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Tea with Solace: A review of Saturday with Victor Chng.

Tuesday, March 18, 2014

This is a guest blog by Solace who spent last Saturday morning attending a talk by Victor Chng and friends.

Review on "Level Up Your Investment Profits"

I first knew about Victor Chng and Rusmin Ang when I came across the book "Value Investing in Growth Companies". I was impressed with their results in many of the local stocks and how they used scuttlebutt effectively.

They are in similar age group as me and when I know that they are hosting a talk at SPH on a Saturday morning which is near my house, I did not want to miss the opportunity to hear them speak. Solace is always curious to know how some people in his age group can be so good in investing. We must always case study successful investors, see what they have in common and model their techniques to suit our own style.

One recurrent advice that Victor gave was to invest within our "circle of competence". This is something that all investors have heard of but very seldom practiced. Their approach is primarily based on fundamental analysis. It involves lots of research and hard work. It does not involve looking at numbers in the annual reports alone but also encompasses looking at business model, industry macro factors, quality of management and finally valuation. It formed a nice little frame work.

 
Number Business
Valuation Management

My Personal Opinion:
If a person does not have sufficient knowledge in the four factors, one cannot say he is investing within his "circle of competence".

The speakers went on to spend some time explaining about common valuation methods, identifying good management, picking up important numbers in annual reports etc. I shall not go into details and bore everybody. I presume most readers of AK’s blog already have some kind of knowledge of investing.

For people who want to know more, just pick up any Pat Dorsey, Peter Lynch or Warren Buffett books to read. Ask AK for recommendations. (AK says: Food for thought found in the right sidebar.)

Victor also spoke about the differences between a good company and a fair company. Even if it is a fair company, we can still profit from it if we buy undervalued. He then went on to explain about distressed industry, where we can actually profit by buying into fundamentally strong company when the price has hit rock bottom. "Fallen Angels" was also mentioned; we need to able to deduce if it is a temporary setback or a permanent decline.

My Personal opinion:
There is a fine line between fallen angels that are value stocks and those that are headed straight towards bankruptcy. Needs experience and good judgment.

Several case studies were shared. Many are stocks that the speakers have invested in before. One of them is LMA international and why it has a unique economic moat. Cerebos, the company behind Brands and how it was so profitable. The comparison between Hanwell Holding (Product: Beautex Tissue) and NTPM (Product: Premier Tissue). A look at the financial numbers would tell us a lot why one is superior to the other.

There was a question from an audience which I thought was excellent. Cerebos, the company behind Brands can potentially be hard hit by a massive outbreak of birds’ flu or a change in consumer preferences, leading to a worse case scenario where no one wants to drink chicken essence any more.


My Personal opinion:

This is a very valid concern and highlights the importance of safety margins in investing, even for stocks which seems invincible. Anyway, Cerebos has already delisted from the Singapore Stock Exchange.

Finally, Victor touched on one sector of the industry which is in distress. The Baltic Dry Index (BDI) has fallen to records low in recent times and value can potentially be found in the Dry Bulk Shipping Sector. Weaker players are out of the game and the search is on for companies with competitive advantages can lead the recovery which may be taking place.

As strong iron ore demand from China drives up price of ship charters, the worst could be over for the shipping sector. Using the framework that Victor has explained, he has identified 2 companies in the region that appeal to him,

This is a cyclical industry which has gone through multiple boom and bust cycles before and this time is no different. Some of the big names and billionaire are believed to have already invested in this sector. Based on the information provided, retail investors can potentially ride on recovery in this sector by carefully investing in fundamentally good stocks in the sector.


My personal Opinion:

I generally agree with the findings of the speaker on this sector. I am monitoring it myself. But as a prudent investor, we should still do our homework to verify the facts and macro industry situation before leaping in. As mentioned before, always invest in your "circle of competence" and with a margin of safety.

Victor will be organizing a roundtable discussion forum where he will be sharing his findings of the sectors in details. He will also show how the methods could be replicated to find opportunities elsewhere. If you are interested to learn more, you can contact Victor and friends for more details on the discussion forum.
 Email: Contact@fifthperson.com


Conclusion
I agree with the investing methods that the speakers have touched on. Many successful investors succeed based on hard work, fact finding and many hours of learning and research. I always believe that is no short cut to riches in investing. I believe the investment methods shared by Victor and Rusmin are very relevant and should be studied carefully.

Finally, I just want to add, if one comes across marketing gimmicks that promise instant riches and instant success by attending courses which charge ridiculous prices in the thousands of dollars, one should open one's eyes to see clearly and think carefully. At that kind of prices, one might actually get better value for money by investing in an ETF or reading some good investment books.


Related posts:
1. Saturday morning with Victor Chng: Level up!
2. Saturday with Victor Chng: Becoming a better investor.

9 comments:

sillyinvestor said...

Hi Solace and AK,

Thank you for the write up, it gave a very good summary of what is said, I almost felt like I have attended the seminar.

I was looking at dry bulk carriers in Singapore earlier on, after I bought yangzijiang. There are a few, out of which golden ocean is a great company and is a dry bulk purist, but it is SUPER DUPER illiquid. Cosco has dry-bulk arm, but you know their rig building business, courage marine, I will give it a miss, regardless how much the price climb.

From newspapers, I know there is pacific basin in HK, but the price has already run up when I look at it. In the end, I gave up, looking at HK counters will be out of my circle of competence/ comfort.

In the end, YZJ did not disappoint as they start buying the bulk carriers from some of the JV they form with charterers. So there is some minimal exposure there, too bad no one likes the HTM segment of the business, especially when China is threatening to blow up its shadow banking. hahaha

I have always wanted to look at the big 4 banks in china and the property counters in singapore in details. Lets hope the school holiday gave me more time.

AK71 said...

Hi Mike,

All credit goes to Solace. I only did a bit of proof reading and editing. He took care of the substance and I did a bit of styling. ;p

The next time Victor and friends organise a seminar, I will definitely spread the word again but I will tell them $9 a ticket/$15 for two won't cut it. -.-"

As for the shadow banking issue in China, if it should blow up, I think it will cause a tsunami in the equity markets. All businesses with a big exposure in China will be hit. Will be ugly. So, it won't be limited to YZJ which has been a good investment for you so far. :)

I look forward to the analyses you will be doing during the school holidays. ;)

SGYI said...

Hi Solace,

Thanks for the review. Seems like the session is quite good for value.

Any hints of the dry bulk shipping companies they are driving at? Haha. Have been tracking this industry for the past 2 years. I'm only invested in dry bulk shipping listed in the US. Not sure about Singapore dry bulk companies.

AK71 said...

Hi SGYI,

When I read the review, it was clear to me that $9 a ticket was a steal! Even $19 would have been a steal.

To be fair to Victor who spent a lot of time, effort and, even, money to do his research, we cannot reveal the companies.

Victor is now a full time analyst and makes his money by selling his research. He will be sharing in greater detail at the forum he is organising this Saturday. :)

Solace said...

Hi Mike,

Indeed, investing in stocks listed in overseas market may be out of many people circle of competence. We do have to research carefully before investing in them. Need to dig hard to find the gems.

I was once interested in Pacific Basin before, but for reasons you have listed, i have let it sail. Let's research to see if there are more good counters out there :)

Solace said...

Hi SGYI,

Based on fundamental analysis skills and knowledge you have, you can start screening the sector for companies that passed your criteria.

If you have identified good stock, most likely there will be others who will also feel the same :) After all, we are all trained under the same school of thoughts in fundamentals.

kenji tay said...

Hi Solace and AK,

Thank you for the support. We definitely need them as it help to push us despite the gloomy weather and the rocky roads ahead.

We hope to continue to deliver insights and share our knowledge on financial literacy to as many ppl as possible.

Of cos as of now, we are small and lacks the credibility. We hope that everyone can give us a chance to prove ourselves. If we do wrong, please feedback to us. We are young(lol) bunch of boys with some crazy ambition to help ppl invest better, spread knowledge so less ppl will be victims of scams and in the process, also contribute back to society as a whole. As humans however, I am sure we have many blind spots that we need your feedback on.

And while this is a business and not a charity, we can't give everything for free. But give us time... And you'll see a greater meaning of what we want to do. (I wun say it now because until it happens, you have every reason and right to doubt us)

Still regardless, we will continue to deliver our best and share our knowledge whole heartedly.

Sgyi,

If you have a chance, come join us in one of our events. We dun really sell programs... So if you want, leave yr credit card, nets card at home and come hear us. No pressure :)

Even if you dun buy our research reports, I am sure knowing a friend or 2 that have the same interest is a good thing.

Again, I wanna take this chance to thank all the readers who came last Saturday, Solace for taking the time to write the review and AK for the trust and friendship.

Thank you everyone...

Thank you..

Best,
Kenji
On behalf of "the fifth person"

AK71 said...

Hi Kenji,

You guys have your hearts in the right place. Continue doing the right things and right things will happen to you too. :)

Given enough time, I am sure that more will come to know what you guys at The 5th Person stand for.

I share the vision of making quality education in investment more affordable to the masses and to help people to help themselves. For those who are unable to help themselves, we should give them a lift when we can. So, I am glad to be more than just an observer in your journey. I am glad to help. :)

SGYI said...

Hi kenji,

Sure, will join you guys in one of your events when I have the time to pop by. Its a noble cause you guys are doing to help people invest better. Trust that many people will come to benefit. Do it with your heart and one day you will succeed.

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