Dear stock pick participants,
How have you been doing lately?
This second stock pick service followed the success and termination of my first stock pick service a few months ago, which as at to date, the portfolio of 14 stocks has gone up by an average of 35% after 17 months, 6 times the return of the broad market of just 6% during the same period.
This second stock pick service you are in has gone through 10 months since I started it on 12th November 2016. I hope you have benefitted; making good returns from the stock market from the stocks picked with detail analysis and valuation, and from some watch lists of stocks given, as well as from the analysis from other sources which were posted in the private blog. I also hope you have sharpen your investment skills from continued learning from the FA postings on behavioural finance, financial statement analysis and various valuation methods on stocks in the blog.
It is an opportune time to make a review of the stocks picked from this service.
Review of stocks picked
I have promised to provide 10 stocks throughout the duration of this service. So far, a total of 12 stocks, 2 more than promised, with detail analysis and comprehensive reports, have been provided for you to contemplate whether you wished to invest or not.
The first stock picked was Thong Guan, given on 24th November 2016, and the last one, Insas, was just given in less than a month ago on 11th August 2017. Please go to our stock pick blog to view the investment thesis on those stocks. They were also sent to you when they were first picked. Regular reviews were made upon the publish of their quarterly reports.
The principle of selection of the companies, as you all would have known well, is based on buying good companies at reasonable or cheap prices, a safe investment strategy. Almost all of them were selected based on earnings and cash flows, generally using the Magic Formula Investing principle, or high dividend yield investing strategy, except for WTK, which used deep asset value investing. All the stocks have excellent cash flows, and with none, or little debts, and some stocks with good growth potential.
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 investment course, and in public forums such as that of i3investor;
“Take care of the downside; the upside will take care of itself.”
For me, safety of the investment is as important, if not more important than chasing high return.
How has the portfolio of stocks selected performed so far?
Performance of stock picks
Table 1 in the Appendix shows the performance of the portfolio of the 12 stocks since they were selected, starting from 10 months ago, and at their closing prices at the end of August 2017.
This portfolio made a commendable average as well as median return of 28%, compared to the gain of 9.2% of the broad KLCI index during the same period. The portfolio out-performed the index by a wide margin, with an excess return of 18.8%, or three times the return of the benchmark. The portfolio of stocks selected also out-performed the broader FBM Emas Index of 12.9%, and even the Smallcap index of +13.1%, also by very wide margins.
There are 10 winners and 2 losers, or 83% winners and just 17% losers. More importantly, the excess returns of winners are way above the losses in the losers.
Most winners experienced double-digit gains. The highest return stock, Superlon, returned 104.5% in less than 6 months, followed by Magni-Tech at +86.4%, and Padini at +53.8%. Other stocks such as Zhulian (+27.7%), Luxchem (+21.4%) and OKA (+18.8%) did very well too in short period of time.
The return from fundamental value investing (FVI) is not necessary have to wait for long time; left three years, and right three years. Often, the high return comes early too as shown in the portfolio of stocks here, when more investors discover them shortly after us.
However, our investing horizon is still long term; 3 years, 5 years or even more than 10 years to let the magic of compounding works.
We are not aiming for a return of 5% or 10% in one month, but 500% in 5 years, or 2000% in ten years.
“Investing should be more like watching paint dry or watching grass grows. If you want excitement, take $800 and go to Las Vegas.”
– Paul Samuelson
WTK, a stock picked based on asset-based investing strategy, was the worst loser with 20% loss. The other loser in Latitude Tree which lost less than 10% after it reported a seemingly poorer set of quarterly results just before the end of the month.
This outcome fits my principle of fundamental value investing nicely, and as usual, that,
“Heads I win (big); tails I don’t lose much”
As all stocks were picked due to their stable earnings and cash flows, and healthy balance sheets and good dividend yields, and picked when they were generally selling at cheap or reasonable prices, the risk involved is naturally very low.
Risk in investing is high if one buys a stock at high price. If one buys a stock at low price, naturally the risk of losing is lower.
I am quite happy with the outcome, bear in mind the stocks were progressively picked over a period of 10 months from the commencement of the service.
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 also utilize the only free lunch in investing in diversification. We could be wrong in our analysis. If we focus our portfolio of just two stocks in WTK and Latitude alone, we could be in a big loss now.
For those who have substantial amount of cash to invest in the equity market, you should consider regional diversification too by investing in the regional or global markets.
We have started a third stock pick service in Bursa.
We have also completing our first stock pick service for the regional market in SGX and HKSE after one year. We have done extremely well there from a year ago, considerably better than what we have done in Bursa. We are contemplating to start a new stock pick service for these markets.
If you are keen in any of the above services, please let me know at the email address below.
The added advantage of these stock pick service is not only you are given good stocks to invest in, you also know and understand why, and whether you wish to invest in a stock given with the knowledge that you gain from a comprehensive online fundamental investment course that comes with it.
Eventually, with the knowledge and experience in FVI that you have acquired, you can even give good investment tips to your friends and relatives.
With so many people touting on stocks in the public forums, with the investment knowledge you gain in the FVI course, you will be able to analyse and differentiate if any stock touted is worth investing by your own self, instead of blindly follow rumours and tips, which often resulting in heavy losses.
Dear friend, it is a jungle out there!
Fundamental value investing has been proven to work well. It works well in any market. That is also my own personal experience.
So far, we have done very good services for investors looking at building long-term wealth, safely, slowly but surely. we have also provided valuable service for those who wish to learn the fundamental value investing through a structured manner.
We are proud of it.
Cheers and happy investing.
K C Chong
5th September 2017
Table 1: Return of second stock picks service as on 30th August 2017