little last year.

Then in June I decided that Aberdeen has lost it way, where top 3 holdings are all China Tech and switch another fund with more old economy stocks in the top 10 holdings since the craziness in China stocks was mainly in China Tech and many old economy stocks valuation are not in excess, that was what I believe and still think so. So with what is happening to China Tech, I think I am lucky. The switch actually locked in and save some money.

In investing, don’t join in the crowd unless you are so sure of getting of out that crowd before everyone does. I switched because I suddenly realised that I was in the crowd and I did not invest in China Fund last year because of China Tech and now not going to do anything until some major drop across the board in China markets or the craziness is back.

I know China will overtake US in term of GDP in my lifetime but that doesn’t mean that stock market will perform just as such. Does SZ and SH charts look like belonging to a country with GDL increasing close to 10% yearly for decades? Remove JKSE and put SSE name in, would more like a stock Index belong to China.

Stock market doesn’t work in a way that say, because the economy is doing well, the market must do well. Personally I think, without the China Tech, China should be the place to be because of its secular bear market since last 2 peaks in last 20 years. I like to invest in places where the charts go nowhere for decades. Yes that include STI and a few others.

Posted by: donmihaihai | August 5, 2021

Sarine, diamond and LGD

Sarine just announced best first half result since 2014. Still can’t believe how lucky I am. Sold close to the peak and bought close to the bottom and now the business is roaring back strongly within a year. It has to be luck since I don’t project/guess what would happen next on year to year swing in business. But I do try project/ assess the company competitive advantage and the landscape it is in.

Diamonds and Sarine are interesting.

With LGD, rather than replacing mined diamonds, I believe it is moving toward 2 tier segments. 1st segment will be where ladies will perceive mined diamonds as real diamonds and 2nd segment where LGD will be perceived as not fake but lesser diamond. And over time, while mined diamonds market size might become smaller and smaller, value of each diamond will increase, and mined diamond will shed off the image of blood diamond.  As for LGD, it will become more and more mass market, ie lower and lower price. I mean how can diamond be rare and forever when it is manufactured in a factory? After some time, differentiation between mined and LGD will be wider and wider despite both are essentially the same thing.

Since Sarine will be servicing both mined and LGD, then the future is very bright because LGD expand Sarine market. For a manufacturer, the equipment they needs will be different from mined diamond, toward the likes of efficient, productivity and cheap which I think Sarine is moving toward the right direction with “diamonds produced by technology – graded by technology”.

Having very strong position on the manufacturing side of mined diamonds, I don’t have much to add except on diamond Journey. This Journey can be so powerful that it can basically chains a diamond from the moment it is mined to on the slim finger of a lady to…… Sarine. I believe Sarine will be losing money on providing Journey but it will gain much more when Journey became the Chain that strengthen Sarine hold on manufacturing side of mined diamond and also make it easier for Sarine to get into the mining side and especially the prized segment – retail.

As long as diamond continue to perceive as rare and forever, Sarine will continue to gain competitive advantage.

Posted by: donmihaihai | June 22, 2021

STI lost decade

Or 14 years.

For the last 14 years, STI has never able to break through 2007 peak.

Valuation of major Constituents 76.8% as of now, in term of P/B, saw compression from 2007 peak and every mid range peak since 2007. I just pick the highest price around the peak period. Roughly right than precisely wrong.

the drop in 2020 is not excessive in term of %, but when it come to valuation, it actually matches Mar 2009.

Ma hou pao.

I had written elsewhere and in my blog that local stocks were really cheap last year. Valuation before 2020 and current is not excessive as well. In fact very reasonable. Last year when I wrote, death of equities (local version) might be the first of the major bear bottom(STI) in the current bear market since 2007, there might another or two bear bottoms for STI going forward. Major bear bottom is not easy to come by in an investor life.

There’s an old saying that bull markets are born on pessimism, grow on skepticism, mature on optimism and die on euphoria.

Posted by: donmihaihai | May 24, 2021

I am so old tech

After ending of my news and magazine subscriptions, I live with feed news, blog and forum and I think my thinking got narrowed or at minimum, stop expanding. Not healthy at all. Look like it is about time to start some digital subscriptions. But my cheapo mindset is still having the upper hand, why pay when I can get them free. Freebies do come with a price.

I live in a googled world which unlike the world when I was a kid, where Iot of time were spent on seeking information (I seldom do), in the current world, information is abundance and getting it without effort. And in investing, information is not about speed, it is about thinking.

With the Pandemic, digital have become like the “god” word. Everyone flock to anything digital like a lemming. Not just investing, startup, news and even older generation start to do more with their smart phone than just calling. Yes, if company doesn’t have a digital strategy, it is doomed when its competitors are upgrading or future proof themselves. But does it mean that having a digital strategy will transform your company and create competitive advantage? I don’t think so. I think it just shift the bar upward, like the good old stories of installing air-con in barber shop. People flock to barber shops with aircon initially but after some time all barber shop has aircon. Well, nowadays which stupid ass will open a new barber shop with fan or which barber ship is competing with installed aircon?

The god like digital word is where the money is. The able and fakes rush to start something digital, AI or whatever. Those with capital but not able enough rush to send money to the able and fake. In my world, the biggest the crowd, the bigger the competition, the higher chances of losing money in long term. In short term, who care as long as the music is playing. For betting on some of these companies to become the next Alibaba/Amazon, good luck on picking a few from the mass orgy. More so if you are unable to think about businesses, industries and competition, etc and being feed from the news.

 In the last year of so, I see quite a few bright industries. One of company in shipbuilding wrote in their outlook on 2 results announcement, ie 6 months that say the global new shipbuilding orders decreased to from lowest since 2004 to lowest since 1996. Mean high cost shipyards were sitting idle! You can be pretty sure no one will start a digital shipyard! There will be more exit than entrant. Then, you got the sudden order book explosion, along with share price but current share price is still more dead than alive.

Another subset of shipping industry is as gloomy as you can imagine. Such as below Q&A reply.

the rapid development of the COVID-19 pandemic and the resultant plunge and volatility in oil price stemming from the sharp fall in oil demand. Our group suffered a stop work situation in 2020 which lasted three to four months during which most of our foreign workers were restricted to their dormitories. Production levels therefore fell with the reduction in available production manpower. As such, where relevant, we notified our clients of the force majeure situation. There was also a slow-down in market enquiries, tenders and potential contracts as end clients suspended or delayed projects. Contract values were also reduced. Vessel charter opportunities also fell away as exploration activities slowed and charter periods were shortened. Activities in relation to servicing and certification of offshore equipment were halted due to travel restrictions.

. Even as recent as April 2021, there are countries in Asia which are suffering significantly from COVID-19 and their unfortunate escalating situation impacts many companies in Singapore within the construction, marine and process sectors. Over the last year, despite the COVID-19 situation, we have suffered a reduction in manpower as a number of workers have resigned to return home to be with family and only in recent weeks, have we been able to secure approvals to bring in existing and new employees to Singapore to strengthen our workforce to enable the Group to take on more fabrication work. Although we have managed to bring in a handful of new workers in recent weeks, the new travel restriction in relation to India will now delay the remaining plans for a month or more and we will continue to suffer from a limited workforce. Although we have enlarged our sub-contractor base to reduce manpower shortages, as travel restrictions continue or escalate, manpower shortages become more of an issue. Our Malaysian employees have returned to Singapore and are occasionally returning back to Malaysia under the Periodic Commuting Arrangement.

Tell me who is going to put their money in here! Which is why I think the future is very bright here. Everyone want to leave this industry and which twenty-something is going to start some digital whatever here?  

The Q&A also touch on a very unfortunate but interesting development. Migrant workers in construction, marine and process sectors. I believe that the current situation will do what the Singapore government has been trying to do for many years but without success. Change the way you do or die off. And of course money is not flowing into these places and with their valuation, the future can be very bright. Bright future grew out of desperation and leftover players enjoy the future.

Ahhh I am so old tech.

Posted by: donmihaihai | May 18, 2021

Stupid Money

Walter Bagehot wrote those words in 1856 about an event that happened in 1720 — The South Sea Bubble. He was describing human nature’s role in turning smart money into stupid money during manias and panics:

A great deal has been written and is being written on panics and manias — a great deal more than with the most outstretched intellect we are able to follow or conceive; but one thing seems certain, that at particular times a great many stupid people have a great deal of stupid money. Many saving people have only the faculty of saving; they accumulate ably, and contemplate their accumulations with approbation, but what to do with them they do not know… Several excellent economists have plans for preventing improvident speculation…but the only real way is, not to allow any man to have a hundred pounds who cannot prove to the satisfaction of Lord Chancellor that he knows what to do with a hundred pounds. The only want of this obvious and proper precaution allows the accumulation of wealth in the hands of rectors, sweepers, grandmothers, and other persons who have no knowledge of business, and no idea except that their money now produces nothing, and ought and must be forced immediately to produce something. “I wish,” said one of this class, “for the largest immediate income, and I am therefore naturally disposed to purchase an advowson.” Every now and then, from causes which are not to the present purpose, the money of people of this class — the blind capital…of the country — happen to be particularly large and craving; it seeks for some one to devour it, and there is “plethora” — it finds some one, and there is “speculation” — it is devoured, and there is “panic.”

Stupid Money • Novel Investor

Posted by: donmihaihai | May 5, 2021

WB quiz

I am going to take the quiz and rather than handicap myself like some hero, I am going to give myself another leg. My guess is base on normal and not some crazy valuation and with my limited understanding of the businesses.

Apple – A close yes base on not many alternatives and it is big enough.

Saudi Aramco – Yes. But I would like to sit this one out.

Microsoft – No. Base on I think window/office become cheaper. ie earn less money and more competition on cloud.

Amazon – Yes. Cloud is same as Microsoft. Online platform, I don’t think it is easy for new players to catch up current players. Current players are both online and offline. International will be a dogfight.

Alphabet – Yes. Google is still search and it is global(except some countries)

Facebook- No. Hard to be the place to be gathered in the future for kids below 20 years old.

Tencent – game and wechat? I say no. More competition in China and lot of competition once they get out of the great china wall.

Tesla – No. Industry is not that big and EV and autonomous create more competition

Alibaba – online platform and alipay? I say no. same reason as Tencent

Berkshire Hathaway – No. Growth will slow. harder to make it into top 20.

Taiwan Semiconductor – No. Domination but too big and powerful for being just a manufacturer.

VISA – Yes. A global electronic payments. You need brand, trust, speed and spread. Kind of winner take all industry.

JP Morgan Chase – No. Banking is about Scale. US not big enough. Maybe China will be but it will follow US footsteps once country with high population developed.

J&J – No. I don’t see drug and consumer co. going into top 20 globally in the future.

Samsung Electronics – No. Would be a surprise if there are more brand in this segment earning lot of money in the future where the basic rule is lower and lower price for same product.

Kweichow moutai – No. Not seeing it as a global brand

Walmart – No. Unless it can repeat what it done in US in another country.

Mastercard – Yes. Same reason as VISA

United Healthcare – No. Same reason as Walmart but in healthcare.

LVMH MOET – No. Brand conglomerate? Very hard and too small.

So my picks will be Apple, Saudi Aramco , Amazon , Alphabet , VISA and Mastercard.

5 US companies and 1 country.

I don’t want to bet against a country and it is so huge now. If the last spot is 4T. I would bet that it will take that spot from current 1.92T. Oil will not be going away yet and 30 year is a long time to adapt.

I am not into the current US vs China shithole and I seriously hope that there won’t be any war. I believe to be in top 20 30 years later, companies must be strong in their home country and also the globe. The bigger the home country the better it is provided they have tamed the competition. That is my preceded landscape 30 years from now.

Pick Apple, Alphabet, VISA and Mastercard because I view them as global companies. While I think Amazon is more US than global, it is huge. I see Tencent and Alibaba as more China than global. While China has a bigger population and will be bigger in the future, there is also a lot more competition. I believe the 5 US companies face lesser competition in home country. At global stage, these companies have advantage they are the first mover and some of them have already “won” in many countries which mean it is hard to kick them off their spots. China companies face a harder time in global arena and while I bet there would be many successful companies from China in the future, I just don’t think it will be the current 3.

Posted by: donmihaihai | April 6, 2021

I like

I like companies that have competitive advantages.

I like companies that is doing well. Doing well not just in good times but in bad times as well. Doing well in term of better than competitors. For example, during down-turn, the company averaging of say 5% ROE where many competitors are swimming in reds. That is doing well. I like to spot good companies during bad times.

I like companies where the management is fair and I want my money to bet on management who is fair. To be fair, I don’t know whether the company is fair to customer/supplier.  While I do know the remuneration of directors/management and non-management and unless the amount of remuneration is so huge that became the elephant of the room, it is hard to know if the remuneration is fair. But over time I thinks are companies is fair when the amount of remuneration jumps along with yearly profit. This fluctuation has to be about the same across the board or management has to take more pain than non-management during down turn if they receive higher upside during good time. Companies where management get big increase in remuneration at the moment of green shoot leaving the non-management behind are those that I don’t like.

I like companies that is not constantly in the news.

I like Biden like not Trump like companies. “You guys are great and I have make XYZ greater like never before”

Posted by: donmihaihai | February 16, 2021

Some knowledge some commonsense

No, I am not writing about AI, nothing of that sort.

Chanced upon writings by someone on where does the money in the stock market come from. Not the kind of big idea stuff that I would spend much time thinking about. But well, somehow I think it fit well into what I have been writing recently.

With a little knowledge and some commonsense, I have always reject the saying that the stock market is a zero sum game. Never was and not going to be. Neither is casino. In a zero sum game, the pot of money remain the same, it just change hand. Even in casino, the house has advantage and that is where the money flow to and of course there are lucky people but when you have advantage, luck will not play a big part in long run. If stock market is a zero sum game, then the whole market is make up of saving of investors/capital providers and market will only grow when the saving goes up. Well, it doesn’t say money on whose hand. That is not what I have seem.

What I have seem in stock market is investor provide capital. Forget about loan, etc. just say capital = equity. With capital, company operate and generate income. Wealth of the investor depend very much on the income generated now and in the future. Pretty much a private market or company or call it unlisted co. When the co. is listed, or in stock market, what happened as a private co. still remain true but investors can easily sell their share or buy more. Buying and selling is where the valuation come in. Actually the same things apply to private co. as well. So in short, money from stock market come from capital from investor, money generate from company and lastly valuation.

In How could SPH lost so much? The swing in valuation for SCM and SPH, SCM valuation was about 1/10 of Dec 2012 as at Aug 2020 and SPH valuation was about 1/6 of Dec 2012 as at Aug 2020. Ignoring dividend/ return of capital if any over the years, your investment is left with 10% and 16.67% of original amount after 8 years base on valuation alone(doesn’t mean it is your actual loss). So this is how you are going to lose money, over paid for an investment(buy) and sell at wrong time or shall I say sell at depressed valuation?

Charts say it better

Who want to do that? Nobody. But it happen to almost every investor, just how regularly and whether the amount impact your employed capital. Everyone like to do the following. Just not many are able to do it regularly or with amount impacting their capital.

Who doesn’t love to invest in AEM or Powdermatic at their low? I have not invested in both co. at their lows. Most investors won’t even want to look at them at their lows. But now they love them. Maybe not so much love for Powdermatic but certainly AEM.

Ifast and Tesla are even better

The recent surge in Ifast and Tesla were wow. AEM was almost the same. Valuation, I don’t even want to talk about it.

There is one thing good about being in the market for many years. Why talk about valuation with investor who are long AEM, ifast or Tesla?

I wish I have the longer chart for SCM or SPH but Microsoft and Sarine should be good.

Just like my title, end it with some knowledge, some commonsense. With the capital from shareholders, company operates and generate profit hopefully and valuation swing….. Yup, don’t be at the wrong side of the swing.

Posted by: donmihaihai | February 5, 2021

Random

Talk about companies that I have invested and unlikely to invest more in the near future because of the valuation.

Micro Mechanics

My first 10 baggers and still holding on to a smaller holding after recent further selling.

The company future is certainly bright especially the consumable tools. While it is good to know that the company believe semiconductor industry may be entering a supercycle of multi-year growth, it is even better to know that the company goal is to become a leading next generation supplier within a handful of suppliers. In short, it means Micro Mechanics intend to beat all competitors during the supercycle going forward. Isn’t that exciting?

How high can the ROE go from close to 30%? I don’t know but I don’t think it will double as this is a manufacturing company and it is constraint by pricing and capacity. So, the current share price isn’t cheap and I am not of the view that just because of the future is so bright, rich valuation is justifiable and share price will keep going higher. But then, I will likely hold on to the last few shares as it is hard to totally sell out on a good company.

My initial purchase was sometime after IPO with my CPF monies and my last was during GFC. So over 17 or 18 years, Micro Mechanics alone funded more than half of my FRS.

Sarine

Initial purchase in 2007 and bought more during GFC. Managed to sell most in 2014 for multi baggers gain after Sarine price jumped. Then Sarine, dominate the equipment side of the processing segment of diamonds supply chain and was trying to enter retail segment. The sale was mainly on valuation ground.

On hindsight, my timing was almost prefect as Sarine share price staged a multi-years drop there- after and I started to repurchase about 6 years later, ie in 2020 and bought more as it head lower. My current average cost is even lower than 2008 and waiting for a second ride, hopefully.  

Diamond industry that Sarine operate in has certainly changed somehow in the past 14 years or so, it seen to be less attractive now compare to before, but I am not so certain because I can come out with views that it is even more attractive now for company like Sarine. And Sarine continue to dominate the equipment side of the processing segment and working (looking good) to combine processing and retail segment and dominate both.

Out of the blue, Sarine share price jumped again recently, reaches close to 3X NBV from below book. While the current valuation is certainly not the elephant in the room on whether it is cheap or rich, I would want to continue riding it base on the Sarine domination.

Penguin International Limited

Building one of the leading brands in vessel for crew and security boats, Flex, locally and managed to be decently profitable as well. While I believe their lead is by no mean secure, the management is pretty good and I like the way they are communicating with shareholders.

Now the management make an offer to take the company private at $0.65. $0.65 is really a good premium from my cost price and what a short holding period but my fate depends on other shareholders.

No complaint on whatever the outcome will be. It is not because of my gain but rather it is part of investing. Why complain?

Penguin International Limited certainly worth more than $0.65.

Jardine Matheson

A decent conglomerate with lot of businesses and mainly in Asia. Most of the businesses range from average to good. Even if some lines are not in top condition, they are not in worrying state. The ROE is reflective of it as well. Management remain consistent but recent years acquisitions is somehow on the expensive side, especially those in China.

Why don’t you wait on your ass? Perhaps the down cycle of some businesses push the management to jump the gun. I don’t know. Really hope JMH is as discipline in acquisition as in share buyback.

I believe JMH have conducted the biggest share buyback for all locally listed co.(primary and secondary listing) since COVID-19 and I believe at this point, buyback already crossed over USD1B. I was hoping that the share price keep depressed longer at USD40 to USD45 but well, share price jumped and JMH is still buying back at around USD55 to USD57. At a price where I still support.

My thoughts on their share buyback is a reflective on what I should do.

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