Thursday 21 September 2017

Meeting with my financial planner friend

Today I have a great catch up with my financial planner, he is my first 3 months SAJC friend. He is a great guy who advocates DIY insurance, conduct holistic wealth planning and never did push sales. He provides a good blueprint on how to achieve financial freedom through protection and wealth accumulation through investment.

In fact, he attended both VIC and OMP courses and explained to me the pros and cons of options investment and trading. He shared how his profit of USD 15k was wiped out due to greed because of constant winning streaks. Then he devised a proper system like a checklist before executing his trade. He asked whether I have this checklist system in place:


  1. Do your fundamental analysis on the company
  2. Do your technical analysis on the company
  3. If it passes both then execute on the trading platform
  4. Do your portfolio positioning
After that, he shared with me his ambition of having multiple streams of income. Well, birds of same feather flock together. I asked whether we should be like Ken Teng having at least USD 900k in options. Trading options is still considered active income. His response is he wants to accumulate assets and generate cashflow without him doing anything. That is passive income. His strategy is:

  1. $3k rental income (he shared a rental property among his family members) 
  2. $40k dividend income (he aims to have S$1m of Singapore stocks) which is present value of $1k/mth
  3. $1k/mth from options income
  4. income from CPF Life
I will start working on CPF strategy by shifting from OA to SA. It is good to meet like-minded friends! We need to encourage each other in this journey towards financial freedom.

JC Options Fund 4th Month Results

This game is getting addictive and dangerous. Just recently, I tried to execute a repair strategy and I press the wrong button. End up, I was stuck with a lousy position of 4 sell put on UAA. 

Just now, I was chasing after FSLR premium, I have a bad vibe about this. I think greed is going to come back to bite me soon.

I bought a LEAP call on IEF and intend to buy LEAP call on TLT, diversifying into bonds ETFs.  

Saturday 16 September 2017

Prada Interim Results Six Months Ended Jul 31 2017

I was been taught that you should always check whether it is the earning season before you place your order and I forgot this rule. I happily sold my shares in toy makers Dreams International, Playmates and apparel wear Best Pacific International, thinking to move from small cap stocks to better quality stocks. I am thinking of seeking revenge on Prada stock which made me lose money in 2016. I bought at an average price of HKD 27.35 including brokerage fees and last Friday the results came out and the Monday that just passed showed a steep drop of 13% in a single day. 


I took a position of 4000 shares, thank God I didn't add more because at the back of my mind I was thinking of going in at about HKD 25. Since it didn't come down then, I enter to take a position. Now let's look into the numbers.

Net Revenues for July 31 2017 was at EUR 1,468,636 thousands vs Net Revenues July 31 2016 EUR 1,554,172 thousands, there was a drop of 5.5%. EPS dropped from EUR 0.055 in 1H 2016 to EUR 0.045 1H 2017 which is a drop of 18.4%. Net operating cashflow is still positive but down 22% as compared to 1H 2016 EUR 266,728 vs 1H 2017 EUR 208,156.

The gross margin improved from the same period of the previous year as the decline in sales volumes was compensated by better ratio of full price sales to discounted sales. E-commerce was implemented for all brands which include an omnichannel growth strategy focusing on merchandising and territorial coverage, new websites and digital marketing campaigns to acquire new client.



The overhaul of processes and cost structure helps to reduce operating expenses which is consistent to last reporting. The net operating working capital at H1 2017 is EUR 552.7 million which is unchanged compared to January 31 2017. The net financial indebtedness amounts to EUR 223.4 million, after the dividend payment of EUR 307.1 m and a reduction of EUR 40.6m resulting from the exchange rates fluctuations.

I read that all net sales by geographical areas are dropping for 1H 2017 compared to 1H 2016. Europe, Japan and Middle East registered a big decline in sales. Decline for brands sales will show that Prada dropped the least at -4.6% whereas Church's shows the largest drop of -15%. 

I done my calculation for total FCF average to be EUR 306m and present intrinsic value of Prada is about HKD 21. Presently, the share price is overvalued. Till date, the stock price has recovered from lowest HKD 24 to HKD 26, filling its gap of HKD 27. Let's see when I can get out of this.

9/10/2017

I have successfully sold on the 4th October at HKD 28.45 

I know HK market seems to be in bull run again but I want to clear this company from my portfolio. 

Wealth Management is an important subject

Wealth management is a very important skill and it is a life long learning journey. Wealth management involves learning value investing, financial planning and wealth creation. Especially, we are at the crossroad where there are alot of disruptions because of high technology. Just look at how Amazon is slowing affecting the business of Kroger and Alibaba's ecommerce causing headwinds for traditional retail business.

We need to constantly increase our financial knowledge to keep up with time. There are a lot frauds and hypes out there, we need to be able to discern the gems from the dirt. You will come across news which mentioned that even traditional investment will have instances where millions of fortune are lost overnight. Why will even these wealthy guys trip and fall? Shouldn't they be more privileged with better information than us commoners?

I see that the common problem is we will spend more time on wealth creation and neglect wealth management. The end result is money in and money out. This is highly prevalent in the media, the actors and actresses, singers, sports superstars, etc. They look brilliant on stage but debt ridden in reality. 

In China, there are a lot of speculators (including me at times) for shares and properties. We should learn how to differentiate between speculating and investing. Speculating is gambling, it will be almost equivalent to playing at the casino. My dad always think that I am gambling with stocks. Sometimes but not all the time.

The real value investors must be prepared to walk the lonely path, it is not based on luck as luck will only bring this far, value investors are willing to take the right bat (not bet) at the right time and stay with their decisions for many years until proven right or wrong.

Investors are categorized to the following few:
1. "I know nothing" - some of the retail investors will just listen to tips, have the herd mentality, not interested in fundamental of the business, worship the buy low sell high to profit. Very often, they tend to buy high and sell out at low in panic. 80% of this category investors lose money.

2. Slightly Brighter than the earlier - short term trader type, he tends to stick to the screen everyday , will get excited with a small price movement (+3-4% will get excited, yes, I fall under this category most of the time).  He will do some homework on the companies but not in depth. Sometimes when he is lucky, he will strike a small homerun.

3. The clever type - Medium to long term investor - will hold the shares for more than one year and make himself available for shareholders' meeting aka AGM.

4. The absolutely brilliant type - Understand the in and out of the business and industry, investing on the potential future returns of the business.

5. The sage - can differentiate between the great and the wannabe, has a portfolio management and investment strategy, once invested, he will wait years to reap his reward.

Most of the retail investors belong to 1st to 3rd category. There will be more pitfalls in investing and we will bound to experience a market downturn sooner or later. We need to continue to read:

1) investment books
2) business books
3) financial reports
4) biographies of great businessmen 

(If you don't like to read, listen to audio books, or watch videos)

After reading, we need to learn and put them to good use to become our own knowledge. We should be thirsty for knowledge and continuously seek to better ourselves, excel in both wealth management and wealth creation. 



      

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