Investing is boring

Investing is boring

A recent blog about whether investing is boring or not caught my attention  with great interest. To many different types of investors, boring can be for some or not or even a very subjective word.

To those who love to ply their activities frequently especially going for short term gain, they will not find investment boring. The thrills of going in and out hoping for some quick gains will excite them more than any other activities of the day can match.

These types of investors are most likely be busy focussing on investment apart from their daily works. They would be checking on the movement of share prices now and then easily as most phone users are connected with data plans.

Such type of investors are unlikely to win big in the market as their focus is only making a small quick gain each time an opportunity arises.

But the real type of investors who are able to win big in the market are the one who finds investment boring. They focus on good quality stocks and are willing to ignore short term price volatility most of the times.

They are happy and contended to receive dividends now and then and are  willing to stay long with their stocks for years. As such, these type of investors are not active players most of the times. Remisers are likely to run out of business if most of their clients are boring investors.

Personally, I also find the stock market boring with no major happenings that affect the movement of prices. I didn't even pay attention to share price most of the times or even discuss at all. There are days I only read the business news pages to find out if there is any major corporate movements and totally ignore the share price pages.

The other day, my spouse casually asked me why I didn't mention anything or any news about stock market for quiet some time.

My reply was it is business as usual with no major issues happening, hence most of the shares should be trading within an expecting range. Of course there could be sudden wild fluctuation of prices, but normally a good quality stock would bounce back within a reasonable time.

If one wants to win big in the stock market, one must be prepared to hold on to those good quality stocks that are growth earners or consistently consistent with profits.

Many of my friends do not invest in the long term most of the times when I checked with them. Therefor, it is not a surprise to me at all that most of such short term investors do not record significant profits in their trading careers.

As usual, life is a matter of choices in many circumstances. No right no wrong, but I choose to invest and have a boring time with my investment allowing them to grow slowly over the period of time and then it is never to late to harvest the matured fruit slowly from the tree.

Selling all my 3,000 shares of

Cycle & Carriage Bintang Berhad (CCB)

on March 10, 2017 at RM2.88

CCB  reported a very dismal 4th Qtr 2016 results. It earned only a meagre earning per share of 1.63 sen. In fact, it is the third straight decline of quarterly results, from 19.53 sen in 2nd Qtr to 8.22 sen for 3rd Qtr 2016.

This is despite the sales of Mercedes-Benz vehicles achieving another stellar performance in 2016, with the brand achieving an all-time record sales figure of 11,779 vehicles, a nine percent improvement over the 2015 total of 10,845 units.

Yet its continuos declination of quarterly profit is not in tandem with its robust sales of vehicles. What could be the reason for this? Is it due to stiff competition that resulted in huge rebate and discount being given out that caused its profit margin to get lesser and lesser?

One sure reason is because CCB sold most of its cars sold were due to the sales of lower-margin vehicles, such as C-Class. Besides, it is believed distributors such as CCB and Hap Seng Star Sdn. Bhd. earn an average of only 4-5% on car sales and Mercedes-Benz Malaysia Sdn. Bhd. (MBM) controls the sales margin.

At times especially towards the end of the year, most distributors will even try to sell their cars with hefty rebates (or even at a loss) to clear the stock.

I have decided to sell off my shares in CCB and switched to Affin Holdings Berhad again.

Buying 3,000 shares of

Affin Holdings Berhad

on March 10, 2017 at RM2.86

Affin reported a commendable 4th Qtr results of 8.82 sen. For Financial year 2016, its total earning is 29.03 sen. At current price, it is trading at a price earning ratio of ten which is among the lowest in the banking industry.

If it can sustain such earnings in the coming quarters, I believe Affin would not be traded at such low PE anymore. As such, I had decided to purchase another 3,000 shares at RM2.86 which is near its new 52-week of RM2.89.

How ironically that I sold my CCB at near its 52-week low and used the proceeds to buy Affin which is near its 52-week high.

When employees get less than shareholders

When employees

get less than shareholders

  

I have always find it puzzling each time a public listed company announces its full year result's earnings and decided to pay our more than its actual earnings. Is there anything wrong for the companies to do so?

While shareholders are rejoiced of the dividends knowing the company they invested earned less and yet decided to pay more actually, the same cannot be felt by the employees of that particular company concerned.

Worse still, if the employees' benefits like bonuses are reduced in that particular year.

My good friend working at the Star Media Group Berhad has informed me that the leading English newspaper company has been cutting bonuses over the last  few years in tandem with continuous weakening advertising expenditures.

He said bonuses of five to six months  or even more during the last fifteen years has been reduced drastically especially in the last three years.

Gone were the days when apart from its usual two months bonuses paid in every December, the additional bonuses usually paid in January (just nice for Chinese New Year celebration's expenses) and another one in September (in conjunction with Star's birthday celebration).

During the birthday celebration of Star, employees and ex-employees are treated to a sumptuous buffet spread. One can imagine the enjoyment during the feast knowing a "birthday" bonus is there in the pocket.

That is not all. In between the January and September bonus, it is expected to get another one or two months bonus as well. But all goodies finally come to an end. First its birthday bonus were gone three years ago, then its January's bonus was also gone the following year. Then the final curtain came down when the in-between bonuses were gone as well.

It was replaced by bonus based on individual's key performance index and it is anyone's guess that such system is always welcomed by the employees as individual's  evaluation can be very subjective.

Another freelance writer lamented about his drastic commission reduction for his once or twice articles published in the paper has seen his fee cut by 50%. Reason is his article is no longer in the main paper and has been move to the Metro pages. But a 50% cut is actually a big figure for anyone. Imagine this happening to your income and how are you going to find the motivation anymore?

Further utilisation to the maximum of staff also occurred recently. A sport reporter who has been covering sports has been directed to cover daily happenings as well. This "new directive" is perhaps to save cost as there are days when no major sports events are going on and hence it is better to use the sport reporter. Well, he resigned in apparent of not happy with this so called "new directive."

While all such known cost cutting measures were being carried out in a bid to reduce operation costs, it is utterly puzzling to me that Star didn't preach what it does when it comes to paying out dividends.

For Financial Year 2016, it is paying out a total 18 sen dividends when it actually earned only 14.89 sen. In short, it is over-paying out from its cash reserves which has been dwindling down from RM632 million a year ago to RM499 million as at end of December 2016.

In 2014, it also paid 18 sen dividend when it earned 15.1 sen only. Will such trend of paying more than it earns continues again in the future years for Star?

Meantime, there would be new ways of cost cutting measures being implemented over the times to come for its employees. I just hope it won't come to one day when there would be totally no bonus to be paid out to its employees.

After all, its main print business segment is experiencing a continuous declining revenue and profits over the last few years. To sum it up how tough it is, its Financial Year 2016's normalised earnings dropped by as much as 49.5% compared to 2015.

Coincidentally, the freelance writer's commission also dropped by as much as 50%, an almost identical percentage.