Since I started investing in the market from 2012, I have bought and sold a few counters. After selling, I found out that most of the counters, if I had held on to them, went north. Time for me to stop speculating and start looking long term. No more trading for me and I’ll try to live by this quote. Just do what you need to do and ignore the noise. Plant your tree, water them and wait for it’s fruits to grow. 🙂
Powermatic Data System – 0.216 (Vested at 0.191)-Margin of safety of 12%
Metro Holdings – 0.808
Nam Lee Pressed Metals – 0.236
New Toyo – 0.208
I have been investing in undervalued stocks for about a year, as far as I like to pay 50 cents for a dollar in value, there are actually some stocks which can be considered as “Value traps”. These are the points which I have noted when I was contemplating to get vested in these stocks.
1) The business is bleeding cash – After years and years of holding, if the business is still bleeding cash, the margin of safety might get wiped out and you might be forced to sell at a loss.
2) Most of these undervalued companies are “Family businesses” and they pay themselves salaries which are highly above market rate. From what I have observed, even if the stock is highly undervalued, investors do not like these stocks and “punish” them by selling it away. So these stocks can be having a high margin of safety and every value investor know it but none wants to get vested. I noticed that no investors like these sort of stocks where management pays themselves obscene amount of salary.
3) You have bought stocks which are trading below book value, but it has been bought out and you will be forced to sell your stocks at a loss if they decided to offer a price lower than where you have bought.
My way of attempting to filter out these sort of “Value traps”
1) If it is an S-chip, totally ignore that stock. – There have been several cases of accounting frauds, thus we do not want to get involved in these sort of investments as they are too difficult to value.
2) Only get vested in companies which have been paying an increasing dividend (or at least stable) for the past 5 years. – This will make sure that at least the company has retail investors interest at hand. And that the cash is “real”. I have found out that Singaporeans are a mixed bunch of “forced” investors due to the low bank interests, thus dividend stocks are more welcomed by them.
3) If the stock is below book value because majority of it’s property are in other countries, take some caution as I have noticed that the market will automatically discount these type of stocks. Thus they are quite difficult to value as well. Apply an additional 20% discount to its Net Tangible Assets if you must invest in them. However there are so many stocks in SGX that we should just ignore them if possible.
However doing the above, you might still get stuck with a “Value Trap”, thus only get vested with the amount you can afford to lose.
Yesterday was my last day of work. I looked back and found myself to be employed for around 5 years in 2 different companies. It just seemed like not long ago when I joined the workforce.
First job (2 years) was almost similar to a story i read a few minutes ago by this OT warrior. Link as per below.
Seemed like no matter how hard I tried on my first job, seemed like I was not able to complete things on my plate, it was until I was working on my second job, then i realized the reason. Reason was a simple and clear cut one. If you are able to complete everything, you would have already become redundant. it was the simple reason that there was a gap which needed to be filled which is why you were employed in the first place. However the naive me at that time, around 26 years old of age did not realized this simple fact. Tried my best in everything and ended up getting burnt out. And when you burn out, you will just feel like leaving. It was those who were underachievers in their thinking who could stay long in a job.
Summary : First job made me realize that i was not someone who could have no “Me” time. I needed something more consistent and less stressful. I also had lesser time to meetup with my friends and being busy made me poor instead as I made several dumb choices such as splurging on drinks etc. I totally did not do any financial overview of my own situation. It also made me realize that the amount of effort you put into doing something may not mean anything to others. So live by this motto : No expectations, No disappointments.
Second Job was less stressful and almost everyday i went home on the dot. There was work to complete everyday, however it was only on my 2nd job that I realized that work would never be completed and it was important to dedicate some time for yourself to engage in other things such as health, wealth, mind and social. First year in the job was a bumper year as it was the first time I had been rewarded with a bonus amount, however as the years passed, the bonus started getting lesser and lesser due to the fact that the company was facing some headwinds ahead. It eventually hit into a point whereby my 3rd year of annual income was even lesser than my 1st year due to the fact that the bonus sum was being reduced.
Summary : Second job made me realize that we should not count the chickens before they hatch. And that balance was required to be in place in order for you to not burn out. To be in a job with high bonus payout is akin to be vested in the market. The market risk is that when you get vested is that even a good stock, when times are bad, will drop together with the market even though it had nothing to do with it. Trying my luck at my 3rd job, however keeping in mind the balance I need to keep health, wealth, social and the mind in balance.
Goal 1 : $100 dividends per month for year 2015
Current : $62.50 per month
Mid term goal : $400 dividends per month
Final Goal : $1000 dividends per month
Updated 1st July 2015
|Counter Name||Percentage of portfolio||Buy price||Current Price|
|Cash – OCBC 360||21.03854028||NA||NA|
|Keppel DC Reits||11.22055481||1.05||1.04|