Any new counter or short-listed or good company for investment? This is probably the most annoying question I have been asked frequently. This is because I do have more than 20 short-listed companies in my watch list. Quite often, when I have shared my positive opinion about few of them with my friends, immediately, they are going to put lots of their capital on one or two of the mentioned. Luckily, so far, they did earn quite lots of money from the 'tips'. However, during this bull market, I really do not dare to share my points of view with them anymore for three reasons.
- First, they simply make investment decision based on my tips.
- Second, the market price of most businesses in the local stock market is no longer cheap compared to few years ago.
- Third, with my portfolio management of more than 10 counters and sufficient cash for rebalancing, my portfolio should be able to sustain any significant impact from the market or misjudgement.
Misjudgement is Unavoidable
I am just a human being who is trying to against the weaknesses of fear and greed by using value investment strategy. Very often, when Mr Market becomes either very optimistic or pessimistic, I really need to be calm down and to revise my homework to justify Mr Market's actions. Once awhile, I do make huge mistakes that cause significant loses.
Mistake One: Time Market
For example, I sold Gtronic when it was one of strong counters in my portfolio at RM1.30 with a cost of only RM0.85. It was a good return already with around 50% capital appreciation. It turns out, I missed the opportunity to grow with Gtronic in last 2 years.
What I have learnt is - stick with good company with reasonable growing rate and good dividend payout, and sell out only when the company is extremely over-valued.
Mistake Two: Simply realize a paper profit
Deleum is another investment that gave me around 50% capital appreciation previous. Again, I missed the chance to grow together with Deleum.
What I have learnt is - never time the market and sell out good business with fair price. To simply lock or realize a paper profit is really an unnecessary task for investors.
Mistake Three: Too OptimisticIndeed, I was too optimistic about the future prospect of MBSB and bought it with a little higher than its fair value. Until today, my MBSB is still facing 20% paper lose due to my 'brave' to buy high. Nonetheless, MBSB is still in my portfolio because I have no any good reason to cheap sell my MBSB provided its value is maintained.
Mistake Four: Lack of Sufficient Evidence and HomeworkNotion was my another huge mistake. When Notion achieved quite impressive earning in its Q3 and Q4, I was little confident that the coming Q1 should be good and Mr Market mispriced Notion with around RM0.67. It turns out that Notion reported a bad result in Q1. This mistake should be avoidable because Notion's customers (Camera segment) are in the process to clear out their stock in this year and is only restore their stock in the second half 2014. In other words, the performance of Q1 should be expected.
So, should I cut lose Notion now? Well, as long as the prospect of Notion remains positive, I really do not think I should cheap sell Notion with RM0.58 now. I expect coming Q2 Notion will achieve slightly lose of around -2sen, then Notion should be able to achieve positive EPS in Q3 and Q4. Nonetheless, with short term negative prospect plus long term uncertainty, I really do not dare to rebalance Notion at its current price. Who knows, Mr Market will be more pessimistic than me.
In fact, there are too much mistakes I have made due to my immature portfolio management strategy and fear of bear market previously. Although my portfolio did able to achieve my desired return in the last few years, my review shows that I could achieve more by avoiding those common mistakes.
Learn from Mistakes and Make Better Decision for Better TurnAfter making so many mistakes (I believe I am going to make some new mistakes from time to time in the future), I do make better decision and improve the return of my portfolio. For example, I rebalanced my Hevea-Wb when it was only RM0.16! With RM0.70 market price, it is equivalent to more than 400% return in two years.
This should not be a surprise because as what Warren Buffett has highlighted -
"An intelligent investor in common stocks will do better in the secondary market ... because which is periodically ruled by mass folly, is constantly setting a "clearing price""
Of course, I did not fully earn the whole cake because I rebalanced my portfolio when the risk was getting higher. I am revising my strategy so that the return of my portfolio can be further enhanced.
Latitude is another my major earner in my portfolio. With initial entry price of RM0.60, Latitude have given me more than 400% return in two years.
Nonetheless, I should highlight that I just allocated some fund on these major earners in my portfolio. As what Cold Eyes Senior highlighted before, just a few counters outperform, the overall portfolio's performance should be satisfactory. So far, I quite agree with the Senior.
My View about Current Market
In general, the valuation of most counters is getting more and more expensive compared to previous years. This should not be surprised because iCapital already increased its cash ratio substantially since the beginning of 2013.
Does this mean Bear Market come soon? I do not know and it is also not my job scope to time the market. Nonetheless, I do know that my current portfolio should be able to achieve my investment's objective again and have sufficient cash for rebalancing when 'clearing price' appears in the market in the future.
Written by: Xaivier Chia
P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.