What should you do when the price drops?

I saw a post on a facebook page and somebody mentioned that he had been quite successful all these while and did not experience a major correction before and asked for an opinion on what should he do if the price suddenly dropped by 40%?

I can vaguely remember it was either 2007 or 2008 when I was in my 2nd job with about 30k in shares. Then suddenly, the market just crashed. I saw the share price dropped like a falling dagger. It was S$2 and suddenly it became S$1.4...$1.3...$1.2. Something inside you tanked as well. Imagine it is 300k or 3m, how will you feel?

If you are a value investor, you will definitely experience several crashes during your investment journey. Do you have the grit to hang on to your shares and will not be affected by others who are frantically selling their shares? 

Markets are highly unpredictable and can be extremely volatile from time to time. Ben Graham has a brilliant metaphor to describe this and will teach you how to handle sudden drop in market price. 

He introduces Mr Market, every day Mr Market will offer you a price for the stock. You have the option to buy, sell or do nothing. It doesn't matter what you do to Mr Market, he will be back the next day. 

Mr Market is a manic depressive guy. When he is in a good mood, he gets greedy and quotes ridiculously high prices. When he is depressed and fearful, he will quote you dirt cheap price. 

The daily price does not reflect how well the company is actually performing. When Mr Market is depressed, it is the best time to scope up shares of good companies and sell when Mr Market is overly optimistic. Sometimes, it pays to be still and do nothing. 

Raffles Medical FY 2016

Revenue increases from 410,535 in FY 2015 to 473,608 in FY 2016 which is an increase of 15.4%. It was noted that staff costs inevitably increases by 18.8% from 203,537 in FY 2015 to 241,736 in FY 2016. In the financial statement itself, it explains that the staff cost increases due to acquisitions and increases in hiring of doctors, nurses and administrative personnel. However, the increase in staff cost does not directly translate to an increase in revenue. I feel investors should not penalise Raffles Medical heavily on this. The results can only be justified after another 1-2 quarters. Profit attributable to owners is slightly higher than the previous year at 70,210 in FY 2016 compared to 69,291 in FY 2015.

It was further explained that investment properties increased by S$27.6 million due to investment property development expenditure for Raffles Hospital Extension and Raffles Medical Shanghai Hospital Project. The Group's net cash position increased from S$53.8 million as at 31 December 2015 to S$81.5 million as at 31 December 2016. This was mainly contributed by the strong operating cash flows from its business operations. Unsecured loans repayable after one year as 31/12/2016 of S$16.947 million is easily covered by its cash position. 

Net cash from operating activities increases from S$72.816 million in FY 2015 to S$78.854 million in FY 2016. Purchase of PPE decreases by almost half. In addition, Raffles Medical made a big sum of repayment of bank loans at approximately S$98 million.

Raffles Holland V has almost 95% of the space committed. I went to the site and took a look at it. 

The picture is taken from courtesy of Yahoo. As you can see one of the key tenants is DBS with a range of restaurants on the 2nd floor. I believe this business unit will contribute and boost the Group's results in the coming year.

Overall, I feel this is a resilient business, easy to comprehend and highly lucrative. I am a customer of Raffles Medical Group, I will do a full body check up and it will easily cost S$500+ per session (during the good times and covered under company's medical insurance to a certain limit). The hospital at Bugis is usually packed with wealthy students from overseas and expats. 

ST Engineering FY2016

Profit before tax (PBT) dropped 6% to $590.6m from $630.3m, and net profit attributable to shareholders (Net profit) was 8% lower at $484.5m from $529.0m in the prior year.

Aerospace sector revenue increases by 19% from 2096 in 2015 FY to 2493 in 2016 FY. Profit before tax (PBT) increases by 3%. Main geographical improvement is in Europe which sees a rise of revenue by 226%.

Electronics sector revenue increases by 10% from 1743 in 2015 FY to 1910 in 2016 FY. Profit before tax (PBT) increases by 9%. 

Land Systems revenue decreases by 6% from 1401 in 2015 FY to 1312 in 2016 FY. Profit before tax decreases by 66% from 65 in 2015 to 22.2 in 2016 FY. 

Marine sees a decrease by 12% from 958 in FY 2015 to 841 in FY 2016. PBT decreases by 15% from 88.3 in FY 2015 to 75.1 in FY 2016. Free Cash Flow is still positive.

Overall, the business is stable and a consistent strong yield stock. On 17th Feb, it shot up by 6.8%.

Preparation for Interview as a Securities Dealer

The stock market is, without doubt, one of the greatest tools ever invented for building wealth. 

What was once the domain of the rich or the investment professional has now turned into the vehicle of choice for everyone to grow their personal wealth. 

So that nearly anybody can own stocks.

What kind of investor are you? 

Investment Style

Active or Passive Investment.

Time Frame

How much time do you want to spend on investing?

How active do you want to be/how involved can you be?

When do you need your invested monies?

Risk Tolerance

Are you comfortable with short term decreases in investment value?

Reasons for becoming a trader

Results oriented traded vs ego driven trader

My style -> work one-on-one as a personal stock broker, offer investment ideas, analyse your portfolio, let my customers execute orders online for buy and sell to save on commission.

Risk and return have a direct relationship. Generally, the greater the level of risk, the greater the expected return. However, greater risk may also lead to greater losses, so the investor needs to determine the level of risk tolerance.

1. Why are you the best candidate for us? Ans: I have strong interest in this field, I have been investing for the last 10 years and construct a portfolio of close to a million. I am determined to make this business a successful one which will be a win-win situation for both the brokerage house and myself.
2. What are your short term career goals? Ans: I intend to grow the business till 4k per month for take home salary within 6 months.
3. Have you worked in sales before? Ans: Yes, since graduation all my roles involve sales element. We need to prospect and close sales.
4. How do you conduct research on companies and markets? Ans: I research on the company management, business, valuation and financial. Management is on who the top guys are, their remuneration, whether their interest with the shareholders are aligned. Business - what industry is the business in and what sort of competitive advantage does the company has over others. Valuation will be determined by DCF model. Financial is derived from financial statements.
5. What qualities do you feel are essential to being a successful stock broker? Ans: Driven, Build rapport easily and trustworthy
6. What do you know about our firm? Ans: 
   Lim & Tan Securities was established in 1973. Its main activity is stock broking and the main focus of the company is the retail market. Believing in providing cutting-edge technology to its clients, Lim & Tan Securities was amongst the first to introduce Internet Share Trading in Singapore in October 1998.
   In line with its belief in providing a fast and convenient way for clients to trade shares Online, multiple channels are provided for clients to access its easy-to-navigate Online trading platform to check prices and trade. This includes the Mobile trading channel using mobile phones, where clients can view streaming live prices, which was added in June 2008. Subsequently in 2011 and early 2012, it introduced iPhone, Android and iPad Apps for more convenient on-the-go trading under its Online trading brand name, limtan.com.sg.
   Currently Lim & Tan offers a trade charting application, LTS Station, where clients can trade using technical charting tools, insert trade diary comments on the charts and also view up to 10 years of their trade history with Lim & Tan Securities.
7. Take me through a recent portfolio you have won over. Ans: I manage my mother's portfolio.
8. Tell me something about yourself that I wouldn't know from reading your resume. Ans: I like to spend my personal reading books.
9. Give me an example of a time you successfully handled a high pressure situation. Ans: I am in Vietnam and I was working to close the contract and started preparation of project procedures at the same time.
10. Where do you predict interest rates going in the next 6 months? Ans: I believe it will be go up slowly.
11. How do you manage working in a constantly stressful environment? Ans: I enjoy momentum and stressful environment, it helps to keep me upbeat. I will unwind after work by exercising and spending with the family.
12. Why do you want to work for our Broker Firm? Ans: I have all my networth in this company. 
13. Are you comfortable cold calling? Tell me about any cold calling experience that you have. Ans: Throughout my career, I need to cold call potential customer and tell them about the company. 
14. Bring your resume to life. Ans: I started my career in the shipyard building and repairing vessels, after which I was handpicked by the CEO to change to marketing role. I got onto a sales manager role and was stationed in Perth for two years, doing project management and sales work in Perth. I came back to Singapore once the project was completed and changed to subsea diving sector, followed by my present role. Elaborate from there.
15. What is your proudest career accomplishment to date? Ans: I manage to secure a USD 42m project and this project was very complex, involves a lot of stakeholders including Pertamina and main contractor in Jakarta. 
16. Would you buy stock in the market right now? Ans: I am always buying stock regardless to how the market is.
17. Tell me where the STI closed at yesterday? Ans: 3107
18. Our industry has a very high turn over rate. Why do you feel you will be one to make it long term in this industry? Ans: Alot of them left the industry are because they cannot make sufficient money and need to draw down from their savings. This business takes time to build like other business. I do not need to rely mainly on this source of income and I can last longer in this business than most.
19. What is the most recent business article you have read? What were your thoughts on the story? Ans: I read on the scorecard of Singapore Q4 2016. It outperforms due to the manufacturing uptick. Personally I think Singapore is in a difficult situation and we are very vulnerable in this open economy. My take is Singapore will continue to deteriorate for the next decade. 
20. Would you consider yourself a calculated risk taker? Ans: Yes, like most entrepreneurs, I take calculated risk.
21. What is your favorite financial market information resource? Ans: Bloomberg
22. If given this opportunity, how would you build trust with our clients? Ans: I will go through a know your client system, understand their requirement and what is their financial goals to be achieved. Then I can start to plan accordingly with them. This is the best way to build trust. Nobody wants to be sold a product but if they know that I have their best interest, they will grow to trust me.
23. What is the largest portfolio you have managed? Ans: I have managed close to 1m, presently standing at 950k.
24. How would you market yourself? Why is that an important part of being a stock broker? Ans: I will engage social media and online resources such as investingnote.com to market myself. Marketing is important for client acquisition. 
25. What do you enjoy about sales? Ans: I enjoy meeting people
26. Are you comfortable generating leads? Tell me about your experience doing so. Ans: I used to cold call client and talk to them to get potential business. I am comfortable in talking to people on the street as well which I intend to do so through road shows.
27. Does money drive you to succeed? What other factors motivate you? Ans: Money does drive me to succeed. Other factors such as freedom and family.

UOB FY2016

UOB produces another stable quarter. FY 16 profit is S$3.1 bn, which is slightly lower YoY. The higher net interest income and fee income offset by lower investment income. Net interest income up 1.3% to S$5bn, led by healthy loan growth. Loans are up 8.8% YoY, with selective targeting of quality credits. The NIM is -6 bps to 1.71%, although it has stablised over last 2 quarters. Non-interest income remains flat at S$3.1 bn. Higher fee income rises 2.5% YoY which is offset by lower trading and investment income which is reduced by 8.1% YoY.

Portfolio quality is broadly stable. NPL ratio is up slightly at 1.5% with high general allowances-to-loans ratio of 1.2%.

Bottom line is dampened by higher allowances from offshore and marine sector. We heard about the Ezra's impairment issue.

Wealth management did pretty well, focusing on growth on mass affluent and high net worth segments. It increases by 8% YoY, profit increases 16% YoY, at $93bn AUM as at end 2016.

Motivation

Recently, I have been listening alot to Gary Vaynerchuk's videos and I like this quote.

"My feeling is that no matter how much you like your job, you should aim to leave it and grow your own brand and business or partner with someone to do so, because as long as you are working for someone else you will never be living entirely true to yourself and your passion."

I had a phone call with a headhunter recently, he will like to recommend me to a different industry working as a business development manager. The pay package budget according to him is 10% higher than my existing package which seems very enticing. However, if I take up this job, I will be on the plane every single week to other countries, clocking insane air miles. I dislike entertainment now as it is a waste of my time. To me, the time is better spent with my family - my love ones. Furthermore, if I am always overseas for work, I will miss the formative years of my child.

"Stay within your circle of competence, do not need to worry about anything outside of it." I just need to reverse engineer and understand who I am, what I good at and focus on them. 




I need to determine my moat - competitive advantage.  I know pursue your passion is overrated and it will be better if you are doing something you are competent at. What if we can combine something you are good at and you are passionate about? It is the best of both worlds. 

ThaiBev 1Q17

Highlights

The fiscal year from "1 January to 31 December" is changed to "1 October to 30 September". The new fiscal year for 2016 was 9 months to 30th September 2016. The fiscal year 2017 will be 12 months from 1 October 2016 to 30 September 2017.


There is a decline in domestic consumption during mourning period in Thailand. Total sales revenue dropped 8% by Baht 4,051 million. Thaibev is dominant in spirits market. Maintain growth in net profit, net profit excluding F&N/FCL increased 12.1% to Baht 6,138 million, net profit including F&N/FCL jumped 29.1% to Baht 7,743 million. There is lower net loss in non-alcoholic segment.


Financials

The way business owners approach management is different from scholars running a corporation. Not a lot of scholars know how to run a business as they are not entrepreneurs to start with. If you look at the financial statements of Thaibev, you will realise the cost control aspect is amazing unlike our Singapore companies. The selling expenses, cost of goods sold, administrative expenses are decreased. Total expenses decreased from 44,857,176 in 2015 to 39,655,839 in 2016.


There is a consistent positive free cashflow, a constant paydown of debts for financing and the company is seating on a heap of cash. The cash is used to acquire companies like Vinamilk.


Conclusion

ThaiBev is a brilliant company. Good quarter results. The market has already reflected on this. Today the share price increases by 5%.