|
|
My Second Investment Winner
I bought Nu Horizons Electronics Corporation (NASDAQ:NUHC) stock at US$3.3461 on 23/03/2010 and sold at US$6.8901 on 21/09/2010. Considering the transaction cost of buying and selling, I made 92.8% profit.
I happen to know about NUHC when someone in the value investing community mentions it as the means of buying it in the form of undervalued stock. Most of the time, I always check every suggestion given by anyone. About 99% of time, I did not buy the stocks that were suggested by anyone. As for NUHC case, it is really exceptional one. I find that its balance sheet and cash and cash equivalent position to be extremely strong enough to buffer any possible shocks. Not only that, it is severely underpriced by the market. Although it may not be best comparison but rough one, I compare NUHC with its two closest competitors namely Arrows and Avnets. The latter two have higher share price than NUHC and bigger distribution network as well. Despite of disadvantage of bigger distribution network, with superb distribution presence in Asia especially China, I strongly feel that its business value should have, more or less, half of the share price of that Avnet or Arrows. Given all these reasons, it seems that there is very large margin of safety.
Losing the major distributor contract with Xilinx, Inc, which has brought the highest percentage of revenue to NUHC is actually not a big deal. It is because NUHC is able to return Xilinx products back to Xilinx, getting the cash back based on the agreement. Based on my purchase, I consider three reasons as a form of catalyst. The first reason is that despite of short tenure of former NUHC CEO, Jim Estrill, the presence of new CEO may bring something interesting to NUHC. In my point of view, it is quite wise to appoint Martin Kent, who has experience in leading electronic firm in high level managerial capacity (just few months after my purchase of NUHC).
Second reason is that NUHC has been strengthening its relationship with its existing suppliers so as to be able to distribute their products with greater coverage of distribution in all areas NUHC is at. With strong distribution presence in China, it is sooner or later that manufacturing powerhouse tag will go to China.
Third reason is that NUHC is taking up such measure to ensure that no single supplier represents more than 10% of sales because it cannot guarantee that they will discontinue the working relationship between both of them. It is correct measure to do so.
In one of the conference call, a guy asked NUHC to do some marketing on itself so as to raise the public's awareness on NUHC. This attempt may raise its share price beyond US$4.50. That is if i recall correctly. NUHC appreciates that guy's suggestion but I don't foresee whether it is really planning it in action. With NUHC's inability to push its share price beyond US$4.50 this year, my rough sell expectation should be at least three-quarter of my perceived business value of NUHC.
However, the analyst of selling NUHC turns out to be unexpected one. I never expect that its direct rival, Arrows will make an agreement with NUHC that the former will buy whole shares of NUHC at $7 per share in cash. Upon hearing this announcement, I am preparing to hold it until shareholder meeting that the board of directors from NUHC require shareholders' approval on this merger agreement. On the next day onwards, news comes out with the fact that many law firms are investigating this merger agreement in the question of whether the NUHC's board of directors has not done its fiduciary duty such that the offer price of $7 per share may be low despite of around 100% rise from US$3.49 last two friday ago. I am stunned. Things can go wrong since lawyers may be capable of finding material evidence to prove it so. In my mind, Martin Kent used to be CEO of Abacus Group Plc that was merged with Avnet. Now, he has done it again, leading NUHC to merger with Arrows. To me, it is quite irony although it is reasonable for Arrows to acquire NUHC due to its strong Asia presence.
Therefore, not wanting to feel all kind of uncertainty in my head, I sold it. My next concern right now is what I should do with sale proceed. I cannot find any new investment at this moment while looking for new ones carefully. I want to use that proceed to buy more shares which I have already own now but time is not right. The economy picture is quite rosy now, sending most of the share prices up. Most likely, I have to wait for the chance to make a new investment or buy more shares from companies that I have partial ownership in the right time.
Book
Book Title: Creative Cash Flow Reporting: Uncovering Sustainable Financial Performance
Author(s): Charles W. Mulford and Eugene E. Comiskey
Rating: 9/10
Remark:
It is very good book, explaining why, what, where, and how to analyse cash flow. It explains why we need to be cautious on the definition of free cash flow that is adopted by financial/accounting professionals in their working place. This book is definitely better than their 'Financial Number Game'. It brought me so much insight about cash flow analysis and various definition of free cash flow. It is required to have some accounting knowledge to understand this book.
Movies
Robin Hood (Hollywood Movie 2010)
Synopsis:
The story starts with how Robin Hood comes about. The battle between England and France has not yet ended until the plot that is devised by the king of France is about to be hatched. Robin Longstride manages to unite all Englishmen to fight French army. In the end, the king of England does not fulfill his promise, declared that Robin Longstride as a criminal, which is known as Robin Hood.
Rating:7/10
Remark: It is fairly nice action. There is one scene that reminds me of World War 2 scenario at Normandy.
Iron Man 2 (Hollywood Movie 2010)
Synopsis:
Tony Stark has revealed himself as Iron Man to the public. A person, who knew Tony's father, wants to show his own verison of Iron Man to fight Tony Stark. Which verison of Iron Man will prevails?
Rating:7/10
Remark: exciting matchup but the excitement in Iron Man 2 is not at the same level as its first installment.
The Last Templar (Hollywood TV Movie 2010)
Synopsis:
This TV movie adopts from a fiction storybook. Tess Chaykin is trying to satisfy her interest to find an item that justify the existence of Templar knights, which are flattly rejected by Christianity. Her interest piques by the incident that has happened in the museum. In that incident, there are four masked robbers dressing as templar knights stealling antiques on spot in front of the eyes of important guests.
Rating:6/10
Remark: The story looks good but there is no suspense or excitement to feel of.
The Expendables (Hollywood Movie 2010)
Synopsis:
With many action superstars, the story is based on how a team of mercenaries deal the missions assigned by its clients. There is one special mission that the leader of the team cannot forget. Emotions can cost a person's life. Can he control his emotion and do something that he has never done before as mercenary?
Rating:6/10
Remark: Interesting strategy but below par story
Knight and Day (Hollywood Movie 2010)
Synopsis:
Roy Miller, who was thought to be rouge secret agent, is trying to escape from gang and real rouge secret agent with a special item that can power a city alone. The gang and real rouge secret want that item. Accidentally, he somehow drag a female innocent stranger, June Havens into the picture. Every action Roy makes is entirely surprise to June. When does that surprise cease to be normal affair to June?
Rating:9/10
Remark: Interesting story with clever jokes.
Baker King Kim Tak Goo (Korean Drama 2010)
Synopsis:
Within 30 episodes, the story starts with how Kim Tak Goo is born. Despite of family conflicts, Kim Tak Goo uses his talent - his ability to smell in order to identify the nature of the food as well as state of the food, which normal humans do not have- to be a baker. Ma Jun is jealous of Tak Goo because of many reasons such as his 'not real' father giving praise to Tak Goo, which the former has not done it before to him. Ma Jun sets his life to complete Tak Goo in order to be better baker than Tak Goo for sure. Who prevails?
Rating:9/10
Remark: Excellent story, excellent character of Kim Tak Goo. It is little wonder this drama has broken the viewing rating record in Korea.
Tony Del Piero wrote and posted at at 2:50 pm Next Blog Entry
I am going to be busy with many things -work, reading, analysing, watching, playing- to be done. I hope that I can write an interesting -and, probably, quality- blog entry about my next investment winner or interesting investment process.
My Investment Winner
I consider myself as amateur value investor. I continue learning more about the depth of value investment. My first investment winner is Pollux Properties Limited. I bought it at SGD$0.055 and sold at SGD$0.08. Nevertheless, it had risen to around SGD$0.110 within few days after I sold. Including the transaction cost, this investment earned me +33.93% profit return.
My rationale to invest this firm is that it is slightly mispriced stock, which I think its business value, on my most conservative valuation, is higher than what the market prices it. On top of that, the catalyst of this investment is the new business model that the recently-appointed CEO (join in 2008) want to implement. This business model is postponed because of sub-prime crisis. Its balance sheet is quite solid with plenty of cash and cash equivalents due to the sale of subsidiaries. I has a rough view of the construction because my friend has invited me to assist his work in his canteen for around one month in the construction site. I think investment analysts view construction industry as not-so-exciting prospect. I often receive analyst reports from different banks. So far, only one construction firm appears in the radar of investment analysts.
I would never invest in a stock that is fairly priced by the market if the business model that will be scheduled to be in action in one year later. There is no margin of safety in this case with low certainty where the business model goes given the competitors who can offer more or less similar products and/or services.
In actual, that CEO made two batches of buying shares in open market purchase on the same day at SGD$0.055 and SGD$0.06. Such behaviour from CEO suggested that he had confidence in the company and his own business model that had commenced this year. It caused the share price to rise, which means that market participants trade furiously in order to establish equilibrium price that both sides - buyers and sellers- agree.. There were a lot of volume activity in between 4.30pm and 5 pm from what I observed. On the next two days, I sold it at evening after placing order in the morning (resulting in long queue). Next week, that CEO bought more shares at SGD$0.065 in the same fashion. It caused the share price to rise further. At this point, I felt that it was the speculation period when the share price went beyond SGD$0.09 because the success of the business model has not yet realised.
I only anticipated that business model that will commences is the catalyst but did not expect that CEO's share purchase was the catalyst behind of my stock investment. I consider that I am lucky to have this kind of happening given that this stock is illiquid than blue-chip stocks.
The lesson behind this investment winner is that many investment analysts in banks focus on blue-chip stocks or high frequently stocks and spend no effort on illiquid stocks that are proven to be good investments. It is best to do your homework to find a good investment for yourself rather than looking for tips or analyst reports. The most difficult part is how well you can hold your investment psychologically. If you are too emotion, you can turn good investment into bad investment by selling stock just because the share price goes down.
I have very little emotion attached to the investment analysis I often do. I quickly sold this investment no matter what kind of direction the business model goes. To deal with speculative period, I will like to think that doing sleuth investment will bring me to sell at slightly higher price at the right time.
Disclosure: No position in Pollux
Disclaimer: You are responsible to do diligent check on any stock for your own investment/trading. This article is not meant to assist you in any means. You are advised to do your own homework regarding on what stock you should buy.
Books
Book Title: How to Win Friends and Influence People
Author: Dale Carnegie
Rating: 10/10
Remark: I read this book because Warren Buffett read this book, wanting to have good soft skill. This soft skill, which is proven to be very valuable, probably many times more than hard skills, involving any kind of relationships, including business as well as solving minor problems. I found it very insightful as Carnegie pinpointed the usual behaviours which all humans tend to have for a given response to the actions we need to make in a good faith. That actions we need to make tend to be 'soft' and quick to solve problems. He also gave real life examples of his students about how they put these principles listed by Carnegie into action. The result of these action is so great that they are very happy, to resolve the problems which they couldn't solve with any other type of actions. It is a 'MUST READ' book. I shall own this book one day so that I can re-read to do these principles in action.
Book Title: Confidence Game
Author: Christine S. Richard
Rating: 9/10
Remark: This book is bloody good, telling real-life facts about short-seller. It tells us how lonely the contrarian is, making a trade that nobody likes to do likewise. It is like going against the world. It also tells me how professional investors behave and treat each other.
Book Title: The Sleuth Investor: Uncover the Best Stocks Before They make Their Move
Author: Avner Mandelman
Rating: 9/10
Remark: This book leaves me a very good impression regarding qualitative analysis. I feel that this book is a good complement with Philips Fisher's Common Stocks and Uncommon Profit book. I am quite tempted to use it but the downside is the cost of doing it.
Movies
Centurion (Hollywood Movie 2010)
Synopsis:
A solider from Roman army, Quintus Dias was caught by Pictish army after they annihilated the Roman army. After that, he was taken as a prisoner for a interrogation. in order to find out when the next Roman army will come and attack Pictish army. Somehow, he escaped and met incoming Roman army. Will this Roman army wipe Pictish army flatly?
Rating:7/10
Remark: Slightly interesting story with good amount of actions.
Gattaca (Hollywood Movie 1997)
Synopsis:
A man, Vincent Freeman, who was born to be less perfect human, wants to fly to the space. To be astronaut, the person must be ultimately perfect (20/20 eyesight, excellent physical results and etc). He tried to pose to be someone else who matches that bill. How does he do it? Can he fulfill his dream?
Rating:7/10
Remark: The story is slow-paced but less exciting twists. By the way, I watch this firm because I read a blog written by Mathematics major, who utilises game theory on real life situations. Out of curiosity, I want to know why it is not possible to control signals like gender, race, and height. This movie clearly lead me the way to the answer for that question. Truly convinced.
Unthinkable (Hollywood Movie 2010)
Synopsis:
A Muslim white American send a tape, saying that he setup three bombs in three different American cities. FBI and army swoop in, interrogating him about the location of the three bombs. On top of that, a unknown man, who is specialised in getting something out of his mouth brutally. A lot of unthinkable actions comes out. Can they find three bombs?
Rating:9/10
Remark: Excellent story. A male lead actor is already well-known figure for its top class acting.
Ong Bak 3 (Thailand Movie 2010)
Synopsis:
This movie continues its story that is not completed in second installation of the movie. Tien finds the way to resolve all evil things. What kind of solution Tien has to do?
Rating:6/10
Remark: As usual, you can expect slick fighting actions in this movie.
Prince of Persia (Hollywood Movie 2010)
Synopsis:
This movie is about the quest of claiming the special dagger that can revert the time back, undoing all kind of the things the holder of that dagger has done. Dustan, who is not royal blood to the noble family in Persia, tries his best to keep the brotherhood that is the key of keeping Persia strong. His uncle is trying to take the throne from his father. What will happen?
Rating:7/10
Remark: Slightly interesting story.
Hello Murder (Korean Movie 2010)
Synopsis:
A young cop is finding his life hard as his superior is barking at him and his team to find the murderer who is on the roll, killing women. At the same time, an unemployed guy is going to investigate the same murder cases in order to get reward of $100,000. One of them will find the real identity of the murderer.
Rating:6/10
Remark: Decent story with interesting rivalry
The Young Victoria (United Kingdom-USA 2009)
Synopsis:
This movie portrays how Victoria lives and what her love life will be like.
Rating:8/10
Remark: Very nice story. This movie helps me to appreciate United Kingdom more.
The Legend Is Born: Ip Man (Hong Kong Movie 2010)
Synopsis:
The story starts with how Ip Man learns Wing Chun and discover that there is no need to adhere traditional principles for using Wing Chun.
Rating:9/10
Remark: Very good story. Very insightful and interesting ways to see how Wing Chun martial art is formed.
Confucius (Hong Kong Movie 2010)
Synopsis:
This is all about the life of Confucius. Within his life, we see his pains of spreading his good nature of belief based on the education and ethics.
Rating:9/10
Remark: Very meaningful story. Great men do take long road with a lot of hardship to spread their proper teachings to the mass.
Lost Season 6 (American Drama 2010)
Synopsis:
It is the final installment of the drama series. It will answer most of the questions regarding the involvement of these people in the island. The biggest question is whether the remaining survivors can leave the island easily.
Rating:6/10
Remark: Decent story with good suspense in the first few episodes. The ending is quite bad although most of the questions are answered, which may satisfy most of the audience.
Tony Del Piero wrote and posted at at 6:32 am
