Sunday, 28 January 2018

Bye Bye, GLP!

Global Logistic Properties (GLP) was delisted last Mon after being successfully privatised. It is a growth stock, and I had hoped to hold on to it for 15 years or more, but alas, some deep pocket investors recognised its potential as well and privatised it before I could see it mature into a globally recognised name.

GLP has the potential to become similar to Uber in the global logistics industry. See The GLP Story for more info. During the shareholder meeting to vote for the privatisation, a few minority shareholders recognised its potential and spoke out against the privatisation. Although I was sad to see GLP go, I voted for it anyway. The privatisation vote was not an isolated event; it was the culmination of a series of events that started way back in Feb 2014 when shareholders voted to sell 34% of the China subsidiary to a group of Chinese investors. Having tasted the sweetness of the purchase, it was only a matter of time before the Chinese investors came back to have a bigger bite of GLP. Moreover, the Chinese consortium had the support of the CEO, Mr Ming Mei, who is the key architect of what GLP is today. Even if the privatisation were to be miraculously rejected, the process was no longer reversible. The CEO could jump ship to another logistics company, and GLP without Mr Ming Mei is not quite the same GLP, just like Apple without Steve Jobs is not quite the same Apple. Our journey with the CEO together had ended, and the best I could do was to wish GLP and Mr Ming Mei well in their future endeavours.

GLP was my largest stock holding, hence, the profit was quite large. Although I would like to think that the successful investment in GLP is solely due to stock-picking skills, the reality is that a huge dose of good luck was involved. 

Given its Uber-like potential, I could have bought GLP at any time since its listing in Oct 2010. It rose to as high as $3.13 in Nov 2013. As the maximum price I would pay for any stock is 1.8 to 2.0 times book value, this price is easily within my purchase range (GLP's book value was US$1.71 in FY2015; hence, the maximum purchase price was S$4.16). However, I did not notice it until Jul 2015 when it was trading around $2.50. The first trade was carried out even later, in Sep 2015 at $2.10. Even so, the position size was a typical stock holding of 1%. As I read further about GLP after my initial purchase, I began to like it more and more. So much so that I pushed up the stock holding to as high as 22% of my capital in a matter of weeks!

There is also another factor that led to the 22% concentration in GLP. In Oct 2015, OCBC announced that it would redeem its 4.2% preference shares in Dec 2015. I had around 13% of my capital in it. The preference shares served as a cash reservoir, meant for use in the event of a stock market crash. With the redemption, I had lost a reliable cash reservoir with no good replacement. If I were to invest the 13% capital into stocks, I would need to find 13 new good stocks that I had not already bought. Given the rage of privatisations in recent years, there was simply no way to find 13 new good stocks. Hence, I put all the money from OCBC 4.2% preference shares into GLP.

There are a lot of things that I learnt from my investment in GLP, including the differences between a financial investor (for small stock holdings) and a business investor (for large stock holdings). See Being A Co-Owner of GLP for more info. The latest lesson I learnt from it is that you cannot just have skills; you also need luck. Could you imagine what would happen had I invested 22% of my capital when it was trading at the all-time high of $3.13? In Feb 2016, GLP dropped to around $1.60, representing a 49% drop from the all-time high. GLP would easily had become my biggest loser, not my biggest winner. In fact, the more than $0.50 drop barely 2 months after I had built up the concentration in GLP to 22% already caused a lot of emotional roller-coaster, so much so that I had to reduce the concentration from 22% to 16% at a loss, before increasing it again to 19%. See My Roller Coaster Ride with GLP for more info.

This is a lesson that I remember well. Thus, when it was announced that GLP would be privatised at $3.38 in Jul 2017, I began to search for potential replacements. The closest replacement would be Capitaland. But I asked myself if I would have good luck if I were to buy Capitaland at $3.50. The answer was neutral, hence I did not buy it.

It is not just skills that matter in stock investing, you also need good luck!

Thank you and bye bye, GLP!

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