Sunday 8 November 2015

No, I Didn't Buy OSIM at 6¢ During GFC

I was originally blogging on the "bear market" theme before the unexpected stock market recovery in early Oct and the retail bond issuances in mid Oct disrupted the plan. Since the "big bad bear" looks like it is not coming any more, let's end this theme with this post.

You might probably have come across blog posts that said if you had bought OSIM at its all-time low during the Global Financial Crisis (GFC), you would have become very rich. That can be quite true. If you look at the figure below, OSIM touched an all-time low of 5¢ before recovering to a high of $2.90, for a 58-bagger. It is the stuff that most investors could only dream of.

OSIM Share Price

But no, I did not buy OSIM during the GFC and here is my side of the story. Please do note that when I say "thinking of buying OSIM" in this post, what it really means is that the thought crossed my mind but I did not seriously intend to put money into it. It had too much debt for my liking and it lost a lot of money during that period due to a poor acquisition in US. I did not put it on my watchlist, hence, I only saw it from time to time. It is like entering the supermarket occasionally and seeing something on sale and thought of buying it but eventually walking away without doing so. Nevertheless, a decision not to do something is as real as a decision to do something.

The first time the thought of buying OSIM crossed my mind was when it was trading at $1. I told myself that I would consider buying it when it reached $0.60. $0.60 came, but I decided to give it a pass, since many stocks were falling then. The next time I saw OSIM, it was trading at 6¢, where it was near its all-time low. If you think that I was rejoicing at the once-in-a-lifetime opportunity to load up heavily on OSIM, you guessed it wrongly. The thought then was "Luckily I didn't buy OSIM at $0.60!". Because if I had bought it at $0.60, I would be facing a 90% loss within barely a year of buying it. 

I did thought of buying it at 6¢, and even considered the execution costs and risks of it, but eventually did not do so. Sometimes, when we imagine buying a particular stock at a certain price, we always assume that we could get all we want at the desired price. The truth can be quite different. At that time, the bid-ask spread was not 0.1¢ as it is now. Then, the bid-ask spread was 0.5¢, i.e. buyer bidding for 5.5¢ and seller asking for 6¢. The spread by itself already constitutes 8% in execution cost should you buy directly from the seller. Not only that, liquidity dried up during that difficult period. My investment (if I had bought) would be around $5,000, or 80,000 shares. I suspect that these 80,000 shares could not be filled with a single order. Some might be filled on the following day or even at 6.5¢ if I was really impatient. At 6.5¢, that is another 8% in execution cost. In total, the execution cost/ risk can go up to a significant 17%. With an investment of $5,000, that can mean between getting 90,000 shares (if bought at 5.5¢) or 76,000 shares (if bought at 6.5¢). It can make a huge difference in the eventual profit that you could make from OSIM. You could see similar trading difficulties in some of the stocks in today's environment, such as MTQ.

Although OSIM is the biggest multi-bagger to be had during GFC, it is by no means the only multi-bagger available. Around the same time as I saw OSIM at 6¢, I was seriously deciding between buying Valuetronics at 7.5¢ or Hongwei at 12.5¢, eventually choosing Hongwei over Valuetronics. Had you bought Valuetronics at 7.5¢ during the GFC and held to its all-time high at $0.585 in Jul last year, you would have reaped a 7-bagger. While it pales in comparison to the 58-bagger of OSIM, it is still a very profitable transaction. In fact, a lot of investors did very well post-GFC despite not having bought OSIM.

Buying (or not buying) OSIM at 6¢ is still not the end of the story. There is still the recovery side of the story. The next time I saw OSIM, it had recovered to $0.23. Did I regret not buying OSIM at 6¢ at that time? Yes, I did. But I probably would have sold most of it at $0.23 had I bought it at 6¢. At $0.23, that is almost a 4-bagger. Considering that OSIM was losing a lot of money then (it lost $0.18 per share in 2008), I would be happy to sell most of it at $0.23, just in case it came back down again. As the price continued to climb, I would probably continue to sell it, with the last lot at $0.60 for a 10-bagger, exactly the price that I initially thought of buying it.

Putting everything in perspective, although not buying OSIM at 6¢ was regrettable, the regret pales significantly in comparison to the pain of selling most of OSIM at $0.23 and watching it climb all the way till $2.90! This is why whenever I recount the events of GFC, I would regret not having invested more in the stock market then, but I have not regretted not buying OSIM at 6¢.

In conclusion, it is easy to say "buy OSIM at 6¢ during GFC". But there are a lot more considerations to executing such a buy decision. Even so, not buying OSIM at 6¢ might not be such a bad thing. Most importantly, you do not need to buy OSIM at 6¢ to be successful in investing.

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  1. Ya. Not easy to buy at market low. Even harder to hold on to a few hundred % capital gains!

  2. Hi boring investor,

    Had I being a osim investor, I think I would already sold at 50% profits given its "hazy" situation then

    1. Hi Sillyinvestor,

      If I had put it on the watchlist after buying it and looking at it everyday, I would have sold before it reached $0.23 too! Some money is just not for us to make.