Sunday, 27 July 2014

The Salted Fishes

In my previous blog posts, I have been sharing my experience with multi-baggers. In this blog post, I will share my experience with those stocks that resulted in wipe-outs and write-offs, in the hope of avoiding the next wipe-out or write-off. Wipe-outs refer to stocks whose companies went bankrupt or were delisted with no exit offers, while write-offs refer to stocks, which although still listed on the Singapore Exchange (SGX), had declined substantially from my buying price and were written off. In my 16 years of experience investing with my own money, I have a total of 3 wipe-outs and 8 write-offs. The list of 11 wipe-outs and write-offs are shown in the table below. Note that some of the stocks written off actually recovered somewhat in price, which I promptly sold off to the next better player. This is what La Papillion affectionately called "salted fish turned over (咸鱼翻身 in Chinese)" in his blog post.

Counter Date Bought Date Wrote-Off Date
Avg Buy Price Avg Sell Price % Loss
AsiaPower Nov 99 Jun 05 Apr 06 $0.310 $0.320 3%
Xpress Jan 00 Dec 02 Apr 06 $0.775 $0.235 -70%
Hor Kew Apr 00 Jun 04 Jan 07 $0.140 $0.140 0%
ASJ Jan 06 Jun 11 Jul 14 $0.141 $0.065 -54%
Sunray Aug 06 Dec 08
$0.300 $0.000 -100%
Surface MT Jan 07 Jun 11
$0.385 $0.000 -100%
Aussino Jun 07 Dec 11 Jun 12 $0.350 $0.146 -58%
JTIC Aug 07 Jun 09
$0.536 $0.000 -100%
MacCookProp Nov 07 Jun 10
$0.632 $0.000 -100%
China Power Feb 08 Jun 11 Jul 14 $0.170 $0.035 -79%
Hongwei Apr 09 Dec 11
$0.125 $0.000 -100%

What can be learnt from the list of salted fishes, besides the fact that most were bought at the height of some market cycles, i.e. dot-com boom in 2000 and pre-Global Financial Crisis (GFC) in 2008? Actually, it is more instructive if you see the list of all past transactions involving these 11 salted fishes, which are shown below and grouped according to each stock.

Counter Date Bought Date WO/Sold Quantity Avg Buy Price Avg Sell Price Profit/ Loss Overall Profit/Loss
AsiaPower Nov 99 Jun 05 5 $0.310 WO -$1,566
Apr 06 5
$0.320 $1,573 $7
ASJ Jul 02 Mar 04 20 $0.530 $0.800 $5,294
ASJ Jan 06 Jun 11 40 $0.141 WO -$5,631
Jul 14 40
$0.065 $2,600 $2,262
Aussino Jun 03 Feb 04 20 $0.245 $0.510 $5,239
Aussino Jul 05 Feb 07 30 $0.323 $0.540 $6,441
Aussino Jun 07 Dec 11 30 $0.350 WO -$10,533
Jun 12 30
$0.146 $4,351 $5,498
China Power Feb 08 Jun 11 26 $0.170 WO -$4,449
China Power
Jul 14 26
$0.035 $910 -$3,539
Hongwei Apr 09 Dec 11 75 $0.125 WO -$9,407 -$9,407
Hor Kew Apr 00 Jun 04 15 $0.140 WO -$2,134
Hor Kew
Jan 07 15
$0.140 $2,072 -$62
JTIC Apr 00 Apr 00 2 $0.200 $0.345 $278
JTIC Aug 07 Jun 09 20 $0.536 WO -$10,780 -$10,502
MacCookProp Nov 07 Jun 10 32 $0.632 WO -$20,301 -$20,301
Sunray Nov 04 Jan 06 25 $0.220 $0.410 $4,690
Sunray Aug 06 Dec 08 35 $0.300 WO -$10,534 -$5,843
Surface MT May 01 Jun 01 3 $0.315 $0.660 $1,012
Surface MT Jan 07 Jun 11 15 $0.385 WO -$5,805 -$4,792
Xpress Jul 99 Nov 99 3 $0.780 $0.905 $323
Xpress Jan 00 Dec 02 3 $0.775 WO -$2,344
Apr 06 3
$0.235 $678 -$1,343

Salted Fish Source #1: Past Winners

The first thing that you would have noticed is that almost all the salted fishes had made some money initially. It is usually the subsequent transactions that lost money. This is a case of being too "familiar" with the stock and its price performance. In some of the salted fishes, the buying price of the subsequent transaction is very close to the buying price of the initial transaction. The initial buying price has created an mental anchor for the subsequent buying price. Unfortunately, while the buying price for both transactions were similar, the economic and/or market performance of the stock were different. As an example, the buying price of Aussino for the 2nd and 3rd transactions were very similiar, at around $0.32 to $0.35. However, the winning transaction in Jul 2005 was initiated when it was doing a roaring business in China, while the losing transaction in Jun 2007 was initiated just before the GFC, from which it never recovered.

Likewise, the buying price for both transactions of Xpress (formerly known as i-One.Net) was similar at around $0.78. However, the initial transaction in Jul 1999 was initiated during the dot-com boom when all stocks remotely related to the internet were in hot demand, while the subsequent transaction in Jan 2000 was initiated when the fervour in internet stocks had peaked.

Salted Fish Source #2: Accounting Irregularities

2 of the salted fishes had some accounting irregularities. They were JTIC and Hongwei. In both cases, the companies found that they did not have the amount of cash as reflected in their balance sheets. This eventually resulted in cash-flow problems as suppliers and bankers demanded payment of goods and loans made to them. Eventually, they could not find the cash to continue and were delisted with no exit offers. For more info on Hongwei, you may wish to read the post on I Don't Understand China Stocks.

Salted Fish Source #3: Over-Leverage

The largest salted fish in my portfolio is MacCookProp. However, it is not the only losing stock. Many shipping trusts bought around the same time as MacCookProp (i.e. just before GFC) had lost money for the same reason -- over-leverage. The only reason why the shipping trusts were not on the list of salted fishes was because they were sold off at a huge loss and not written off.

MacCookProp is actually a property fund-of-funds that invested in other property funds in Australia. At the time of my investment, the amount of debt it carried on its balance sheet was quite reasonable, with a Debt-to-Equity ratio of only 42%. Unfortunately, it was a fund-of-funds, and the underlying funds it invested in also carried debts. When you consider all the debts in the underlying funds, the see-through Debt-to-Equity ratio becomes higher. During the GFC, many of its underlying property funds faced a cash crunch from the banks and reduced the dividends paid to it. Itself was also subject to cash calls from the banks and were unable to raise much cash by selling and/or redeeming the underlying property funds, most of which were unlisted and some had suspended fund redemption to tide through that difficult period. Eventually, it had to conduct 2 rounds of rights issues and sell off or redeem whatever property funds that could be sold off or redeemed to raise cash to pay off the debts. After this episode, the stock never recovered to its original price.


The above are some of the ways in which stocks can turn into salted fishes. When a stock becomes a salted fish, it is actually very difficult for it to turn around. Thus, it is important to constantly monitor the economic and/or market performance of a stock and the leverage it has to prevent it from becoming a salted fish in the first place.

As a final note, in this long investment journey, if I have eaten more salt than you have eaten rice, it is because I have eaten a lot more salted fish than you have! LOL!


  1. If ate too many Big salted fish will be very hard to recover from high blood pressure.

    A few small salted fish still okay.

    Now I see not-so-fresh fish I also run. LOL

    1. That is correct. Leave the salted fish to the younger ones, a few salted fish for them can strengthen them ;)

  2. Well said by both LCW and bro8888, well said!

    1. Thks. We have much to learn from each other.

  3. Shipping companies and airlines are really losers.

    1. That is correct. Over-capacity in the shipping industry and economic weakness in the Euro zone has weakened the shipping companies.

  4. if shipping companies and airlines are losers than how come some are profiting from them?

    good article khinwai. thanks for educating us. i taken in the mental anchor part, accounting irregularies. i wouldn't call over leverage a big significant bearer of bad performance. perhaps its the strength of the company. this is a very asian concept.

    then again you see a generation now that have very little regard for overleverage.

    1. Usually, companies that are over-leveraged make good profits when there is no crisis. But when there is a crisis, such companies will face a credit crunch and can have a hard time turning around.

  5. Kyith,

    Airlines and shipping companies are probably fun for the traders. Ups and downs. But for the buy-and-hold type, it's probably tough to find any real winners for the long term, no? Depreciating assets and high capital expenditure will always be a challenge. Anything interesting I'm not seeing?

    1. You need to post in the comment thread started by Kyith in order for him to
      be alerted of a response to his comment. Otherwise, he won't know that you have posted a question for him ;)