With the start of the new year, it is good to take stock of the changes made to my investment strategies in 2014 and the likely changes coming in 2015. Looking at the list of changes below, it is amazing that I still have so much to learn despite being an investor for so many years. Here is the list of changes in 2014.
Turnarounds
I seldom invest in companies that are making losses. Most of the time, if they are loss-making, it is because the business conditions turned sour after I had invested in them. However, turnaround companies have been one of the sources of multi-baggers for me. You may wish to read How to Get a Multi-Bagger? for more info. Based on this knowledge, I started to purposely invest (or more correctly, speculate) in loss-making companies. The amount of money invested is relatively small and is mentally written off at the point of investment, so the expectations for them are rather low. So far, these speculations have performed up to expectations, with one of them already graduated (i.e. sold off) with a profit of 87%. Having said that, it is still too early to draw a conclusion and more time is required to review their performance.
Moving forward, due to the small amount of money involved, turnarounds are unlikely to form a big portion of my portfolio. Nevertheless, it is a good training ground to identify which companies are likely to start making a profit. Hence, small speculations in turnaround companies will continue to be made. You can expect to see maybe a few multi-baggers and a lot of salted fishes from this strategy.
High-Priced Stocks
Again, I seldom invest in high-priced stocks. The highest price I ever paid for a stock (excluding preference shares) in my 15 years of investing experience is $2.46 for Keppel Land. It is not that I am prejudiced against high-priced stocks. It is just that when you search for companies with high growth rates, these high-priced stocks usually do not appear high up on the list. So, what made me change my mind with the recent purchase of Keppel Corp at around $8? It is the realisation that while low-priced mid-cap stocks have better growth rates than high-priced large-cap stocks, these growth rates usually do not last. For more sustainable (but lower) growth rates, they can be found in high-priced large-cap stocks. Nevertheless, I am still very much into low-priced mid-cap stocks. The recent purchase of Keppel Corp is a small step towards discarding long-held traditions about high-priced large-cap stocks.
Freehold Stocks
This phrase "freehold stocks" comes from Uncle CreateWealth8888. It refers to stocks for which the intial capital has been recovered, either through dividends or partial sale of the stock at higher prices. Again, my usual practice is to sell all the shares of a particular stock instead of keeping part of them in the hope of higher prices. This practice is for ease of accounting, so that I do not need to adjust my investment cost. Moreover, even when I keep part of the shares, the share price usually goes down, so I usually sell the rest of the shares to protect the profits. However, inspired by Uncle CreateWealth8888's success, I decided to keep a portion of a 2-bagger (Valuetronics) to see what happens.
Frankly speaking, retaining freehold stocks is not as easy as it seems. I initially sold 50% of the stock at $0.485, intending to keep the remaining 50%. However, the price declined further to $0.41. Even though the cost had been recovered, the thought of the profits vanishing should the stock return to the price I bought was too much to bear. So, I sold a further 25%. Currently, the stock is trading at $0.345, but I am more at ease with the remaining 25% of the stock as freehold.
Generally, I do not expect to see a lot of freehold stocks, since I do not have many multi-baggers. A lot will depend on the experience with this freehold stock before deciding whether this should be a part of my investment strategies.
Dissenting Shareholder
Related to the idea of freehold stocks is the intention to become a dissenting shareholder in a privatised stock. This action was taken in response to Capitaland's privatisation of CapitaMalls Asia. To avoid locking up my money in a delisted stock, I accepted the privatisation offer only partially, such that the remaining shares became freehold. I wanted to experience what is it like as a shareholder in an unlisted but profitable company. Unfortunately, Capitaland acquired enough shares to allow it to compulsorily acquire all the shares. So, I had no chance to become a shareholder in an unlisted company. The reasons for taking this stance are further explained in The Last Stand on CapitaMalls Asia.
Nevertheless, I believe I have the chance to become a dissenting shareholder again since another 2 of my stocks have received privatisation/ cash offers, namely, UE E&C and CH Offshore. I will consider my response to the offers carefully.
Annual General Meetings (AGMs)
Prior to 2014, I have never attended an AGM. However, in search of blog ideas, I started to attend AGMs last year. So far, the experience has been mixed. The good side is that some directors are wiling to explain the nature of the business and the reasons for the company's performance as well as future prospects and challenges, while the ugly side includes arrogant directors, angry shareholders and hungry shareholders. Generally, you see more of the good side if the share price of the company is rising and more of the bad side if the share price is languishing. Moving forward, I believe I will still attend a few more AGMs, until the point where there is no longer any benefits in attending AGMs.
Conclusion
It is amazing that despite having 15 years of investing experience, there are still so much to learn. Investing is really a life-long learning journey.
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Very refreshing!
ReplyDeleteNow that's what I call higher level planning and goal setting - focusing on the PROCESS, not the END RESULT ;)
Thks. The end results matter too, but it's the process that gets us there ;)
DeleteRead and then do it upon ourselves. First hand learning is still the best. One can really feel the emotions and the difference.
ReplyDeleteTrue. It always seems easy when reading, but difficult when doing.
Delete