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Because of these activities, I was lazy to write blog for the past few months. When I was student, I had a lot of passion to write my ideas here. Nowadays, I don't mind sharing investment ideas if feasible. However, as you see that I never share all investment ideas, the ones I did invest, not many people have tolerate to hold such stocks for a long period. Thus, there is mismatch between me and the readers (most of them at least).
If you are concerned with your financial matters in particular growing your savings, you need to be aware of whether you are willing to hold as long as the idea mature. Mature is defined as Mr Market, the market that aggregate all people's emotions and opinions, recognise the 'true' value of the company. This is almost silent when financial planners promote investment recommendation.
Insurance firms' saving plans that beat inflation may be attractive to average person. To generate interest income to average person, it has to invest your money at its own discretion. It is silent on how it invest. It is something average person never thought of. He or she should question on how insurance firms operate saving plans rather than looking at percentage figure! It should be in Singapore context as I am not sure if they do offer similar plans outside Singapore.
Investment: Meade Instruments Corp (MEAD)
I bought MEAD at US$3.36 per share on 26 September 2011. Finally, we
sold at US$3.45 on 21 May 2013. Consequently, we make no loss, making
decent profit of 2.12%.
Rationale of Investment in MEAD
I was brought to the attention to this stock by Canada-based
value investor (he wrote it on his blog). At first, I investigated it and was not interested due to
unattractive valuation. In few months later, after MEAD reverse split its
shares (as in decreasing the number of outstanding shares, not affecting
shareholders’ wealth), I was interested as there is sufficient margin of safety
and attractive upside.
The investment protection in MEAD is probably enhanced by Paul Sorkin, who took directorship in MEAD. I know that it is in the most boring industry
where it is selling sophisticated telescopes. The most interesting thing is
that it was able to shuffle the positions in the balance sheet to the point that
it can withstand the most extreme situation. The most extreme situation is when
it fails to sell its sophisticated telescopes as hoped.
After the purchase, it was sure enough I am sitting a
cushion of 10-15% profit for quite some time for given its illiquidity. With
limited numbers of news about MEAD, I am not sure how it fares in the profit
position. It did disappoint me with poor showing of sales in last two quarters.
That value investor resigned the position of director. As a result, its share
price drop to mid and late US$1, wiping out the paper profit.
In fact, I am not worried about these happening because its
fundamental is so solid that it can last long enough as a going concern
company. It is a kind of stock that I can hold while sleeping soundly. Just
that, it is unfortunate that we are at the wrong side.
Few days before I sold MEAD shares, a company named Jinghua Optics announced publicity that it intended to
acquire MEAD shares at US$3.45 per share. This enables me to exit peacefully.
With proven patience and sound investment philosophy, our
time has come to get back our initial investment amount intact. That is the
quality of insisting on margin of safety on every investment we make.
I think that I successfully protect our investment, rather than
losing foolishly due to uncontrollable emotions which 99% of market
participants do. However, I do think I may have let tiny element of emotion to affect my buy and sell decisions. Capital protection comes first before making profit. It
matters the most.
I am probably disappointed not to realise early enough about
the main attribute of the value investing. I once heard from Li Lu who gave the
speech at Columbia Business School that Benjamin Graham’s investing method cannot
make a lot of money as much as current Buffett’s investing method. Now, I can
see what he is trying to say.
To be specific, in the normal situation where stock
experience negative news about itself, I can make decent profit which should
be in the range of less than 20%-50%. Please take note that the traditional
value investing legacy left by Benjamin Graham does make respectable profit,
which is still attractive to many average person.
That is what I should have sold MEAD early in 2012, taking
around 15%-20% profit. There is an exception when the value investing can yield
you 50% and above profit when the countrywide problems like sub-prime crisis
affect all stocks. MEAD is actually in the former category!
Postmortem of MEAD investment
I am surprised that there are other interested parties taking over MEAD with higher price bid. Am I not being patient enough? I think not - it is probably due to lack of my hindsight. My hindsight is that it is in unattractive industry where no profit-making firms want to be in. Such events amaze me.
Investment: Miyoshi Precision Limited
I made 12.410% and 34.86% profit for two batches of purchases ($0.054 and $0.045 purchase respectively). In aggregate, I made 32.45% profit.
Firstly, I nearly made a blunder in the first investment as I forgot to include
additional zero next to the point ($0.54 instead of $0.054). Subsequently,
I got it right by placing large order of $0.045.
It is in the industry where it makes plastic
molding items for its customers who are in automobile industry. I am very
familiar and experience in this industry and so I have no problem investing
this unknown firm with such low share price. I came across of this firm when I
noticed it in ‘top 20 low’ list during the period when everything is bad in the
market.
There is
decent margin of safety created by temporary problems such as Thailand flood
affecting its factory at Thailand and fraud related to an employee stealing
money. It has been hiring Big 4 firm to investigate the fraud and provide
better internal control recommendation. Thus, it is almost Benjamin Graham
classic type investment. These are not a problem as I can sleep properly while
managing our monies for purely investment purposes.
When it
reached $0.7x last year, I thought I should let it to sell at intrinsic value,
which is above $0.7x. This year, with respect to Maeda investment and my
understanding on why Li Lu said that Benjamin Graham method will never bring
large profit as much as current Buffet’s investment method for Berkshire
Hathaway, I sold it at $0.61. The rationale is that I want to downside the
Singapore portfolio and invest large sum of cash including the proceeds into
one or two foreign stocks. When I find suitable one, the future purchase will
offer better upside than and similar downside protection as Miyoshi. As it is
illiquid stock, it took me 5 months for the sell order to be realized.
Postmortem of Miyoshi
I made the right decision to sell since I would need cash to purchase for next stock investment which may be more attractive.
Movies and Drama
Movie Title: A Good Day to Die Hard (Hollywood Movie 2013)
Synopsis:
John McClane learnt that his son was arrested in Russia. He flew to Russia to find out more about the arrest. Meanwhile terrorist attack took place at the court where his son and political prisoner are held for the trial. What happened?
Rating:6/10
Remark: It is just all about crashing the cars, firing weapons and creating explosion.
Movie Title: The Queen's Classroom (Korean Drama 2013)
Synopsis:
A female teacher is hired to teach in public school. Somehow, her teaching method is unique apart from average teachers which you can expect their teaching standards. With her unique teaching methods, which many people find it strange, she get all her students to bond each other. No more loner. no more stress from their parents.
Rating: 8/10
Remark: It is good.
Movie Title: Oblivion (Hollywood Movie 2013)
Synopsis:
Jack Harper has a job to repair drones and look after the rigs. His wife, Vika, is watching him so that she can be the backup in the tower telling him who is attacking him. It is every day routine for them. One day, Jack learns something shocking. What is it?
Rating:7/10
Remark: It is really mysterious movie. Puzzle has not been answered at the end of the show.
Tony Del Piero wrote and posted at at 9:33 am
