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
Sold
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
AsiaPower
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
ASJ
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
Aussino
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
Xpress
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.

Conclusion

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!

Sunday 20 July 2014

Multi-Baggers – To Hold or Not to Hold?

In my previous blog post, I shared the various ways in which you could get multi-baggers. There were a few interesting comments from Lizardo and Uncle CreateWealth8888, namely, what would have happened if I had held on to the multi-baggers and not sold them? The results are shown in the table below.

Counter Date Bought Date Sold Avg Buy Price Avg Sell Price %
Gain
Current Price % Add
Gain
Remarks
Surface MT Apr 01 May 01 $0.315 $0.660 110% $0.001 -100% Conso
Multichem Wt Jul 01 Jan 04 $0.093 $0.205 120%

Expired
Fischer Sep 01 Jan 02 $0.148 $0.315 113% $0.158 -50%
Ionics Oct 01 Apr 02 $0.185 $0.420 127% $0.015 -96% Delisted
Magnecomp Aug 02 Jan 04 $0.290 $0.950 228% $0.410 -57%
Nera Tel Mar 03 Mar 04 $0.252 $0.565 124% $0.790 40%
AP Oil May 03 Sep 03 $0.195 $0.420 115% $0.313 -26% 2 Bonus
Aussino Jun 03 Feb 04 $0.245 $0.510 108% $0.006 -99% Delisted
Fortune REIT Dec 03 May 13 $3.420 $8.050 135% $7.190 -11%
Food Empire Mar 05 Jan 07 $0.353 $0.780 121% $0.456 -42% Bonus
Kingboard Nov 05 Jan 07 $0.205 $0.535 161% $0.184 -66%
Meiban Jun 06 Jul 07 $0.260 $0.550 112% $0.400 -27% Privatised
DMX Mar 07 Sep 09 $0.164 $0.433 164% $0.190 -56%
A-iTrust Aug 07 Feb 10 $0.442 $0.954 116% $0.855 -10%
CapitaRChina Oct 08 Aug 09 $0.493 $1.300 164% $1.550 19%
FrasersCT Oct 08 Nov 10 $0.697 $1.430 105% $1.940 36%
ParkwayLife Apr 09 Feb 11 $0.760 $1.732 128% $2.430 40%
VizBranz Sep 10 Jul 12 $0.268 $0.646 141% $0.815 26% Privatised

As shown in the table above, a couple of the multi-baggers have been delisted or privatised. For these stocks, the current price refers to the price at the time of delisting or privatisation. For all stocks, the % additional gain refers to the gain based on the average selling price and reflects the additional gain had the multi-baggers not been sold.

Based on the 17 multi-baggers listed above (excluding the 1 warrant which expired), a total of 12 (or 71%) of the multi-baggers dropped below the selling price. Essentially, these multi-baggers are like Cinderella, who turned back into a maid after midnight. Does this mean you should not hold multi-baggers and stories of 10-baggers are just a dream? The answer is it really depends on what type of multi-baggers the stocks are in the first place.

Cyclical Multi-Baggers

As mentioned in my previous blog post, multi-baggers can come from different sources, namely, from market cycles, growth companies, turnarounds and warrants. Multi-baggers that arise from market cycles are never permanent. If you do not sell the multi-bagger near the peak of the market, eventually it will decline as the market direction turns. Like-wise, turnarounds are usually cyclical companies that go from boom to bust and back during economic cycles. If you do not sell the multi-bagger near the peak of its economic cycle, eventually it will decline as well. 

Growth Multi-Baggers

The only type of multi-baggers with some longevity are the growth companies. Among the 18 multi-baggers listed above, only the REITs have been growing their Distribution Per Share with some regularity, and it is not surprising that most of these REITs have continued to rise in price after I sold them. Nera Tel is another company that has sustained its growth over the years and its current share price reflects that growth.

Having said the above, growth is not permanent. Some companies could be growing at a high rate for a few years, after which the growth stalls. When this happens, the high-growth company will become just like any other companies and are subject to economic and/or market cycles. Aussino used to be a high-growth company with booming business in China until it encountered difficulties during the Global Financial Crisis (GFC) from which it never recovered. Likewise for Food Empire, whose share price performance is shown in the figure below.

Share Price Performance of Food Empire

Thus, it is important to monitor growth companies closely. The moment they lose their growth, they too will turn from Cinderellas into maids and lose their lustre.

Multi-Baggers Reloaded?

If the Cinderellas have turned back into maids after you have gotten your multi-baggers, is it advisable to buy the same stocks again, hoping that they would turn from maids into Cinderellas once more? Again, it depends on the type of multi-baggers they are. If they are the cyclical type (market or economic), then it might make sense to pick them up again from the bottom of the cycle. However, it is important to check that nothing fundamental has changed with the company to ensure that it can participate in the upswing of the economic and/or market cycle. As mentioned earlier, Aussino never recovered from the GFC and you will no longer find it again on the Singapore Exchange (SGX).

Just to share, over the same 16-year period of investing with my own money, there were 3 wipe-outs and 8 write-offs in addition to the 18 multi-baggers. The wipe-outs refer to stocks whose companies went bankrupt or were delisted with no exit offers. The write-offs refer to stocks, which although still listed on the SGX, had declined substantially from my buying price and were written off. It is interesting to note that among the 11 wipe-outs and write-offs, 2 are among the list of 18 multi-baggers, i.e. the second time I bought into these stocks, they lost money. These 2 stocks are Aussino and Surface MT. Unfortunately, the capital invested during the subsequent purchase was larger than the original purchase and whatever profit from the original transaction could not cover the loss from the subsequent transaction. This is probably a case of being too "familiar" with the stocks without realising that they have changed fundamentally and are no longer the same companies.

Conclusion

There are several reasons why a stock can become a multi-bagger. But when the reason is no longer around, it is time to sell the multi-bagger before it turns from Cinderella back into a maid.


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Sunday 13 July 2014

How to Get a Multi-Bagger?

In my last 2 blog posts, I identified the multi-baggers listed on the Singapore Exchange from May 2006 and May 2014 and categorised them according to the industry they are in. This is to understand where multi-baggers come from in the hope of finding the next multi-bagger(s). In this post, I reviewed the list of all multi-baggers that I had since I started investing with my own money 16 years ago. Sad to say, despite the wealth of investing experience, I only have 18 multi-baggers and over the same period, I also have 3 wipe-outs and 8 write-offs. The list of my multi-baggers is shown below.

Stock Date
Bought
Date
Sold
Avg Buy Price Avg Sell Price % Gain
Surface MT Apr 01 May 01 $0.315 $0.660 110%
Multichem Wt Jul 01 Jan 04 $0.093 $0.205 120%
Fischer Sep 01 Jan 02 $0.148 $0.315 113%
Ionics Oct 01 Apr 02 $0.185 $0.420 127%
Magnecomp Aug 02 Jan 04 $0.290 $0.950 228%
Nera Tel Mar 03 Mar 04 $0.252 $0.565 124%
AP Oil May 03 Sep 03 $0.195 $0.420 115%
Aussino Jun 03 Feb 04 $0.245 $0.510 108%
Fortune REIT Dec 03 May 13 $3.420 $8.050 135%
Food Empire Mar 05 Jan 07 $0.353 $0.780 121%
Kingboard Nov 05 Jan 07 $0.205 $0.535 161%
Meiban Jun 06 Jul 07 $0.260 $0.550 112%
DMX Mar 07 Sep 09 $0.164 $0.433 164%
A-iTrust Aug 07 Feb 10 $0.442 $0.954 116%
CapitaRChina Oct 08 Aug 09 $0.493 $1.300 164%
FrasersCT Oct 08 Nov 10 $0.697 $1.430 105%
ParkwayLife Apr 09 Feb 11 $0.760 $1.732 128%
VizBranz Sep 10 Jul 12 $0.268 $0.646 141%

Please note that the bought date refers to the date the stock was first owned. During the holding period, additional shares might be bought as the stock price declined, thus decreasing the average buying price.

What can be learnt from this list of multi-baggers?

Multi-Bagger Source #1 - Market Cycles

If you notice the bought dates, almost half of the multi-baggers were bought in the years 2001 till mid-2003. Those were the years when we had the September 11 terrorist attacks on US, accounting scandals in US and Severe Acute Respiratory Syndrome (SARS) in Asia. Similarly, another 4 multi-baggers (including A-iTrust due to averaging down) were bought between Oct 2008 and Apr 2009, during the depth of the Global Financial Crisis (GFC). It is as though shares, like wines, have vintage years. Shares bought in certain vintage years perform better than shares bought in other years. Hence, the simplest way of getting multi-baggers is to buy at market depths. That is provided, of course, you still have the capital and emotional strength to buy when practically everybody else is selling.

If you sort the multi-baggers according to the dates when they were sold, 4 of the multi-baggers were sold between Jan 2004 and Mar 2004. This is the period of the recovery from the SARS episode. Another 3 multi-baggers were sold between Jan 2007 and Jul 2007, just before the start of the GFC. So, in order to get multi-baggers, not only must you get the buying right, you must also get the selling right! The figure below shows the time periods when the multi-baggers were bought and sold.

Time Periods when Multi-Baggers were Bought & Sold

For the above reason, market-timing remains a cornerstone of the investment strategy for my active portfolio, despite scores of literature showing that market-timing performs worse off than a buy-and-hold strategy. While this theory is true, always leaving some cash in reserve has saved me from total destruction countless times. You may wish to read Have a Plan for my market-timing strategy and Behind Every Successful Bear Market Recovery is A Cash-Like Instrument for my experience in coming back from market depressions.

(Having said the above, I also have passive portfolios that invest 100% in stocks and bonds. The defence mechanism in these passive portfolios is the ability to rebalance/ invest during market depressions. You may wish to read Possibly The Worst Time to Invest for more info.)

Multi-Bagger Source #2 - Growth Companies

If a company can keep on growing its earnings (at least for a period of time), enough investors will take notice and bid up the share price. Among the list of multi-baggers I had, Fortune REIT and Food Empire both fall into this category. Let's take a look at Food Empire. Between 2000 and 2006, its earning per share grew by 379% from 1.37 cents to 6.56 cents, or at a Compound Annual Growth Rate of 36.8%. Its share price went from a low of $0.075 in Sep 2001 to a high of $1.16 in Apr 2007, creating a 15-bagger over a 5.5-year period.

However, despite "owning" this 15-bagger, I only achieved a 2-bagger from this stock. The figure below shows my entry and exit levels.

Share Price Performance of Food Empire

From the figure above, it shows that I had sold this stock too early. It could have been a 3-bagger had I been more patient and sold near the peak. The moral of the story is that when you have a growth stock on hand, allow it some time to reach its full potential. Nevertheless, it is also important to watch closely when a growth company stops growing. As the figure above shows, growth can sometimes take a breather and the share price can come down in tandem. Fundamental Analysis and/or Technical Analysis can be helpful in determining when to sell.

Multi-Bagger Source #3 - Turnarounds

Turnarounds can be a great source of multi-baggers. The biggest multi-bagger I had is actually a turnaround. Magnecomp (now known as Innotek after it sold its harddisk drive business in 2007) had started to lose money when I bought it at $0.29 in Aug 2002, thinking it was a value stock. However, the business went from bad to worse, losing 10.6 cents per share and posting a Return on Equity (ROE) of -17.5% in 2002! The share price followed suit and hit a low of $0.13 in Mar 2003, resulting in a paper loss of 55% or a negative 2-bagger. In the following year, the company turned around and made 12.2 cents per share. The share price reversed its decline and climbed to nearly $1.00. I sold it at $0.95 for a 3-bagger. The figure below shows the performance of this stock.

Share Price Performance of Magnecomp

While turnarounds can be a great source of multi-baggers, they can also be a source of great despair. As explained in the paragraph above, it can turn out to be both a positive or negative multi-bagger. The ideal moment would be to wait till when its troubles are nearly over, but it can be difficult to gauge when is that moment. If you wish to play turnarounds, be emotionally prepared for the roller coaster ride. And as the figure above shows, turnarounds can happen in both directions!

Multi-Bagger Source #4 - Warrants

Among the list of multi-baggers is a warrant on Multi-chem. Warrants are leveraged instruments and can magnify both the gain and the loss significantly. Thus, it is very easily to achieve both positive and negative multi-baggers from warrants. Nevertheless, the underlying principle remains: the mother share should be rising for whatever reasons (e.g. coming out from market depth, growing, turning around etc.) in order for the warrant to become multi-baggers. If the mother share is not rising, then there is no way for (call) warrants to become multi-baggers.

Warrants, like all leveraged instruments, are highly risky instruments. If you wish to play warrants, make sure you can afford to lose the money! For this reason, warrants rarely appear in my portfolio.

Conclusion

The above are some of the ways in which multi-baggers can be achieved. In all of these ways, emotional strength is necessary to buy a stock at a low price and/or let a growth company grow to its full potential. Competency in Fundamental Analysis and/or Technical Analysis and mental discipline are also necessary to sell the stock at a high price. If you do not have the emotional strength, financial competency and mental discipline, even a 10-bagger stock might be only a 2-bagger stock in your portfolio. For a 10-bagger stock to develop in your portfolio, you also need to have a 10-bagger emotional strength, financial competency and mental discipline as well.


See related blog posts:

Sunday 6 July 2014

Origins of the SGX Multi-Baggers

In my previous blog post, I identified all the multi-baggers that are listed on the Singapore Exchange (SGX) that retained their original stock codes between May 2006 and May 2014. I also categorised them according to price ranges to identify which price ranges are most likely to produce multi-baggers. In this blog post, I have categorised the multi-baggers according to their sectors (as classified by SGX). Here is the list of multi-baggers with their sector identification. And thanks to Uncle CreateWealth8888's suggestion, I have also added their share prices during the lows of the Global Financial Crisis (GFC) in Mar 2009.

Name Sector May-06 Mar-09 May-14 % Gain
RH Petrogas Ltd MFG 0.060 0.850 0.660 1000%
Design Studio Group Ltd MFG 0.045 0.180 0.480 967%
Yongnam Holdings Ltd CONS 0.025 0.080 0.240 860%
Breadtalk Group Ltd MFG 0.195 0.300 1.450 644%
Ramba Energy Ltd TSC 0.085 0.125 0.490 476%
Super Group Ltd MFG 0.600 0.365 3.390 465%
Vicom Ltd SERV 1.040 1.530 5.830 461%
Swissco Holdings Ltd TSC 0.075 0.080 0.415 453%
Chinavision Media Group Ltd MFG 0.033 0.124 0.177 439%
MTQ Corporation Ltd MFG 0.380 0.500 1.975 420%
Straco Corporation Ltd SERV 0.125 0.075 0.645 416%
Lian Beng Group Ltd CONS 0.155 0.110 0.705 355%
Casa Holdings Ltd COM 0.045 0.035 0.200 344%
Raffles Medical Group Ltd SERV 0.800 0.770 3.500 338%
Transit-Mixed Concrete Ltd MFG 0.095 0.170 0.415 337%
Rowsley Ltd SERV 0.065 0.035 0.280 331%
Loyz Energy Ltd COM 0.075 0.120 0.315 320%
ABR Holdings Ltd HOTEL 0.215 0.180 0.880 309%
Jardine Cycle & Carriage Ltd COM 10.800 9.000 43.530 303%
Progen Holdings Ltd CONS 0.040 0.060 0.160 300%
King Wan Corporation Ltd CONS 0.075 0.060 0.295 293%
Genting Singapore PLC SERV 0.360 0.425 1.330 269%
Nobel Design Holdings Ltd SERV 0.155 0.060 0.560 261%
Poh Tiong Choon Logistics Ltd TSC 0.170 0.175 0.605 256%
OKP Holdings Ltd CONS 0.085 0.270 0.300 253%
Lee Metal Group Ltd COM 0.120 0.080 0.410 242%
Superbowl Holdings Ltd SERV 0.220 0.100 0.750 241%
Challenger Technologies Ltd COM 0.160 0.165 0.530 231%
LHT Holdings Ltd MFG 0.040 0.035 0.131 228%
Tye Soon Ltd COM 0.060 0.050 0.195 225%
Tuan Sing Holdings Ltd PROP 0.105 0.070 0.340 224%
Jardine Matheson Hldgs Ltd COM 24.031 20.902 76.723 219%
United Envirotech Ltd SERV 0.395 0.120 1.250 216%
Chip Eng Seng Corporation Ltd CONS 0.235 0.140 0.735 213%
Jardine Strategic Hldgs Ltd COM 14.519 11.139 43.919 203%
Giken Sakata (S) Ltd MFG 0.100 0.020 0.295 195%
Heeton Holdings Ltd PROP 0.230 0.220 0.670 191%
Dairy Farm Int'l Holdings Ltd COM 4.506 5.507 13.067 190%
Koh Brothers Group Ltd CONS 0.110 0.125 0.310 182%
Spindex Industries Ltd MFG 0.180 0.200 0.490 172%
Tianjin Zhong Xin Pharm Group MFG 0.501 0.451 1.352 170%
Far East Orchard Ltd PROP 0.710 0.520 1.885 165%
Ho Bee Land Ltd PROP 0.875 0.300 2.200 151%
Lee Kim Tah Hldgs Ltd CONS 0.360 0.345 0.900 150%
Tai Sin Electric Ltd MFG 0.140 0.150 0.350 150%
Etika International Hldgs Ltd MFG 0.165 0.130 0.410 148%
Petra Foods Ltd MFG 1.470 0.345 3.530 140%
Silverlake Axis Ltd SERV 0.375 0.120 0.900 140%
Lion Teck Chiang Ltd COM 0.315 0.190 0.755 140%
Cortina Holdings Ltd COM 0.360 0.270 0.855 138%
Noel Gifts International Ltd COM 0.115 0.110 0.265 130%
Falcon Energy Group Ltd COM 0.150 0.310 0.345 130%
United Industrial Corp Ltd MULTI 1.480 1.190 3.330 125%
BRC Asia Ltd MFG 0.090 0.075 0.200 122%
Sarine Technologies Ltd SERV 1.080 0.115 2.400 122%
Select Group Ltd SERV 0.160 0.120 0.350 119%
See Hup Seng Ltd CONS 0.135 0.140 0.295 119%
Sim Lian Group Ltd PROP 0.405 0.260 0.875 116%
Pollux Properties Ltd PROP 0.040 0.035 0.085 113%
Karin Technology Hldgs Ltd SERV 0.145 0.130 0.305 110%
Powermatic Data Systems Ltd MFG 0.070 0.100 0.146 109%
Ying Li Intl Real Estate Ltd PROP 0.130 0.290 0.270 108%
Teckwah Industrial Corp Ltd MFG 0.195 0.110 0.400 105%
UOL Group Ltd PROP 3.260 1.630 6.630 103%
Addvalue Technologies Ltd SERV 0.065 0.055 0.132 103%
Sakae Holdings Ltd HOTEL 0.265 0.120 0.530 100%

Collectively, which are the sectors that produced the most multi-baggers between May 2006 and May 2014? The figure below shows the distribution of multi-baggers according to sectors. Shares that are listed as "Same" have neither doubled nor halved in price between May 2006 and May 2014, while shares listed as "Worse" have their prices at least halved, while shares listed as "Better" have their prices at least doubled.

Distribution of Multi-Baggers By Sector
Based on the above figure, it can be seen that the Construction sector has produced the most multi-baggers in percentage terms, with 45% of the shares at least doubling in price. The Property sector is ranked second, with 24% of the shares doubling in price. It is no wonder that these 2 sectors have produced the most multi-baggers, considering how property prices in Singapore have risen over the past 10 years. The Services, Commerce and Hotel sectors are ranked third, with around 17-18% of the shares doubling in price.

On the converse side, the Manufacturing and Services sectors are the worst performers, with around 50% of their shares having prices at least halved. This could be due to the loss of competitiveness of the electronics industry, which contributes about 25% of the manufacturing value-add in Singapore. Factories have also relocated to lower-cost countries such as China and Thailand over the 8-year period of the study. As for the Services industry, it is more puzzling, as the sector also produces multi-baggers in 18% of the shares. This shows how diverse the sector really is. While the Agriculture and Electricity/Gas/Water (EGW) sectors have also performed badly, there is only 1 share in Agriculture and 2 shares in EGW.

On a net basis, the Construction, Hotel, Property and Multi-Industry sectors have produced more positive multi-baggers (i.e. those that at least doubled in price) than negative multi-baggers (i.e. those that at least halved in price). The worst performers are the Manufacturing, Services and Finance sectors, which have more negative multi-baggers than positive multi-baggers.

Generally, which sectors will produce the next crop of multi-baggers will really depend on the prospects of that sector in the next few years. While the Construction and Property sectors have produced many multi-baggers in the past, it does not necessary follow that these 2 sectors will continue to produce multi-baggers in the future, especially considering the property cooling measures and demographics headwinds that the Property sector faces.

On the other hand, even in the worst performing sectors, there are multi-baggers among the shares. There are only 2 shares that multiplied by 10 times or more over the 8-year period, and they both belong to the Manufacturing sector, which produces 41% more negative multi-baggers than positive multi-baggers. Thus, it is not a given that if the sector faces poor prospects, its shares are also poor performers. It is important to look at individual companies rather than just considering the sector the companies are in.

On a last note, it is interesting to note that the share price of some multi-baggers during the GFC in Mar 2009 is even higher than that during normal economic times in May 2006. This shows that if a company is good, it will perform well even during times of great market stress.


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