I was re-reading the article "Avoid The Mistake Most Investors Make" by by The Motley Fool Singapore and was reminded that the ingredient to success investing is timeline and temperament. I strongly encourage you to read the full article as it provides good pointers on how to keep level-headed when investing.
One suggestion which I would take up is to write down why I bought the share in my portfolio, my expectations of the share and what would make me sell it.
I hope to cover all my counters in the next two months.
I have made some adjustments to my portfolio in July. I decided to reduce my exposure to REIT, so divested CDLHT and reduced SG REIT. This leads to a drop in my dividend which led to the purchase of QAF and increase stake of Valuetronics.
I also added back some Best World when its price dropped form $1.5+ to $1.3+ recently. Finally, I initiated a position on ISOTeam after reading positive reports about it and quite like its performance over the past few years.
With all the adjustment, the current dividend yield decreases to 4.2%. For Income (55.6%)
Parkway Life REIT
Starhill Global REIT
Capital Retail China Trust
Fraser Centrepoint Trust
Dividend Stocks (23.9%)
SGX SIA Engineering QAF For Growth and Punting (38.6%)
My initial reactions on the JV were more negative. Personally think that management should focus on expanding their core business, especially ensuring execution of their business in China market. I also think that stem cell banking business seems to be a stretch from their current business.
However, the investment is only 2.5 mil. So it does not warrant any action at the moment. I am keeping faith with the management that they know what they are doing.
Difference of 2.5k. Haiz, should have cleared the loan earlier and saved more on the interest. Nonetheless, I am happy that I am temporary financial free, that is until the next car loan. Wishfully hoping for the COE to drop below 40k by end next year.
I decided to sell the two stocks that I punted Cityneon and Sunningdale Tech upon confirmation of Brexit, in anticipation of a drop in share price after that. However, that did not materialise over the past 2 weeks. Will hold on to the cash for future investment.
As mentioned in the last post, I sold a third of my holdings in Best World. While I am confident of their business in the next few years, I took profit as the share price has risen much in a short period of time.
Lastly, I have taken a small stake in SIA Engineering after reading through what it went through over the past 2 years. I reckon that while earning in near term will be flattish, it will benefit from its venture with Boeing and Airbus in times to come.
Best World share price has gone from $0.335 at the beginning of the year to $1.5 today (4 July). An investment of 10k then would give you 45k now. To sell or not to sell is the question that would pop up in many of our mind.
In theory, the price purchased should not matter in the sell decision. A sell decision should be based on one or more of the following reasons.
a. The fundamentals of the company has deteriorate
b. The company is overvalue at the current price
c. To raise cash for a better buying idea
d. To raise cash for other reasons
For Best World, its fundamentals definitely has gone better with the award of its China DS License. Annualising 2016 1Q results, 2016 PE at $1.5 will be approximately 14. Not dirt cheap but definitely not expensive, given its growth in the coming years. At the moment, I do not have any better idea. Last but not least, other reasons which for me is my recent decision to pay off my remaining car loan.
Again, in theory I should sell off my other holdings since BWL has such huge potential. However, I succumbed to my emotion and sold a third of my BWL holdings to take some profits due to its quick gain. Will hold on to the remaining shares to participate in the company's growth in the coming years.
Back to its business, Best World International Limited (BWL) is a direct selling company that sells health supplement, skin care and lifestyle products. Its key products are Avance range of health supplements and DR's Secret skin care products.
Listed in 2004, it had shown tremendous growth till 2008. From 2009 onwards, its revenue, net profit and dividend shrank and was flat between 2010 to 2013. The growth and then subsequent challenging years was due to over-reliance on Indonesia market. The regulatory change in Indonesia that revoked some of BWL products' license caused the huge drop in both its top and bottom lines.
During these trying period, the company worked on other markets and establishing its China market. The acquisition of China manufacturing plant in 2014 allowed them to fulfil the final criteria in its application for DS licence. In the same period, its Taiwan market grew and on their own estimation, the company felt that they are the number 13th/14th company in Taiwan in 2015. They reckoned that they will be 8th/9th this year. While waiting to get their DS licence, BWL sold their products to China through export model which also see a tremendous growth last year and 2016 1Q. All these recent developments augur well for the company and they should have good growth in the next few years.
Crunching the numbers
As seen from the data, this is a cash business. As long as the company can grow their top line, its FCF will mirror or be higher than its NP. The company has a dividend policy of at least 30%. So again, if NP grow, its dividend will continue to grow.
Having heard the COO spoke during an investment seminar, I would say that the management know what they are doing. Together, they hold more than half the shares, so their interest will be aligned with the rest of the share holders.
Having gone through and survive a challenging period, I am confident that the management has learned much from the episode and is ready to bring the company to the next growth of phase.
I will hold on to my current holdings to participate in the company's growth. I might look at accumulating the shares when and if the current euphoria is over, resulting a lower share price.
MLM sent a shudder through me. That was true for me for many years when I felt that it's a scam. I reckoned that I felt this way because of various negative reports about pyramid scheme during a period of time. When did that happen, I could not recall but probably quite a long time ago.
This negative association continued until I read briefly on an investment by Warren Buffet on MLM company. If the world best investor is into MLM, then there must be something I don't know about MLM. It was then that I first knew about Best World, the only direct selling company listed in SGX. Without much knowledge, I bought the shares in 2009 even as its sales were dropping. Then, I felt it was a temporary problem and dividend yield was good. Held on to the shares, bought the rights and continued to accumulate but things got worse and when their best market in Indonesia tanked, dividend was cut as the group hardly made any profit. Finally sold out at a loss of about 11k in 2013.
It was then a friend called me out to introduce me to Amway. After attending to an introduction presentation and finding out more about its business model, I decided to have a go at it. While I am not very used to the use of NLP during the seminars, my perception of MLM has changed. I think the business model is highly scalable and one can achieve success if he put in sufficient effort in it. To cut the long story short, I was a passive member for two years and decided not to renew my membership as I was not putting it as my priority. I might one day re-join Amway when I decided to have a go at having a business.
While I have divested from Best World in 2013, it was still on my radar. Last year, I read about its improved performance and decided to purchase a small stake in it again. I accumulated more with the release of its 2015 results. The share price just rocketed after it released its 2016 1Q results. And of course it is with joy that I read that the company received its direct selling license in China.
I am now clearer of Best World business after reading its past 12 years annual report and the various analysis done by valuebuddy Boon. The presentation by its COO during a recent investment seminar also provided me a better insight of the company.
This is my experience with MLM companies and Best World. In the next post, I will share more on what I know about Best World business.
After 2 years of lacklustre performance, I am happy to announce that my portfolio returned 23.7% (including dividend) for the first half of this year. This is definitely better than STI ETF, which reported an annualised 0.51% return over the past 6 months.
The good return is largely attributed to the amazing performance of Best World International Limited (BWL). If I have excluded the gain from BWL, the gain would be approximately 6%. Not fantastic but I think it is better than STI ETF.
As of 30 June 2016, top 5 holdings of my portfolio in terms of capital outlay are
Parkway Life Reit
Starhill Global Reit
Straco Corportation Limited
Best World International Limited
Singapore Technologies Engineering Limited
I decided to start tracking on average how long I held on to the stock since I first purchased it.
And on average, it's only 0.9 years! Well, this is so as I did a major review last year. The two counters that I held for a longer time are Starhill Global (since Jan 2012) and Food Empire (since Mar 2014). I am confident that with the review last year, the holding period of the companies will be longer.
BWL requested a trading halt yesterday, pending an announcement. Cautiously optimistic that it will be a positive announcement and if so, that should further boost its share performance. I will write more about BWL in my next post. Besides BWL, the rest of the companies should produce stable performance for the rest of the year. Looking forward to dividends from PLReit, SGReit, BWL, STEngr, VICOM, CRCT, CDLHT, Valuetronics, FCT and SGX in the second half of the year.