The pandemic has given a boost to prices for cards of all forms from Pokemon cards, to Basketball and Soccer cards. For example, sales of Pokemon cards increased by almost 6x last year, while sales of Basketball cards has risen by almost 4x in the same period. Who would have thought that just by collecting cards, you could make a profit?

Card trading has also been popularized by Shark Tank’s Mark Cuban and controversial YouTube Logan Paul. I was surprised to read that a signed rookie card for NBA star Luka Doncic could fetch USD 4.6m. Sounds pretty insane just for a “small piece of cardboard paper” but who cares when there is a buyer out there who value it at this price.

I myself stumbled into collecting wrestling cards in my primary school days. I remember the fascination of buying cards from Comic Connection, opening them up, and hoping it would be those foil cards. It was not so much of trying to profit from it at that time, but rather, you want to build up a collection of all these rare cards.

Source: Finance and Toast. Author’s own collection of WWE cards.

Source: Heritage Auctions. Did you know that there are professional valuers to value your trading cards?

Later on in life, I found the joy of collecting such collectable items to help me in my investing and trading. It all boils down to the “mindset” on finding unloved, undervalued or even lesser-known growth stocks, the same way you hunt for rare cards. The key is to always be on the lookout for opportunities where no one is going to. Also, it helps in knowing when to exit because you do not want to hold on to such cards or stocks “forever”. Paper gains are not actually real gains until you realized it.

Of course for those who are thinking of doing this as a part-time or even full-time job – trading cards, there are risks involved. Just like watch collecting, prices may be irrational and the fad may die down over time.

However, I still believe as long as people value the joy of collecting rare cards, the market should still hold up for now. Not everything needs to make sense and ultimately, it boils down to demand and supply.

How many of you still have such trading cards collected while you were young? Share with us in the comments box below.

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Best wishes,

Finance and Toast

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A close friend once told me the story that he met an acquaintance, who lives in a Bungalow all by himself. But he wears 10 different types of rings on each of his fingers to sleep because his reason was “at least if I die, I have 10 rings on my finger”. That sounds absurd and ridiculous of course, and to a certain extent miserable. You can have all the wealth in the world but you will never be happy.

Why such extremes?

Being rich is a mindset. Nothing can make you feel richer if you don’t change your mindset. And I’ve found that the below is even more important than money in the literal sense.

A. Time

We have all heard that Time = Money. Time, while unlike money, is not an infinite resource. This is why in each decade of our lives, we start to feel that time is passing faster and faster. Being rich in time and having the freedom to do the things that we enjoy, can make us feel “richer” in life. That is why so many of us invest in the stock market, trying to grow our wealth so that we can “buy” back some time by retiring early. I wrote in a previous article on how I structure my stocks exit plan with the concept of time.

I urge people who are just starting out in their career to put in the time and sweat in their work, but after a certain period of time, they should use their experience to offset the time needed to work on tasks. It just does not make sense to me if you progress ahead in your career ladder, but are unable to delegate out work that your subordinates can do.

B. Health

Another phrase commonly used is that Health = Wealth. I can’t emphasize how much this has become for me ever since the pandemic started and my health took a toll while working ridiculously long hours. Health is not just in the physical sense but also in the mental sense as well. The pandemic exposed a lot of bad working environments where workplaces squeeze their employees pulp dry. Managers get worried that workers who choose to work from home will not be productive, and end up putting a lot of pressure and micromanaging their workers.

Having good health will make you feel richer overall, as you are able to save on costly medical bills, and also be in good shape to invest wisely. All these will have positive spillover effects on your life and allow you to find more ways to make money.

C. Knowledge

Knowledge is wealth too. How many times do we feel “rich” just by gaining more knowledge through books, newspapers, articles etc. This year, I set myself a personal goal to read at least one book per month. So far I have read five books such as What It Takes, A Ride of a Lifetime, and Sapiens, and am into my sixth book. Books allow you the opportunity to “have lunch” with virtually anyone and know how the author is thinking. This provides valuable insights especially reading biographies of successful businessmen as you avoid the pitfalls that they made. Acquiring more knowledge has also allowed me to make sense of economics, politics and businesses given that almost everything is interlinked. The more you can connect the dots, the better you are able to spot pockets of opportunities in the market.

Take for example a small side project that I am working on called Watch Care, it existed from my love of watches and from taking care of them. Till today, I am proud to say that I am the first in Singapore to bring in trusted watch cleaning products from the States, and am consistently seeing my revenue figures grow.

D. Relationships

Having meaningful relationships brings about fulfilment, which is also a form of wealth. As humans are emotional creatures, we crave the interaction and bond with each other. By having relationships with people of different background, levels, and diversity can allow you to see a different perspective of life. All these will also alter your thinking as you become open to new experiences. And that is where I see the value lies. How many times have we spoken with another person and gain inspiration from him or her? This itself makes you “richer” than just by having money.

In addition, having strong family ties also brings about wealth as well. Sharing a personal experience – my Dad, who has been my pillar of support since my schooling days, has allowed me to try new things and to take risks. I have changed jobs numerous times which most parents would disapprove. However, my Dad knew that I had a plan in mind and he was always supportive of it. Without such support, I will not be where I am today.

E. Travelling

Travelling, while it’s an irony as we spend money to travel, actually make us feel wealthy as well – in the form of experiences and learning new cultures. As I look back on my 20s, I have travelled to more than 17 countries, and 24 cities and found it a very fulfilling time. I encountered experiences from scams in Zhangjiajie China, to attempting a full marathon in Switzerland, and all these have shaped how I view the world and understand more about myself. I view these as important aspects on becoming a better investor, and a more knowledgeable person.

What are your thoughts on wealth? Share with us in the comments box below.

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Best wishes,

Finance and Toast

The post Concept of Wealth appeared first on Finance and Toast.

Diversification is not a magic elixir.

These are the words mentioned by Howard Marks, co-chairman of Oaktree Capital Management, and one of those widely regarded in the investing community, in his latest podcast.

The link to this 34 minutes podcast is given here, but I regurgitate / provide a quick summary on what he thinks about the current investment environment below.

A. Change and technology are much more a part of life than in the past

Howard started off in his podcast that the world today is significantly different than the world 40-50 years ago. In the past, the world didn’t felt like it was evolving so fast. However, now, anything and almost everything can be disrupted.

There are several implications to this, particularly that we have to give much more thought to how a particular industry or business will potentially be disrupted. This will affect the timeframe which we hold onto stocks or even our thesis on why we buy them in the first place.

Another implication is that there are no longer safe, once considered blue-chip stocks anymore. Hence, we have to constantly refine our way of thinking and see how disruption will affect industries and businesses.

B. Diversification is much more than buying lots of companies in your portfolio

If you buy 100 companies, but all get their supplies from a particular company say China or India, that is not diversifying. Diversifying is to protect yourself from what you don’t know. Howard is of the view that if you have a favourite stock, and you are sufficiently well covered on the downside, you can actually put all your money in it. Diversification is more about trading downside risk in exchange for upside potential.

C. Current market cycle is not as low as in the year 2000

Understanding cycles is really important in investing because people live their lives through pattern recognition. Cycles are comprised of excesses and corrections as long as people are involved in the markets.

Howard mentioned that this is a very unusual cycle because the correction in March 2020 was not due to excess in the economy. He mentioned that this is a one-off event and not a typical cycle.

Usually, the stock market follows an economy. When an economy is doing well, stock prices rise. Conversely, when an economy is not doing so well, stock prices taper.

He further mentions that a lot of people are saying that the current market cycle is a bubble, however, he doesn’t think so because the economic outlook for most economies is still positive. The P/E ratio of the S&P 500 today is approximately 21 times, whereas in the year 2000, the P/E ratio of the S&P 500 is approximately 32 times and that is then a bubble.

D. Cryptocurrency and bitcoin

Howard used to be a sceptic on cryptocurrency and bitcoin, given that there is no intrinsic value to such “assets”. If there are no intrinsic value, how do you then assign a price on it?

However, the pandemic, which allowed him to spend lots of time with his son, changed his mindset.

His son made him conclude that he was a knee-jerk sceptic, just because he has seen a lot of financial innovation that failed. Howard also admitted that he did not see the supply and demand side of things. There are lots of things in life that have no intrinsic value but still have a lot of value, eg. Art and Paintings.

Hence, for cryptocurrency and bitcoin, supply may be limited while demand may be high and hence, people can accord value to it. Even though we may not see the value of it, doesn’t mean others doesn’t see the value of it.

What are some other useful insights that you have learned from Howard Marks? Feel free to share with us in the comments box below!

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Best wishes,

Finance and Toast

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I remember since young, I’ve always had a thing for theme parks and Disney was one of them that stood out well. I have been to Hong Kong Disneyland with my family during my JC days, and subsequently Disneyland Paris during my exchange program. I have yet to visit the Tokyo Disneyland and Walt Disney World Resort in Florida though.

Source: Finance and Toast. Went to Disneyland Paris in 2014 while on exchange. 

This book gives you a great perspective on what it is like to be a CEO at one of the Fortune 500 company, and the more you read, the more you will understand the different moving parts of Disney and how it is a behemoth.

Below are some of the key takeaways / insights that I’ve learned through reading this book.

A. Disney is more than just theme parks and movies

Disney is more than just theme parks and movies that you see. It comprises Pixar, Marvel, Lucas Films, and 21^st Century Fox. At one point, they wanted to buy Twitter as well to build up their tech capabilities (but subsequently decided to drop the deal as there were too much risks involved). This gives them scale, depth, and penetration into different markets like:

• Movies (Walt Disney Animation, Disney Studios, Pixar, Marvel, Lucasfilm, 21^st Century Fox, Fox 2000, Fox Searchlight)
• Television (ABC, ABC News, Disney Channels, Freeform, FX, NatGeo)
• Sports (ESPN)
• Tech (BAMtech)

There is a reason why most people love Disney simply because they have been doing a lot of things right.

Source: Disney

B. M&A can be accretive, only if you know how to integrate them

Contrary to what Charlie Munger said, that two thirds of M&A don’t work, this book shows that M&A can add significant future value to your business if you know how to choose the right business, pay the right price, and integrate them. Most companies end up paying a lot more than what they should, and end up, shareholders lose value. Also, most senior executives do not know how to best integrated two large companies while preserving the other’s culture. And with that, many great talent leave.

Bob Iger showed how he managed to integrate Pixar with Disney, and not let it encroach on its existing business lines. He went with his gut feelings after assessing the intellectual capital, talent, and technology at Pixar, and felt that the acquisition will bring a lot of value (which true enough it did).

C. A company is only as good as its people

Time and time again it is the people within the company that make or break the company. In this book, Bob talks about the difficult decision of letting people go. He does not tolerate people who do not have integrity and he is not afraid of asking them to leave despite them having been with the firm for so long. Well, people do change along the way and that is where you have to adjust to the situation. There is a reason why Disney Is Named the Company Americans Want to Work For Most, and it boils down to culture and people.

Source: Disney, Employee Benefit News

D. The famous saying ” Innovate or die”

As I wrote in my previous post of Why tech is too big a sector to ignore, this book emphasize the need for companies to innovate or fall of the leader pack. Bob emphasized several times in the book to “Innovate or die”. This could mean many things to us. The first, companies have to continually invest in technology, change the way they do things, and always strive for progress. Disney is a classified as a media and entertainment company. But if you look deeper than that, they are actually a part tech company with the acquisitions they have made. In addition, with Disney+, they are even competing in the streaming space with the likes of Netflix. The second, on a personal level, this phrase “Innovate or die” also tells you that you have to continuously improve your thinking and be willing to embrace changes. Old norms are for us to challenge and to push boundaries. For example, if you have always been a value investor, it’s time to also get exposed to growth investing as there could be more opportunities in that space.

E. Negotiation is an art

Negotiation happens in all aspects of your life. Whether it is internally with co-workers, or externally with clients. There is a time to be firm, and a time to be flexible. The more you get comfortable with negotiating, the more it is going to help you in difficult life situations.

Bob Iger illustrated this perfectly in this book. Steve Jobs had a terrible relationship with Disney even though they were in a partnership previously. But that was not due to the fault of Bob. Once Bob took over the CEO role, he immediately tried to repair the relationship with Steve Jobs and over time, told Steve that he wanted to acquire Pixar (which Steve agreed in the end).

In another acquisition where Steve was contemplating on buying 21^st Century Fox, Disney was willing to pay $28 per share for it. But Rupert Murdoch, then CEO of 21^st Century Fox, wanted the offer price to be $29 per share ($1 more could result in as high as an additional 5 billion), which Bob firmly declined.

F. Trust your instincts

If something feels wrong, it is probably not for you. It could be a job, a boss, a team, or even a particular investment. Everybody probably has their own model in their head and with particular data points and occurrences, their minds can spew out an outcome on what is best for yourself. Only you will know it yourself so filter out all external “noises”.

What are some other useful insights that you know about Disney? Feel free to share with us in the comments box below!

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Best wishes,

Finance and Toast

The post Takeaways from the Book The Ride of A Lifetime by Bob Iger (Disney) appeared first on Finance and Toast.

Also in 2014, I bought JD.com (NASDAQ: JD) when it first listed and sold it at a loss. In 2015, I bought Alibaba (NYSE: BABA) and also sold it at a loss!

Since then, I stayed away from tech stocks and was sold by the idea of value investing. I started investing more into undervalued, out of loved companies, and avoided tech stocks which I couldn’t comprehend their business model. This itself has caused me to miss out on a lot of money-making opportunities

Fast forward to 6-7 years later, I knew the tech sector has grown too big too be ignored. Think FinTech, BioTech, PropTech and many more. I started reading more books and from online sources like Seeking Alpha, and feel more confident in investing with tech companies.

Below are the reasons why even if you are a hardcore believer in value investing, it is good to get some exposure into high growth, tech stocks, simply because tech is for the future.

A. Global technology market is only going to grow

Just last year, research consultancy IDC estimated global revenue of USD 4.8 trillion for 2020 and projected 2021’s global revenue to be USD 5 trillion. This is also largely due to the greater adoption of technology accelerated by the COVID-19 pandemic. IDC expects the growth of the tech sector to continue, estimating a ~5% compound annual growth rate (CAGR) for the industry through 2024.

Source: IDC

This represents a huge opportunity set for adjacent sectors / companies who can adopt technology to advance their progress or product offering.

B. Tech is complimentary and won’t be here to replace our jobs entirely

Look at the days where we had to look at stocks from the Teletext and read newspapers hardcopies. Tech has entirely changed that and introduced more convenience at our fingertips.

Computers and softwares are good at processing large amount of data in the most efficient time possible, whereas humans are the opposite and are better at making judgement calls. Hence, there are certain things that humans still do best eg. sales, customer service, making important board-level decisions which may affect the outcome of a company. By reducing the amount of time spent processing large amount of datas, tech can help to simplify one’s job and let humans focus on the critical aspects of a company.

C. Value stocks have been out of favour since 2010 while tech stocks have grown exponentially

The divergence between value stocks and growth stocks has started more than a decade ago. Take a look at the Russell 1000 Growth vs Value chart, where growth stocks have significantly outperformed value stocks in the last 2 years.

Source: Refinitiv

This makes the story for value stocks less appealing because you simply do not know when the divergence will converge given that markets are at best random. Having some growth, tech stocks in your portfolio will act as a “hedge” and improve your overall portfolio returns.

D. Unconventional sources from Seeking Alpha, Reddit can be way more useful than traditional brokers’ reports

This point is not so much of a reason why you should invest in tech but rather where you can find information to aid your due diligence. I use CapitalIQ for most of my general research on companies and one thing I find lacking from brokers’ reports when it comes to the tech sector is that they are WAYYYY too conservative. They look at historical figures, standard financial metrics, and usually give a target price that is just a few dollars over the IPO price of a particular tech company. I find this puzzling. Furthermore, most of the reports written by Wall Street Banks’ analysts, are simply not insightful.

My view of a good due diligence report should come from insiders in the industry, those who have gotten their hands dirty while being in the industry, rather than some finance-trained analyst trying to give their assessment on tech companies. And with this I actually find that Seeking Alpha and Reddit does have good due diligence reports if can you sieve through the noises.

Source: Reddit

E. Conclusion

It took me more than 6-7 years before I finally had the courage to plough back into tech stocks. Sometimes, being too fixated on a particular type of strategy may not be a good thing after all. It limits one’s view of broadening their horizon, and miss out on opportunities elsewhere. The best type of investors in my opinion are those who are nimble, disciplined, able to think out of the box and are farsighted. However, it is never too late to become the type of investor you want to become.

What other tips do you have when it comes to tech investing? Share with us in the comments below.

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Best wishes,

Finance and Toast

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Contrary to Warren Buffett’s famous quote of “Our favorite holding period is forever”, I think this is simply not that great advice given that the fundamental tenet of markets is that they are random. What I mean by this is that you cannot simply like a stock, buy a stock, and leave it there forever with no plan on exiting. Based on my personal experience, I am able to make sound investments but I always lacked an exit plan.

Source: Warren Buffett, AZ Quotes. Please, this is not sound advice in our opinion as nobody knows what lies in the future.

This has caused me to go from paper gains, to almost always paper losses. For example, I invested in the largest telco company in China back during the 2016 days back when there was still hype on 4G and 5G advancement, and since then due to structural reasons, the share price has reduced significantly.

Below I share some of my opinions and how I structure my exit plan. I would like to highlight once again that investing is very personal, and hence, you should always form your own view and see what works best for you.

A. If you buy a stock and the stock price drops by 50%

We can’t control the price of a stock and likewise, cannot control the timing of when we enter a particular stock simply because markets are random. However, you can always control your emotions and decide on an exit plan. Note: a bad plan is always better than no plan.

To share a personal example on China Mobile, which actually has extremely little debt with strong free cash flows, the share price has unfortunately come down significantly over my 5 year holding period. The IRR on this investment would be very negative, but I view this as one of my most important lessons in exiting an investment. I was initially puzzled on why such a financially sound company would be unloved, but judging from how rotation of funds have been into tech the last 5 years, it is not surprising that such “old economy” stocks will be out of favour. My plan is to reduce my loss of this investment to -30% and then move on to other investments which can generate better returns. Painful lesson? Yes. But in investing you win some and you lose some.

Source: Yahoo. Share price of such “old economy” stocks will probably never be the same again.

B. Find reasons that make sense on exiting an investment

One personal reason I use to make sense of when I should exit an investment is when say the paper gains of a particular investment is approximately the amount of my one-month salary. I convince myself that by locking in a one-month salary worth of gains, I am actually getting back the time I need to work for that one particular month. This keeps me motivated in finding stocks that have the potential to yield such a return. Likewise, this is personal, so find what works best for you.

C. Use guidelines to serve as a reference point on when to cut your losses (eg. if a stock is down 8%, you will cut your losses and move on)

I came across this article recently and thought it serves as a very good benchmark on how to cut your losses should markets or your thesis go against you.

For example, for stocks that are more value-based or have less volatile movements, you can use a range of 7-8% below your cost to act as a loss cutting point. Reason being it is better to put your capital to other better uses and accept the loss and move on.

For more volatile tech stocks, I set a range of about ~20% below my cost price or whatever I am comfortable with if I have strong conviction of a company.

Setting some guidelines will instil discipline in your investing process.

D. Double down on stocks you have strong conviction to bring down your average price

My equity research professor once told me, in equities, you still can double down on stocks as it is driven by fundamental reasons. But in commodities, you cannot since you will be margin-called and wiped out.

One personal success story that I have is ComfortDelgro, where my first investment tranche at ~$1.47 was not the most optimal. The stock price continued to slide but I still have the conviction that it was undervalued. Hence, I bought in another tranche at ~$1.34. This brought down my average price and when it recovered, it also amplified my gains.

E. Do not be swayed by forums’ “fake advice” which comes across as convincing to say a stock price can go from say $20 to $100 in a year

Lastly, with new avenues of information springing up now and then, be very selective and prudent in taking in information. Us humans are emotional creatures. Sometimes when we read such forum with random keyboard warriors saying that a price can go from $X today to $100 in a year, take it with a pinch of salt. Even you think it could be true, always have an exit plan simply because you do not know where will markets be headed tomorrow. I believe prudency and discipline will help you go a long way in your investing journey.

I wish you all the best in finding your next best stock.

What are some of the other tips that you have in exiting an investment? Share with us in the comments box below.

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Best wishes,

Finance and Toast

The post Always have an exit plan appeared first on Finance and Toast.

I’m trying to make it a personal goal to read more books this year as I believe it can positively affect the way I think about things. Hopefully, it will help me in my everyday life eg in work, relationships, career, family etc.

I’m currently reading a book titled Sapiens – A Brief History of Humankind, by Yuval Noah Harari. It’s a lengthy (466 pages) but super interesting book recommended by my Professor back in 2016 and also an ex-colleague who recommended me the book What It Takes.

Source: Y N Harari website

This book, Sapiens, talks in-depth about history, survival, money and will change your perception of a lot of things. It tells you that a lot of the issues that we are facing or seeing currently, already existed in the past. It reveals a lot of dark truths about societies, to a certain extent it may be uncomfortable to read.

So here are my takeaways from the book so far.

A. On getting strangers to work together

Have you ever wondered how empires are built or how strangers from one company are able to work together towards a common goal? Yuval mentions this is due to the appearance of fiction and that a large number of strangers can cooperate successfully by believing in common myths.

Take for example the recent Wall Street Bets (GameStop) saga, and even the Myanmar protests. These are people who don’t know each other but they all believe in the greater good and by banding with each other.

• Redditors from Wall Street Bets thinks that hedge funds and institutions have got away with shorting the market which caused their parents to lose tons of money in the stock market back in the GFC. Now, they are forming an alliance (albeit a short term one) to target such stocks which are heavily shorted.
• Myanmar protestors believe that the coup is unjustified and believes there should be some form of democracy in the country. Hence, they band together to go on strikes to send a strong message to the military

What does this tell you? This tells you that once people from all walks of life come together, they are able to form a strong coalition and can take down even the most powerful of organizations or people.

B. On competing for resources

There’s a reason why people fight over political power, money, and status. This is because they know that resources are scarce. Even dogs, as much as we like how cute and loyal they are, also know how to “manipulate” us for their own needs. (I honestly never thought of it this way until I read this book, but it was an interesting perspective).

The book talks about how the agricultural revolution is one of history’s biggest fraud whereby farming communities were fighting with each other over wheat, just because they think that it is essential for survival.

This can often happen in the workplace where you see people trying to outshine one another, or trying to limit resources from one another.

C. On lifestyle trap

The book also mentioned the irony that the pursuit of an easier life resulted in more hardship. People in the past were farming more wheat just so that they can keep enough for bad seasons, and this act continued for ages. It is similar to most of us today where we thought that studying hard, taking high-pressure cooker jobs, and climbing our way up will eventually lead us to a better life.

No, it does not.

We only fall trap into the rat race. We keep delaying on pursuing our activities and interest when we attain a certain amount of money or reach a certain amount of age. In fact, I am guilty of such too.

We also buy more luxurious items which eventually become necessities for some, and the whole lifestyle of working doubly hard to fund luxurious items happens again. And then, it becomes difficult to leave a job for fear that we cannot sustain the lifestyle that we have strived for.

Moral of this story is to live within (or below) your means, save and invest that additional capital you have, and aim for an earlier retirement.

Source: Animal Welfare Institute. The book mentions that the cattle represent some of the most successful animal species which existed, but yet they are some of the most miserable animals on earth. 

D. On money

Your view of money can significantly affect the way you live and work. You can either be a slave to money, or let money work for you.

The book brings up an interesting point that money was not invented through any technological breakthrough, but it was solely a mental revolution.

Money is nothing more than a medium of exchange that allows people to convert something into another thing.

And people do not actually trust one another, but they only trust the money that someone else holds.

I believe the way you view money is important because it can affect the way you grow wealth, or manage your investments. If you do not put too much value on money, then temporary losses on your investment statement will not matter to you. It’s all about training your mind to not put so much emphasis on money.

I am left with about 1/4 of the book, and so far, it has been encaptivating. My only regret is not starting to read this book earlier which would probably alter the way I think about several universal topics sooner.

I look forward to sharing more useful insights once I complete this book.

What are some other books that have helped you in the way you think? Share with us in the comments box below.

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Best wishes,

Finance and Toast

The post Takeaways from the Book Sapiens by Yuval Noah Harari appeared first on Finance and Toast.

Despite the circuit breaker,  real estate activity was still very healthy with developers selling 10,024 private housing units in 2020, surpassing the 9,912 units in 2019 by 1.1%.

I personally believe that the residential real estate market this year will continue to be healthy given that more young couples are looking to buy their first house, and foreigners are also looking for a place to park their money – which in this case, Singapore looks like an attractive destination.

With this trend, naturally, PropNex caught my eye as my next investment.

PropNex is an integrated real estate services group with core businesses in 1. real estate brokerage, 2. training, 3. property management, and 4. real estate consultancy. Their primary business is the provision of real estate brokerage services which comprise of real estate agency and project marketing services.

Why I like PropNex and think that this stock will do well at least for this year:

A. Demand remains strong

How many times have we seen young couples trying to BTO for flats and couldn’t secure a unit? An ex-colleague of mine told me that she and her other half tried BTO-ing for Tengah and they failed! Talk about our minister saying that “they must continue to enable young Singaporeans to own their homes and fulfil their aspirations” in one of the Business Times articles…

I believe this will drive up the resale demand as young couples prefer not to wait and get tired of balloting for a unit. For those who manage to get a unit and even in a prime, mature estate, lucky you! I heard it is as good as striking lottery!

In addition, we have seen a lot of affluent foreign buyers buying properties in Singapore over the last year. One real estate agent even profited $400,000 in commissions in the month of August 2020 where he sold several units of a condominium to several wealthy Chinese (even without them viewing the physical property!).

In fact, the Business Times have reported that bungalows buying activity in Sentosa Cove have increased to 13 transactions in 2020, from just 4 in 2019. I expect more foreign buying to happen in 2021 as they shift their focus from Hong Kong to Singapore.

Lastly, real estate remains one of the preferred investment choices for the affluent as they are likely to give more stable returns in the long term.

B. Supply remains limited

We don’t have to be geniuses to know that land is scarce in Singapore. In fact, land sales have declined rapidly over the past few years.

With a cap on supply, prices have continued to increase. Private home prices rose by 2.2% for the whole of last year. Even HDB increased the BTO prices in some areas. For example, an article by 99.co mentioned that HDB increased the 5-room BTO prices in Woodlands by almost 20%! That is quite significant given that one of HDB’s aim is to make housing affordable for Singaporeans.

With a (potential) increase in housing prices in the coming year, PropNex, can only benefit from it.

Source: Business Times

Moving on to the company itself, PropNex has established its mark in the Singapore residential space.

C. Largest property agency with ~8,700 real estate salespersons

Based on information from the Council for Estate Agencies, PropNex has the most number of real estate salespersons / agents of approximately 8,700. It has plans to grow its sales force to 10,000 within the coming two years.

Naturally with the sheer size of its sales force, it has a higher probability to close more deals, which will directly contribute to its revenue.

D. Biggest market share of 45% versus competitors

PropNex also has the biggest market share among all other real estate agencies of 45% and they are plan to grow it to 55-60% by year 2022-2023. Market share is important because they will be able to secure more exclusive listings.

I recall that when I was young, ERA (Apac Realty) used to be in the mind’s of people but this has gradually changed hands over the years.

E. Asset light model with a strong cash position

Companies like PropNex operate on an asset-light model. It is also a cash-rich business with an approximate S$94.8m net cash position. I personally like this kind of companies very much and they are better able to tide through crises.

F. Share buyback is a sign of confidence in the firm

Based on Smart Insider, Mohamed Ismail Gafoore, Co-founder, Executive Chairman and CEO, and Kelvin Fong, Executive Director, have been buying back shares of PropNex. To me, this is a sign of confidence in the firm and there still will be runway for the stock to go higher.

Source: Smart Insider, 15 Jan 2021

G. PropNex invest heavily in its people and technology

PropNex also invests heavily in its salesperson, regularly providing them with training on how to close sales deals and stay up to date with the property market. They take provide in constantly refreshing their training curriculum to allow their salesperson to stay relevant in such a competitive market. With a huge number of real estate salesperson in Singapore, it is important to differentiate themselves in terms of their knowledge.

In addition, PropNex also continues to invest in technology to stay ahead of the curve. PropNex’s virtual webinars last year, using creative ways to showcase new project launches to prospective buyers, has proven its effectiveness.

I believe for a company that is willing to invest in two important aspects of a business ie. People and Technology, will go very far as it will increase its retention rate of its salesperson.

Source: Edgeprop. The use of technology has accelerated their market share.

Of course, there will be some risk involved and one of it I can think of is the cooling measures implemented by the government. However, I don’t this will affect organic buyers as young couples look to purchase their first home and genuine upgraders purchase their first private property.

What are some other stocks that you think will play out this year given the current situation? Share with us in the comments box below.

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Best wishes,

Finance and Toast

The post PropNex: Riding the Wave appeared first on Finance and Toast.

I am a person where I have to at least like or love the company to some extent before I buy it. And when I sell it, the reason why I bought it in the first place must not hold true anymore. Most people say it is best not to be emotional when it comes to investing. However, I believe there must be some form of emotional attachment to it.

ComfortDelgro was a stock that I like very much last year. I bought it on the premise that:

• Global travel and activity will resume
• Share price at June/July 2020 levels was near post 2008/2009 GFC crisis low
• ComfortDelgro’s share price recovered 75% in 8-10 months post-SARS
• Fundamentally, it is still a sound company and is one of the largest land transport companies in the world

Source: Straits Times. Pre-COVID days.

With no significant improvement in the COVID-19 situation, my view is that at least for this year, there will be very minimal global travel activity. Even though the vaccine was announced late last year, I felt that it was rushed and have my own doubts about it. We have seen many delays in the delivery of the Pfizer COVID vaccine in UK and other European countries, casting doubts on the credibility of the vaccine process.

Just by speaking with several cab drivers, I can tell that they are struggling to make ends meet. A few have candidly told me that it is the tourists and foreigners that make up a huge chunk of their income. Most of them will camp at Changi Airport to take passengers and that is where the majority of their income lies. With a significant reduction in the number of tourists from the last 9 months (almost 90% decrease), income generated by the cab drivers is badly affected. I don’t see this situation improving at least in the coming year. Many have cited that they are planning to stop driving taxis altogether as the daily rental of $100 does not make economical sense to them (they are enjoying a $20/day subsidy but that is not enough).

Also, we are seeing in a rise in the number of imported cases and I believe that the Singapore government will further tighten the border should this persists. This should further dampen the profitability of ComfortDelgro at least in the near term.

As much as I would like to hold on to winners, I am not certain how this year will play out and thought it will be better to take profits off the table. Furthermore, the current share price has run up ~20% since my entry price.

Should the share price corrects in the near term, I might consider to re-enter. For now, I shall hunt for other stocks that will support my macro outlook for this year.

What are your thoughts on the vaccine process? Do you think that global travel will resume partially this year? Share with us in the comments box below.

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Best wishes,

Finance and Toast

The post ComfortDelgro: Why my thesis does not hold true anymore appeared first on Finance and Toast.

“Should I sell now when I am still making a profit albeit a reduced one?”

“Should I buy more given that I know the fundamentals of a particular company is good but the whole world is panicking and I do not know how much lower it will go?”

I made the amateur mistake of both. Which is 1. to sell existing stocks the moment markets recovered with a reduced profit as compared to pre-COVID prices, and 2. not buying more of certain stocks given that the company’s fundamentals are good.

These are very valuable lessons for me as I could not fully capitalize on the opportunity presented in front of me. Hence, this serves as a reminder for me for subsequent market downturns in the future.

I believe market downturns are one of the best teachers we can have in our lifetime for the following reasons:

A. When you are just starting out in your career, you do not have much savings. Even if you lose in the stock market, you will not lose much.

Early on in one’s career, when one’s net worth is still not very high, such market downturns can prove very valuable. When stocks across most sectors and geography tank due to poor market sentiment, you will learn that it is only temporary. What goes down must come up, just a matter how of long it will be. Hence, if you are new to investing and have realized a net loss due to the market downturn, it is totally okay. Money, can always be made again and opportunities are plentiful if you look hard enough.

B. You will learn more about your risk appetites.

I found out that I am a person who is more afraid of losing money (due to a few bad trades and poor timing) than to gain massive returns. However, I also found out it was because I did not have the right mindset. I was hasty, wanted quick returns, and had previously invested based on a herding mentality. I’ve learnt that if you have the holding power, the paper losses do not matter. Also, there are certain stocks which even covering for the downside, the current price do not make sense and that is where it will give you the confidence to plough back in.

For example in August, I noticed that Comfort Delgro has been oversold. I sized up my investment and went in at a good price of $1.42 / share on average. I made sure not to be encaptivated by fear of losing, by making sure my downside was covered. I took the opportunity to speak with cab drivers to get a feel of what is happening on the ground. A lot of them told me that it is impossible to get back to pre-COVID levels without tourists. Hence, I believe this is temporary and will recover once global travel resumes.

C. You are less likely to make the same mistake should a future downturn happens.

It is best to experience a market downturn in your 20s rather than in your 30s. This is because in your 30s, you would have commitments like a family, a house, other expenses and having experienced a market downturn could be very painful. Psychologically, seeing your portfolio drop in value could make you lose faith in investing and your decisions made in the past. However, in our 20s, you would have less commitments and will be less likely to make investing mistakes like selling too early, not buying in when opportunities present itself, etc.

For me, I feel more confident now investing my money if the pros outweigh the cons.

D. You are less likely to buy too early, relying less of your gut feel and more on facts and data points.

I wrote previously in my post here that most retail investors rely on gut feel and buy thinking that “it is cheap”. However, there must have been a better way to rely on facts and data points.

Stephen Schwarzman, Co-founder of Blackstone advised against reacting too quickly and that it is better to forego the first 10-15% of a market recovery to ensure that you are buying at the “right” time. That said, applying his advice to real-life situation, we surely will not be able to predict that March 2020 last year as the bottom of the cycle. But even if we had bought in during April 2020 or May 2020, I believe it would have been a safer choice.

E. In the later part of your career, when you have amassed more capital, you would be able to size up on good investments.

The older you get, the higher your salary will be, and the more your capital will have been amassed. This will give you the confidence to plough more into stocks which have better risk-adjusted returns.

F. You will fine-tune your own exit strategies

Having done a bit of equity research during my university days, I have realized that brokers’ target prices of companies are subjective. This is because assumptions can be subjective just to reverse engineer and attain the “target price” that you want.

Hence, I myself am still fine-tuning my own exit strategy and trying out different ways. There are far too many times when a stock has went up in value and it was the right time to sell, but I didn’t. There are also far too many times when a stock has not hit its potential value, and I was too quick to sell.

I believe exit strategies are very personal and will be tweaked accordingly to one’s own life circumstances, and only you will know it in the later part of your years.

What are some of the investing mistakes that you have made early in your career and how have you changed it? Share with us in the comments box below.

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Best wishes,

Finance and Toast

The post Why going through a market downturn early in your career is one of the best lessons ever appeared first on Finance and Toast.