November update

Cash Portfolio

Celestial’s 3Q revenue increased by 62% while net profit increased by 7.8%.  The lower rate of increase in profit is due to due to non-cash component of interest expenses on convertible bonds.  Company was able to increase the price of its product to mitigate higher cost of raw material.   Company is in progress to expand into production of bio-diesel, high protein nutrient beverages, power, noodles and pastries for 2008.

Midsouth completed its move to Lingxian plant at end September.  3Q and 9M results are positive with 9M revenue increased by 32 % and net profit increased by 21.5%.  Main contributor for increase is vehicles FRP and PP parts.  It is expected that firm will produce a good 2007 results.

Pacific Andes posted a strong 20081H results with revenue increased by 65.4% and net profit increased by 41.5%.  It is expected the group to continue with strong performance in 2H.

Received dividend of $41 from KODA.  Thank you.

I have purchased a small speculative stake in Lantrovision (50 lots at $0.06).  The micro cap has turned around from its loss in 2005 (due to bad debt) and has posted a 40% and 160% growth in revenue and net profit for FY2007.  The company provides design, implementation and installation of structured cabling system services.  I am unsure if company can consistently produce good results but the potential of company’s growth in the next few years is there. 

CPF Portfolio

Metro has announced $0.04 less tax interim dividend to further utilize the group Section 44A tax credit.  The group has posted a creditable 1H results with the shortfall in net profit attributed to change in value of short term investment.  The group is expected to gain from its disposal of Gurney Plaza in Penang and at the same time the closure of Tampines Metro will result in a drop of revenue from retail.  Metro City Beijing officially opened in September 2007 and this will lead to an increase in rental.

Received $153 and $19 from First Reit for dividend and capital reduction.  Thank you.

ComfortDelgro produced a consistent 3Q results.

I have bought 1 lot of Singapore Land at $8.45 which was 70% off its peak in September.  I do not quite understand the property sector but with its RNAV above $12, $8.45 seems a good entry price.  Not sure if I made the correct decision but I am confident that it will perform better with raising office rental and its price possession in the Marina area.

I also purchased 10 lots of Food Junction at $0.56 in view of its move to bring in more exclusive food stores to its food courts.  The group reported a drop of 19.2% in net profit for FY2007 largely attribute to the full disposal of Anhui Food Junction at a loss of 1.1 mil.  Food courts at Bugis and Great World City re-opened for business in September and October 2007 with the management pleased with the operation to date.  FY 2007 dividend is at $0.045 which gives a dividend yield of 8% at my purchase price.

October update

After selling Aberdeen China Opportunities Fund and Schroder European Alpha Equity Fund in September, I have decided to sell Aberdeen GEM and Lion Capital Korea Fund in October.  Primary reason is the volatility of the current market and personally do not think this exuberant mood can sustain.  So I have decided to take profit and no longer hold any unit trusts.

Celestial announced on 30^th Oct to begin production on High Protein Nutrient Noodles and High Protein Nutrient Pastries.  The production is expected to begin in last quarter 2008.  The construction will be funded internally (funds raised from convertible bonds).

Kingsmen Creative announced as of 30^th Sept, they have confirmed contracts of approximately $118.1 millions (2006 $86 million).  The confirmed contracts are of a value that is higher than the total revenue of $108.95 mil in 2006.  Hence, it is expected that the group is going to grow its top and bottom line by at least 20% for FY2007.

Food Junction, a F&B group which I used to hold finally opened its food court in Beijing.  They have also brought in Japanese omelet rice Rakeru in Bugis Junction with plan of opening another 2 stores in Singapore.  All these are positive movement by the group and I will probably purchase a small stake of the group next week.

Apex-Pal which operates Sakae Sushi opened its first Sakae in New York.  I like the enthusiasm of Douglas Foo and his bold vision to transform Sakae to a global brand.  The risk comes from the execution and highly competitive market.  Can he do it?  With expected lower bottom line for FY 2007, I will wait for a lower entry price.

OSIM has cut its loss in 3^rd Quarter.  Its core earning is back on track though for months, the company is still suffering a loss.  While it is expected that Brookstone is going to be profitable in Q4, FY2007 will still result in the company still making a loss.  It is time to go back to the group to anticipate a turnaround for FY2008?  This will not be my top priority as I am uncertain of its performance in the near future.

Company Review: First REIT (CPF)

First REIT is the first healthcare REIT that is listed on SGX focusing on Asian healthcare industry.  When listed in Dec 2006, its property portfolio primarily consists of Indonesian healthcare and healthcare-related assets.  They intend to grow its portfolio in Indonesia, Singapore, China, Malaysia, Thailand and Hong Kong.  The sponsor of First REIT is Lippo Karawaci, the largest listed broad based property company in Indonesia.

In 2007, the group has grown its portfolio to include 3 properties in Singapore.  Currently its portfolio consists of Siloam Gleneagles, Siloam Hospital West Jakarta, Siloam Hospital Surabaya, the Imperial Aryaduta Hotel & Country Club, Lengkok Nursing Home, Senja Nursing Home and Adam Rd Hospital.

Merrill Lynch initiated coverage on the group in February this year and based on the group’s valuation of asset comes out with a NAV of $0.89.  Estimated DPU for the company is $0.066 this year which translates to a dividend yield of 8.48% at my purchase price of $0.775 (10 lots).  For 2008, group will distribute a minimum 90% of its income.  Even if the DPU does not increase from further acquisition in 2008 and assuming 90% of income is distributed, dividend for 2008 will be $0.055 which is a yield of approximately 7.7%.  Though the risk is higher due to properties based in Indonesia, the high yield is enticing enough for me to have a share of this counter.

Company Review: Metro (CPF)

More well known for its departmental store, Metro in fact does better with its property business.  The group owns and operates several prime retail and office properties in Beijing, Shanghai, Guangzhou and Penang.  With the increase in properties prices and rents in major China cities, Metro is set to benefit from it.

Since the group is more geared towards property development, I use their NAV as a yardstick instead of PE and ROE.  I purchased 10 lots of Metro at an average price of $0.933, which translates to a discount of about 35% to its RNAV of $1.40.  Also, based on 2006 dividend, my current dividend yield stands at about 4.3%.  With Captial China Retail Reit having a yield of only two plus percent, Metro deserves a better price.

Company Review: ComfortDelgro (CPF)

ComfortDelgro is formed with the merger of Comfort and Delgro in 2003.  The company has stated upon merging, that the group aims to achieve 50% of its revenue from overseas operation within 5 to 7 years after merging and based on 2006 Annual Report, the company is well on its way.  The company has become the second largest land transport operator in 2006 with footprints in China, Australia, UK, Ireland, Vietnam and Malaysia.  Locally, the company owns SBSTransit, VICOM and Comfort Taxi fleets.  In 2006, the company has finally made a gain in NEL which will continue to do well with the North East getting more populated.  One major concern for the company is the volatile high oil price which has a negative financial impact on the company.  The group has coped with this problem quite well, continue to achieve reasonable growth in earning.

The group has a net profit margin of about 8% to 10% and ROE of about 13%.  The company has a generous dividend policy which pays out approximately 50% of its net earning.  Based on what I have read, Chairman Lim Jit Poh appears to be a detailed person with strong belief in his vision.

I have 5 lots of the group shares purchased at an average price of $1.538 which translates to a forward PE of about 13, cheap considering it has a market cap of about four billions.  At my purchased price, my dividend yield stands at approximately 5.8%.   I will continue to hold on to my shares as I am happy with its dividend and am pretty confident that the group can even be better for their 2^nd 5 years.

20071H Results

The company has posted a credible first half result with 8% and 10% growth in revenue and net profit respectively.  Oil price remains a major concern but I am sure the group has the capability to cope with it.

Financial Info Analysis Pte Ltd - Shareowl

http://www.shareowl.com/
A new investment website which I discovered this year that gives a new perspective in investing.

Investing in Singapore small-cap stocks and fine French wines

http://www.wallstraits.com/wsforum
The site where I learned a lot on investing. Currently, only the forum is up to date.

SGX

http://www.ses.com.sg/
Singapore Exchange website, you can obtain lots of information here.

Company Review: Kingsmen Creatives

As a one-stop design, production and logistics center, Kingsmen tops as a leading communications design and production entity in the Asia Pacific region. Providing clients with integrated solutions in Exhibitions & Museums, Retail & Office Interiors, Research & Design and Integrated Marketing Communications, Kingsmen is the epitome of a reliable global marketing communications firm.

Listed on SESDAQ in 2003, the company was affected by SARS in 2004.  However, since then, the company has posted a CAGR of 30% in earning over the past 3 years.  Net profit margin has improved from a low of 2% in 2004 to 5.9% in 20071H with its average ROE around 20%.  The company has a net cash position and insiders hold about 25% of the total shares.

I was attracted to the company due to the big name clients that it served such as Adidas, Chanel, Hour Glass, Esprit, Nokia, DFS, DBS/POSB, FJ Benjamin and others.  This is an impressive list of clients and having seen some of the interior designs, I am impressed by their works.  One concern that I have is its low net profit margin, hopefully it can be better with new production facilities in Malaysia.  With its expansion plan on track, it is expected the company would grow further this year.

I was lucky to come across this company in Dec. 2006 and purchased 15 lots at a price of $0.22 (at an amazing low historical PE of 4.5).  The market has recognized the potential of this micro cap over the year and its price has more than double over the past 9 months.  I will continue to hold on to my 15 lots as long as the company continues to perform well.

20071H Results

The company has posted a good first half results in August with its bottom line improves by 65%.  It is expected that company to continue to do well in the second half of 2007 which traditionally contributes a higher percentage to company’s revenue and profit.

Company Review: Koda

Koda is a leading ODM furniture exporter in South East Asia.  The company focuses on up market furniture and established customers over 50 countries.  The company is a micro-cap with only a market capitalization of just slightly over $100 mil. 

The company has posted 4 years of double digit growth in both revenue and profit.  CAGR net profit is 25% over the past 4 years.  With its production base shifted to Vietnam (lower cost), this growth is expected to continue for 2008. Net profit margin is approximately 10% with ROE of around 25%. The company has a net cash position with insiders holding approximately 68% of total shares.

I’ve purchased 12 lots at an average price of $0.751 (PE of 7.5 based on 2007 results).  Again, this is not such a cheap price considering the company has a small market capitalization.   However, I am intrigued by the company’s performance over the past few years and I like the way they report their results.  Company chairman has come forward to say that the company will not be affected by US sub-prime problem as company’s product is targeted at the higher end market.  With the volatility of market over the past few months, I have decided to pare down my holdings on Koda.  I will continue to hold the 5 lots of the company and wait for opportunity to purchase more if the price is right.

Company Review: Celestial Nutrifood

Established in 1997, Celestial NutriFoods Limited is a leading manufacturer of soy protein-based food & beverage products.  The company is invited to co-develop the first phase of the Hi-Tech Soybean Zone project initiated by the Daqing Government in 2004.  Phase 1 of the development has since been complete and operations commenced in June 2006.  It has boosted Celestial capacity and enables the Group to introduce three new products, namely soy functional protein, biochemical feedstuff and lecithin.  The group is also exploring the production of bio-diesel fuel using soybean oil, a by-product of the manufacturing process.

The company net profit margin is approximately 25% with ROE of around 25%.  For the past 5 years, company has achieved a blistering CAGR of 50% on both revenue and net profit.  This is largely attributed to the completion of Soybean Zone project last year.   The growth is expected to continue for 2007 but the earning will be dragged down by non-cash convertible bond interest expense.  The company has a gearing of 87.5%.  The chairman and CEO Ming Dequan holds approximately 28% of the total shares.

I made a mistake on this company in Dec 2004 by selling it off when the market did not react positively to its expansion plan.  Purchasing it at $1.41 in May is not exactly cheap but with its track record over the last 3 years, I am more confident of the management in delivering further growth of the company with careful handling of the company’s debt.

20071H Results

The company has reported a good set of results in Aug with sales growing at 72.1% and net core earning at 38.5%.  Net earning decreases by 3.3% due to non-cash component of interest expenses on convertible bonds.  The company expansion plan is on track and is expected to reach its target of 70% utilization rate of facility.

Company Review: Pacific Andes

Pacific Andes is primarily engaged in industrial fishing and the supply chain management of frozen seafood products to customers mostly located in the People’s Republic of China, Japan, South Korea, Europe, North America and Africa.  For the past 2 years, the company has grow its bottom line at a blistering pace of 50%. 
In June 2007, the company restructures with an increase stake of 63.9% in China Fishery Group.  The company is upbeat about global seafood industry especially for industrial fishing for FY2008.

The company net profit margin is approximately 7 – 8% with ROE of 14 – 18%.  To expand its capital base CFG issued US$225 million of 7 years senior notes in Dec 2006 and PAH issued US$93 millions 4% convertible bond due 2012 in Jun 2007.  This results in a net debt to equity ratio of 117%.  Approximately 63% of the shares are held by insiders.

I purchased 10 lots of the counter at a price of $0.765 due to its impressive growth rate.  At this price, it is only trading at a forward PE of 6.6x and it’s trading at a discount to its NAV of $0.91.  What I don’t quite like about the company is its debt structure.  I do not know its ability to handle this huge debt that they carry and also the dilution effect of the convertible bonds comes 2012.  Also, the fishing industry can be quite unpredictable especially due to weather factor.  Having said that, personally feel that it’s a cheap price to buy the counter.

20081Q Results

The company posts a strong first quarter results in August where both revenue and net profit increased by 43%.  It is expected that the company will continue to do well for the rest of the year.

Company Review: Midsouth

Midsouth is a manufacturer of fiberglass reinforced plastics (FRP).  Listed in May 2006, the company has produced good results for 2005 and 2006.  Its revenue and net profit has grown by at least 35% in 2006.  Shifting its production to Lingxian plant, the company is expanding its production and since the beginning of the year, its bottom line is boosted by the production of Polypropylene (PP) parts for automotive vehicles.  The company will continue to benefit from China boom in infrastructure and property sectors.  Also, the company is looking into exporting its parts to US and Europe markets which will provide another driver for its growth.

The company net profit margin is approximately 24% and ROE approximately at 25%.  With cash from its IPO listing in 2006, the company is in a net cash position.  Approximately 57% of the total shares are hold by the Executive Chairman (Gao Yanjun), CEO (Gao Yanhua) and GM (Gao Yanguo). 

While I do not really like a family based business, the company’s numbers is impressive enough for me to purchase 10 lots of Midsouth at a price of $0.815 (in June) which translates to a forward PE of 9.2x.  Not that compelling considering the company has just listed.  However, if the company is able to execute its growth plan, there will be good returns in the coming 2 to 3 years.

20071H Results

The company reported a good set of results in August.  Revenue grows by 37% while net profit increases by 33%.  With a historically stronger contribution in the second half, it is expected that the company will continue its double digit growth rate.

2007 3rd Quarter Report

It has been 16 months since I made my last entry.  I do need to make more effort to update this journal. 

I decide to take on a new approach in dealing with my investment portfolio.  Instead of just thinking that this is an ad-hoc interest, I will take that I am having a business that holds interest in Singapore equity.  Hence, I will do at least a quarterly report on my company and will also provide update on my business decision (buy and sell decision).

3^rd Quarter Performance

Last quarter sees my cash portfolio drops by 10.2% and CPF portfolio increases by 4.6%.  The drop in my cash portfolio is largely attributed to two wrong moves I made: purchasing MMP Reit, Guthrie and FSL in July and subsequent selling of these counters during the meltdown on 17^th August.  This again surfaces my lacking in the control of my emotions in decision making.  As for my CPF Portfolio, the gain is attributed to the gain in Jardine C&C, Aberdeen China, GEM and Lion Capital Korea Funds.

Buy and Sell decision for 3^rd Quarter

Cash Portfolio
Besides the three mentioned counters which I have bought and sold, I have sold Cougar after receiving the dividend, making a gain of $341.01.  Again if I have hold on to the counter a little longer and not sold at the meltdown, the gain would be heftier.  With the rise in valuation over September, I have decided to raise my cash position.  I have pared down my stake in KODA and sold Beauty China.  I will continue to keep Beauty China in my radar.

CPF Portfolio
I have taken profits from Aberdeen China, Schroder Euro Fund, Jardine C&C and SIA Engineering.  While the counters might still have some upsides in the next few months, the sharp rise in the price in such a short period made them a riskier investment for me.  Again, they are still in my radar and I will purchase them if the opportunity appears.

9^th Month Performance

The first 9 months of this year saw my cash portfolio increases by 52.7% and CPF portfolio by 13.7%.  Overall, I am satisfied with this performance especially considering the two crashes in February and August.

Buy and Sell decision for 20071H

As I have not reported on my investment in the first half of the year, I will highlight some of the buy and sell decisions in the first half of the year.

Cash Portfolio
I have sold off my positions in China Flexible Packaging and People’s Food in June.  For the former, it was still at a very low valuation.  It is frustrating to hold this counter as it hardly moves even when the whole market has moved.  Eventually, it might move to its value but with so many other possible positions I can take up, I decide to sell it off.  People’s Food is a company which I have wanted to hold long term.  The decision to sell it come after the company announced that they faced short term problem in the shortage in supply of pig which will drag down its profitability for the next 2 quarters.  I still believe the long term prospect of the company but will wait for the correct opportunity to purchase it again.

CPF Portfolio
OSIM was sold off in the beginning of the year after holding the counter for slightly more than 3 years.  I should have sold it off earlier last year when the company faced problem after consolidating the accounts of Brookstone.  However, I took confidence from Ron Sim purchase of the company shares and held on to the shares believing in a fast turnaround.  This did no realize and the company suffers a larger than expected loss for FY2006.  I still made a profit of $2500 over the 3 years but that profit could easily be $8000 if I have sold it out when the fundamental has changed.

I sold Sincere after holding it for a year.  Made a 60.8% gain (including dividend) over a year.  The primary reason to sell Sincere was to raise cash for purchase of Jardine C&C and SIA Engineering.

Market crash during the week 15th May to 19th May 2006

On Monday, the STI has its largest drop...don't know since when and on Thursday, it has its 2nd largest drop.  While most of the stocks I hold are not included in the STI, they were sold down too.  I see my cash portfolio dropped by approximately 6k over the week.  The unrealized gain has gone into negative territory.  My CPF portfolio is more resilient, fluctuating as per normal trading day.

So what was my response to this?

When I first read the headline on Monday before going to school, I was a bit gutted.  As last week, I was thinking of cutting my loss on YHI this week and switched the cash to other counters.   Reason being I think I have purchased YHI too expensively and other counters probably provide a better return in the same time frame.

I have already regretted making a too hasty use of the gain that I have earlier made on three new counters; I thought I could have been more patient.  This crash compounded my error and makes the lesson slightly more painful especially when I do not have much cash to take advantage of this weakness in the market.

In any case, I was thinking of selling China Flexible Packaging to raise funds to purchase other counters but after considering the low valuation the market is giving CFP at the moment, I decided against it.  I do feel that the market has over reacted to the raising oil price and “punished” my two plastic related counters: CFP and Full Apex too much.  With the two companies still expanding their top line and with ROE around 15%, the potential upside when the oil price stabilizes is at the very least interesting.

After overcoming the disappointment of the lack of funds to purchase more shares, I’ve decided to stay put with my counters and continue to track their business.

My investment strategies III - Company screening for CPF portfolio

Unlike my cash portfolio, I do not go through all the steps.  Dividend yield is an attraction to me and if the company can provide me with consistently high dividend yield, I will consider purchasing it.  So these are the few factors I look for.

Either:
Dividend yield of at least 5%
There are some large cap that provide such yield and of course the higher it is, the more entice I am to it.

Potential growth in dividend yield due to growth in company
These can be either through acquisition like REIT or organic growth oversea.  The minimum is that the company must not show deterioration in its fundamental.

Or

Very interesting business with huge growth potential
These are companies more like those in my cash portfolio but it must be a business which I can recognize with and strongly believe in.  Unlike my cash portfolio, I would not simply invest into a so-so business with cheap valuation.

My investment strategies II - Company screening for cash portfolio

How does a company enter my radar?  This is the initial part of the homework.  I do not actually specifically go look for companies but I stumble upon them through various means.  These means include recommendations on investment websites, “The Edge” magazines and simply coming across brands in my daily life.

So what kind of companies do I invest in?
i)    Business which I found to be interesting with potential to grow, valued reasonably.
ii)    Companies which are valued cheaply with its fundamental intact.

Based on what I read from different books and websites, these are the criteria I look for when I screen a company.

1) Company has shown consistent growth of 15% in both revenue and net profits over the past 5 years
Since I am looking for growth companies, this is important.  I can accept a year where revenue or profit is flat.  However, there must be a trend that the company is growing over long terms.

2) Company’s net profit should be around 10%
A higher percentage of net profit ensures that the company is not too badly hit when they cannot pass the cost to customers.

3) Company’s ROE around 20%
ROE shows how the company manages its equity.  A high ROE shows that management put to good use of their equity and not makes silly investment.  If the company is not able to sustain a high ROE, it should return the net profit to investor as dividend.  The amount of debt a company carries must be taken into consideration when using ROE.  With a high amount of debt, ROE will be higher.

4) Company’s cash position and cash flow
The company should carry little long term debt unless it is necessary for expansion.  I would avoid companies that requires large amount of capital expenditure (capex) regularly.  The operation cash flow of the company is also important.  It should mirror its earning.  I would avoid a company that consistently shows a must lower cash flow as compared to earning without investment/capex.

5) Management credibility and ownership
This is hard to judge but I would take it that if management is able to keep his promise or target and not afraid to come out to justify the company’s poor performance as creditable.  It would be a plus point if senior managements hold shares of the company; this will align their purposes with the investors.

6) PE less than 10 and PEG less than 0.7
I am attracted to company with a PE ratio of 10 and below.  Alternatively, if its PE ratio to Growth rate is less than 0.7, it will be a possible candidate.

My investment strategies I - Cash Portfolio

So what are my strategies in picking the stocks to invest?  As I mentioned earlier, I will use a fundamental approach instead of technical analysis.  There are two things I am looking for:
i)    the past performance of the business and its outlook in the future; 
ii)    the valuation of the company at its present price.

There is no specific industry which I will concentrate on but I will look into a company with a simple business model.  This means I will most probably not going into banking, properties and technology counters.  I am also more inclined to look into small to mid cap companies with potential to grow.  To me, this means that the company must have exposure to oversea markets and China is one country where there is a lot of potential.  Of course this does mean that risk is higher since I will not be able to have an actual feel of the market and there is always an inherent risk of creditability of China companies.  However, this is the risk that I will have to take and be more prudent in analyzing the companies’ reports.  This again works on the assumption that the reports are genuine and there’s no manipulation of figure.  How would I know?  I won’t but if I don’t believe the creditability of the report, then there’s no point in carrying on with the analysis.

My investment goal

When I started investment, I take it as a tool to generate alternative income.  As I learned more about investment and especially from Wallstraits, I like the idea of having a target of 15% CAGR because, with such a return, your portfolio doubles every 5 years.  It makes tracking easy.  It happened that I have about $25 k in liquid assets 1999 and thus by using the rule, I will have $1 mil in 2024, after 25 years.  I was able to double my liquid assets to $50 k in 2005 even though marriage preparation took up some parts of my savings.   So it seems that I am on track with my goal.

With the decision to be more analytical about my investment, I recently re-look at my cash-flow and verify if my goal is achievable or if the growth rate is sustainable.  The picture does not look as rosy as I have in mind.  Reason being my earlier projection has been made due to a lower equity base.  Also, I need to set aside a sum of money for renovation in this 1 ½ year which reduces the amount of money available for investment lesser.   As I put in the new factors, I will need to achieve a CAGR of 15% on my investment to achieve $1 mil by 2024.  At this current moment, I have little confidence of hitting that target.

Instead, I aim to achieve a liquid asset of $650 k by 2024 (CAGR of 14.5%).  This will be attainable through increase of both cash portion (including $40 k from insurance by 2023) and investment return.

With some planning from 2025 to 2029, I will probably achieve my $1 mil target by 2029 when I am allowed to withdraw from my CPF with the option of not working from 2025.

Translating all these figures to my investment goal means that I would need to achieve a return of CAGR of 10% from my stocks from 2005 to 2024, with an injection of $80 k into the portfolio from 2007 to 2024.

Why not 8% or 5% CAGR?  With such return, I do not think I am able to be financially independent by 2024.

A brief history 4 – Mistakes and Lessons learned

As mentioned, I did not become a guru after gaining some financial knowledge.  I still make mistakes and in the process of becoming a better investor.  These are some of the biggest mistakes and best moves I made from late 2003 to 2005.

1) Selling of CAO at a price of $1.28 and $1.87 in Feb/Mar 2004.  The price has rocketed without reason.  The fundamental remained the same.  At $1.28, I sold it to lock in some gains.  At $1.87, it has tripled to my purchase price and the PE was more than 20 x (I can’t remember the actual figure) which I feel that it will not be able to sustain.  Even though the price went to $2.7 later, I remembered I did not feel bad at all because the market is reacting irrationally.  I am glad that I have sold this stock before it crashed due to their trading loss.

Lesson learned: When the price shoots up too far from its fundamental without any news, release it.

2) Making a loss of $300 on Integra2000 in Mar 2004.  It’s a small loss but an important lesson.  I’ve speculated that the company will report good results and hence give me a good return.  How wrong I was.

Lesson learned: Do homework before investing.

3) Making a loss of $1200 on AGVA in Sep 2004.  I was influenced by other analysis of the stocks and did not look into the business mold.  Also, I bought because I am familiar with the brand.  The company was affected by an increase in raw material price and could not pass the cost to its customers as their products do not sell at a premium.

Lesson learned: Familiar brand does not mean a thing.  Do no rely on others’ analysis.

4) Making a total loss of $3000 on UFood by Dec 2004.  I was influenced by Wallstraits analysis of the company.  The company has indeed done well from 2000 to 2003 and has been shareholders’ friendly with their generous dividend.  Due to an increase in pig price, the company suffers and both top-lines and bottom lines went south.  Management has not been forthcoming and the sale of shares my insiders sent the sentiment of the down.  As the fundamental did not improve, I still hold on to the shares, hoping for it to turn around.  I finally decided to let it go as I have no confidence in the management based on their actions and their inability to keep their promise on setting up a webpage.  Currently, I still think the share is cheap but opportunity cost and the lack of transparency of the management makes me decides to invest in PFood instead.

Lesson learned: When fundamental of company is not doing well, look hard into the cause and divest the shares instead of hoping for turn-around if there are no such signs.

5) Selling Celestial NF at a loss of $400 in Dec 2004.  The company has big expansion plan but market did not react positively to it and with CAO scandal, Chinese companies were not doing well.  I am impressed by their expansion plan and know that if their expansion plan goes well, their earning will grow.  However, I made an emotional decision to cut loss instead of hanging on to the shares.  My 5000 units would have given me a gain of $5000 by last week price.  I have let this four-bagger goes too early.

Lesson learned: Believe in your own analysis!6) Selling TPV and locking in gain of $1150 in Aug 2005.  I read up a report on TPV and after going through their annual reports, was impressed by their progress over the years.  The only worry that kept me back was their low profit margin.  Their prices move in Aug 2005 and at $1.12, the company was still valued pretty cheaply.  However, I let the fear of the margin overcomes me and decided to sell it.  With my confidence of the LCD market moving forwards and also how the company has progressed over the years, I should have hold to my shares and I would have another $4000 unrealized profit based on the recent prices.

Lesson learned: If valuation is reasonable with sustainable high growth rate, don’t rush into selling.

7) Making a loss of $1800 with SMT by Feb’ 06.  SMT has always been an undervalued stock.  Till now, the only reason I can come out with that SMT is undervalued because of its high debt.   I have held on this stock for more than 2 years and its price has been dropping with flat profit over the 2 years.  I decided to let it go because of pretty flat performance and it is a low profit margin.  This is not a company which I feel grow into a major player and I bought it simply because of its low valuation.  Is my decision correct?  Only time will tell.

Lesson learned: Valuation is not everything.

A brief history 3 - A new look at stocks

Through some idle chat with my brother and his friend, I have got to know this website Wallstraits.com in Aug 2003.  It was a turning point of my investment journey because it is from here that I gained valuable insights of investment.  I gained valuable financial knowledge and through the sharing of various forum members, I decided to read up more on investment.  Initially, I started with library and before long I was purchasing books on investing.

This does not mean my investment reaps fruits immediately but with the new knowledge, the stock market finally makes sense to me.  It is from this point that I believe that investing in company’s share is a mean of an alternative income for me which will assist me in gaining my financial independence in the future.

It is from this point that I move away from price movements and more towards business analysis and learn how to value a company, to invest in a business that has the potential to grow in the future.

Of course, there is always an argument between technical analysis and fundamental analysis.  I decided I am not smart enough and do not have time to track prices everyday and hence will stick to learn how to analyze a business and make investment based on that.  Also, I preferred a bottom-up approach in investment instead of a top-down.  This leads me to diversify all my unit trust investment in cash by April 2005.

Like I mentioned, I am still in the learning process and till end of 2005, my CAGR from 2000 is only a paltry 2.5%.  Yes, it’s definitely higher than bank interest but it’s nothing exciting.  Also, I am still prone to purchase/sale due to my emotion.  I believe one reason is that I do not know enough of the company I am purchasing to have the confidence to hold it longer.

I started purchasing stocks using my CPF account too.  The initial reason is that I still do not have too much cash to invest and there were opportunities that were too good to give up.  I am more conservative with my CPF investment because it earned an interest of 2.5% per annum.  So the company I invested in must be a blue chip with good dividend or a company with proven track record and has huge potential to grow.  I will analyze the individual companies later on.   The return from my CPF account had been good, with 25% in unit trust (due to a 35% limit on stock investment), it has returned me a CAGR of 9% since 2001.

If I tracked my return using NAV, my cash portfolio returned a measly CAGR of 2.3% till 2005 and my CPF portfolio returned a CAGR of 20.9% till 2005.  Looking at the CAGR for my CPF portfolio, it does make me think whether I should invest in unit trust or just concentrate on stocks.  Of course, the only reason I invested in unit trust is simply because of 35% limit.  So should I speculate my CPF in other funds, or should I stick to an index fund?  Points for me to ponder.

A brief history 2 - Venturing into stocks

I started investing in stocks in Apr’ 2000.  I am interested in this alternative way to earn money.  Again, I know nothing of stocks but was amazed by the lack of price movement when I read good news about the company in papers.  I remembered mentioning to a friend that to win the game, it is more important to know the psychology of the mass than the earning of the company.

Thinking back now, that’s quite a good observation.  After reading up, I still feel that understanding the psychology of the mass is important.  Or should I say you can make use of opportunities which surfaces when the mass reacted in an irrational manner.

Being new to the game, I was excited and with little knowledge, I traded a lot.  Locking in small profits; selling when the price drops.  I simply go by my gut feelings, thinking that it has gone down a few days and it was at this price two weeks back, and place a bet that it will go up.  Looking back now, these were such irrational behavior.
Luck was on my side I guess.  My portfolio has been erratic instead of going down all the way, such that I only made a loss of $1000 by end of 2002.  A much better performance than my unit trusts.

I have also started investing my CPF in 2001.  Again, with little knowledge, I made a paper loss of $2000 in 2 years.

Still, I was a loss sheep, not knowing anything how to make a consistent profit.  In a way, I was lucky that I do not have much disposal income for me to speculate and I was discipline enough not to go into debt or use money that I need for my daily expenses to play.

A brief history 1 - In the beginning with Unit Trust

I started investing after I graduated from NUS in June 1999.  I do not have any knowledge on investment but still went ahead to purchase GE insurance-investment plan.  This was followed by a purchase of UOB unit trusts, the highly popular Telecom unit trust which had appreciated 60% from its launch.  This was followed by another UOB unit trust Euro S.C since it was just launched and its prospect seems attractive from the promotional pamphlet.  These two UOB unit trusts turned out to be disastrous; I could not remember when I cut my loss but it’s a $2000 lesson and I was at a loss and blame it on my luck.  Yes, I am more of speculating than investing.

Introduction

The idea of starting a journal to track my investment has surfaced a few times over the past one or two years.  While I did one or two write up on two companies that I held, I have not actually put in conscious effort to consistently and systematically monitor my investment.  While I have put in effort to read on the business before investment, I still succumb to my instinct when purchasing or selling my holdings.

I was prompted to start this investment journal when I was having a discussion with a friend.  I found that I was not clear in my investment goals and strategies.  I was not able to inform, convince and put across my points clearly.  Hence, the discussion does not really benefit either of us.

Hence, I decided to put in a more conscious effort to reflect on what I have learned over the past few years and note down the positives and negatives of my buy, sell decisions.  I realize that this is important if I am to do well in investment and use it as a tool to realize my goal of being financially independent in the long term.

The followings are the objectives in this investment journal:

1)       Brief recap on my investment journey over the past 6 years.

2)       Define my goal for investment.

3)       Define my investment strategies.

4)       Write up on the companies that I currently hold

5)       Writing of important insights that I gained from the books/articles that I read.