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.

 

PBB - One Truly Great Share in Bursa Malaysia

PBB -  One Truly

Great Share in

Bursa Malaysia

If there is a share that most investors will regret for not buying and keeping it  until today, what share would that be? Yes, this is an interesting question and I am sure many investors would start to scratch their heads and think and think.

After all, there are over one thousands companies in Bursa Malaysia and it is definitely not an easy question for an right or wrong answer from any investor.

But if someone were to pose this name one great share in Bursa Malaysia, my answer must be that solid as a rock banking company, Public Bank Berhad. (PBB). A fifty year old company having listed in 1967 (at that time I was just five years old), PBB today is one of Malaysia's biggest banking giant with business spawning throughout many regions in the world.

Just recently PBB reported its 4th Quarterly Result for Financial Year 2017.  It earned RM1.49bil from revenue of RM5.08bil. For full financial year ended Dec 31, 2016, its revenue broke the RM20bil mark underpinned by continued growth in the net interest income and fee and commission income. Net profit increased to RM5.2bil.

Now I am going to say this. I am very poor in Mathematics or even accounting. But when we are talking about revenue in business, am I right to say that it mean all money collected by the company is considered revenue and then it will be used to offset all operating expenses including tax before we derive to the final net profit figure.

If this is so, then its full year net profit of RM5.2bil is something like a 25% margin from its revenue of RM20.1bil. This is considered a very high margin business. Although I or most of the average Joes will never understand the very complicated of banking accounting, but in a simple layer way of looking at it, the profit margins must be tantalising.

Just imagine if you are a air conditioner seller and your profit margin is 25%. Anyway I am most probably wrong because I shall never understand how banking business or its system is run.

PBB also continues to be profitable year after year despite going through several world crisis that sent many other companies to their knees. Its profits continue to ascend steadily and gradually over the years with their prudent management way of running a typical business.

To many Chinese, they see PBB as being managed properly in a China man style of way that will always be safe to put in their money and secured business dealings like taking car or housing loans.

Many customers particularly the Chinese would feel very comfortable and ease to do their banking needs at any PBB banks. Not because they are racist, but because the working culture is very customers friendly.

I am not saying other banks are not customers friendly. They are, too. But the feeling when you step in a PBB bank is you can feel all the staffs are ready on their toes to attend virtually to your needs most of the times.

I know of one particular PBB branch in Bayan Baru where the newly branch head was seen busily assisting in the front counter apart from the occasional moments she has to approve or sign endless documents.

I didn't realise she was a branch head until a customer service staff introduced her to me. When the head is also on the ground actions, you can imagine the motivation feeling of all those under her striving to do even better.

Back to PBB, the remarkable thing is its share price generated immense wealth for those early enough to invest in it.

According to its 2015 Annual Report, assuming a shareholder of PBB had bought 1,000 shares in 1967 and subscribed for all rights issues to date and not sold any PBB shares, his shares would balloon to 148,938 PBB shares worth RM2.7 million based on the share price at RM18.52 at the end of 2015. Total gross dividends received amounted to RM1 million whilst having a capital outlay of RM235,612, including subscription for all rights issues.

How many companies can generate such kind of gigantic returns all those fifty years? In fact, even those late investors investing in any period from year one right up to 2015 would see their investment remaining positive and receiving regular dividends.

Even at this very moment, PBB closed at RM20.00 on Feb 17, 2017. At RM20, it is trading near its new 52-week high of RM20.28.

Why I did not pick up a single PBB shares since I started investing in 1993 is a mystery to me? How could I have missed out such steady company all these while? How could my radar not pick up PBB at all?

Nevertheless I have decided to add banking share to my Basket of Defensive Stocks portfolio. I don't think I have ever bought any banking stock at all in my lifetime if my memory is still vivid.

Buying 4,000 shares of

Affin Holdings Berhad

on Feb 13, 2017 at RM2.49

Affin is a very small banking company that has a fair yield record of paying dividends. It continues to be stay profitable  for many quarters.  At this purchase price, it is not far from its 52-week high price of RM2.57 done on Feb 17.

Well, for the first time ever, my Basket of Defensive Stocks have seen more stocks in positive territory than negative. At closing time on Feb 17, 2017, there are six positive stocks and four negative stocks. But the more pertinent question is did the portfolios makes any return at this stage so far?

Well, I am glad to report that the answer is YES, albeit a mere profit of RM1,140.00.

The Allure of Regular Good Dividends

The Allure

of Regular

Good Dividends

Companies that have a good track record of paying regular dividends (anything between 2% and more) are always an attraction to me. Not that I will necessary invest in them, but at least they would in my radar of attention from time to time.

There are actually too many companies on Bursa Malaysia that fits easily into this criteria of mine. So one has to be selective in choosing certain companies which apart from able to pay this range of dividends, their business must also be sustainable in the long run.

Another good point would be if the company is fundamentally sound with minimal debt or better still zero debt. It would be even more wonderful if the company is loaded with cash as well.

Surprisingly on Bursa Malaysia, many of these companies are actually not  actively traded most of the times. It is like the majority of investors of such companies are not bothered by the daily movements of stocks market.

Rather these investors are just happy and contended enough to receive their regular half yearly, quarterly or yearly dividends. Your truly is one such investor if one is to take a closer look at most of my shares all those years.

The remarkable wonder is such companies become almost free or more than free after a number of years of keeping. Two of my more than decade old stocks, Fima Corporation Bhd (Fimacor) and Harrisons Holdings (M) Bhd, (Harrisons) are more than free shares after leaving them untouched regardless of what happened to the world. Not only that, their current share prices are even higher than my previous purchase price.

Keck Seng (M) Bhd, another asset rich and cash rich company which is currently out of flavour and limelight as well, is another free shares for my spouse after keeping it more seventeen years since Nov 2, 1999. The consistent twice yearly dividends received all those years have more than offset the purchase price of RM1.65. Including the bonus 500 shares received means the current price of RM4.84 is still worth easily RM7.26.

LPI Capital Bhd (LPI) is also another superb regular dividends paying company where the dividends seem to grow more and more each year gradually without investor realising it. Dividends received for Financial Year 2012 to 2015 raised gradually from RM325.00, RM350.00, RM375.00 and RM525.00 respectively. For Financial Year 2016, an interim dividends of RM187.50 was paid on Aug 3, 2016.

LPI has yet to announce its final 4th Quarterly Result by this time which is rather a bit unprecedented in my opinion. In the previous few years, LPI used to the first to announce its Quarterly results in every quarter or the rare occasions, by the second or third week of the month.

Instead its senior siblings, Public Bank Berhad superseded LPI in announcing its 4th Quarter Result on Feb 2. It was a strong expected good results.

Anyway, I am confident LPI will also follow suit with an equally impressive 4th Quarterly Result, anytime to be announced next week. I look forward to another final dividends. The current share price of LPI at RM17.18 on Feb 3 means my 750 shares is easily worth RM12,885.00 when compared to my original capital. What a such good investment although I was a late comer to invest in this wonderful solid company.

My basket of defensive stocks is one typical example where the companies invested are expected to pay regular dividends throughout the years again and again although there is no guarantee of that.

Although most of the share prices are below my original purchase price, but the dividends received since the last one year amounted to quiet a good sizeable amount. But as I have already stated that for easier calculations of how my basket of defensive stocks will perform in the longer run, first year dividends received will not be taken into account to offset the selling and buying brokerages charges. Unless the first year dividends is a rather big amount, it will be taken into account.

To date my basket of defensive stocks have received/qualified for a total amount of RM1,800.00 in dividends. At least this dividends can give me some happy Chinese New Year mini ang pow money to enjoy.

On this happy festival joys, a very Happy, Prosperous and even more important, Healthy Chinese New Year to all of you.

Cheers and Gong Xi Fa Cai!