Portfolio: June 2012

The month of June was a quiet one, the only key action I took was accepting the 15% Partial Offer for Wing Tai.

As shared in my previous post, my intention will be to increase my available-for-investment funds.
The Eurozone issue is generating alot of volatility and I am raising cash to purchase good companies on dips. 

My thoughts on Wing Tai's 15% Partial Offer

Late May, the Cheng Brothers made an offer of 15% of shares in Wing Tai at $1.39.
This partial offer is a shrewd move to get a bigger share of the company at a cheap price (relative to RNAV) for them.

The recommendation in page 56 of the Offeree Circular summarizes the crux of it:
http://www.wingtaiasia.com.sg/uploadfiles/news/Despatch%20Announcement%20-%20Offeree%20Circular%20-%207%20June%202012.pdf

Excerpt --->

"Shareholders with a short term view or those that wish to partially monetise their holdings
should accept the Partial Offer and if they wish, tender excess Shares if they are unable to
obtain a price higher than the Offer Price on the open market.
 

Shareholders who are prepared to take a longer term view of the investment in the Shares and
/ or who are positive about the prospects of the Company may wish to retain part or all of their
Shares. Shareholders who wish to retain their Shares should note that the future performance
of the Shares is dependent on, the performance and future prospects of the Company, general
sentiment in the equity market and prevailing equity market conditions."

It truly depends on the investor's perspective in each case.

I will accept the Partial Offer.
Because it allows me to realise a 10% profit in 3 months on this counter.
Yet will still allow me to retain some holdings in Wing Tai too.

My overall aim now is to add to the cash component of my portfolio as I do sense a GSS coming soon, if it hasn't occured yet.
Will be watching the situation closely.  :-)

Investment Philosophy: Part 2

Was overseas for 2 weeks thus have not been blogging! Now for Part 2 of my series.

"Buy companies that you can see"
     
In 2006, a friend who studies Value Investing in-depth shared this philosophy with me over coffee.
He advocates that one can make money by simply paying attention to services, things and events that we encounter in our everyday lives.
You'll be surprised the number of companies we actually come across during our daily routine.
These encounters indirectly alert us about the financial pulse of these company's operations to give us an inkling on whether if its healthy or sickly.

For e.g,

If you want to buy SPH, see for yourself and ask around if more people are using internet advertising rather than print?

 

If you want to buy a REIT like CMT, walk the malls and see for yourself. Are there many empty shop spaces in their malls? 

If you want to buy AUSSINO/Breadtalk/Sakae's shares, take a look at their shops and merchandise before making a judgement.

If you like their sunday banking service, or their suite of products, you might be alerted to study OCBC in depth.  


Simple questions and observations for us to start off with.
Of course, additional "investigations" and efforts are definitely required to follow through. 
It is definitely a tool to increase your probability of a more accurate qualitative assessment of the company.
 
Now, to share some case studies I personally encountered with respect to application of the investment philosophy:

Frasers Centrepoint Trust

During 2008/09, I applied the philosophy on my purchase of this REIT.
REITs generally derive income from rental  income, and I believe by looking up occupancy at the malls, we can have a good feel if the rental space are really sought after.
I chose FCT as its bigger malls are found near my home in the North. It would be easier for me to do my research too.
At that time, many analysts were calling for SELL on FCT due to the Global Financial Crisis.
Its stockprice went to as low as $0.50.
However, reality seemed a little different because when I walked through its malls, it was business as usual. I noted that its 2 biggest malls Northpoint and Causeway point had high occupancies and business was bustling. Pedestrian footfall was good.
Only catch was that Northpoint had a major AEI ongoing. However, I called the investor relations dept and the officer confirmed with me that several shop spaces were actually preleased with 3 months rental deposit paid up.  
These findings, together with the necessary fundamental analysis on its financial figures gave me confidence to buy in bulk at the $0.80 to $0.90 region. I felt it was a calculated risk worth taking.
Today, its price is at $1.63. My yield on cost is in excess of  9%.

China Paper

A stock which i lost money in 2008 - 2010. Looking back, I totally ignored the philosophy of buying what I can see in this case.
China Paper was a profitable company with superb fundamentals......on paper. At that time, its NAV was at $0.48, Share price was at $0.185 and I bought in.
Only thing was its operations is located in the faraway land of China managed by an unknown PRC national, a small risk for the big discount to NAV, i guessed!
Share price fell over a period of 2 years and I sold off all at $0.125. Well, guess I paid the price for buying something I can never see/gauge in depth. A result of poor qualitative analysis.
Nonetheless, it got worse as company did 2 Rights issue subsequently and paid close to 0 dividends. Share price now at $0.037. Glad I bailed out.


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Further Reading:
The application of this philosophy is explained in detail with countless practical examples in high profile investment books on of which is COMMON STOCKS UNCOMMON PROFITs written by Philip Fisher. In his book, he calls this approach to investing "scuttlebutt".
Peter Lynch's investment best-seller  ONE UP ON WALL STREET  also has several examples of this approach to investing.

Both books were great reads and the lessons shared by the authors formed huge impressions in my mind. Worth a read. :-)