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!

Ten bagger stock

Ten bagger stock

Ten bagger is an investment term coined by Peter Lynch in his book, "One Up On Wall Street." This refers to an investment which is worth ten times its original purchase price, and was adapted from baseball where "bag" is a casual term for "base", and extra-base hits like doubles, triples, and home runs are colloquially called two-, three-, or four-baggers.

Another line from the internet described a ten bagger stock as A stock whose price multiplies 10 times over, leaving the shareholder euphoric, giddy, and ... rich.

So we all invest in Bursa Malaysia hoping that one of our investment will turn into that elusive Ten bagger stock one day. Imagine that our one thousand investment becomes ten thousand or a ten thousand investment becomes one hundred thousand in value. Sounds great.

Fortunately in Bursa Malaysia, ten bagger stocks are there to be "discovered" from time to time if one is sharp or lucky enough to be one the early investors. Take the recent case of one stock Datasonic Group Berhad. Its share price shot up from below RM1 to RM10 (before bonus issues) in a space of less than two years (I believed I am right about this) and another one, DKSH Holdings Berhad. Investors who bought the stock at 39 sen on April 20, 2009 and holding until today must have been more than happy than anyone else. DKSH touched a high of RM9.20 on March 31, 2004. If you included the dividends all those years, definitely there must be several hundreds of dividends including those special dividends.

Unfortunately, many investors especially the retailers do not possess that ability to hold on to their massive winning stocks. They are easily distracted by the daily movements that caused the share price to move up and down. I personally know of one of my readers (I discussed with him about Harrisons before that blog was posted) and he told me years ago, he bought some DKSH shares at RM1.80 and sold off for just RM2.20! He was obviously affected and influenced by certain factors internally and externally at that time. When he looks at the present share price of DKSH, he was really mad with himself. (I think he scolded himself silently deep inside his heart, ha ha ...)

Anyway, despite my more than 20 years experience of investing in Bursa Malaysia, I must truly claim that I have yet to have invested in one stock that turns out to be a ten bagger stock for me! Yes, you hear me right, Kassim is still not able to claim he has that ten bagger stock. Perhaps the nearest stock I can claim to have is that strong potential company called Keck Seng Berhad. Even based on today's closing price of RM6.99 at time of posting on May 2, 2014, my remaining 1,500 shares of Keck Seng (bought at RM1.65 on Nov 2, 1999) investment will only be RM10,485.00. Together with all the dividends received, it still did not add up OFFICIALLY as a ten bagger stock.

But don't despair if you are like me. There is nothing wrong if we are not able to have one ten bagger stock. It is easier to aim for two or three bagger stocks. All one needs to do is to have that ability (or luck, depending on how you see it) to be able to invest in stocks that generated consistent profits and then hold on over a mid to long term period (3 years or more). Sometimes, that stock we hold slowly turns up to be potential diamonds and its share price will start to move up north over that period. Be brave enough to hold on as long as the business fundamental of the company remains.

Imagine when you have a few stocks of that kind in your portfolios achieving that kinds of returns and you will be amazed of your huge returns when all those profits are added up together.

Take my two recent profit takings of Hup Seng and Pharmaniaga shares. Although both were not ten bagger stocks, but the amount of profits are something I believed many investors would be more than happy to have that. That is why I believed that we should not be bothered by huge returns from investing in Bursa Malaysia. I believed we should just focus on understanding the simple business of the our stocks and think ourselves as business partners. In this way, we won't be so much bothered by the daily fluctuations of the share price (due to daily changing various factors which will have an impact).

We feel great when dividends are credited into our bank, especially dividends regular dividends that are on par or even slightly above the bank's fixed interest rate.

We should see ourselves as BUSINESS OWNERS of various companies in Bursa Malaysia.

LPI Capital Berhad

- a how many bagger stock?

Recently I received my LPI's Annual Report 2013. As I read through the pages, I came across this part which I would like to share with readers about the returns of LPI if one had invested :

Over the medium-term period of 5 years

A shareholder of LPI who purchased 1,000 LPI shares at a price of RM9.45 per share at the beginning of 2009 or an investment of RM9,450 and held them for 5 years to the end of 2013 would have received gross dividends amounting to RM6,463 and would have held 1,600 LPI shares as at the end of 2013. At the price of RM17.44 per ordinary share at the end of 2013, the shareholder would have shares worth RM27,904 which together with the gross dividends of RM6,463 and would give the shareholder an exceptionally high annual rate of return on investment of 32.4% or a total return of 238.6% for the 5-year period.

If a shareholder of LPI had bought 1,000 shares

in LPI when it was listed in 1993,

and assuming the shareholder had subscribed for every right issue to date and had not sold any of the shares, she/ he would have, at the end of 2013, 8,640 LPI shares worth RM150,682, based on the share price of LPI shares of RM17.44 as at the end of 2013. In addition, she/ he would have also received a total gross dividend of RM57,894 over the years which LPI has unfailingly paid every year since its listing in 1993.

With a capital outlay of RM10,730, including subscription for all rights issues, the total return to this shareholder would be RM197,846 or a remarkable average rate of return of 26.1% annually for each of the 20 years that this shareholder has held the shares in LPI since it was listed in 1993 or a total return of 1,843.9% for the period.

So how many bagger stock is LPI?

A simple idea to use less plastic

- Have you start the practice?

Remember how I shared from my previous blogs about how to use less plastic when we go shopping in the hypermarket posted on Apr 4? I do not  know really at all if any reader has adopt my idea at all, but here is what I am going to share of my experience with several hypermarkets in Penang.

The response from the hypermarket's assistants has been a tremendous! They gave me the thumbs up! They actually supported me using the recycled white plastic sheets again and again! Not only that, my home has less white plastic sheets to keep too! Definitely a WIN-WIN-WIN situation for me, the hypermarkets and most important of all, the environment.

If there is anyone who is also practicing my ideas or perhaps has some different ideas of how to use less plastic, please share or email me at kassim123888@gmail.com

Nothing makes my day more happy knowing that someone is also supporting the environment by using less plastics!