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This Saturday, after several false starts (once, I had a car accident on the way to meeting him, resulting in me cancelling it), I finally had the chance to meet Mr Ooi Teik Bee for a meal, in KLCC, which he very kindly treated me.
Well, who is Ooi Teik Bee? Well, he is the person with the highest ever publicly tracked record on I3, via the yearly stock competition.
Assuming someone started with RM 100,000.00.
2013 Competition - 104% ROI - The total value is now RM 204,000.00.
2014 Competition - 61% ROI - The total value is now RM 328,440.00.
2015 Competition - 129% ROI - The total value is now RM 752,128.00.
2016 Competition - 22% ROI - The total value is now RM 917,596.00.
2017 (Self claimed)- 87% ROI - The total value is now RM 1,715,905.00.
Needless to say, this kind of track record even if it’s for 4-5 years (publicly tracked portion), we can probably count with our hands, the number of people in Malaysia who can beat/or have beaten this track record.
He was also someone I was very eager to meet, because of how different our thinking when it comes to investment is. And considering his track record, chances are, there is more skill than luck involved.
We spoke for about 3 plus hours, and we tended to jump from topic to topic, and on many occasion, come back to a previously spoken about topic.
Therefore, for this article, I will be paraphrasing our conversation very heavily by topic. The chronology of our conversation will be very different, but I believe the essence to be accurate.
We also spoke on my favourite picks, and what I consider to be great companies at good prices in Malaysia and why, as well as his portfolio size, net worth etc. I will not be giving specifics on this as they are understandably private and confidential.
So let’s begin.
The Conversation
Jon: Mr Ooi, thank you for being willing to spend some time with me to talk in general. Let me begin by saying that, when it comes to talking about the market, investment, trading or speculating in general. I’m going to come across a little abrasive at times and will be asking questions that breaches propriety.
Because the goal for me is to find out the truth and learn as much as possible, and for this conversation to be as useful for you as it will be for me. I’ll do my best to be polite and respectful, but only to the extent of it not affecting what I really mean.
Can you give me a background of your life and career so far?
Mr Ooi: Yeah, sure. I was born in Perak and have stayed in Kuala Lumpur for the last 30 years. I was born into a very poor family. I remember helping my mother sell kuih every day due to make some extra income.
During my schooling years, I was considered to be quite smart and hardworking. For the most part, in terms of academics, I was either the top of my class or near the top. However, when it came to university, despite my good results, I was not able to further my education as my parents were too poor to pay the fees. And so I had to start working.
For the first 18 years, I worked the electronics industry. And around 1990 or so, I left the industry to become a remisier. And I’ve been a remisier for the last 30 plus years.
Jon: Haha talk about great timing. You managed to become a remisier just before the go-go years. How was the experience for you, during the boom, up until the 1998 asian crisis, and post crisis?
Mr Ooi: Pre-crisis, during the boom from 1993 up until 1997, i did extremely well. The remisier business was booming, and working in the industry, I was 100% in the market, and held some margin loans. At my peak then, I was worth roughly RM4million then. It’s a fortune now, and doubly so then.
Jon: What happened during the crisis for you? Did you manage to get out before hand?
Mr Ooi: Unfortunately, no, and as my entire net worth back then was in the market. As the market dropped from 1200 to 270 in 1998-1999. I lost every sen of my fortune, and then had to vomit out even more to cover my margin losses.
Things were extremely bad for me back then. I was extremely close to bankruptcy. I started working 3 jobs for several years and managed to dig myself out. It was really difficult.
Jon: When did things turned around for you?
Mr Ooi: Well it started around 2006. I started my subscription service then, which back then, was a free newsletter for my clients in the remisier business. I also started to learn TA just before then. Around 2009, I had a net worth of a few hundred thousand. Nothing to shout about, just enough to live.
It was around 2009, when things started to really turn around for me, as you can see from my track record. That few hundred thousand ringgit, in 9 years turned into the RMXXmil today.
Jon: What changed for you? How did you get such fantastic results?
Mr Ooi: Well, it was around 2009 that I used my current investment formula. My stock selection criteria, “UBS GM".
Technical Analysis comes first
U - Uptrending stock
B - Breakout chart
S - Sector to focus (cross 200 days SMA)
Fundamental Analysis comes second
G - Growth > 10% per year
M - Margin of safety > 30%
Cut loss when it breaks SMA200.
Jon: Well Mr Ooi, you read and commented on some of my articles so you probably have a rough idea on my perspective.
So, I’m not going to elaborate too much. However, you are aware of the “Theory of Reflexivity” as propounded by George Soros. Where he states, the landscape of the market (and therefore what works) is affected by the activity of the participants.
Your investment philosophy, is essentially one of that for a momentum investor. And now in the bursa, almost everyone is a momentum investor.
As you may have noticed, due to the unique characteristics of the bursa market as well as its thin liquidity, it’s not uncommon for people to post articles about an explosion in earnings and fry the price of the stock up beforehand. And when the results come out, even if it’s a good one, it will drop. And if it’s even slightly below expectations, it will drop, or even limit down.
The sheer amount of money flowing into that must have affected you somewhat, how do you deal with it.
Mr Ooi: Well, you are not wrong, now in the Bursa, there is too much money following me. And it’s starting to be difficult for me and my followers to sell or buy at good prices, because we tend to be holding a lot.
I started some different strategies for entry points, such as SMA20 cross SMA70 (I have no idea if he really said that as i’m ignorant of most Technical Analysis methods, and happily so). However, this did not work so much for me, and has in fact caused me losses. If I follow my original trading strategy only, I would have lost a lot less this year.
Jon: Well, you know my thinking. For me, liquidity is dynamic.
If you want to buy when the market is selling, and to be selling when the market is buying. You will rarely find liquidity a problem.
Since you feel there is too much money following you, and thus affecting you and your clients returns, what do you plan to do?
Mr Ooi: Well, one of the things I’m considering is closing my subscription service. For the most part, I do not post my picks on i3, because I do not need more people knowing it. However, plenty of people steal my research and post it online, or forward it to their friends.
And that is even worse than me putting my research online publicly, because these people only post half the research, ie the buy call for the trade. They don’t post the sell call. And so the people who buy when I and my followers buy, and don’t sell when we sell, are not going to have good out comes and will be very unhappy, tarnishing my reputation.
One thing I’m considering is for me to close down the subscription services. But there is so many people following it and relying on me, that I just cannot in good conscience do so.
Jon: From what I heard, you have 2,000 or more followers. Given your RM1,000 subscription fee, that should be at least RM2 million a year. Isn’t that highly profitable and thus also a reason why you would not want to close it down?
Mr Ooi: Hahahaha, no I don’t have anywhere near that number of followers. Most of the people who see my research see it for free, due to people stealing it and posting it online or forwarding it to their friends.
In addition, I also hired 2 people to help me with my research, and I pay them good salaries of RM6K or so each. That is also only their net salary. As they know my picks first, its not uncommon for them to make more than their yearly salary on the side.
The profit net of my cost, is very small. And any profit, I’ve donated it to charity. The amount I earn from this subscription is far below my earnings as a remisier and from my trading/investing.
Jon: Alright, I’ll take your word for it. In that case, why not just open your own fund, and run it for people?
Mr Ooi: Honestly, I really don’t need the money. My lifestyle from when I had a few hundred thousand, to now when I have RMxxmil, did not change much. The only difference is that now, I’ve been buying up more property for cash, to give to my two children, and for the rental to cover my living expenses. My monthly living expenses now is very similar to when i was only wortha few hundred thousand in 2009. I really don’t need the money or the stress.
Right now, the goal for me, is to never suffer what I did in 1998 again. This fortune I am never losing it again.
Jon: May I know why did you buy property? Malaysian property prices, like most Asian countries, is historically extremely high. This is due to down payments here being 10% or less. In the US and other western countries, pre-2003, down payments were 30% of the property. When they lowered it to 10% or more, we all know what happened in 2008, the housing crisis that almost brought down the global economy.
Since 1700, property globally have only appreciated by 0.7% per annum. With most of the gains coming from the last few decades.
And in those decades, human population in certain areas (particularly cities) have multiplied many times, which lead to the burst in property values. I don’t think this will be the case going forward, even now, the jam in KL is making me want to vomit blood. People will open offices or move away from KL etc, slowing the growth, if any.
Given the above, I consider property to be a foolish investment most of the time. Even if the price was right, the only reason to buy is because it’s the only asset class where the banks allow you to leverage 10X.
If you wanted property, you can buy so many fantastic property counters, many of them selling at 30% of RNAV or less. With PE of 2-6 times.
If you do not want stock, you just get FD. Even FD will give you better yield. I doubt your property is yielding even 2.5%
Mr Ooi: Correct. However, I bought it for a few reasons. Firstly, I already have a lot of FD, I don’t need more.
Secondly, I want something that can give me enough rent to cover my living expenses. In addition, I want that possibility of price appreciation. Even if its small.
And most of all, I want something I can touch. I do not want what happened in 1998 to happen to me again.
In terms of investing/trading, I really learnt it the hard and painful way. Only the last 9-10 years allow me to catch up and succeed financially.
Jon: Fair enough. Everyone have certain quirks that lowers returns. Warren Buffet's is that he refuses to sell any of his businesses at any price, and will only close them down if they are expected to make unending losses.
Mine is to look at my companies as Sdn Bhd, and never sell unless there is a change in fundamentals or its now too expensive. In addition, I also refuse to sell even if better opportunities happen (may change my mind), and I’ve probably lost out on some gains. Having said that, I probably forgot about some of the potential losses if I did shift out. So, we’ll see.
I have to ask; have you ever front run your own followers? The temptation must be incredible. Knowing that the moment you post your research, the price will shoot up at least 10% or so.
How much of your fantastic results do you think is due to your followers pushing prices up, and how much is it due to your skill?
Mr Ooi: Before posting a buy all, in terms of position, I will buy 1% of portfolio or so, to test the market. By testing, I mean to test if my TA is correct. Only if I feel the TA is OK, I will announce to my followers via my weekly update.
It is only then that I buy the rest of my position, the same time as my followers.
Honestly, I have no idea how much of my returns is due to my followers. But I have to admit, when Mr Koon follows my buys, such as the export stocks in 2015, Gamuda WE etc. It really did push up my returns.
Jon: Fair enough. How do you think this strategy works in bear? I remember reading that you lost a significant amount of money this year. Do you still hold anything?
Mr Ooi: This year, I lost some money. The amount is not small. (I did not ask the %, and I’m dont think I should disclose the amount). But personally, for me, I am fine with it. Because no strategy works forever, we have to look as a whole. And considering how much money I made from 2009 to 2018, the amount of money I lost, is not significant.
My strategy, which is basically momentum investing, does not work in bear market at all.
Having said that, I feel very bad for my subscribers who lost money in 2018, especially if they signed up this year. Money is not easy to earn, and I hate it when my subscribers lose money. Since 2009 I have not lost money other than this year. I hope that we can make money for the next few years so my subscribers can cover.
My portfolio is currently 90% in cash. The remaining 10% is in Hibiscus. I only hold this counter.
Jon: Yeah Hibiscus. I remember getting a whatsapp message from you out of the blue, asking about my opinion the fundamentals on Hibiscus. I studied it abit and decided that even if they can only make 5 dollar per barrel on their 2P reserves (Which translates to oil prices less than USD 25 per barrel). The value of the company undiscounted is worth RM1.9bil or so.
As oil price will not be below USD50-USD60 per barrel, in my opinion, for any significant amount of period, due to the cost of extraction of shale in the US being like USD40-USD50 per barrel, it represents a pretty good buy investment wise
From my understanding your cost is RM1 or so. Now that it’s at RM0.8. It has broken your cut loss of below SMA200, why have you not sold it yet?
Mr Ooi: Well, I informed my followers its below SMA200. But I have not sold, because it think it is too cheap. As it is my only holding, I decided to hold on.
Jon: If it went to let’s say RM0.4. Would you buy more or cut loss?
Mr Ooi: I don’t think I will cut loss, but I will not be buying more.
Jon: When would you buy? Following your rule, when it breaks out above SMA 200? So, you would buy at say RM1, but not at RM0.4?
Mr Ooi: Yes.
Jon: Well, it’s clear we have extremely different philosophies. You know my style. For me, if it’s cheap, I buy more.
For me, risk is permanent loss of capital via the purchase of overpriced securities. I’m guessing in your case, volatility is risk?
Mr Ooi: Yes, for me volatility is risk.
Jon: Ok. I remember we spoke about a few stocks that you think are cheap, such as VS etc. However, you said you would not buy it now. But will wait for trend to turn, even if it’s more expensive.
I noticed that based on your style, you will buy an up trending stock, almost regardless of Fundamentals. And when down trending, you would sell, almost regardless of Fundamentals.
Would it be accurate to say that fundamentals concern you very little, and you focus mainly on technical and if it’s up trending or down trending?
Mr Ooi: Yes.
Jon: One of the things I’ve noticed about top traders. Is that they are usually very clear about the fact they are trading/speculating. Unlike the mediocre traders, they cut loss as per their rule. And do not allow a bad trade turn into an even worse investment.
Bad traders on the other hand, confuse if they are trading or investing. And continue averaging down a bad trade. Turning a bad trade into a worse investment and thus being “stuck”.
One friend of mine, used to say, to make and keep the easy money in bull market, he needs to be able to refuse to make the big money in bear.
Does this apply to you?
Mr Ooi: Yeah that is accurate. Although as we can see from my record, the easy money is not necessarily small.
Jon: Hahahaha, Touche! I have to admit, for much of 2017, this was the question on my mind, I was wondering if I should follow your method, even though it often made very little sense for me. In the end, I chose to only make money through methods that make sense to me. Some money, just not for me to make.
Having said that, speaking to many traders, even the best ones, they often break the rules, and it is during these moments that they make a lot or lose a lot.
Whether it is a good decision or a bad one seems almost wholly dependent on the outcome. Which does not make sense, for good decisions can result in bad outcomes. Vice versa. However, over the long term or over a large sample size, an improvement in decision making should result in good outcomes.
For example, you said that if you had followed your method only, you would not have lost the amount you lost this year. And yet here you are holding on to hibiscus despite it having broken your rule.
Although, to be honest, I think it’s a good decision to hold. How do you reconcile this decision making in your head?
Mr Ooi: Well, for me, I held it because it is as you said, it’s really cheap. And in every respect, it follows my rule, except for below SMA200 cut loss. As it is only a 10% small position, I’m willing to hold. I won’t lose it all, and any losses won’t be significant to me.
Jon: Haha Mr Ooi, that does not really answer the question. Though to be honest, every single trader/non-investor can’t really reconcile and give a comprehensive answer. Which makes me think that in trading, traders have a certain set of rules, but 20% (unscientific) of it comes down to gut instinct.
This makes it really hard for you to know if you’re lucky or skilful. Or if you’re both, what’s the split. 80% Skill 20% Luck etc or?
How do you know that your method really works, not due to luck or underlying economic market?
How do you find the confidence to not panic when everything seems to be going on badly, and you have contradicting thesis in your head?
I think for me, its because it has worked so well for so long. And given the time period, it appears to be good enough.
Jon: Alright. Fair enough. Many people here like to quote Deng XiaoPeng. "It doesn't matter if a cat is black or white; as long as it catches mice, it's a good cat."
In that case, how do you avoid the turkey before Christmas error?
A turkey is fed by the farmer every morning for 1,000 days. Eventually the turkey comes to expect that every visit from the farmer means more good food. After all, that’s all that has ever happened so the turkey figures that’s all that can and will ever happen.
But then Day 1,001 arrives. It’s two days before Thanksgiving and when the farmer shows up, he is not bearing food, but an ax. The turkey learns very quickly that its expectations were catastrophically off the mark. And now Mr. Turkey is dinner.
How do you avoid this from happening to you? You clearly avoided major losses this bear year, what is it about your process that saved you?
Mr Ooi: Well, these days im generally quite conservative. One of the things I do, is to not put all my money in the market. I have FD, I have property, and I don’t borrow much when investing.
In addition, I have my cut loss rule, which I follow relatively strictly, although it is getting hard to dispose at a good price when so many follow me and know my rule. So I have to find a new rule to adapt.
I do not really chase high when valuations is too expensive. I sold Gkent at RM2.4, and watched it go up to RM3.4 pre-elections.
Also in terms of sizing, no stock can be more than 20%. With most of the big ones being 10%. This one I follow very strictly.
I also do not trade or invest in a company when they have high debts.
Jon: Fair point. Do you have any plans to turn to investing in bear markets? Seems like abit of a waste to not buy when so many things are so cheap.
Mr Ooi: Nope, I will only buy when I think market is no longer bear. This method have worked for me for a long time and it’s still working. I will follow my method.
Jon: Fair enough. Mr Ooi, you probably said this publicly before, but did you have anything to do with Mr Koon’s buying of Jaks, Sendai and other companies?
Mr Ooi: No. Since day 1, I have always advised Mr Koon against buying those companies. And sometimes we even start arguing and don’t talk for a while because of this. But right now, everything is ok again. Mr Koon and I still text often now about what to buy, and my ideas.
Mr Koon has been very good to me and I owe him a lot. He recommended a lot of clients to me and these clients are not small. If I think differently from Mr Koon, I will tell it to Mr Koon privately.
Jaks was recommended by QQQ3/Stockmanmy only.
I have always tried to advise Mr Koon that the management is being ungentlemanly by doing private issue cheaply and selling it them to him at a higher price.
Jon: What is your opinion on QQQ3/Stockmanmy? For me, I think it’s quite disgusting how he front run Mr Koon with max margin. That is really the bulk if not all his profits.
Mr Ooi: He is very ungentlemanly, to recommended stock to Mr Koon, and trade against him. Buying cheap to sell to Mr Koon at a high prices, when you know he is buying and collecting.
I asked Mr Koon recently what he thought of QQQ3/Stockmanmy recently. He said he is not even worth my little finger.
Jon: Alright. Ok, this will seem a little disrespectful, but I want to ask you on your process for a specific counter to see thing turned out. Lets talk about MASTEEL.
Mr Ooi: Well for MASTEEL, when we started buying, we bought very cheap, at around 0.4 pre split in 2016. Overall, we sold at 0.9 when it broke the SMA200. We rebuy in at 0.52 or so before the second bounce, before I made a second sell call at 0.5.
My followers who follow me strictly and diversify would not have lost much or even make profit. But if you don’t subscribe but rely on people to forward you my research, or you read rumor’s online on i3, you will probably only see the “Buy” call and not the “Sell” call, which will lose you a lot of money.
Jon: Fair enough. One of the things I remembered about MASTEEL was you complaining how the PE is so low even though the results was good. For me it was obvious, the capital structure is not good with high debts.
They are many companies with high debts and therefore despite appearing to have good prospects, don’t sell for much. Such as Softbank in Japan that sells for 7-8PE.
At the end of the day, investment is to look at all the future cashflows of the company and discount it to present value. If you cannot see with strong confidence the earnings of the company 10 years from now, and buy at a significantly cheaper price, you are not investing.
All these PE, EV/EBIT, ROE etc is just a short cut, which if you don’t look at it as such, will likely result in very bad outcomes at some point.
Mr Ooi: Well for FA, I have a list of things I look at, and it’s in my research reports. My range of target price is based off that. My focus is on TA.
But having said that, if the debt is too high, I also won’t touch.
Jon: Fair enough. Alright Mr Ooi, before we end things I would like to ask of some advice.
Being someone who has lived and experience life far more than me. As well has having been in the market for 30 years.
There is a Chinese saying, “The old man have eaten more salt, than the young man have eaten rice”. And I think this is particularly obvious in this scenario.
What would be your advice to me?
Mr Ooi: Well, one of the things that have really helped me and I think is absolutely key. Is to be truthful and sincere. To be gentlemanly when dealing with others. Never lie. Never take advantage of your clients.
It is wrong, and in bear markets, when everyone is criticising you or calling you name online, you will at least have a clear conscience, knowing that you did not do anything wrong on purpose.
You will still feel bad and want to work harder to make back the money for clients. But this one is quite a natural feeling, if you’re a good person.
Jon: Thank you, I’ll take that to heart.
Conclusion.
During the conversation, we also spoke a lot about my own picks, my thinking of investments, which are the good/great companies in bursa at good prices. Whether market will crash, a little more on Mr Koon. On the development of economies, property market, energy in general, China etc
But some of this I think we both want to keep private, or would take too long to write out, and others, his subscribers can ask him themselves.
Overall, I learnt a lot from Mr Ooi. It was an interesting conversation. I hope this is as useful as it was to me when I spoke to him.
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Facebook: Choivo Capital
Website: www.choivocapital.com
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https://klse.i3investor.com/blogs/PilosopoCapital/187705.jsp
Website: www.choivocapital.com
Email: choivocapital@gmail.com
https://klse.i3investor.com/blogs/PilosopoCapital/187705.jsp
