True Story - Selling is Harder than Buying

Couple of weeks ago,  Lady, You Can Be Free blogged about her struggles with selling Starhub. LYCBF mentioned that she could have done better with the art of selling. That is something that i can empathize with because i have a similar story. It is definitely no where near her absolute amounts so that might have make my emotions a bit easier to handle.

Screen from Yahoo Finance. Annotations mine.

The Buying
Back in September 2013, i bought Singpost at $1.26. Main reason was for the stable dividends that their cash flow could sustain. The rest of the numbers look okay too, including net cash position, growing businesses and that bit of eCommerce exposure. 4 years ago, eCommerce was growing massively which i felt could counter the weak domestic mail segment.

At that time, i just started dipping my toes into the markets and that position was about 25% of the capital then with 0 cash position in the portfolio. Definitely the newbie mistake of I can do anything thought.

Everything was stable and expected for a couple of quarters until 2nd quarter of 2014. Suddenly, price took a steep climb. I recall back then thinking that it was just sentiments and i should lock some profits when i could. Few days into that spike, i sold half my stake at $1.495 only to see a trading halt a week later. That's when Jack Ma's Alibaba took a stake.

I remember i was full of myself thinking that i was in before Jack Ma. How dumb. Because, the share price went up to almost $2 in October. That is a 40% gain that half of my stake missed out on. I felt so much regret in making that sell decision and that is the greed devil whispering into my left ear. The right ear was trying to console myself that i still have a stake that is now $2.

Piling on to that eCommerce story, i was convinced that Singpost is no longer just a stable company. It actually has a growth story especially with Alibaba backing them up. The voice in the head became - let's just hold on to this permanently. Anyway, the dividends are still coming, my cost is low so i have ample time to disembark this ship with a profit regardless.

It seems like nothing could go wrong and share price marked a high of $2.16 in January 2015.

Then, the oil crisis kicked in and the share price corrected together with the market. It was only until early Nov 2015 with the quarterly results coming in that i first spotted red flags. The company was struggling to grow the revenue despite rapidly rising cost. The net cash buffer dropped big time and i remember looking at it a bit concerned. To be fair, it was still net cash at this point. But the market did not like it as much and sent it way down.

Dividends are still maintained so i held on but i felt really bad for all the profits that i "returned" to the market.

CEO Resigns
Out of the blue, the CEO quits citing new endeavors. After a series of acquisitions, it felt to me like this company is next to get the typical CEO treatment. Two weeks later, we get announcements about corporate governance issues. Putting two together, it seems the new endeavor of his includes escaping a sinking boat.

That pulled share price way down to $1.335. Looks like back to square one for me.

And then the results came in Feb 2016. Everything was growing as they say in the slides but BAM! Net debt. Obviously the cost of driving all those growth is getting to them which derived less performance than they saw.

However, the share price rose for the next quarter, probably in-line with a recovering market. It rose to $1.60 and on hindsight, this is probably my last chance to escape, especially with that damning report coming from the corporate governance scandal.

I waited another quarter for the next results and it came out bad. eCommerce segment underperformed and underlying net profit actually fell.

I finally sold in July 2016. At the same price i did in May 2014. $1.495. Grand total of 2 years wasted there.

Takeaways
I made 2 selling decisions in this trade. One was probably too early. The other was probably too late.

I probably should have waited a bit more on the first sell because the momentum is to the upside. If others buy on rumors and sell on news, i probably could wait until at least the real news comes out before making that decision. Also, at $2, it is definitely not a price i would buy Singpost even with the kind of growth story. If it is not a price i would consider buying, i should seriously consider selling.

On the other hand, on the break of the corporate governance news and especially with the CEO resignation. The flags are waving in my face. To have a cash company going to debt, with an ongoing scandal, with people questioning about overpaying for acquisitions in May 2016, i think it is clear as day to bail. I could have also sold at the low too assuming i sell on the news, but if it recovered with weak fundamentals, i ought to have considered dumping at a price maybe slightly upwards of $1.50 which i had ample opportunities to.

It is painful to watch an opportunity go by and not participating in it. But it is equally or more painful to give back all the profits that you could have gotten back to the market. I definitely could have done better here.

Have an exit strategy to protect your profits.

The M1 Disconnect

Back in October 2016, i watch this stock fall together with the sector in what was a fairly lackluster year for equities. I thought to myself, it's pretty significant off the highs, i am going to take a pessimistic estimate of its earnings, and then find an entry that will make me feel comfortable.

That entry came and i took up a position in M1. News of fourth Telco were fairly widespread then and coupled with some political uncertainties around the world, were some of the reasons thrown out for its decline.

It was a few days before they announced their results so i did some calculations on whatever latest results they had and took my own estimations of the fall in Earnings and therefore yield. Telcos have had a good run since 2010 together with the population boom and has became a fairly stable and good yielding defensive stock.

Stable in the sense that the price doesn't fluctuate much and the yields are fairly high. Considering that their revenue are pretty steady due to many of us being tied to contracts, it is not unreasonable to call it defensive and describe it that way.

Having said that, i entered expecting that the next 12 months dividend should come up to around 12c.
Now that their 2nd quarter results are out, and i have held it almost to full 12 months, i am pretty disappointed to see that even my estimates were too optimistic. Actual dividend comes up to only 11.1c and you can kind of extrapolate that the rest of the figures are not healthy.

The price has since fell big time after this recent earnings announcement. While i strongly advocate proper money management of cut loss, i am still holding it. I hate to admit it but i think i do still suffer from loss aversion. There are some positive stories that i am still hoping to play out so that is keeping me in.

Maybe not so much a disconnect per se, but more like a lag in bandwidth.

As of this post, the price has not fell enough for me to consider adding more stakes. I did not take a big position (relative to full portfolio) so i have some room to add. Management has since warned that Full Year net profit will be lower than last year and i am going to estimate that the next half year will see a poorer showing in percentage wise than the first half.

Lessons learn here are that i need to consider more factors in my estimation. Clearly the fourth telco is known, and the threat should probably worth more than i gave it credit for.

The Salted Fishes in My Freezer

I won't have noticed how fast time passed if not for the fact that the last post was already a month ago. I really need to pen more content than i am currently doing.

Since this is the new month, new half of the year, I want to start talking about my portfolio which till now hasn't been revealed. Fun Fact: There's more days from July to December than Jan to June so its actually closer to half today than on the last day of June.

But before going to the portfolio, i just like to share about this two salted fishes that are sitting in my financial freezer. I define them as the duds that i have failed to cut loss on,, which i really should. They are unlikely to make it back to the price i entered but hey, i'm like you, i'm still there waiting for one day when it happens. The returns will be shit of course but whatever, 咸鱼翻身 (google translate) you know. 

Image from: Retail News Asia

Salted Fish #1

Construction counter. Entered in its heyday when there were good news about a potential exciting overseas venture. I was still new to the market and the knowledge of the market pricing in all the "maybe" information has not dawned upon me yet. Then, a string of bad news happened to the firm. Talk about when it rains, it pours. Cut loss was a theoretical know-how at that time as well. So nope, did not cut when i could. At one point, i was at 80% loss. 

Salted fish is still in the freezer and it always reminds me of the mistakes i made in the past. Looking on the bright side, it taught me cut-loss, efficient market pricing and even a share consolidation exercise. I might have also made another further mistake by averaging down not so long ago during a rights issue. Though it hasn't fall much lower than that price ever since. 

There's still a tinge of hope (which is bad). But honestly, that is the end of adding to this salted fish.

Salted Fish #2

When i entered, it was a shell investment holding company. Hyped by the stakes taken by a very prominent broker in Singapore taking it on an RTO exercise, it was marketed to be a play on the future of the real estate it then owns just across the straits to the north. As i watched it move, the classic FOMO (Fear of Missing Out) stirred within me. Of course, being human and also extremely new, i succumbed to it. Guess what, i succumbed on the very last retrace which turned out to be the exact downfall. Talk about fear of missing out on catching falling knives. Two lessons in one go, how lucky was I.

This was a good story because the very next day after i entered, a brokerage even called for a trading curb on this counter. Guess what, it was the sole brokerage that i was using. This might have exacerbated the fall for all i know. But there was I, panicking due to the fall and having no means to dump it other than calling my broker. Couldn't contact him and had to be put through to a colleague to give instructions to dump it. 

So why is it still in the freezer? 

I did not dump all the shares i had purchased. I left the last one lot (at that time) so that i could remember this event. That is stupid because i doubt i would have forget given the kind of emotions i was feeling at that time. Anyway, there were warrants that were given for free and i got myself into some kind of unwarranted mess (pun). 

Got forced to learn what warrants were and how it worked. There were occasions where i thought about selling the free warrants which i really should but they have since lapsed and expired. There is no point in exercising because the mother share was cheaper than the exercise price. 

By now, it should be fairly obvious what counter this is. Including the contra loss, i am at 90% loss. And it is so cheap now that it might not even pay for brokerage if i sold. There is really zero hope in this guy recovering to break even but i am including it in my portfolio returns because this is what it is. 

Summary

I made mistakes before, and they cost me quite a sum of money at that time. This two counters took out about 5% in my XIRR over 3 years because a lot of it was committed in the early years. I have obviously paid my school fees and learned my lessons as the new counters are doing much better.

They are still in the freezer as unfortunate reminders. What are some of your salted fish?