The Importance of Lady Luck

 

The Importance of Lady Luck

In the early 1970s to the late 1980s, one club dominated the English Premier League. The club was Liverpool FC, very famous for its “You shall never walk alone” slogan. So dominance was Liverpool that I became sick to see them winning titles here and there every now and then. Somehow I became

anti-Liverpool. I would support any teams that played against Liverpool.

Then later came the challenge of Manchester United under the then-new boss Sir Alex Ferguson. After a few years, Manchester United overtook Liverpool as the big boys of the English Premier League and went to win a record 20th English Premier League title.

Guess what? I too became anti-Manchester United. Again, I will support any teams that take on them and nothing makes my day  more merry than knowing Manchester United is beaten, of course only on very few occasions.

However, the recent concluded Barclay Premier League’s (BPL) season was one hell of a season for Manchester United. They lost so many matches and many teams discovered Old Trafford was actually not a haunting ground for them, but for the devils themselves!

My two favorite teams Manchester City and Arsenal provided me great joys and happiness in winning the Premier League and FA Cup titles respectively. At the closing stages of the BPL, destiny was actually in the hands of Liverpool. But as I have always said so many times that we needed tremendous dose of consistent  luck if one is to win big. Unfortunately luck deserted Liverpool during the last crucial matches against Chelsea and Crystal Palace. Against Chelsea, Liverpool dominated and missed chances after chances and the normally reliable Mr Fantastic Captain, Steven Gerrard “slipped” at the most unfortunate time and allowed Ba to score the first goal. Against Crystal Palace, with less then 15 minutes to go and three goals up, they allowed Palace to score three times from perhaps the only last three Palace’s attacks!

From the above, it is clear that it is possible to win and win again for a long period of times, but there are also times when it is on the receiving ends. Perhaps the difference is that one must still have some lucks along the way.

In the investment world, luck plays an important role, too. Sometimes there are some stocks which are very attractive to invest. The reasons could be undervalued, cash-rich, having a simple business with consistent good profits. Somehow and sometimes, we just ignore or adopt a “tidak-apa” or “wait and see later” attitude towards that stocks. However time will be the final judge later. Here are my two lucky and well ... unlucky ones!

The Lucky Miss in HB Global!

Luck played such a very important part when it comes to investing for me this time. Several years ago, I was very attracted to HB GLobal Limited (previously Sozo Bhd). After its listing, it was just traded at above its IPO price of 80 sen. Its cash per share was almost its trading share price. It was in the sunset business as its management was upbeat about the prospects of its frozen business in China. Readers will know that I am one type of investor who look for cash rich company to invest. Even I was sharing this cash-rich stock with some of my friends although I did caution that this is one Chinese stock from China with business over there faraway while we the investors are here in Malaysia.

As I was going for one last analysis before investing in Sozo (I would most probably be purchasing twenty to thirty thousand shares), I asked myself one simple question: This company’s operation is in China. It is going to buy land for its expansion of its duck farm. How much transparency will their business dealing be?

Also at that time (even in present time), most Chinese stocks were trading at a big discount from their IPO prices. That didn’t give me the extra secured reason to invest. In the end, I did not purchase a single share in the company.

At its last price of 9 sen, I would be starring at a huge major loss that would probably needed some much big massive winning trades to cover this colossus loss.

So the advise of being cautious most probably saved me this time.

The BIG Miss in DKSH!

My reluctance to invest in companies that carry debts also caused me to miss this big one, DKSH Holdings (M) Bhd. I knew about DKSH’s business and its potential. As I have been a shareholder of Harrisons Holdings (M) Bhd. for the last ten years, at some point of times, I did some checks on its business rivals and discovered the two were DKSH and to small extend, Yee Lee Corporation Bhd. At that time during my observation of DKSH, it was trading at less than RM2 while Harrisons was trading at around RM3.50.

Apart from their almost similar business models, the one difference between Harrisons and DKSH was that the former was growing its cash pile with its consistent good profits, the latter was carrying quiet some debts while its earnings were quiet at a moderate level.

Remember that I normally try not to invest in company that is carrying some degree of debts. But I know that if you own DKSH shares and as well shares in Harrisons, you are actually having the best of both worlds in this trading house business, because for Harrisons to accept Nestle’s business, most probably they would not be able to take on Dutch Lady’s business and again the Dutch Lady’s business would have to go to DKSH. Know I mean?

Had I invested in DKSH at that times, today, I would be sitting on a massive winning trade as its share price had stunningly risen from less than RM2 to a high of RM9.20 (which is actually more the double of Harrison’s current share price of RM3). The main reason I believed DKSH’s rise was its improving quarterly results and its increasing dividends payouts.

Again, I would be buying at least 10,000 shares and not 1,000 shares. Imagine I would be having a more than RM60K profits based on its current closing price of RM7.93 on May 23, 2014.

In conclusion, I seriously believed in Lady Luck in whatever we are doing. It could result in a razor sharp difference between winning big and losing big.

alwayswin111 asked me this question :

Do you think HUPSENG is worthwhile to buy now?

One good “Seng” is really one good hell of a stock that stunned me more than anyone else after I sold off my 3000 shares at RM6.11 on Nov 23, 2013. Hup Seng Industries Bhd. went further up to close above RM7.00 before the bonus split exercise. I would have thought that at RM6 plus, it was trading at a very rich valuations, obviously the market did not agree with me.

On May 20, 2014, Hup Seng released its 1st Qtr 2014 results showing an EPS of 1.19 sen. Annualised and the EPS would be somewhere around 4.8 sen. The present price of Hup Seng is RM1.14 and that would show a PE of 23. Compared to other similar stocks and one would find that Hup Seng’s PE is at a rich level. The reason could be “the premium” investors are willing to pay for this good dividend yield stock. Surprisingly, Hup Seng declared a special dividend of 1.5 sen which will be payable at a later date.

A stroll of its 1st Qtr’s notes revealed that amongst its three divisions (comprising Biscuit Manufacturing, Beverage Manufacturing and Trading Division), it is the Biscuit Division that provided the lion’s share of revenue of RM44 Million and profit of RM7.7 Million. The Beverage Division provided revenue of RM2.4 Million and profit of RM174,000. The Trading Division provided revenue of RM48 Million and profit of RM5.7 Million.

If Hup Seng is able to pay a total dividends of 5 sen to 7 sen for financial year 2014, then most probably, it is still a worthwhile buy!