To be a good investor, one has to be detached from his stock purchases. Many investors invest in the stock market and cannot live without looking at how their purchases have done for the day. Do you feel excited when you see profits and when the market is bullish? And feel sad when the market is bearish? Monitoring your stock purchases everyday doesn’t help. Only traders monitor their stocks everyday. An investor’s target should be long-term and monitoring the stock movements everyday doesn’t make the price go up higher. It only takes you on an emotional roller-coaster ride. If you monitor it everyday, you would feel like selling it when it goes down a few cents, as you cannot bear to see loses. Buying and selling erodes your profits and ROI as you need to pay commissions.
Also, when the target price of your stock purchase has been reached, you have to sell and look for other stocks to roll the money. Don’t be attached to the stock emotionally and be unwilling to sell the stock just because it has served you well for the past few years. For example, I purchased Raffles Medical on 25th June 2009 and sold it on 26th August 2009 at $1.24. I only held it for 2 months even though my initial target was to hold it for at least 5 years. I sold it off at $.24 as that was the intrinsic value that I calculated at that time. It is an extremely good business as it has FCF, high ROE, low debt and it’s a defensive stock. Now, the current price is at $1.71. Am I regretting selling it at $.24? Not at all. Once the value is reached, I sell it and not look back.
So, don’t be emotionally attached to your stocks. Practice detachment. Fear and greed are an investor’s worst nightmares. Benjamin Graham says it aptly: “The investor’s chief problem – and even his worst enemy – is likely to be himself”.
I was analyzing Singpost a few days back and while analyzing, I learnt something about net cash and net debt that I was not fully aware of before. When I saw companies with huge debt previously, I merely brushed them off without doing a thorough analysis to learn more about them. Now that I have done an analysis on such a company with a proper Excel spreadsheet, I have realised some new things.
Singpost has a long-term debt of $502.977 million against a net profit of $165.741 million as of FY2010. Their cash and cash equivalents on their balance sheet was $390.220 million. By deducting their long-term debt and cash, we have a net debt of $112.757 million. Their long-term debt comprises of $200 million 10-year notes that they released in March 2010. I was wondering why are they taking up so much of debt. I could not find any news about any imminent investments by Singpost. Is the debt to be used to pay their dividends that they have consistently been paying (a ridiculous move!) or are they looking to buy up smaller overseas logistics companies? I don’t really know. Maybe someone can shed some light on this.
In FY2004, their dividends paid in total was $319.988 million. Their payout ratio was a whooping 307%! This figure is much more than their cashflow, net profit or cash in hand, so I’m wondering where they got the money from to pay so much dividends (anyone knows how this works?). Furthermore, Singpost has always been in a net debt position rather than a net cash position that value investors prefer.
Some things I like about Singpost is that their net profit margin is very high and they have lots of free cash flow with low CAPEX.
I’m also going to re-read some investment books that I read long time ago to reinforce the theories on how to thoroughly analyse companies that throw up funny situations. I don’t have any accounting background so from books are where I learn the accounting principles from. When I re-read, statements and ideas that didn’t warrant my attention previously will be reinforced.
Hopefully, I have analysed Singpost correctly and if seasoned value investors spot any mistakes, do let me know so that I can learn from it as well.
We all have dreams and goals that we all want to achieve. Some have the dream of buying a big house, a fast car, having a luxurious lifestyle, etc. While others just want enough money to provide for their family and meet their basic requirements without all the superfluity. Whatever you desire, there must be a compelling reason why u want it. The “what” gives you focus, the “why” gives you the determination, drive and courage to take action.
For example, you might want to have a $x by the age of x. This is the “what”. If you don’t have a strong enough reason on why you want that amount of money, then you would feel lazy, lack determination to take action and feel that the goal is out-of-reach. Soon, the dream fades away and it remains just as it is – a dream. So a “why” could be that you want to provide for your family the best that they can have, go for a holiday whenever you like, provide for your children’s overseas education, donate to charities and do things you always wanted to without having to worry about money at all. When you have a strong “why”, it drives you forward towards your goal. So like the title suggests, the “why” is more important than the “what”.
Personally, sometimes I too feel lazy to blog, analyze companies, read more books on investing, etc. However, when I think of my personal reasons of why I’m doing all these, then it gives me the drive to move my ass and complete the task. The purpose of this post is also for me to remind myself to think of my whys when I feel like giving up. So, remember that the “Why>What”
World Cup just kicked off yesterday with South Africa facing Mexico. It was an exhilarating match and I personally felt South Africa deserved to win.
In my previous post about the World Cup Syndrome, I stated that “In five out of the seven tournaments since 1982, the STI started to consolidate one to two months before the event. The STI typically reached a high in the April to May period…” So, how did the STI fare from April’s high till Friday’s closing, the first day of World Cup?
STI peaked on 14th April and closed at 3019 points. Friday’s closing was at 2796 points. This was a drop of 223 points or 7.4% from the peak. The lowest STI went for the month was 2650 points on 25th May. It was a drop of 369 points or 12.2% from the peak! So the pattern stated above was held true. I will do a 2nd review when the tournament ends on 11th July. Look out for that..
In the meantime, I’m off to watch the Argentinians take on the Nigerians. Looking forward to some Messi magic…
I did an analysis on Singapore Airport Terminal Services (SATS) last weekend. Even though SATS has a huge moat, their financial numbers are dismal. Comparing SATS with Thomson Medical, TMC wins hands down. A possible reason for this might be that SATS is a very mature company that there isn’t much growth left.
The revenue and cashflow for SATS are extremely inconsistent. These in itself will kick SATS out, as it doesn’t fulfill the value investing criteria. Since revenue and cashflow are unpredictable, it is difficult to project the future cashflows to find a proper intrinsic value. However, I managed to obtain a ballpark figure for intrinsic value at $1.80. This means that SATS is grossly overvalued currently, in my opinion. Even if SATS drops below $1.80, I would not touch it due to the sole reason that it has inconsistent numbers.
Today, mypaper’s front page headlines read “S$18,316,267,123,556”. Curious, I went to read the article. It stated that the US debt is the highest ever in its history and the debt is almost 90% of GDP. And my friend beside me popped this question to me, which was something along the lines of, “Wah, does the government really physically own this amount of money?”. The answer I gave was that it actually does not. Why? Look at the following video to understand:
Also, all the money US government owes cannot and must not be paid back. If it does (if that is ever possible), then money would cease to exist. Why? Take a look at the next video:
A detailed version of the first video and it also explains what inflation is:
Kinda creepy isn’t it?
If you are really interested and can invest more time to really understand the whole money game, I recommend that you go to http://www.chrismartenson.com/crashcourse and take a look at all the videos in that page from chapter 1 to 20. It will be really mind-blowing!
In Singapore, there are a number of listed companies that have a very wide economic moat. I will point out of some the companies that I like.
Very wide economic moat companies
SGX – Only stock exchange in Singapore. A monopolistic business
SMRT – Provider of the train and bus services in Singapore. A monopolistic business.
Capitaland – Owns lots of prominent residential, commercial, office buildings in Singapore and other countries
SPH – Owner of lots of newspapers and magazines in Singapore and owns 20% of Mediacorp as well. A monopolistic business.
SATS – Provides most of the airport services in Singapore
ST Engineering – Provides engineering services especially to the defence sector in Singapore
SIA Engineering – Engineering arm of SIA, which is involved in the Aviation Maintenance, Repair and Overhaul (MRO) sector.
DBS Bank – One of the more prominent banks of Singapore.
Just because these companies have a extremely wide moat, it doesn’t mean that they are all worthy of value investing. I would still take a look at their financials to make sure they have low CAPEX, low debt and lots of free cash flow. I will be doing an analysis of SATS soon and will post it in my blog once I’ve done it… For now, adios!