“Investing is not easy; anyone thinks it is easy is stupid” Charles Munger
A regular contributor in i3investor, JT Yeo, recently wrote an article giving an analysis of the top 10 stock picks of each of the 12 professional analysts, Research Houses and investment bankers for the year 2016 as shown in this link below,
http://klse.i3investor.com/blogs/JTYeo/112828.jsp
The performances of their stock picks were summarized below,
“Out of the 12 lists of top picks, 4 managed to have a positive return this year. Make no mistake, it is a tough year, KLCI is down 3% this year and FBMSCAP is even worse, capping -7.71%. Out of the 80 top picks stocks, 34 had positive returns compare to 46 that register negative return. Overall return sits at -2.20%. Against KLCI performance, only 1 list managed to outperform the index by 10%”
A search from Fundsupermart on equity investing in Bursa shows of the 79 unit trusts, the average as well as the median return is 2.9% for the last one year, with maximum of +16.3%, and the worst at -9.87%. Only six unit trusts, or 7.6%, have return more than 10%.
Dear participants,
this stock pick cum practical investing service was offered to you nine months ago, since end of April 2016. The idea was mooted as I thought most of you are busy in your career, family and other interests or simply have no time to learn or have adequate knowledge and confidence to invest by yourselves. This provided an opportunity for those who wish to build long-term wealth to start invest straightaway, while taking their time to learn the nitty gritty of fundamental value investing.
About nine months have passed, and as promised, a full list of twelve stocks were given in this service within a six months’ period. Detail financial analysis and valuations were done on the stocks, and comprehensive reports written for participants to consider to invest.
The principle of selection of the companies, as you all would have known well, is based on buying good companies at cheap prices. Almost all of them were selected based on earnings, generally using the Magic Formula Investing principle, except for Stock W, which was based on deep asset value investing. All the stocks have excellent cash flows, and with none, or little debts. On top of that, a couple of the stocks were selected with the additional momentum investing element, or what I call “Value on the move”, which I have taught in my course. Growth strategy was also incorporated in selection of stocks when there is clear visibility of growth and earnings.
All stocks are small to medium capitalized stocks. I am a value investor trying to find good companies trading at cheap prices. It is hard to find them in the large capitalized stocks which are closely followed and owned by local and foreign funds and hence would likely to be fully or overvalued.
In general, the selections of the stocks were based on the very basic principle of what I have been propagating and imparting to you in your online course, and in public forums;
“Take care of the downside; the upside will take care of itself.”
The investment thesis, analysis and detail reports of all these selections were sent to you and published in our blog. You may re-visit them any time you wish. Quarter reviews have been carried out, and published in our website, for all the stocks as soon as the quarterly financial reports were announced in the Bursa website.
In the service, you were also given revision of your online FVI knowledge with practical financial statement analysis and interpretation, evaluation of company performance, and the various valuation techniques used on the stocks selected. The various investment strategies such as Graham net-net, the Magic Formula, investing for dividends, Value on the Move etc. were re-visited and used for the analysis and discussions for those stocks. Some good articles by some well-known investors were also shared in the website. It is just like a practical finance and investing course, one simpler, but much useful and better than what I have done named “Practical Finance” paper when I was doing my Master in Finance degree in University.
There were also a few watch lists of Bursa stocks posted in the blog based on some FVI strategies such as Magic formula, investing for dividends, No-Brainer cash yield, etc. for you to consider for investment.
How has the portfolio of stocks selected performed so far?
Performance of stock pick
The portfolio made an average return of 12.5% since inception 7 months ago, compared to the loss of 1.9% of the broad KLCI index, and the loss of 0.8% of the FBMEMAS Index during the same period. The excess return, alpha, of the portfolio is hence +14.4%.
There are six winners and 5 losers. However, the loss in the losers are generally small at single digit negative return, except for a couple of them in the teens. In contrast, there are five high double digit winners of +82.9%, +32.2%, +29.3%, +18% and +10.2%.
“Heads I win (big); tails I don’t lose much”
I am quite happy with the outcome, bear in mind the stocks were progressively picked over a period of 6 months from the commencement of the service.
However, we must remember that investing is a long term endeavour, and we must have reasonable expectations, with little risks that we can sleep well. Short-term return doesn’t tell much about the long-term return, and a good and proven process of investing, will continue to yield satisfactory outcome in the long term. And in this short term, it did well too.
Please be reminded to utilize the only free lunch in investing in diversification. You could be wrong in its analysis. In our case, if we focus our portfolio in Stock M and Stock F, which have lost more than 10% each, we could be in a big loss now.
I believe the downside risks of all the stocks in the portfolio are limited looking at their business models, how they make money, and their performance metrics with high ROE and ROIC, great cash flows and healthy balance sheet, and their valuations are still attractive, trading with low multiples of enterprise values (EV) against their earnings before interest and tax (Ebit), or high earnings yield of Ebit/EV. Most of them are paying good dividends too with dividend yield even higher than the bank fixed interest rate, on top of their good growth prospects. There may be spectacular upside potential for some of the stocks if my investment thesis proved right, and the market remains good.
I hope you benefit from this stock pick service and practical investing course. I encourage you to carry on continued learning and ask me any questions you may have. Meanwhile, I will continue to update on the performance of those stocks selected as soon as the quarterly reports are announced.
Cheers and happy investing.
"Investment is most intelligent when it is most business-like.” Benjamin Graham
Anyone who wish to learn about the business-like investing, and at the same time have some good stocks selling cheap to invest in may contact me at
ckc13invest@gmail.com
K C Chong
http://klse.i3investor.com/blogs/kcchongnz/115211.jsp
