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?

Paying School Fees

Last post narrated a story that i went through where i wasn't the lead character. It happened after i gained some form of knowledge in finance to be able to help in the way i did.

Today's post will cover the one story that started it all. The one that made me realize there are wolves out there. And if you're not the predator, you'll become the prey.

It all started when i entered the workforce. I was finally earning my own keep.  Like others, i'm no longer bounded by the allowances I receive, not bounded by the little income I can get teaching tuition or working part-time after school. A sense of freedom enveloped me which i later realized was the ability to meet my own needs.

I was now in a situation which was sustainable. My expenses were lower than my income; exactly the meaning of living within my means. And that just means i could save that difference of income minus expense.

Now with this spare cash, you could do countless other things. The one thing i knew back then was that the banks were giving me miserable interest. I had to do more in order to make better use of my accumulating savings. I had the misconception that because i was not a finance person, investing was beyond me and i best outsource this scary and complex task to some one else.

In came, this very kind FA by the name of Z.

Z was a young skinny lad, probably not much older than i was. The only clue i had about him was that he was already working during my days in National Service as that was when he first contacted me. Till today, i believe an acquaintance of mine left my contact with him. Z knew my profile and didn't bug me too much about buying a product with him for a good 3 or so years when i was in school. However, he continued to stay in touch, slowly leaving an impression in me. 

When Z contacted me this time round, my profile has changed. I was now well-fed as a prey rather than a malnourished young cub which won't satisfy much of his satiety. Z was smart and patient to have stalked this young prey till now. Honestly, young FAs out there could take a leaf out of this book. I thought he was sincere enough to have followed me for so many years so i agreed to a meet-up.

With an income, some savings, complete ignorance in finance, i make the perfect candidate to sell some toxic products. "I want to invest some of my spare cash because the interest rates are very low." This was what i told Z on our first meeting. Oh how foolish was I. I thought i was so smart to know the little bit about low interest rates. Z must have peed a little in his pants at this point. He must have been a very good actor as well because I don't recall him being terribly excited at that point. I did get fantastic efficiency in processing my paperwork and that coffee was on him.

And so, i started paying for an ILP and perhaps also, a bit of Z's car loan. Looking back, i should have bought from a sweet, young thing in tight skirt instead of Z. At least i could have a more pleasant meeting and a good feast for the eyes. But i digress.

After several months, i logged in to the platform the insurer provided. I was shocked to see that 90% of my savings went to costs and only 10% was actually buying some funds. I took out the policy documents and indeed, this was already presented to me. I guess their sales tactic worked as it successfully managed to divert my attention to the good stuff and forgot about the bad ones. Obviously now, the coffees we had during that fateful meeting was borne by me.

I quickly terminated the policy at a loss and got back a mere fraction of what i spent. It could have been much worse like the folks who have paid for years. With a street-trained mahjong background, i took this as necessary school fees. I then embarked on educating myself on finance and has never looked back ever since. I don't fully blame Z for selling me that product because i asked for it. But he could have done a better job in explaining to me the full intricacies of the product. It was clearly not suitable for me. 

Now that i have a few years managing my own finances under my belt, still novice in the world, i can proudly say that investing is not THAT scary or complex a creature. With a good dose of discipline and self-control, it can be made simple.

Onwards, the posts will become a bit more random covering values, concepts and examples as and when i find good lesson material in my day-to-day life.

Leopard Origins

Let me narrate a story.

One day, my aunt came to me, asking for help with her insurance policies. I thought it was strange that she knew i had some proficiency in this. So I probed a little and found out she was facing problems with her finances which led to the deterioration of her health. I agreed to help her out, careful not to over promise for i had neither experience nor qualifications.

So i went to my Aunt's house one morning. It surprised me to see another lady there. Somebody closer to my age than my aunt. This lady was well dressed and professional in her short white dress. She introduced herself as S who was an agent who managed some of my Aunt's policies. While my Aunt was gathering her documents, i spoke to S trying hard not to be smitten by her powdered and beautified face. You can't blame me for they were good in the art of making-up - both cosmetics and stories.

S handled the situation first and reviewed many of the documents that my Aunt brought out. She sounded perplexed and upset at the situation my Aunt found herself in. Way too many policies, way too many unnecessary insurance with premiums way too high for her income. Now, this sort of situation came as no surprise. I've read and even witnessed many such cases but to hit so close to home is another matter altogether. Not all products were sold to my Aunt from S and she only recently took over my Aunt as a client.

I was wary about S because she's an agent and she's pretty. As S was going through all the products, it was clear she was not the one responsible for the most toxic products sold to my Aunt. Her products while not ideal was actually providing some decent coverage. I can't speak the same for the rest. S's heart is as good as she looks.

Below i list the products that my Aunt had.

- A hospitalization plan
- 15year endowment plan (started in 2014)
- Single premium ILP
- Limited Whole Life (started before 2012)
- 5+5 Endowment plan (started in 2012)
- 5+5 Endowment plan (started in 2013)
- Annuity Plan with 8 years premium, to be paid out from Age 70

All the above for my Aunt who turned 55 in 2012 with take home income less than that of a diploma graduate. Her health is not that good and she has no dependents.

At this point, S and i were frantically trying to locate the receipts and passbook details for the accounts to gather the full picture. Observant readers will note that 55 is the age of the withdrawal of CPF funds. It was clearly the case where extra money was suddenly available and you became the fattest prey to these unscrupulous wolves. My Aunt merely wanted to place money into rolling Fixed Deposits.

As we went through all the fact-finding, it was clear what happened to the monies and we managed to piece together the timeline in which all of the above happened. S finally took her leave after doing the paperwork her client requested for. I stayed on and planned for my Aunt her best course of action.

The 2 5+5 Endowment plans were sold to my Aunt by a bank sales staff named I. Initially, i was angry at I. She was probably only focused on hitting her own KPI when selling products to my Aunt. These two plans had annual premiums 10 times the amount my Aunt brings back home monthly. Just what is left for my Aunt's day to day sustenance is beyond my comprehension. She even had to withdraw more money from her CPF to fork out for these premiums. To make matters worse, my Aunt downgraded her hospitalization plan so that her overall cost is lower. Thinking in the shoes of my Aunt, she probably felt silly for making mistakes like this. Me getting angry will only make her feel worse.

Still, I won't wish I well though. I's LinkedIn profile has her looking worse than S and most probably her heart too. It's no wonder some people will never look good no matter what they do.

I thought of approaching the bank for a resolution. If that does not work, to go on to FIDREC. After more thoughts, this seems to me to be at the cost of the victim's well-being. Long story short, justice cannot always be served and if it does, it comes with a cost that cannot be compensated by dollars and cents. I eventually took over most of the outstanding premiums so that my Aunt can focus on getting well.

It has been 6 months since that fateful day i helped review the policies. We did eventually raise an issue with the bank but we didn't get the outcome we wanted. My Aunt seems to prefer not to push through with her case. The only consolation for her now is that she knows she isn't alone in this.

All i can do now is to hope she doesn't need her money until the plans mature.