tag:blogger.com,1999:blog-39515467093662008102024-03-05T21:34:27.729+08:00Our Journey Towards Financial FreedomWe have embarked on an journey to achieve financial freedom through our investment portfolio and other streams of income.
JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.comBlogger173125tag:blogger.com,1999:blog-3951546709366200810.post-3021701657403068252021-10-26T23:46:00.001+08:002021-10-26T23:46:02.243+08:00We have moved!<p>We have moved to a new website:</p><p>www.jcprojectfreedom.com</p><p>Visit us there!</p>JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-25109362139202121452018-04-07T18:19:00.002+08:002018-04-08T21:12:56.252+08:00Things I learn from Jim Cramer's Get Rich Carefully<b>Sector ETFs overpower Individual Stocks</b><br />
Why does the sector pull matter? Stocks are hostage to them, even if individual companies don't deserve to be. That's because of the immense popularity that sector indices and the ETFs that mimic them have gained among huge institutional money managers. To put it bluntly, they would rather play with big, liquid ETFs than mess with trying to get in and out of individual stocks. These baskets, designed by firms to, once again, give big-portfolio managers large and quick exposure to a group of stocks instead of one stock, fulfill the same role the S&P 500 futures play for the entire market. How do they impact stocks on a day-to-day basis? Let's take the oil service group, one of the sectors most keenly dominated - I would go so far as to say it has been wrecked - by ETF trading.<br />
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<b>The power of bonds and the Fed on stocks</b><br />
How you might ask, can you figure out when a run on the stock aisle into the fixed income section of the supermarket might occur? How do you stay on top of this process so you can profit from it? I could say,"Just keep an eye on the stock market at all times." But I have a better way. I monitor the action by following the TLT, the iShares 20+ Years Treasury Bond ETF. This security goes down when interest rates go up, and vice versa. When the TLT goes down, you can expect the stock index futures to go down soon after, as stock index futures react to every minute move of this security.<br />
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<b>How fundamental is important to investing</b><br />
When I started investing I cared only about fundamentals and focused on traditional sector analysis. The most important fundamental influence is the company's growth rate. While a company's past - how much revenue and earnings it has booked historically can be very important, it is not the most significant factor when we are determining how much to pay for an individual stock at any given moment. What is important is how fast a company's sales and earnings are growing, especially in the context of what is expected of the company. The expectations are set by the analyst community which is why we have to pay so much attention to the consensus of those expectations.<br />
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At all times we are trying to figure out how fast a company can grow, compared to both all other stocks and stocks in its sector. We need to know how to assess how a company performs in times of not just domestic but worldwide economic acceleration and deceleration.<br />
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We are always on the lookout for companies that can better both their sector's growth and the economy's growth as a whole. If we can profit from secular growth companies, that's terrific but we may have to pay for an expensive price. In other words, the price-to-earnings multiple, what we will pay for that stream of future earnings is higher or more expensive that what we might be willing to pay for a stock with a far more variable, economically dependent earnings stream. Many companies which are the classic growth stocks include Kimberly-Clark, Procter & Gamble, Johnson & Johnson, General Mills, Coca-Cola, PepsiCo, Kellogg and Clorox. These stocks are trading at historically high levels because they can deliver consistent, albeit slow, earnings growth in a tepid economy. If you own Caterpillar, Ford, General Motors, General Electric or Cummins, you have to be on top of world events, particularly in China, pretty much every day.<br />
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Some stocks like 3M, Honeywell and Emersons are what we call growth cyclical, hybrids that have both kinds of stocks. They hold up at times of mild acceleration and stability.<br />
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Of course, some companies are levered to individual cycles. Deere, Monsanto and Potash (acquired) are all about the farm cycle, chiefly whether or not the farmers are flush. Boeing and Precision Castparts (acquired) and to some degree United Technologies hug the aerospace building cycles and track worldwide aircraft demand.<br />
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But all stocks, whether they are cyclicals, growths or hybrids, get graded the same way by analysts: Are the underlying fundamentals of enterprise better or worse than expected, as expressed by he consensus of the analysts' estimates? Many people are fixated on the top line, I think the bottom line is more important, what a company has left after it takes out the costs of all of those goods sold, expenses, taxes and depreciation. Bigger earnings can lead to bigger dividends. Profits matter even in this new crazy world because profits can put dividend checks in your hand and help propel stocks higher over time due to those ever-increasing dividends.<br />
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<b>How to Grade High-Growth Stocks</b><br />
1st Test: Is there potential for multi-year growth that we can put a value on, a clear growth path that provides long-term visibility with multiple revenue streams?<br />
2nd Test: Is the total addressable market big enough for the companies to sustain their growth?<br />
3rd Test: Does the company have the ability to stay competitive?<br />
4th Test: Is there a possibility for the company to return capital over time, through either dividends or well-timed buybacks? Or does the company have such as well-defined growth plan that it can just continue to pile the money into the business to get consistent or accelerated revenue growth?<br />
5th Test: Can the company expand internationally?<br />
6th Test: Can the balance sheet support strong growth?<br />
7th Test: Is the stock expensive on the out year?<br />
8th Test: Does the company have the right management?<br />
9th Test: Does the company need macro growth to meet the numbers?<br />
10th Test: Can the company maintain or grow its margins?<br />
Understand which hidden metrics really matter in each sector, as they won't necessarily be the earnings per share. Know the best of breed of each sector if you want to invest in it.<br />
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<br />JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-73784309764889272018-03-30T16:17:00.000+08:002018-03-30T16:17:09.702+08:00End of March personal reviewIn March, I spent time on career discovery with Finexis Advisory, Phillips Capital and IPP FA. I sat through a few of the sales training, personality test, financial planning process and team meeting in Finexis Advisory EXO. From all the sessions, I find that EXO has one of the most comprehensive system which will prepare the new financial consultant to succeed in the business. I think EXO has a good team culture, with senior managers having specialized skill sets to complement the team knowledge. I attended one of their investment training which explains the importance of diversification and how Finexis harness their team of researchers' knowledge to advise on investment products. The session helps me to understand that instead of spending so much time on researching stocks to purchase, sometimes you spend some money to engage a specialist to invest and manage on your behalf has its own advantages such as freeing up your time. Definitely it is still your money and you should look closely at the performance of the fund. On the other hand, value investors feel that stock picking is a game, when you are enjoying what you are doing, it is not work.<br />
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I believe in my future career, I will have a stint with one of the independent financial advisory.<br />
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I was offered a new role with an offshore support vessel company. However, the salary was another 20% cut from the previous role. The below is the snapshot of the income statement. I will not comment further but I will do my best to stay as long as possible in the company to put food on the table.<br />
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I realized that I was too spoiled on the pay because the industry was experiencing high growth for the last ten years. I was able to command high pay at an age of 27 years old (2009) till 2017. Now the pay has reverted to the mean.<br />
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I attended an executive workshop at e2i and I got to know a few friends. Some of them were from the marine industry, one gentleman is looking for work since end of 2016, one gentleman suffered from depression a few years ago and back on track to look for work, one gentleman was retrenched when he was 40 years old in 1999 and has been on various contract work till now. Sometimes when we did not go through tough times, we will never know there are a lot of people out there who are in need of help and they are facing different and unique challenges in their lives too.<br />
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I pray that my new friends will be able to find new placements within six months and they can remain healthy and positive in life. Life is not just about financial freedom and money. I thank God for humbling me through the various situations he put me in. Stay authentic and humble to myself.<br />
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JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-76827794172225840392018-03-11T22:39:00.000+08:002018-03-13T22:06:34.248+08:00General reflections on 11/3/2018It has been about 2 months since I stopped working. Time passes by very fast. In today's church sermon, it is about time. There is always a season for rest, teaching me to learn how to be still. I think I have a different type of rest. I have rest from work, rest from difficult and nasty people, commuting long distances, traveling for business acquisition. For the last two months, I have spent my free time in the National Library, doing my own research, reading, studying and meeting up with friends. I met one of my industry friends in the library using the Regus business lounge. I met my MBA classmates. I met my high school friends. I was able to attend weddings, baby birthday parties, and dinner. More importantly, I was able to spend quality time with my family.<br />
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At the same time, I am worried for money every time I took out the wallet and withdraw either the credit card or cash. Why should I be worried? I am financially independent. I should be able to cover my family basic expenses. I do not know why there is this fear. I feel that I need to work. I feel that I need to accomplish something more. I feel that I need to contribute to the household income. I did contribute to the household income, I sold some shares and made some money. I just have this sense of insecurity. I have a lot of "what if" scenarios. What if the market crash and draw down of 50%? What if I don't have sufficient money for retirement because I am spending money and not making more money? I feel that I can provide more for the family.<br />
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I have more time to think. Think about my present portfolio and how will the business perform in the future. Some of the businesses worry me. Most of them will be fine. I also have time to think about what I will like to do for another 30-40 years of my working life. I cannot forecast 5 years into the future. I can only plan 1-3 years ahead.<br />
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1. I will like to join the wealth management industry<br />
2. I am interested in equities (bottom up approach)<br />
3. I am reading up on the macro business news (top down approach) to appreciate currencies, bonds, commodities, employment and interest rates.<br />
4. I want to serve the mass market. I was never brought up in a rich family, my parents save and scrimped to put food on the table. I save money through giving tuition during army days and working guard duties for people to pay for half of my university tuition fees. I continued to teach tuition from 18 years old all the way till 28 years old. I worked every single semester holidays from store man, QA/QC technician, dress up as an elf to give brochures in Raffles Place, zoo facilitator, etc to make and save money. You get the idea. I am very thrifty and always have been an underdog. I have an achiever mentality and want to prove to my primary school friends and people who undermine my capability that I will strive to be better. I believe the underdogs can win the race too if they believe in themselves and continue to work hard for their goals. I want to help them to increase their financial literacy and financial well beings. Yes, I know the money is made from the wealthy but my heart goes out to the mass market. I derive satisfaction from helping few of my friends to improve on their financial well being through financial planning. I want to reach out to more people to understand their needs and how to improve their life.<br />
5. I want to spend quality time with family<br />
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Sometimes I will have this gambling mindset, wondering if I have placed $1 m when Creative share price is at $1.25 and sell it at $10, how will my life be. This mentality is same as what if I strike lottery. Stupid and greedy me.<br />
<br />JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-87407150891581681352018-03-09T10:38:00.005+08:002018-03-09T10:38:57.592+08:00Early Retirement vs Semi-Retirement<b>Early Retirement</b><br />
A study conducted by Melbourne University shows that after working for intense long hours will cause brain damage. For workers age 40 years old and above, the ideal number of working days should be just 3 days per week. This will keep the brain active yet will not over exert oneself due to undue stresses.<br />
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Seriously, who does not want to work just 3 days a week? I always believe in there is a price to everything. If you work for 3 days a week, I will think this is considered a form of part time work or sharing of work. Part time work can be considered as a subset of semi-retirement. Be it semi-retirement or early retirement, you need to be financially and psychologically prepared. Before you think about early retirement, you need to envisage what sort of lifestyle you want to live when you are retired. With this in mind, then you can work backwards to decide what is to be done to get you there.<br />
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Step 1 - Set your retirement goals. When will you like to retire? At what age, will you like to retire? How long will you be retired for? During your retirement, what sort of monthly income or draw down from savings will be required?<br />
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Step 2 - You need to work out your personal balance sheet to understand your personal assets and personal liabilities. You can also make use of CPF retirement calculator or some of the online retirement calculator tools to make some simplify forecast and estimation. You can also determine the differences to make up for in order to achieve your retirement goal.<br />
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Step 3 - If there is no gap to fill, congratulations, you are well prepared for retirement. If not, proceed to Step 4.<br />
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Step 4 - You may want to increase your time frame for wealth accumulation, delaying your retirement age.<br />
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Step 5 - You may want to reduce your post retirement monthly income or draw down amount per month.<br />
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Step 6 - Reduce your present monthly expenses to increase your monthly savings.<br />
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Step 7 - Increase the rate of return of your investment. Remember higher return comes with higher risk.<br />
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Most of the people feels that to retire is to stop all forms of work, they will depend on their passive income to maintain their lifestyle to enjoy the finer things in life. If your definition of early retirement is to lead a more prudent lifestyle, reducing your expenses which is more practical and sustainable.<br />
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<b>Semi-Retirement</b><br />
Most of us in their mid-life will strive to have work life balance to have more quality time with the family. I am sure you too will like to have early retirement. The age group between 40 - 50 years old will be commanding the highest income level during their working lifetime. However, this is the age group where their family expenses will be highest as well due to children education, ageing parents and home mortgages.<br />
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If you will like to maintain a certain level of lifestyle and your savings cannot last for the entire duration, you can consider another form of retirement. You can find a part time job to keep yourself active while maintaining your lifestyle.<br />
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Many Singaporeans are over dependent on their CPF as the main source of retirement fund. However, you can only draw down after an age of 65 years old. If you wish to retire before 65 years old, then you need to have other source of income.<br />
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For early retirement and semi-retirement, the expense will be at a similar level compared to your working days. Early retirement is to enjoy the same level of lifestyle, usually people will not reduce their expenses. In the worse case scenario, it will be even higher than before.<br />
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In order to retire earlier, you need to do the following:<br />
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1) Be very thrifty<br />
2) Invest alot<br />
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When it comes to investment, do not have a gambling mentality in order to make money in the shortest time, thinking this will allow you to retire earlier. What if you are wrong? This will set you back in terms of your retirement fund and retirement age.<br />
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If you are 40 years old this year and will like to retire at 55 years old, you have 15 years to save and invest to lead the retirement life you desire. If you have already accumulated sufficient CPF, you can consider contributing to your CPF voluntarily to earn a higher interest and reduce your taxes.<br />
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<b>3 Tips towards Semi-Retirement</b><br />
1) Ensure that you have sufficient savings to cater for retired lifestyle. A part time job will have lesser income than your full time job. You can depend on your part time job to save up on your retirement fund.<br />
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2) Part time employee may not have health and medical benefit, you need to ensure that you have sufficient health and medical insurances. A drastic medical event may wipe out your retirement fund if you are adequately covered by insurance.<br />
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3) Part time income may not be stable and as high as full time employment. Therefore you need to change your spending habits. For example, cook your own meals or eat mixed vegetables rice instead of going to posh restaurants.<br />
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<br />JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-67171037045506585542018-02-27T10:56:00.000+08:002018-02-27T10:56:06.060+08:00China Port IndustryStock Code: 00144.HK<br />
Company Name: China Merchants Port Holdings Co. Ltd<br />
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<b>Business</b><br />
CMPort is the largest and a globally competitive public port developer, investor and operator in China with investments in China, Hong Kong and overseas. Its nationwide port network includes coastal hub ports in Hong Kong, Taiwan, Shenzhen, Ningbo, Shanghai, Qingdao, Tianjin, Dalian, Zhangzhou, Zhanjiang and Shantou. It is growing its presence in South Asia, Africa, Mediterranean and South America. In 2017, the total throughput handled reached 100 million TEU.<br />
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<tr><td class="tr-caption" style="text-align: center;">CMPort's Ports in China</td></tr>
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Hong Kong modern container terminal co., Ltd (MTL) was established in 1969 was the first container terminal in Hong Kong, and is one of the Hong Kong's largest container terminal operator. China merchants international owns a 27% stake in the company, the container terminal in Hong Kong tsing container terminal has seven container ship berths and two feeder berths, along a total length of about 2432 meters.</div>
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China Merchants Container Services Limited (CMCS) is one of CMHI's wholly owned subsidiaries. It is a mid-stream service provider, owns quay resources, equipped with rail mounted gantry cranes. Located in Tsing Yi island, the company can access to an array of transportation infrastructure.</div>
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In port related business, there are Tianjin Haitian Bonded Logistics, QingDao Bonded Logistics, China Merchants Bonded Logistics (Shenzhen), Shenzhen Haiqin Project Management Company and Asia Airfreight Terminal. Asia Airfreight Terminal is an air cargo terminal based at Hong Kong International Airport for premier passenger and cargo hub. </div>
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<b>Financials </b></div>
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In the latest interim 2017 report, the ports operation increases by 1% from HKD 12,161 million and HKD 12,043 million. Bonded logistics operation dropped by 16% to HKD 281 million from HKD 335 million. Port-related manufacturing operation increased by 40.4% to HKD 9,265 million from HKD 6,599 million. Total revenue increased from HKD 3,847 million to HKD 4,055 million whereas cost of sales increased from HKD 2,206 million to HKD 2,291 million in 2017. The operating profit doubled in 2017 to HKD 2260 million. This is due to other income and gains. Dividends increased due to special dividend.</div>
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Current Assets is HKD 19,590 million and Total Liabilities are 34,743. </div>
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Cash and cash equivalent increased to HKD 15,424 million from HKD 5,263 million. There is a disposal of subsidiary which amounts to HKD 8,543 million. CMPort raised capital as well. </div>
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Overall, CMPort is operating profitably and has the scale of operations. </div>
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Counter: 01199.HK</div>
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Company Name: Cosco Shipping Ports</div>
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<b>Business</b></div>
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Cosco Ship Port's network of terminals extends to 31 ports worldwide, covering the main five port clusters along the Chinese coast, Southeast Asia, Europe, the Mediterranean and the Black Sea. In 2016, throughput reached 95 million TEUs.</div>
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<b>Financials</b></div>
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In the interim 2017 results, the cash dropped from HKD 834 million in 2016 to HKD 332 million in 2017. Long term borrowings increased by HKD 130 million in 2017 compared to 2016. </div>
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From the Income Statement, the revenue is relatively flat while cost of sales has increased slightly from HKD 167 million in 2016 to HKD 177 million in 2017. The company made a gain on disposal of a joint venture which amounts to HKD 283 million. Subtracting this from the Profit is HKD 200 million which is still a good improvement from 2016. </div>
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</div>
<div class="separator" style="clear: both; text-align: left;">
On 24 March 2016, the company disposed all issued shares in Florens Container Holdings to China Shipping Container Lines (now known as COSCO SHIPPING Development) for a total consideration of USD 1,241,032,000. Upon completion of disposal, Floreans Container Holdings ceased to be a subsidiary of the Company.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
The Group's net cash generated from operating activities amounted to US$70,129,000 (1H2016: US$167,844,000) in the first half of 2017, of which included capital gain tax of US$39,365,000 in respect of the disposal of Qingdao Qianwan Terminal. </div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
The net debt to total equity ratio was 20.1% (31 December 2016: 14%) which is still healthy.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
There's a lot of re-organisation within the group through sale and disposal of entities, this will shift money across individual entities.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
<b>Operations Review</b></div>
<div class="separator" style="clear: both; text-align: left;">
According to International Monetary Fund, global trade volume in 2017 is estimated to grow at 4%, an increase of 1.7 percentage points compared with 2016. Buoyed by increasing international trade, China's foreign trade continue to improve. According to China Customs, the country's total import and exports (in RMB) in first half of 2017 recorded a growth of 19.6% compared with last year. The throughput of container terminals in China increased 8.8% to approximately 115,000,000 TEU which was 6.3% higher than same period in 2016.</div>
<div class="separator" style="clear: both; text-align: left;">
<br /></div>
<div class="separator" style="clear: both; text-align: left;">
The rise in international trade, as well as launch of mega-vessels, all increased calls at hub ports will enable the Group to achieve encouraging results in container terminals business.</div>
<br />
The recovery of international trade and the increase in calls by shipping alliances enabled Yantian Terminal to achieve a satisfactory performance for the six months. The co-management of COSCO-HIT Terminal and Asia Container Terminal effective from 1st January 2017 served as an additional growth momentum to the terminals leading to a surge in the throughput of the two terminals by 42.8% to 1,694,130 TEU for the period.<br />
<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUbGpphNhnVSrHv_g3CwE4IQEwUg8Yb5aONOj96SDgwW-E7LYThnnhg0PmKXPXDXSKSj-bTZyVCsBqM0kQi5Ely61enDxjfCQ1sP2ViKGSJAKIg1-maUFwXVoUqjSunX42On1M4a0T-ba0/s1600/JCProjectFreedom+01199HK+Cosco+Shipping+Port+HK+operation.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="137" data-original-width="498" height="170" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEiUbGpphNhnVSrHv_g3CwE4IQEwUg8Yb5aONOj96SDgwW-E7LYThnnhg0PmKXPXDXSKSj-bTZyVCsBqM0kQi5Ely61enDxjfCQ1sP2ViKGSJAKIg1-maUFwXVoUqjSunX42On1M4a0T-ba0/s640/JCProjectFreedom+01199HK+Cosco+Shipping+Port+HK+operation.JPG" width="640" /></a></div>
<div class="separator" style="clear: both; text-align: center;">
</div>
<br />
<br />
There are other ports such as CIG Yangtze Ports 01719.HK, Xinghua Port 01990.HK, Dalian Port 02880.HK, QHD Port 03369.HK, Xiamen Port 03378.HK and Qingdao Port 06198.HK.<br />
<br />
<br />
<br />
<br />JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-1698473301951163782018-02-25T23:16:00.002+08:002018-02-25T23:24:50.107+08:00Warren Buffett's advice to survive a market downturnFor the last 53 years, the company has built value by reinvesting its earnings and letting compound interest work its magic,"Buffett wrote. "Year by year, we have moved forward. Yet Berkshire shares have suffered four truly major dips. Here are the gory details."<br />
<br />
March 1973 to January 1975 - 59.1% decrease<br />
10/2/87 to 10/27/87 - 37.1% decrease<br />
6/19/98 to 3/10/2000 - 48.9% decrease<br />
9/19/08 to 3/5/09 - 50.7% decrease<br />
<br />
All four of those big drops coincided with major market moving events.<br />
<br />
59.1% plunge from March 1973 - January 1975 occurred when the US economy was mired in an ugly recession resulting from the oil crisis and fallout from the Bretton Woods agreement. The benchmark S&P 500 lost as much as 44% during that time.<br />
<br />
The 37.1% drop during October 1987 happened after Black Market stock market crash. The S&P 500 bottomed out at a loss of 34%.<br />
<br />
The 48.9% slide from June 1998 to March 2000 occurred just ahead of the dotcom bubble's burst. The S&P 500 actually gained 27% during this period.<br />
<br />
The 50.7% plunge from September 2008 - March 2009 occurred during the darkest days of the Great Financial Crisis. The benchmark S&P fell 44% over this time.<br />
<br />
"This table offers the strongest argument I can muster against ever using borrowed money to own stocks,"Buffett wrote.<br />
<br />
There is simply no telling how far stocks can fall in a short period. Even if your borrowings are small and your positions aren't immediately threatened by the plunging market, your mind may well become rattled by scary headlines and breathless commentary. And an unsettled mind will not make good decisions."<br />
<br />
Buffett concluded that big drops are great opportunities for those who are not in debt.<br />
<br />
To reflect on his words on the February minor correction, I was straddled with a huge debt in AAPL options position which cause me to lose focus on the bigger picture. It was a good opportunity to buy into undervalue companies then. Never be in an over leveraged position.<br />
<br />
<div class="MsoNormal">
If you can keep your head when all about you <o:p></o:p></div>
<div class="MsoNormal">
Are losing theirs
and blaming it on you, <o:p></o:p></div>
<div class="MsoNormal">
If you can trust yourself when all men doubt you,<o:p></o:p></div>
<div class="MsoNormal">
But make allowance
for their doubting too; <o:p></o:p></div>
<div class="MsoNormal">
If you can wait and not be tired by waiting,<o:p></o:p></div>
<div class="MsoNormal">
Or being lied
about, don’t deal in lies,<o:p></o:p></div>
<div class="MsoNormal">
Or being hated, don’t give way to hating,<o:p></o:p></div>
<div class="MsoNormal">
And yet don’t look
too good, nor talk too wise:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If you can dream—and not make dreams your master; <o:p></o:p></div>
<div class="MsoNormal">
If you can
think—and not make thoughts your aim; <o:p></o:p></div>
<div class="MsoNormal">
If you can meet with Triumph and Disaster<o:p></o:p></div>
<div class="MsoNormal">
And treat those
two impostors just the same; <o:p></o:p></div>
<div class="MsoNormal">
If you can bear to hear the truth you’ve spoken<o:p></o:p></div>
<div class="MsoNormal">
Twisted by knaves
to make a trap for fools,<o:p></o:p></div>
<div class="MsoNormal">
Or watch the things you gave your life to, broken,<o:p></o:p></div>
<div class="MsoNormal">
And stoop and
build ’em up with worn-out tools:<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If you can make one heap of all your winnings<o:p></o:p></div>
<div class="MsoNormal">
And risk it on one
turn of pitch-and-toss,<o:p></o:p></div>
<div class="MsoNormal">
And lose, and start again at your beginnings<o:p></o:p></div>
<div class="MsoNormal">
And never breathe
a word about your loss;<o:p></o:p></div>
<div class="MsoNormal">
If you can force your heart and nerve and sinew<o:p></o:p></div>
<div class="MsoNormal">
To serve your turn
long after they are gone, <o:p></o:p></div>
<div class="MsoNormal">
And so hold on when there is nothing in you<o:p></o:p></div>
<div class="MsoNormal">
Except the Will which
says to them: ‘Hold on!’<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<div class="MsoNormal">
If you can talk with crowds and keep your virtue, <o:p></o:p></div>
<div class="MsoNormal">
Or walk with
Kings—nor lose the common touch,<o:p></o:p></div>
<div class="MsoNormal">
If neither foes nor loving friends can hurt you,<o:p></o:p></div>
<div class="MsoNormal">
If all men count
with you, but none too much;<o:p></o:p></div>
<div class="MsoNormal">
If you can fill the unforgiving minute<o:p></o:p></div>
<div class="MsoNormal">
With sixty
seconds’ worth of distance run, <o:p></o:p></div>
<div class="MsoNormal">
Yours is the Earth and everything that’s in it, <o:p></o:p></div>
<div class="MsoNormal">
And—which is
more—you’ll be a Man, my son!<o:p></o:p></div>
<div class="MsoNormal">
<br /></div>
<br />
<div class="MsoNormal">
Source: A Choice of Kipling's Verse (1943)<o:p></o:p></div>
JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-30894373864470039082018-02-25T13:39:00.000+08:002018-02-25T14:56:26.541+08:00Hutchison Port Holdings Trust FY 2017<b>Overview</b><br />
Global trade outlook remains positive due to continued growth in economic activities in the US, Europe, China and India. Shipping lines are moving into mega vessels to attain capacity and fleet optimization to achieve cost efficiency. In addition, focus has shifted from port performance to supply chain performance to drive competitiveness and operational efficiency. Hong Kong remains a strategic transshipment hub and a preferred gateway to the Pearl River.<br />
<br />
<b>Financial Performance</b><br />
Revenue in 2017 dropped 3%, HKD 11, 551 million compared to HKD 11,912 million in 2016. In 2017, 64% of the revenue is derived from China.<br />
<br />
The total CAPEX sheds by 52% to HKD 841 million in 2017 compared to HKD 1,765 million in 2016. The CAPEX in 2015 was HKD 2,042 million. In 2014, the CAPEX was HKD 1,106 million. I think the CAPEX should be considered a normal level at HKD 1,000 million level.<br />
<br />
The Distribution Per Unit (DPU) has dropped to HKD 20.6 for the overall year.<br />
<br />
From the Income Statement, the key item for me is the Interest and other Finance Costs, it has increased by 22% from HKD 701.2 million to HKD 856.9 million. The overall operation is seen to be undergoing cost cutting measures but the profit is still lower than previous year. The Profit after Tax drops by 30% to HKD 944.2 million from HKD 1,356.6 million. Rising interest rates environment coupled with increased new borrowings (FY 2017 was HKD 11,736.8 million and FY 2016 was HKD 9,426.6 million).<br />
<ol>
<li>Payout Ratio is 200%.</li>
<li>Dividend will continue to drop as revenue drops and interest expenses increase. Double whammy situation.</li>
</ol>
<b>7% price correction on 2nd February is too steep</b><br />
<br />
Based on 1st February 2018, the National Development and Reform Commission has reduced the tariff rate for origin and destination foreign trade containers at Shenzhen - Yantian ports from RMB 1400/TEU to RMB 980/TEU. Through Yantian International Container Terminals which contributes 64% of HPH Trust's revenue, it contributes less to the bottom line as a 50+% owned subsidiary of HPH Trust. YICT's Average Selling Price is already lower than the new tariff rates, this will allow the port operator to negotiate for better terms. I don't think this will affect HPH Trust.<br />
<br />
I will conduct a study on the China ports to understand the competition HPH Trust is up against. I will dispose HPH Trust when the price has reverted back to the mean (when my losses are less significant).JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-41180730705405098202018-02-21T13:28:00.000+08:002018-02-25T13:31:05.055+08:00CPB:NYSE Campbell Soup Company<strong>Introduction</strong><br />
Campbell is in the business of providing high quality soups, simple meals, beverages, snacks and packaged fresh meals. Led by Campbell's brand, the portfolio includes Pepperidge Farm, Bolthouse Farms, Arnott's, V8, Swanson, Pace, Prego, Plum, Royal Dansk, Kjeldsens and Garden Fresh Gourmet.<br />
<br />
<strong>2nd Quarter Results for period ending 16/02/2018</strong><br />
<ul>
<li>Net sales compared to prior year, organic sales decreased by 2 percent.</li>
<li>Earnings before Interest and Taxes (EBIT) increased 19 percent and adjusted EBIT decreased 4 percent.</li>
<li>Earnings per share (EPS) of $0.95; adjusted EPS increased 10 percent to $1.00</li>
</ul>
Campbell Fresh did not meet expectations. Sales did not recover and Campbell expects beverage performance to pick up in second half, turning back to profitability. Sales performance of Global Biscuits and Snacks, particularly Pepperidge Farm and Kelsen are doing well.<br />
<br />
The acquisition of Pacific Foods were completed to increase the brand presence in the organic soup and broth market. The planned acquisition of Snyder's-Lance will expand the snacking business.<br />
<br />
Gross Margin decreased from 37.4 percent to 35.1 percent. Marketing and selling expenses decreased 5 percent to $228 million due to lower advertising and consumer promotion expenses.<br />
<br />
Net interest expense increased 14 percent to $32 million reflecting higher average interest rates on the debt portfolio and higher levels of debts.<br />
<br />
The company gave a fiscal 2018 outlook on EPS to be increased by +2 to +4 percent or $3.10 to $3.17 per share.<br />
<strong><br /></strong>
<strong>Moat</strong><br />
<ul>
<li>Branding</li>
<li>Cost of finance is low because of the size of company</li>
</ul>
<strong>Operating Performance</strong><br />
Return on Assets 2017 is 11.4%<br />
Return on Equity 2017 is 56.1%<br />
Return on Invested Capital is 18.77%<br />
<strong><br /></strong>
<strong>Valuation</strong><br />
Price/Sales is 1.79<br />
Price/Earnings of 16.14<br />
Price/ Forward Earnings of 15.55<br />
Earnings Yield 6.19%<br />
EV/EBITA is 10.21<br />
Fair Value is about USD 48 - USD 50<br />
<strong><br /></strong>
<strong>Latest updates</strong><br />
Campbell's update at CAGNY on 21st February triggered a steep 7% price decline. My guess is CEO Denise mentioned about the ongoing discussion with a key customer will cause the sales to be sluggish. This is due to the dispute with Walmart. Walmart wants to continue to fight with Amazon and will exert its purchasing power to pull down all prices. Campbell will need to pull down the prices or go home. Rising cost of production eat into Campbell's margin. The company needs to work on its cost saving campaign.<br />
<br />
The market has already priced in a decline in margin on Campbell's products.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-50832603029105951092018-02-20T13:12:00.000+08:002018-02-25T13:27:48.739+08:00JD:NASDAQ JD.comI was shown an article by APS' Mr Wong on JD.com as a <a href="http://www.aps.com.sg/qws/slot/u50175/2.%20Investor%20Resources/2.1%20Notes%20from%20the%20CIO/170517%20-%20CIO%20Note%20-%20JD.com%20Tulips%20Anyone.pdf">bubble</a> in making. This contradicts to my previous findings on my investment thesis. I went back to research on JD.com. I was combing the internet for all the developments of JD.com when I chance upon this <a href="https://oraclefromomaha.wordpress.com/2016/05/05/jd-com-a-multi-decade-compounder/">website</a>. The author provides a very in-depth research on JD.com and Amazon.<br />
<ul>
<li>China's 2nd largest eCommerce company reported profit in third quarter. JD.com posted net earnings of 1 billion yuan, its highest profit in the three months to Sept. 30.</li>
<li>JD.com expects revenue for the quarter ending in December to be 107-110 billion yuan which equates to a rise of 35-39 percent. The marketing campaign in November will affect the bottom line.</li>
<li>JD.com is investing in logistics infrastructure in South East Asia, expanding in Indonesia.</li>
<li>In China, JD.com is focusing on "white glove" platform focusing on imported food, fashion and electronics.</li>
<li>Thesis for the company is eCommerce retailing is a logistics business, the lowest cost will win the race.</li>
<li>JD.com differentiates from Alibaba in terms of its faster delivery times, authenticity quality products, and great customer service.</li>
<li>JD.com has invested from the start on its logistics network in China whereas Alibaba is relying on partnership with 3rd party carriers (eg. China EMS).</li>
<li>EV to Revenue ratio points towards undervaluation when compared to its competitors. EV to Revenue of JD is 1.29x, Amazon is 3.68x and Alibaba is 16.69x. This company serves the world's largest population, loyal customer base, logistics advantage and industry tailwind.</li>
</ul>
<br />
<br />
JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-22259446154448113972018-02-20T13:09:00.000+08:002018-02-25T13:11:29.473+08:0000700.HK Tencent<b>Business Overview</b><br />
Tencent is a leading internet services provider in China, established since 1998 and has achieved steady growth in its user-oriented approach. Tencent Holdings Limited is listed as 00700.HK in Hong Kong Stock Exchange.<br />
<br />
<b>Business - Social Networks</b><br />
1) QQ<br />
QQ is an instant messaging platform with diversified functions and services. QQ has also introduced CM show which delivers tailor made interactive experience for youngsters. Users can access QQ Wallet and use mobile payment to top up for online shopping and bank transfer.<br />
<br />
2) Weixin/ Wechat<br />
Wechat is now the dominant messaging platform in china with social media entertainment, real time communications and payment ecosystem - WeChat Pay. It has reached more than 938 million monthly active user accounts as of the first quarter of 2017.<br />
<br />
3) Entertainment<br />
Tencent has a wide range of entertainment services such as Tencent Games, Tencent Literature, Tencent Comic, Tencent Pictures, Tencent Video, etc.<br />
<br />
4) Platform<br />
Tencent Open Platform is built for its partners to enable them to connect via QQ, Weixin, Qzone and YingYongBao to gain traffic and revenue through open APIs across PC, mobile and multiple devices.<br />
Tencent has its own cloud services for corporate and individual users. It provides developers with cloud servers, cloud databases, cloud storage and cloud computing services.<br />
<br />
5) Artificial Learning<br />
Tencent AI Lab is moving into machine learning and big data, it has 50 world class scientists and 200 experienced engineers in China and US. The key focus areas are machine learning, computer vision, speech recognition and natural language processing.<br />
<br />
Tencent is focus on growing its revenue from both online advertisement and online gaming.<br />
Strengths of Tencent<br />
<ul>
<li>Strong brand portfolio</li>
<li>Multiple and resilient revenue streams</li>
<li>Product innovation</li>
<li>Growing ecosystem - network effect</li>
<li>Strong and reliable suppliers/supply chain - 20% stake in JD.com</li>
<li>Automation</li>
</ul>
Weakness of Tencent<br />
<ul>
<li>Require investment into new technologies which will continue to require high CAPEX into R&D, currently Tencent is expanding into other countries will require more capital injection.</li>
<li>Attrition of employees</li>
<li>Resources are drawn too thin with rapid expansion plan</li>
</ul>
Opportunities for Tencent<br />
<ul>
<li>Economic growth can lead to increase in customer spending</li>
<li>Move online to offline channel</li>
</ul>
Threats<br />
<ul>
<li>Rising pay in China</li>
<li>Require breakthrough in innovative products</li>
<li>Intense competition from other industry players</li>
<li>Change in consumer behaviour</li>
<li>Rise of new technology to disrupt existing strength</li>
</ul>
Valuations<br />
I do not need to go into this as Tencent is not cheap at the moment. Tencent will be on my watchlist.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-38863659750748981292018-02-16T13:07:00.000+08:002018-02-25T13:08:36.531+08:00JC Fund and JC Options Fund - personal reviewThe Singapore and Hong Kong markets closed today at 12pm and I was looking at the results of Thaibev. I knew the acquisitions will make the results look nasty but did not expect to be this bad. I sat there thinking about the next 1-2 years outlook for Thaibev. I am worried of its over leveraged position and rising interest rate environment. In the short run, the stock will not perform well but the business is consolidating to grow from strength to strength.<br />
<br />
I was wondering why I chase after bad investment such as HPH Trust USD, double down on my losses and did not cut this counter last year. In fact, there was a window of opportunity when it was even profitable.<br />
<br />
I was thinking of this recent market correction when there were opportunities for me to switch out laggard IBM shares to acquire AAPL shares. I done my homework and I was convinced that AAPL was mispriced. Why I did not do it? There are a few other companies which provide that window of opportunity to switch and move my money into a faster lane. I seem to prefer status quo (maybe I have a fear of losing money) or I have no confidence of my own valuation?<br />
<br />
My portfolio consists of mainly dividend stocks and only 1 growth stock. I am playing a defensive role here. Maybe I believe that now I am jobless and there's no income coming in from my side, I need income from dividend. I just want to be prudent and to be paid while waiting. I think everyone has different investing approach and as long as the same objective is been achieved, it does not matter which route you take. I am just thinking whether I should move away from net-net stocks which sometimes can be value traps.<br />
<br />
As of 14th February post market share price of AAPL was USD 168.93, maybe on the 16th February, my AAPL sell put options will expire with share price above USD 170 (20th February when I review this, the option expires worthless and share price closed at USD 172 on 16th February 2018). On hindsight, I could be profitable instead of pocketing the huge losses. However I should remember the important lesson learnt. What if a huge bear wakes up and share price drops by 50%? Will I have money to top up margin maintenance call? Nope. It will be a worse scenario resulting into a very unhappy Chinese New Year. Thou never gamble with leverage and trade within your cash and cash equivalent. Always follow the checklist. If it is a huge gain, there is bound to be another larger loss later on (this applies to me, I suffered twice on this - a total loss of <strong>USD 32k </strong>on two trades). If I follow a small gain of 1% per month, this will be a safer approach in the long run.<br />
<br />
Overall, as of 15th February, JC Fund and Option Fund portfolios have recovered to a neutral position with no paper gain or losses. Let's think of a strategy on how to shift the stocks around and what sort of mistakes to avoid in the future.<br />
<ul>
<li>Rebuild watch list - understand beta of each stocks, moat, intrinsic value and margin of safety</li>
<li>Re-balance portfolio towards end of Q1 and review again in Q3.</li>
<li> Withdraw some profit every quarter to spend on the family</li>
</ul>
JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-18710414734947629432018-02-13T13:04:00.000+08:002018-02-25T13:05:06.824+08:00FB:NASDAQ Facebook<strong>Introduction to Business</strong><br />
Facebook does not require further introduction as it is one of the most powerful social media platform in our times. Actually, I was using another social media platform - Friendster during my university days. That was the Tinder back then.<br />
<br />
Facebook is a social media platform, it monetize through digital advertisement through its huge database of Facebook users. Gaming revenue is decreasing. Facebook takes 30% of purchases, with balance going to likes of Zynga. Facebook also acquired Whatsapp and Instagram.<br />
<strong><br /></strong>
<strong>Strengths:</strong><br /> Leading social platform<br /> 2 billion of active facebook users - network effect<br />
<strong><br /></strong>
<strong>Weakness:</strong><br /> Dependent on cyclical ad market - 98% of quarterly revenue came from advertising<br /> Lack of alternative source of diversified income<br />
<strong><br /></strong>
<strong>Threat:</strong><br /> Facebook members growth decline or stagnate<br /> The new/younger generation may not wish to use Facebook, they prefer SNAP or other platforms.<br /> Reputation damage (loss of trust) which may lead to downfall of Facebook<br /> Users will grow numb to ads<br /> New Social Platforms may enter the social media industry but the eroding effect will be very slow<br />
<strong><br /></strong>
<strong>Opportunities:</strong><br /> With big data, can harness them into other business ventures other than ads<br /> New products such as Oculus virtual reality headset and workplace office software<br /> With big amount of cash can make new acquisition or build stronger moats to retain users<br />
<strong><br /></strong>
<strong>Financials</strong><br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLabHcgZX1offY2RXceN9ZMHlbptU898-czcmN1608jmZXKGPx0Y_i00bof4e_vjUQV25DfrPC-rgw4J8Tl29aoP49Xo15ixpxhID83kewIZ62cyxO5_TmMCmJcUdOTU7-6hUQKf21Ykxj/s1600/JCProjectFreedom+FB+Revenue.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="898" data-original-width="1600" height="356" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhLabHcgZX1offY2RXceN9ZMHlbptU898-czcmN1608jmZXKGPx0Y_i00bof4e_vjUQV25DfrPC-rgw4J8Tl29aoP49Xo15ixpxhID83kewIZ62cyxO5_TmMCmJcUdOTU7-6hUQKf21Ykxj/s640/JCProjectFreedom+FB+Revenue.jpg" width="640" /></a></div>
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The revenue has been growing since 2013. I just heard from my friend who is running an eCommerce store using Facebook advertisement during last year November and December, the ads cost more for a campaign. I believe this is due to the holiday season. In January, the ads cost is back to normal. There is a lot of algorithm Facebook is using based on seasons, demand and supply, target audience group, etc. You get to sell to an audience group with specific interest, hobbies, family background, profession and income level. This is targeted marketing. This makes Facebook's advertisement a very powerful tool for internet marketer. I have run Facebook ads, mobile advertisement and Google campaigns. My personal experience for eCommerce and apps download, Facebook is by far the most superior marketing behemoth.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9DTz1tDNd4okr0MuXJboBpDMR6LnH28jbSqTmnbpEn-TsliyPLxUhKIJd0iKjDcJvbgkUteqFYyWA3Bp73UG335v8HB71KxhI0Nrsnbb69mMyDrBMgLAYrbm77T9URKOiQyx5vya8o6Lz/s1600/JCProjectFreedom+FB+diluted+EPS.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="840" data-original-width="1397" height="384" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh9DTz1tDNd4okr0MuXJboBpDMR6LnH28jbSqTmnbpEn-TsliyPLxUhKIJd0iKjDcJvbgkUteqFYyWA3Bp73UG335v8HB71KxhI0Nrsnbb69mMyDrBMgLAYrbm77T9URKOiQyx5vya8o6Lz/s640/JCProjectFreedom+FB+diluted+EPS.jpg" width="640" /></a></div>
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EPS is increasing since 2013. You can calculate CAGR. However, I do not think this type of growth rate is sustainable.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRnbOxCrSd_YqJk79enuWFMdr7fWk9tW3s3MAvMKnztPn0BeP_g0MfefLzmAALxC8recWX8U14Oj2SSW4L31LRC5nIGuUgj_p7pi0RI6vbx9SEua3ao6TpJvUP6D5OJYiky3Nh0Or_XWWm/s1600/JCProjectFreedom+FB+Interest+Expense.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="924" data-original-width="1600" height="368" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgRnbOxCrSd_YqJk79enuWFMdr7fWk9tW3s3MAvMKnztPn0BeP_g0MfefLzmAALxC8recWX8U14Oj2SSW4L31LRC5nIGuUgj_p7pi0RI6vbx9SEua3ao6TpJvUP6D5OJYiky3Nh0Or_XWWm/s640/JCProjectFreedom+FB+Interest+Expense.jpg" width="640" /></a></div>
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<br />
The interest expense is decreasing over the years. Free Cash Flow is increasing over the years, building up a strong hoard of cash.<br />
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<strong>Valuations</strong><br />
My calculation on EV/EBITA is at 20.33 and I took a very conservative approach to discount the growth rate, placing an estimation on the targeted price between USD 190 - 200 in 2021.<br />
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<strong>Conclusion</strong><br />
When I am writing this, FB share price is USD 176. There is not enough margin of safety for me to buy this company. I will need a good 30% margin of safety before I will buy FB. Personal take. DYODD. This is not a buy or sell call.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-28550068045652034602018-02-13T12:50:00.000+08:002018-02-25T12:55:15.998+08:0000517.HK Cosco Shipping International<strong>Introduction to the business</strong><br />
Business is divided into two main business segments.<br />
<br />
<strong>Shipping Services</strong><br /> Cosco shipping International<br />
<ul>
<li>Provision of shipping services</li>
<li>key customers include ship owners and operators, shipyards and container manufacturers</li>
<li>Tangible products such as marine equipment and spare parts, marine coatings, intangible services such as consultancy services for buying ships, marine insurance, ship financing and related information support, as well as provision of value-added supporting services for vessels operations such as supply of marine equipment, marine fuel and ship supplies, and ship management.</li>
<li>One stop shop which enhance the core competencies of fleets</li>
</ul>
<strong>Business Scope</strong><br /> <strong>1. Ship trading agency services</strong><br /> Providing agency services relating to shipbuilding , ship trading and charting for all types of vessels.<br />
<strong><br /></strong>
<strong>2. Marine Insurance Brokerage Services</strong><br /> Offer insurance intermediate risk assessment, designing insurance program, placing insurance cover, loss prevention and claims handling to<br /> vessels insured worldwide.<br />
<strong><br /></strong>
<strong>3. Supply of Marine equipment and spare parts</strong><br /> Sale and installation of marine equipment and spare parts, as well as equipment and of radio communication systems, satellite communication navigation systems for ships, offshore facilities, coastal station and land users, and marine material supply and voyage repair<br />
<strong><br /></strong>
<strong>4. Production and sale of coatings</strong><br /> Production and sale of container coatings, industrial heavy duty anti-corrosion coatings and marine coatings<br />
<strong><br /></strong>
<strong>5. Trading and supply of marine fuel and related products</strong><br /> Provide marine fuel supply services, as well a trading of marine fuel and related products.<br />
<strong><br /></strong>
<strong>Shipping Services are beneficiaries of shipping capacity</strong><br /> Demand for shipping services are driven by shipping capacity growth and ship owner's fleet restructuring activity. As distinct from shipping companies the revenues of shipping services are either direct or indirect costs of shipowners or ship operators, and are not affected by short term fluctuations of freight rate.<br />
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COSCO shipping international has a diversified business mix of shipping services which are complementary to each other without obvious cycle.<br />
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEis3q6zeGc7PLtdPwGQ1D-l_SRxw4cwi0NyuENf0OBh9u60YL9qmqlhUeF1IbZoHXE7HXkE3GD2OiiY-n_2VLS2HHt1ey49dE4A2f4Y3K0seN3N4GTj9i9_KnlJ1pYZCVA4w2v3aeF14kiU/s1600/JCProjectFreedom+00517.HK+Cosco+Shipping+International+Business+Overview.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1003" data-original-width="1472" height="435" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEis3q6zeGc7PLtdPwGQ1D-l_SRxw4cwi0NyuENf0OBh9u60YL9qmqlhUeF1IbZoHXE7HXkE3GD2OiiY-n_2VLS2HHt1ey49dE4A2f4Y3K0seN3N4GTj9i9_KnlJ1pYZCVA4w2v3aeF14kiU/s640/JCProjectFreedom+00517.HK+Cosco+Shipping+International+Business+Overview.jpg" width="640" /></a></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbTtldqyTTbabXFb9E5lyzv1qX1OL7WPluZoPxKIwob4hI8AhVy77F1s36z41soZF_exeSHwjjrv2C8kJnzHea3T4vXowUfrIrTpLYUgbJv1O3ewMe3bOtPajVQx3qa_x2hhg7m9Ip0LP4/s1600/JCProjectFreedom+00517.HK+Cosco+Shipping+International+Business+Relationship.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="622" data-original-width="956" height="416" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEjbTtldqyTTbabXFb9E5lyzv1qX1OL7WPluZoPxKIwob4hI8AhVy77F1s36z41soZF_exeSHwjjrv2C8kJnzHea3T4vXowUfrIrTpLYUgbJv1O3ewMe3bOtPajVQx3qa_x2hhg7m9Ip0LP4/s640/JCProjectFreedom+00517.HK+Cosco+Shipping+International+Business+Relationship.jpg" width="640" /></a></div>
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As seen from the above image, for ship trading agency, marine insurance brokerage and marine equipment and spare supply, Cosco Shipping International is the "sole agent" to provide a centralised procurement to Cosco Shipping Fleet. This means in simple terms left pocket pass to right pocket. They do not want such a high value and margin business to benefit third party, instead they are passing the meaty part of the business to an internal party.<br />
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On the marine insurance brokerage, 40% of revenue comes from external customers and they are growing this segment, moving into non-marine insurances. This could be a growth factor.<br />
<br />
Marine insurance, equipment for maintenance, marine bunker, crew changes, logistics and marine coatings are OPEX of a shipping company. They can be reduced in times of downturn but can never be reduced to zero. Moreover, now with the global economy recovery in place, the China Containerized Freight Index is recovering from 2016 low, standing at 836.6 at the time when I was writing this.<br />
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In essence, I felt that Cosco Shipping International has certain level of moat. The business is sheltered by the parent company and it has given some autonomy to grow other aspects of the business. However, need to monitor the growth and decrease rate of each individual segments in the next financial report.<br />
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<strong>Valuation</strong><br />
Based on June 2017 results, Net Cash per Share is HKD 4.19 and NAV is HKD 5.09. As of today, the share price is HKD 3.09 which is approximately 25% safety margin. Recently, I read this book Deep Value Investing by Jeroen Bos. It gives me a good insight on what he looks for in deep value investing.<br />
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<strong>Conclusion</strong><br />
I am invested in this company. There are certain risk as shipping is cyclical business. Please DYODD. This does not constitute a buy call.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-5570990710105528982018-02-12T12:40:00.000+08:002018-02-25T12:41:48.211+08:00Finding Value in Today's Market <div class="separator" style="clear: both; text-align: center;">
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We are officially in a correction which can go up to 19% drop in terms of share prices. If the market price drops >20%, then we are into a bear market. What should value investors do at this moment?<br />
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Let me share some of the thought processes:<br />
<br />
1) The Sale that you have been waiting for is here, it does not mean that you need to enter the market but with cash seating on the sideline means you can deploy them when the stock price comes to your ideal price range. This means that you have done your homework, created your watch list of stocks and understand what are the intrinsic values. I am going to deploy the last 100k into different tranches to absorb China A50 ETF and Tracker Fund to focus mainly on China and Hong Kong market. The dividend will allow my wife to settle some expenses such as charity and bills. I will not deploy margin money for correction. I will only deploy it when there is a bear market and there is a strategy to peg to margin to make it work.<br />
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2) Investor Mindset - Investing is all about managing your emotions. That is the reason why the gurus always say a good temperament is essential for investment. Everyone likes to think they can be a contrarian but when the fire is here, everyone shit in their pants. Especially with the past 1 week, there is so much volatility in the market, the market can drop 1000 points on alternative days, you will not know how to react. I will like to take this as a form of training. You need to be calm and see this as an opportunity to re-enter the market. We need to control our natural human instinct to flee when there is danger and avoid the herd mentality to follow everyone to sell when the market prices hit low.<br />
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3) Be like an ostrich - I recalled just 2 years ago when I thought with the rising interest rates environment, OCBC should benefit from it and I took a huge stake in OCBC (about 30% of my portfolio back then). Then OCBC started to drop till $8+ as Singapore STI took a correction. It was very painful to keep looking at your price and your total portfolio value. The pain of losing money is much more severe than the feeling of winning money. Prices will not miraculously increase in a downturn just because you keep pressing the refresh button. The only thing that holds is Value which is not based on market pricing. For example, Apple has its ecosystem of products and services in tact and a share price of USD 100 or USD 200 does not affect the business. In a market downturn, people are still buying iPhone X (maybe lesser). Focusing on value instead of just price itself, you can sniff out undervalue stocks and rebalance your portfolio. Mr Market is offering you a good price for these coming few weeks as a form of Ang Bao for Chinese New Year. For example, if you are yield player, Singtel is offering a pretty awesome 5% yield. Unfortunately, I have already deployed my cash into the market but the bulk of SGD 200k is been bet on a specific counter. I was lucky to consolidate the money before the correction into this defensive counter. So far it has corrected 7%. I will switch out to AAPL or a few other stocks depending whether there is sufficient margin of safety. I have learnt in times of downturn, I will be like an ostrich, I will not check the prices and unrealised profit/losses. I continue to build my stocks watch list.<br />
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4) Find a Hobby or Things to do other than spend time looking at the screen - Do something that keeps your mind away from the market. It can be in the form of exercise such as cycling, running, swimming, etc. It can also be working hard at work. It can be spending more quality time with the family.<br />
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There are companies which counter the down trend and there are bargains out there. Hope you can find value stocks and enjoy life! Stay healthy, stay wealthy. Health comes first. Do not let the market affect your health. Close the screen and go exercise now!JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-52797189594986280232018-02-04T12:38:00.000+08:002018-02-25T12:39:03.252+08:00Run a home based businessThe decision to start a home-based business - to begin a new business within walking distance of your kitchen! - will be your second decision as a new entrepreneur. Your first decision will already have been made: The decision to become an entrepreneur and enter the fast growing world of the self-employed. It is a decision which thousands of ambitious, confident people make each working day.<br />
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As a home based entrepreneur, you will be setting out on a journey designed to improve the overall quality of your life by taking control of your working life. It will be journey by taking control of your working life. It will be a journey filled with enormous challenges, unexpected obstacles and the possibilities of significant financial and emotional rewards!<br />
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You will have to make certain that you are endowed with confidence and with patience; that you are prepared to cope with the inevitable ups and downs which will occur as you build your home-based business and that you have the support of all the people in your life who matter to you.<br />
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Every new business entails considerable risk, but you have already skewed the odds in your favor: By electing to start your own new business at home, you will be beginning your self-employment career with the right attitude.<br />
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<b>Home-based Benefit No 1: Low Overhead</b><br />
Accountants designate them as "fixed expenses." By starting your new business at home, you can save on one of a business' most onerous fixed expenses - the rent.<br />
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Thus you are starting out with an enormous financial advantage. Maintaining a low efficient overhead is a sound, conservative business practice. Rent is frequently the largest single fixed expense. By eliminating it, you have given your new business a significant advantage.<br />
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<b>Home-based Benefit No.2: Your ego is in the right place</b><br />
If you were to ask a venture capitalist what single element causes him to back away from a prospective deal, he would probably tell you that it was an entrepreneur who ushers him into a large flashy office from which he then proceeds to attempt to convince the venture capitalist that he will prudently manage the money which he is seeking to raise.<br />
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The point is obvious: the intelligent entrepreneur has a strong sense of priorities. He knows that his limited funds have to be spent as carefully and productively as possible. His sense of personal satisfaction will come from the success of the business, not from the elegance of his high rent corner office.<br />
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<b>Home-based Benefit No.3: Efficiency</b><br />
If you live an hour from where you work, you spend two two hours a day commuting. That's ten hours, 500 hours a year! To the new entrepreneur, time is money. By working at home, you will be saving time and money. It is an irresistible combination.<br />
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All of your working hours will be productive ones, and your sense of purpose will be heightened. There is no more satisfying bottom line and working at home will provide you with that priceless sense of satisfaction every working day.<br />
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<b>Home-based Benefit No.4: Your Self Discipline</b><br />
One of the most critical characteristics of the entrepreneur is self-discipline. He has to be able to motivate himself. He has to be able motivate himself, to provide his own sense of direction and determination. There is no "boss"or time clock to keep him in line.<br />
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Working at home requires enormous self-discipline because of the endless potential distractions. When you are working at home, you have to be able to resist the bed and get to work.<br />
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By working at home, you are putting that self-discipline to test every working hour of every working day. It is a test which you cannot permit yourself to fail - and there it becomes another of the many subtle benefits of starting a home-based business.<br />
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<b>Home-based Benefit No. 5: Quality Time</b><br />
The home-based entrepreneur quickly develops a useful sense of "quality" time - because he has to make time based judgement all day long in the same environment where he works and lives.<br />
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Quality time is admittedly difficult to quantify but like many positive events, most of us recognize it when it occurs. It is a dimension which can improve the quality of our lives - and home based entrepreneur often develops the ability to create it because he has to.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-33688792845631729062018-02-04T12:34:00.000+08:002018-02-25T12:35:54.198+08:00Self Sabotage to JC Options FundThis is a dire situation. Forecast loss will be at least USD 10k. Many mistakes made in this AAPL <a href="http://jcprojectfreedom.blogspot.sg/2018/01/jc-options-fund-update-27-jan-2018.html" rel="noopener" target="_blank">trade</a>. I am going to list the following mistakes. In addition, my mistakes were further aggravated by the timely market correction.<br />
"Owning stock is like having children. Don't get involved with more than you can handle."<br />
<ol>
<li>After cutting loss, you need to gain your grounds and be able to think before you jump into another trade.</li>
<li>Do not over-leverage.</li>
<li>Stick to your cut loss rule. No emotion at play.</li>
</ol>
I got an email from thinkorswim that I need to top up cash to cater for the maintenance margin call. That was the first wake up call that I have an over-leverage position.<br />
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How do you know that you have overextend your position? That is when you cannot sleep in the middle of the night. For the last two days, I woke up at 3 am to look at the market. I have never in my life gone through this when I was investing.<br />
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On the other hand, on Friday wee morning, US market has wiped out a lot of my paper profit for JC Fund but I did not fret because they are cash position. I understand this is a market correction before the market can reach a higher position.<br />
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I have two incidents when the share price returned to 168 and I did not manage to minimize my loss. I was praying that it will go further up beyond 170 which is my strike price. On Thursday after post market, the stock price did reach 173 temporary. I have discussed with my wife to close the position at below 165 and I fail to execute this as well.<br />
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I am going to pause any new trades after 16 Feb 2018 and review my temperament. There is a serious issue with it and I need to rectify this. Don't need to beat myself up for this but I need to learn from it. Many things to unlearn and learn.<br />
I have made a simplified checklist.<br />
<div>
<br />
<b>Sell uncovered PUT</b></div>
<ol start="1">
<li>Does the company have consistent increasing or positive EPS over the long run say last 5 years. Better still, if last 10 years. <img /> If YES, move to Step 2. If NO, kill this idea.</li>
<li>Does the company have MOATS <img />If YES, move to Step 3. If NO, kill this idea.</li>
<li>Is there any interim results or annual results announcement? <img />If NO, move to Step 4. If YES, kill this idea.</li>
<li>Now, go to the chart <a href="http://www.tradingview.com/">www.tradingview.com</a> , whether this stock is at the support line <img />If YES, move to Step 5. If NO kill this idea.</li>
<li>Before you execute the trade, check did you click SELL PUT? It should be red colour with -1 or -X amount<img /></li>
<li>Did you negotiate for a better price? The market is there to serve you. Have more margin of safety is good for you. <img /></li>
<li>To decide the quantity of Sell PUT, run a quick check, is the NUMBER of CONTRACT x 100 x SHARE PRICE < your CASH BALANCE? If YES, move to Step 8. If NO, reduce your quantity now! Save the headache, you can sleep better instead.</li>
<li>Execute the trade and wait for it to be filled.</li>
</ol>
7th February 2018 - I closed 15 contracts of AAPL and accepted a loss of USD 18k which wiped out all my profit from options. I want this to be a very painful lesson for myself.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-44621521503226479222018-02-01T12:26:00.000+08:002018-02-25T12:28:52.322+08:0000101.HK Hang Lung Properties Annual Report 2017<div class="separator" style="clear: both; text-align: center;">
<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxQc5KuBxBp4RQdyglOQQDnZjgJopZasZ-auGrwxIPjmQV1ChlVtz4cPv6IYX1i5hokzwa0kkBDNAZxDwl6olYniCW_DcrC6JGdvl-KjgZsPvO6UnVXApfXoK36OHj3xRwG2TpwXmC-oLt/s1600/JCProjectFreedom+00101HK+Hang+Lung+Properties.jpg" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="762" data-original-width="1244" height="392" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhxQc5KuBxBp4RQdyglOQQDnZjgJopZasZ-auGrwxIPjmQV1ChlVtz4cPv6IYX1i5hokzwa0kkBDNAZxDwl6olYniCW_DcrC6JGdvl-KjgZsPvO6UnVXApfXoK36OHj3xRwG2TpwXmC-oLt/s640/JCProjectFreedom+00101HK+Hang+Lung+Properties.jpg" width="640" /></a></div>
<strong><br /></strong>
<strong>Brief</strong><br />
30th January 2018, Hang Lung Properties announced annual report results. I estimated based on underlying profit a fair value of about HKD 18.6 - 19.00 disregarding the revaluation of the properties. I did not sell immediately when the share price was at HKD 20.7 when the results were first issued. I have my own justification why I believe this company will do well in the long run.<br />
<strong><br /></strong>
<strong>Introduction</strong><br />
Hang Lung Properties Limited (00101.HK) is the operating arm of the Hang Lung Group (00010.HK) is in the business of real estate development, owns and manage world class commercial complexes in key cities in the Mainland since the 1990s.<br />
<br />
Hang Lung Group was founded in 1960 by Mr Chan Tseng-Hsi. The business grew rapidly building residential complexes along the Mass Transit Railway (MTR). On January 1991, Mr Ronnie Chan took over as the Chairman of the company and venture into the Mainland. They took the opportunity, acquiring a lot of land and investment properties to position itself for the future.<br />
<strong><br /></strong>
<strong>Present Properties Portfolio</strong><br />
Hang Lung Properties owns Shanghai Plaza 66, Shanghai Grand Gateway 66, Shenyang Palace 66, Shenyang Forum 66, Jinan Parc 66, Wuxi Center 66, Tianjin Riverside 66 and Dalian Olympia 66 in the Mainland.<br />
<br />
Hong Kong's leasing portfolio includes Kingston in Causeway Bay, the Peak Galleria, Kornhill Plaza in Hong Kong East, leasing properties in Mongkok includes Grand Plaza and Gala Place and Amoy Plaza in Kowloon East.<br />
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Offices are in Central, Causeway Bay and Mongkok. Residential and serviced apartments such as Kornhill Apartments. Properties for sale include The Long Beach, houses at Blue Pool Road and The HarbourSide.<br />
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<strong>Property Development and Capital Commitment</strong><br />
The total aggregated value of investment properties under development was HK$21,592 million. They comprised mainland China projects in Kunming, Wuhan and remaining phases in Shenyang and Wuxi. The portfolio consists of malls, office towers, hotel and serviced apartments.<br />
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The construction work for Kunming Spring City 66 is progressing, total gross floor area of the entire mixed use development is 432,000 square meters, comprising a world-class mall, a Grade A office tower, serviced apartments and car parking spaces. The mall is expected to open in min 2019.<br />
Wuhan Heartland 66 covers a total gross floor area of 460,000 square meters. This prestigious commercial project will house a 177,000 square meter mall, a Grade A office tower, serviced apartments and car parking spaces. The project is planned for completion in stages from 2019.<br />
The conversion of top 19 floors of the office tower at Shenyang Forum 66 into a Conrad Hotel is in progress. This five star hotel will be expected to open in 2019.<br />
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The construction work for the second office tower at Wuxi Center 66 is progressing as planned. In May 2017, Hang Lung Properties took a piece of land of 16,700 square meters for Wuxi Phase 2 development. This will be used to build serviced apartments.<br />
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With conversion of existing property into five star hotel, grade A offices and serviced apartment, I believe Hang Lung Properties is well-positioned for the rise of China in the next decade. The recurrent income will help to grow the company and allow it to acquire future lands in the inner China. The revenue from these will only be recognised in 2019 and 2020.<br />
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<strong>Financial Strength</strong><br />
Hang Lung Properties has a Net Debt ratio to Equity ratio of 1.9% and Debt to Equity Ratio of 17.4% which are both healthier than 2016 results. Net Assets Per Share is HKD 31.60.<br />
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<strong>Key Risks</strong><br />
This is an age of disruption, the co-working era is coming and grade A offices will face its challenges as well. I cannot predict whether co-working will replace the traditional office setting but I think this erosion factor will be slow.<br />
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Malls are challenged by eCommerce making traditional retail more difficult than previous era. Malls have evolved into social places for entertainment, services and food & beverage. The trend is to cater to experiential tenants such as cinemas, online to offline stores, mobile payment and smart parking to entice footfall and retail sales. Hang Lung Properties is said to be in talks with smaller eCommerce players to collaborate on some of the malls.<br />
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The progress in China's economy will continue to play an important role.<br />
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<strong>Conclusion</strong><br />
I will continue to hold on to this company, I have only 12,000 shares and my average price is about HKD 17.98. If share price drops below HKD 18.6, I will acquire more of this company. To review half a year later.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-33288429411395548382018-01-28T23:58:00.000+08:002018-02-24T23:58:52.843+08:00How to Invest in an Overpriced MarketWhat should an investor do when all asset classes appear overpriced? The 10-year US treasury Bond yields about 2.6% which is much lower than the 5% historical average and only slightly higher than the Federal Reserve's 2% inflation rate target. S&P 500 Index has recorded new all-time highs, Hang Seng Index was at a new record high in January 2018 and even laggard Straits Times Index is close to all time high of 3800.<br />
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The cycle adjusted price/earnings ratio (CAPE) - the valuation metric which predicts future 10 year rate of return is about 34. That's one of the highest valuation exceeding only readings in 1929 and early 2000, prior to crashes. Today's CAPE suggests that 10 year equity rate of return will be barely positive. Do you believe that this time it will be different?<br />
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A corollary is that no one can consistently time the market. Proper market timing involves making two decisions - when to get out and when to get back in. Timing both correctly is virtually impossible. Investors who try to outsmart the market more often get it wrong than right.<br />
What can an investor do to minimize this risk? Here are some options:<br />
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<strong>Rebalance </strong><br />
A simple portfolio that started out 2009 with 60 percent in US stocks and 40 percent in US bonds would now have close to 80 percent in stocks and 20 percent in bonds. You can rebalance and set target asset allocation weights and periodically rebalance back to your preset amounts on occasion.<br />
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<strong>Overbalance</strong><br />
If you are worried about stocks, you can shift money to underperforming assets. Value stocks have underperformed growth stocks by more than 3 percentage points annually over the last decade. US stocks have outperformed International stocks which include European stocks and emerging markets over the same intervals. Hence, investors looking at mean reversion could allocate more of their portfolios to value and international stocks.<br />
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<strong>Avoid </strong><b>complexity and shift to Cash/Bonds</b><br />
There are plenty of complex hedging techniques available but require incredible foresight to work. It is difficult to time the trades, volatility and costs can eat into your returns. The easiest way is to simply take less risk by raising more cash or invest in high quality bonds and lesser equities. By holding enough cash on hand will give you the peace of mind in knowing you can meet your expenses in a downturn is worth more than a few percentage points in returns. This money is your war chest which you can use in the next round of downturn.<br />
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<strong>Buy and Hold</strong><br />
Being a long term investor is easy when the market price is going up but when it is coming down, it is a test of grit and temperament. Beside been emotionally challenging, it is a great way to avoid transaction cost and market timing errors.<br />
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<strong>Use momentum</strong><br />
Momentum is based on the idea that asset that performs well will continue to perform well and vice versa for a short period of time because market is irrational in the short run.<br />
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<strong>Diversification</strong><br />
Staying the course in a broadly diversified portfolio is the best strategy when all asset classes appear overpriced. If rebalancing is required to constrain portfolio risk, consider good quality dividend stocks. With a yield of about 5%, it offers some return even when the market turns against you.<br />
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Each of these approaches has its own drawbacks and limitations. The best investment strategy is one which will suit your temperament and you stick to it.<br />
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JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-84598611635028038402018-01-27T23:53:00.000+08:002018-02-24T23:55:23.638+08:00Self-justification on why I shift out from IEF and TLT<strong>Why I cut loss on Treasuries ETF?</strong><br />
In my earlier post, I shared that I cut losses on all my LEAP calls on IEF ETF and TLT ETF. I have read previously on the perfect (all weather) 60-40 equity bond portfolio which beat both holding 10 year Treasury and reinvesting coupons returned 155% and S&P 500 with dividends 158%. The theory is when stocks are up, you need to rebalance and shift to bonds, vice versa. The crux lies in the link between equity and bond, when there is a crisis, investors will flee to Treasury which is considered as a safe haven.<br />
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The risk is that bond yields rise without any corresponding strength in economy to protect the profits and stock prices. This may be caused by Inflation and Interest Rates hike. Allow me to side track my previous train of thought on this, if the corporate taxes are reduced, the deficit in the long run will increase, the Interest Rate will not increase as fast as Federal Reserve will like to.<br />
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<strong>Behavior of Shares and Bonds</strong><br />
Prices of Shares and Bonds have moved in opposite direction since the 1990s with a strong negative correlation. Since the start of 19th century, there has been only one other significant period where stocks and bonds behaved this way according to Ian Harnett of Absolute Strategy Approach. The late 1950 and 1960s had a similar stock bond relationship to the past few years. The behavior of share and bond prices moving inversely may change, but question is when will this shift materialize?<br />
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><img alt="" class="wp-image-596 size-full" height="372" src="https://jcprojectfreedom.files.wordpress.com/2018/01/jcprojectfreedom-correlation-between-spy-and-ief.jpg" style="margin-left: auto; margin-right: auto;" width="640" /></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Relationship between S&P and IEF 7 years Treasury ETF</td></tr>
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<tr><td style="text-align: center;"><img alt="" class="wp-image-597 size-full" height="342" src="https://jcprojectfreedom.files.wordpress.com/2018/01/jcprojectfreedom-correlation-between-spy-and-shy.jpg" style="margin-left: auto; margin-right: auto;" width="640" /></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Relationship between S&P and SHY 3 years Treasury ETF</td></tr>
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The extra yield on Treasury investors are looking for to compensate for inflation uncertainty is extremely low. The other risk is Fed, quantitative easing has only just been put into reverse mode, the 4 trillion is only 3 billion smaller. As the balance sheet shrinks, the pressure is put on bond yields and downward pressure on stock prices. I believe inflation will be low for 2018, economy will improve further but higher bond yield will definitely happen.<br />
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<strong>Bond Bear Market</strong><br />
Legendary value investor Bill Miller has an optimistic view on equity market. He strongly believes that bond bull market has come to an end and investors are cashing out from bond market, shifting to equity market. He said,"I believe that if rates rise in 2018, taking the 10 year treasury above 3 percent, that will propel stocks significantly higher, as money exits bond funds for only the second year in the past ten. Bonds, in my opinion, have entered a bear market, but one that is likely to be benign for the next year or so."<br />
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The market had already showed a strong rally in 2017 and a strong start in 2018. The improvement in corporate earnings, global recovery, tax reform, improvement in fundamental factors and further stimulus to economy drove the market prices up. According to Bill Miller, investors are shifting from bond market to stocks which will further reinforce the stock price's movement. My guess is rising bond yield condition will further depress bond prices (TLT and IEF). The thesis is the bull run for bond market may come to an end.<br />
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Warren Buffet felt that stocks have gotten less attractive but they are still very highly attractive compared to bonds because interest rates are very low. With rising valuations, it is not like buying shares after the 2008 financial crisis which is like shooting fish in a barrel. Nonetheless, I felt that rather than seating and waiting for the Treasury ETFs to appreciate, it will be better to switch out to stocks and ride this last wave.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-76028334732121490132018-01-27T23:47:00.000+08:002018-02-24T23:48:36.164+08:00JC Options Fund Update 27 Jan 2018<br />
<img src="https://jcprojectfreedom.files.wordpress.com/2018/01/jc-options-fund-premium-income-report-card1.jpg?w=680" /><br />
Just now, I experience a moment of fear. I remember recently in 2017, I experienced a fearful incident. I took the staircase in International Plaza on the 26th floor to 25th floor then I tried to open the door but it was locked from inside. I started to descend to the next level and try to open the door. Again it was locked. Then I tried the next floor and the next one. Fear started to creep in when I went to 20th floor. I was flustered and worried what if nobody realized that I am missing as it was a Sunday. Then I calm myself, took a breather and continue to walk downstairs and finally the door was able to open on the 6th floor which leads to the car park.<br />
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My fear earlier was when I did a cut loss on all my TLT and IEF options. It was very painful and scary. I just frantically pressed the right click button on the mouse and execute the close position order. I will explain my rationale why I need to shift out from bonds in another post. For capital loss, it was - USD 4,304.95 and premium loss was - USD 433.88. OUCH! To justify for the losses, I chased after a volatile stock AAPL and sell put on it to gain the premium of USD 9,189.54. I think it is going to be shitty as 1st February after market close, the earnings is going to be released. Yes, I did not check the earnings date again. This is the type of situation which you can only pray that the earnings is good and you get to keep the differences and free up your capital. Worst case scenario, it is going to be a thick white bar downwards like the month of November 2017 as shown in the above figure. If it happens, the thick white bar is going to be very scary.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-76822410605131543582018-01-25T23:41:00.000+08:002018-02-24T23:43:04.003+08:00Evolution from a Trader to InvestorI borrowed a book called "Evolution of a Trader - Fundamental Analysis and Position Trading" from the library. I think the concept of the book is interesting as it talks about fundamental analysis and how you can enhance your gain by swing trading. I recalled just a few days ago I met up with my trusted financial advisor. He recalled that about 4 years ago, he started to share with me about value investing. He introduced to me Fifth Person's online course. I recalled my mentor that he is a value investor and not a good trader. He mentioned to me that trading will not be as profitable as value investing. I agreed that my wealth did not grow much during my earlier years trading in stocks. The following, I will like to discuss the differences between trading and investing.<br />
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<strong>Capital</strong><br />
Day trading or short term trading needs to have a certain amount of capital to make it sustainable for income. In addition, you need to cater for the commission and taxes for entering and exiting the trades. If the capital is not big enough, after deducting all the commissioning and taxes, it will hardly cover your profit. I tried this in 2008 for an entire month of day trading as I was on my garden leave. I made about SGD 3k but it was very stressful and you need to be fast to react to the few ticker movements to make a profit.<br />
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<strong>Time</strong><br />
Day trading will require time commitment. You need to be in front of the screen, fully concentrated to look at the charts, 1 year chart, 1 day chart, 15 mins chart and 1 min chart. Most of the actions will happen in the first two hours when the market opens and 1 hour before the market closes.<br />
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Investing can be done anything because the research work can be conducted anytime. I will say probably spend 1-2 hours a day to research on your present portfolio and those in your watch list. Then you just need to follow up on the quarterly results to review the companies. This is more suitable for most working population.<br />
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<strong>Discipline and Patience</strong><br />
Both trading and investing will require discipline and patience. Day/short term trading will involve more active price involvement, looking for the right setup and trigger point. Investing involves waiting for the right swing and give it your best shot. It means you need to wait for opportunity to acquire the business when there is a mispricing. This mispricing is a short window and will be gone when everyone starts to realise it. Both trading and investing require risk management. Both will require to understand what is the value at risk and the potential return, whether this return justifies the risk.<br />
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<strong>Return</strong><br />
Speaking of return, I will mention that day or short term trading can generate high return fast, compounding on daily or short term basis will grow the amount. However, once a trader makes a mistake or a series of mistakes, it will wipe out all the gains. For wealth accumulation, I will suggest to take the route of investing, taking a longer time frame to compound and grow the money.<br />
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<strong>Conclusion</strong><br />
In conclusion, investing is recommended to build your retirement sum, reinvestment of dividend and new capital will help to speed up the compounding effect. Trading is meant for income and you need to spend time on it.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-736422822549700072018-01-21T23:34:00.000+08:002018-02-24T23:36:31.589+08:00Hedging with OptionsHedging enables the fund manager to transfer part of the risk with holding a position in the underlying instrument from one party to another. Options act like an insurance policy. There is a cost with hedging. It involves initial cash or opportunity costs involved such as potential profits and additional risk exposure in certain scenario.<br />
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<strong>Using Options to Protect an Equity Portfolio</strong><br />
Buying protective puts is the most obvious way to hedge a portfolio. The investor selects the option with a specific expiry date and strike price, the level of risk assumed and the cost (premium paid) incurred is known.<br />
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Selling Covered Call is selling options against long position. This strategy does not offer limited downside risk compared to buying protective puts. Income (premium) generated from selling call options can mitigate a decline in the portfolio value, but the premium received may not provide much buffer when the stock/underlying asset's price falls sharply in the market. I have limited my gains when I previously sold call on SKX at $26, when the results came out, the price went up to $30 and as of 21st Jan 18, it is about $39. Selling Call can limit your upside and provide limited downside. If the stock price is neutral and does not move much, it can enhance your yield or premium can be considered as an income.<br />
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<strong>Zero-Cost Options</strong><br />
If an investor wants to hedge with very limited risk exposure, he can do so by simply purchasing an option. If he also wants to avoid putting up cash associated with such a strategy, he can achieve this by been cash neutral through simultaneously combining the purchase of the option with a sale of another option.<br />
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This is known as a zero-cost dollar, by buying protective put and writing an out of money covered call. The call option is sold with a strike price where the premium received is equal to the premium paid to buy the put. This zero dollar collar is used to protect existing long stock positions with little or no cost.JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0Singapore1.352083 103.819836000000010.8441055 103.174389 1.8600605 104.46528300000001tag:blogger.com,1999:blog-3951546709366200810.post-83906934712389707232018-01-19T00:41:00.003+08:002018-01-19T00:45:49.235+08:00JC Options Fund - January 2018 Update<div class="separator" style="clear: both; text-align: left;">
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<span style="text-align: justify;"><span style="font-family: Trebuchet MS, sans-serif;">I have divided the tabulations into two sections for JC Options Fund, the first leg will be Annual Options Income and the second leg will be from Capital Gain. For January 2018, I have used Diagonal Call on three counters to achieve the capital gain. For the monthly options premium, I have achieved USD 1,865 which is approximately 3% yield per month based on my initial injected capital into JC Options Fund.</span></span></div>
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<span style="font-family: Trebuchet MS, sans-serif;">I have taken a large position in TLT ETF both in terms of Diagonal Call and sell put. My take is for 2018, the yield should not increase fast enough and there is still some room for the price to appreciate. I am trying to use GLD and TLT to smooth the deviation of the entire portfolio's performance. </span></div>
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<table align="center" cellpadding="0" cellspacing="0" class="tr-caption-container" style="margin-left: auto; margin-right: auto; text-align: center;"><tbody>
<tr><td style="text-align: center;"><a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjDwLFrsCDGJQBcatsgpYxObHo4-qzrgm8q3XogUG8P5A69_9XdpoevM7Gp0nRDj6gI4A9QUwN_k0N7g513B4xvC_VNB0Qurjje6mTdMgKBqVh3Z1haNnTC3nYj8eSTwAmTPPrS8fFSYQE/s1600/JC+Options+Fund+January+2018.jpg" imageanchor="1" style="margin-left: auto; margin-right: auto;"><img border="0" data-original-height="720" data-original-width="1280" height="360" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEhjDwLFrsCDGJQBcatsgpYxObHo4-qzrgm8q3XogUG8P5A69_9XdpoevM7Gp0nRDj6gI4A9QUwN_k0N7g513B4xvC_VNB0Qurjje6mTdMgKBqVh3Z1haNnTC3nYj8eSTwAmTPPrS8fFSYQE/s640/JC+Options+Fund+January+2018.jpg" width="640" /></a></td></tr>
<tr><td class="tr-caption" style="text-align: center;">Figure 1 - JC Options Fund Overview and Performance</td></tr>
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Overall, I am still experimenting with how options can be used to enhance yield and hedge against existing positions in JC Fund. When I hedge an existing position by buying an insurance through buy put, I will be reducing my overall performance.</div>
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I have tried another strategy which is selling put on a counter, with the premium gain, I will use it to do a buy LEAP call on GLD or TLT.</div>
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<br />JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0tag:blogger.com,1999:blog-3951546709366200810.post-8479712436639797032018-01-17T22:59:00.001+08:002018-01-17T22:59:58.084+08:0017/1/2018 Interesting Encounters<span style="font-family: Trebuchet MS, sans-serif;">This morning I sat outside Starbucks and I was about to start my revision on CMFAS M6A when a guy called out to me. He used to be my assistant project engineer a decade ago. </span><div>
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<span style="font-family: Trebuchet MS, sans-serif;">I think he is a messenger sent from God.</span></div>
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<span style="font-family: Trebuchet MS, sans-serif;">He told me he left the last company two years ago and has been self employed since. He has been driving Uber. It is easy to break even but to be profitable is not as easy as it seems. There is a lot of strategic planning with route, fuel efficiency and where the passengers are to increase the hit rate of getting a customer. He told me a lot of his friends who are driving Uber dropped out because there is no CPF contribution. Getting a job with CPF seems like a better choice for them. I agree that CPF contribution compounded over the long run can be an astonishing amount.</span></div>
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<span style="font-family: Trebuchet MS, sans-serif;">He explained further he will drive Uber in the morning till 10am, he will proceed to warehouse to pick up goods and use the rental car to make delivery. Then he will go back to rest from 2-4pm before driving the evening shift. In addition, he has an event management business. He explained that you need to have a few businesses or streams of income to see which works better. This year, he is 35 years old and he set a deadline by 38 years old he needs to make it in business, if not he will go back to get a job.</span></div>
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<span style="font-family: Trebuchet MS, sans-serif;">I went to the library and queue up at 10 am to enter. All the staff came out to greet us to start the day, it was a good feeling and I felt like a super star. Haha. In addition, I found a nice spot in the library with a nice view.</span></div>
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<a href="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3bDQvJGS-092Ik7tTbo2Zn9sjwO00W-32K8wVhzlbeHfzMxmkP5YmJ2jsF4NLnHyXP5B7IeY5Inwgyf6zwFqky62J6q1fT666Yz1OrBp2wreHQKD5dRvndz4G5ZZ8y9_DjIU8IGMHjFx_/s1600/JCProjectFreedom_Study+CMFAS_M6A.JPG" imageanchor="1" style="margin-left: 1em; margin-right: 1em;"><img border="0" data-original-height="1600" data-original-width="1280" height="400" src="https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEh3bDQvJGS-092Ik7tTbo2Zn9sjwO00W-32K8wVhzlbeHfzMxmkP5YmJ2jsF4NLnHyXP5B7IeY5Inwgyf6zwFqky62J6q1fT666Yz1OrBp2wreHQKD5dRvndz4G5ZZ8y9_DjIU8IGMHjFx_/s400/JCProjectFreedom_Study+CMFAS_M6A.JPG" width="320" /></a></div>
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<span style="font-family: Trebuchet MS, sans-serif;">While studying these two days in the library, I saw a middle aged man dressed up formally using his laptop. He is actively sending his resume and apply for jobs. I was thinking does his family knows that he is out of job and he still dress like he is working and goes out everyday. Maybe tomorrow I will reach out to him and talk to him. Sometimes, he will check the status of his stock holdings. Maybe I will use that as a conversation starter. </span></div>
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<span style="font-family: Trebuchet MS, sans-serif;">Today I clear all the trust fund and acquire more HK shares. </span></div>
JC Project Freedomhttp://www.blogger.com/profile/15024982620483590769noreply@blogger.com0