The Super Investor Debate

The Super Investor Debate

Along the journey into the investment world, one would have experienced  winnings and losing from time to time. Unless you are one who only  trades once in your lifetime, then either you are a clear cut winner or loser. But of course most of us do not trade once in our lifetime, rather many times over the periods of years.

The question is do you make more money from your profitable trades or lose more money from your losing trades? Only the individual will know this to himself and no one else. After all, not many people are keen to tell or share to others how much they made from investment or the other way round.

Even a spouse might not want to tell his other half of his winnings from stock market because the wife might want to "impose her income tax" on his winnings. Ha ha, I am just joking although this is true for certain couples when it comes to ringgit and sen issue.

This brings me to the question of if you have been winning more than losing, can you consider yourself a Super Investor? What is the definition of a Super Investor? Is there a clear spelt out written statement that one must win this or that amount to be considered a Super Investor?

Clearly, I can't find a clear definition of it although numerous accord of this prestigious title has been given to so many world famous investors such as Warren Buffet (Check names again) being the top on the mind of most of us. We also have our own locals Super Investors too although it remains to be seen whether it was universally accepted by the majority or minority.

Recently too, a blogger posted about the debate of comparing Super Investors to another one and the lists keep going on. In the end, her views were that there should not be comparison to one another at all. I couldn't agree with her more. Everyone of us here is somehow a super investor in her own way one way or another. As long as one continues to make more  money than losing money, one is on the right track to increase his wealth faster than just keeping inside the bank.

But how many of us can make more winning trades than losing trades over the times? And it is not about winning trades. A few of the winning trades must be Big Winners such as rising more than 100% or at least a ringgit and above. Achieving a few Big Winners can make a very big difference to your winnings' margin.

Then also it is not about losing a few trades. The losing trades must also not be a massive one or else it will be very difficult to recover back your winnings ones.

To simplify this, one must make a few Big Winnings trades among those normal winnings trades and must also NOT LOSE at all any BIG losses in those few losing trades. If one can achieve this more often in the stock market, one is going to see his wealth increasing at a faster pace than he can imagine.

One way to monitor this is to record all those buying and selling details and keep them in a record to that one can see clearly whether one has been winning or losing in a big or small way.

By keeping records, it lets you see clearly how much you have been losing or winning and thus let you realised how much progress or (the other way round) you have been faring with your investment in the stock market. This also let you know if you have been more consistently right with your judgement/analysis/strategies you have applied in your approach.

Then you can safely say to yourself if you earn the title of Super Investor or Super Investor when it comes to losing, haha.

Looking for stable high dividend stocks

Stable companies that continue to pay regular good dividends that are on par or even better than banks' average fixed deposit of 4% are companies that will always be in vogue from time to time.

Several articles appeared through online by several bloggers and by print that appeared in The Edge Weekly and Focus Malaysia from time to time always catch the attention of many, especially conservative investors who are looking not so much for growth, but rather a stable consistent flow of dividends credited into their bank account. I have kept several shares of these companies for many years, a few are more than ten years old and it is always a joys when these money are credited in.

In the early days, the joys were through by post when you received them through cheques. I still remembered those days when I gleefully got it and write down my name and account number behind and have it banked in.

For someone like me who should be retiring comes February 2017, but thanks to the Revised Retirement Age to 60, I would be having the option to whether to continue or decide to retire anytime I wish to.

At my age, I am looking for even more such stocks to invest and hopefully to receive dividends more compared if I keep them in the banks. Of course I am also practising asset allocation too, meaning I would not be all my money into stocks, I still need to keep some in banks just in case stock market might go through another world major crisis.

Anyway, I am searching for more such stable stocks to be added into my Basket of Defensive Stocks from time to time. There are plenty, but I am just practising patience to buy them at appropriate time.

Keep in touch.

From zero to hero to zero again

From zero to hero

to zero again

What can I say about Focus Lumber Berhad's share price performance since I started investing it in the beginning last year? It's share price had gone like one round the world and back to its starting point, I think, haha.

My huge paper profit has just vanished into thin air just like that. I think the declining of its share price is as fast as its rising share price too.

For those who went in for short term and have gone out with some profits, I would like to congratulate them for their right or lucky execution to exit. For those who bought higher than the current price or even near its RM3.09 peaks and still holding, I share your disappointment and pain as well.

For those like me who had been sitting on a near 100% paper profit gain and let it disappear off just like that, do not feel sad although not every one will feel the same. Some might still feel very hati sakit for letting off an wonderful opportunity to let go of such a massive paper profit gain.

I wonder if there are some who might feel bad or sorry for following me in this Focus Lumber investment all the way. If you feel so, you have reason to be. I feel bad too because I didn't sell when there is a big profit to take. Some of you might feel to take profit at certain stage, but because I wasn't taking profit yet, some of you might hold off the idea of selling and instead in the same boat as me now.

So what went wrong

for Focus Lumber actually?

Here, I would like to break down into several sections to see a clearer picture of what were the good points (if any depending on individual's perceptions) and the disappointing points.

Revenue

Revenue for Quarter Two 2016 was RM52.74 million which was a slight decrease of just RM0.55 million from the preceding quarter. So we can safely say it is still business as usual which should be alright for its usual business operation. What one should fear is there is a gradual decrease of revenue indicating that business are dwindling down and that is a bad sign which investor should take note of.

Higher Quarterly Profit

Quarter Two 2016 profit of 4.5 sen was 40% higher than its preceding quarter of 3.21 sen. Isn't this an improving result which investor should rejoice if we are able to see our companies reporting a stronger set of result than its preceding quarter?

I would be happy if this sort of 4.5 sen earnings per share is just maintained for many more quarters to come. It would amount to an annualised 18 sen  per share which in my opinion, a dividend of 8 to 10 sen would still be in the comfortable range for Focus Lumber to pay out.

Absence of a Dividend Announcement

I think many investors are disappointed of an absence of an expected interim dividend (which was a five sen dividend last year) that did not happen. This must have put off many dividend loving investors to invest in this stock.

I understand that there are many conservative investors who are dividends lovers just like me. A stock that is able to pay a reasonable regular dividends that amount to nearly 5% or more would normally have a steady base on its share price.

Increased of fund in

Other Investment

Its cash hoard has been reduced to RM 19,614 million as at June 2016 while its Other Investment sees an increase to RM62,510 million. According to its Annual Report 2015, the fund is invested in something called Structured Investment where it will earns 3.08% per annum, plus bonus interest of 2% for the first quarter of the year for Year 1, followed by 0.34% per annum, plus enhanced interest (3M KLIBOR) of 2.7% per annum for the number of days that the daily 3M KLIBOR is fixed at or below a predefined level throughout Year 2-5.

The purpose in this investment is to provide income for investors through investments in fixed deposits with financial institutions and/or money market instruments. The weighted average effective interest rate at Dec 31, 2015 was 3.61%.

As an investor, I think it is alright as long as the management would want to enhance more returns from this hoard of cash, but then there should be a reasonable amount for such investment that is comfortable, certainly not more than 50%.

What if such investment goes awry? Who would suffer the massive loss? In such investment, there is always some new potential risk which might effect it without a warning.

Why not return some of its money to shareholders in the form of special dividends and let individual investor decide what to do with their windfall? Isn't this most individual investor would prefer?

I am 100% sure if management allows minority to vote for special dividend or investment in this structured typed, the majority minorities would vote for the former. But sadly, management decided on their own which must have not gone down well as reflected in its share price having a declination   to RM1.54 as at September 2, 2016.

Management must understand all this money belongs to all shareholders although the majority minorities are not in the power to decide as the minority majorities shareholders are.

Is there anything to learn

from this episode?

Is there anything we can learn from here? How could a much touted rising star suddenly in just a few months is ditched so badly that those who still keep faith in it must be reeling their mistake badly. Is is better to take profit rather than keeping for long term investment?

In this instance, short term investors who profited are mostly likely to argue it is always better to trade short term rather than long term. In this particular case, they were 100% right and I congratulate them for their precise judgement.

For those who are still holding like me, we can only hope that all will turn up well in the end. We never know when if there could be a new catalyst again that will make share price rise again.

By the way, have a wonderful belated Merdeka Day!!!!!!!!

The Very Importance of Margin of Safety

The Very Importance

of Margin of Safety

There is a famous rule in investing that is rule number one : Never lose money and rule number two: always remember rule number one.

Unfortunately it is almost impossible not to ever experience losses in stock market unless one is not a human and something else or have a time machine that can go travel back to time or ahead. Or perhaps unless one never invest in stock market at all.

I have my share of experiencing real cash losses in some stocks in my lifetime too. It is never an easy feeling when one cuts losses in a bad investment. The feeling of "hati sakit" is one you know I know.

So one needs to avoid losing money in the stock market as much as possible. If one cannot accept losing money, one should totally stay out from investing and put all his money in Fixed Deposits. At least he can sleep well peacefully every night. Ironically I have a close relative who does that and nothing else when it comes to money matters. He is so conservative and cautious is his approach that he doesn't trust investment at all even though he knew about my interest in investing.

So what kind of strategies should be applied if one wishes to minimise his losses? I do not think there is a standard strategy for this. Rather I believed

many of us would have their own definitions of entering the market based on their version of margin of safety.

Here are two I like to share which again are my own and not necessary suitable or applicable to anyone. But if it works for me, then it is fine.

Buying at near 52-week low or a few years low

Strangely while this sounds easy to understand, it is also difficult to apply because there are always detractors who will advise against this by saying : don't catch a falling knife. But if one waits till the falling knife has landed, then one waits forever unless that particular stock drops to as low as 5 sen or less which is most probably unlikely for most stocks.

As long as that particular stocks continues with its usual profiting business (better still paying some decent dividends usually), buying it near its 52-week low is actually quiet a low risk buy. The stock might still go down to another new 52-week low after one enters, but then again one has already secured a big margin of safety compared to all those who bought above the 52-week low.

If one remembered when oil price was skidding to new lows in late 2014, many stocks were skidding to new 52-week lows. I bought three stocks over a period of three months : Century Logistics Holdings Berhad, Supermax Corporation Berhad and Thong Guan Industries Bhd. Supermax and Thong Guan were trading at new 52-week lows. But what happened today is Thong Guan has more than doubled its share price to above RM4 (and still standing there) while Supermax went to touch a high of RM3.54 in early January 2016 (I admitted I was lucky enough to sell off at RM3.52, no reasons for selling other than to take profits sometimes). Supermax today is trading just above RM2.

As for Century Logistics, it was not exactly trading near its 52-week high, rather I liked for its superior dividends of 5% plus which should support its share price.

Buying when it has fallen substantially from its peak price but not 52-week low

There are times too when we notice a particular stock has been going up higher and higher by the days due to some good news like a recent announced quarterly results. It sounds too tempting if one does not jump in before the price goes even higher.

Normally in this type of case, I feel I might have missed the early boat and now if to buy must pay a higher price. Unless this particular stock's fundamental and future predicted earnings can convince me deep enough, I do not mind entering even at that stage. I had done that before and has been richly rewarded too on numerous occasions. But of course if one is to practise patience and caution, one can always wait for its price to peak at certain stage and allow profit-taking to step in. Then there were be a price retreating period where one must set a target to enter.

A few recent examples were Chin Well Holdings Berhad (which had gone to touch a high of RM2.34 on Jan 7, 2016) which I was interested, but I set a target of RM1.70 if it ever retreated and it did).

Cycle & Carriage Bintang  Bhd (CCB) which soared to nearly RM3.93 on Jan 11, 2016) when it was shared by a few famous bloggers which caught my attention. I waited for it to retreat and my price below RM3.40 which it did.

Another was BP Plastics Holding Berhad (which soared to a high of RM2.02 on Jan 15, 2016). It was a stock I had kept for many many years and sold off at RM1.92 early  this year for a more than 100% profit. I was hoping it would retreat back to a more realistic comfortable level price which was below RM1.60. And it just did when the market became negative for most export oriented stocks later.

So having patience and setting target price for stocks which had surged to new high (but stocks which should be good to keep for longer terms) when there is a retreat can be cost saving and also one has some reasonable big margin of safety in it.

Finally Focus Lumber Berhad which reported a disappointing set of result for Quarter One 2016 (but still a profitable result) saw a massive selling spree which saw its share price spiralling all the way down from a peak of RM3.09 in January to as low as RM1.68 recently. That is a very big retreat of more than 45% which must be one of the most shocking drops for its long term shareholders (including yours truly).

It is currently trading around RM1.70 plus which seems to be its more or less stabilising point where it seems not many are eager to sell any lower or not many are eager to pay more. Note that its 52-week low is RM1.27.

Mind you, Focus Lumber is a good fundamental stock that is cash rich and its dividends has been quite generous when it is able to earn more. So should one enters Focus Lumber now knowing at this stage, the margin of safety is such a massive one of 45%?

It depends on your guts, but I knew a guy has recently bought 3,000 shares of Focus Lumber of July 22, 2016 at RM1.77. If you really care to know who he is, check the latest Kassim's Basket of Defensive Stocks. Dare to follow him again?

Yes, you read it correctly.

I have bought more shares of Focus Lumber

on July 22, 2016 at RM1.77 which is significantly selling at a massive 45% off from its peak price of RM3.09 in January 2016. The margin of safety is even more now.