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Sunday, 1 October 2017

Peter Lynch's 6 Types of Stock Plays - as applied to SPH, ComfortDelgro, and Singpost


During my time "anyhow hantam" stocks from 1999 onwards, Peter Lynch's books were the rage. Everyone was Peter Lynch this, Peter Lynch that.

Retail investors were enamoured with the fabled 10 baggers.

Which makes sense. It was a time of outsized growth and multi-baggers in technology stocks! Tech is it!

No one were mentioning Warren Buffett... Warren Buffett who? 

LOL!


Peter Lynch had a simple and quite useful classification of stock plays:

1.  Slow growers

2.  Fast growers

3.  Stalwarts

4.  Cyclicals

5.  Turnaround

6.  Asset plays


No, I'm not going to explain what those mean. You go read the book yourself!  

(Or read other blogs who love to provide summaries on summaries of a book. If you photocopy a photocopy of a photocopy of an original, what do you get?)

Its more fun to apply the above 6 stock classifications into real Singapore stocks which quite a lot of old timer Singaporean retail investors like to own.

Let's take SPH, ComfortDelgro, and SingPost.

10 or 15 years ago, these 3 stocks can be classified as either Slow growers or Stalwarts right?

Retail investors include them into their portfolios to add stability and enjoy the dividends as income. Even when there were big tsunami waves as in 1997 Asian Financial Crisis, 2000 Dot-com crash, and 2008 Lehman event, these 3 stocks will always bounce back.

I mean people still read the papers, take public transport, and send mails by post right?


But something interesting has happened.

Notice the overall market as in STI index is still in "bullish OK mode" but the above 3 stocks are down quite a lot. Some even close to bear market territory as in 20% down from their recent highs...

For those who own these 3 stocks, do you still classify them as Slow growers or Stalwarts?

Evidently you do from the way you are averaging down. If lower you would buy even more!

OK, for Stalwarts I still can accept the argument (grudingly); but for Slow growers?

I mean slow growth still means there must be some growth either in revenue, profit, cash flow, earnings per share, dividends per share right?


For the Stalwart fans, I have some "wu liao" (nonsensical) questions to ask you:

1.  Of course you stiil buy the papers in hard copy form. But do your children and grand children buy newspapers in hard copy?

2.  If you own a business or in charge of HR/marketing/advertising for a firm, what's you share of the advertising budget in print today compared to 10 years ago?

3.  Ask your younger family members, do they use Uber or Grab more than taking taxi recently? I not going to ask you. You cheepskate frugal giam kana - you walked.

4.  Just kidding! While we still are on the topic of saving money, when you shop online because you frugal you, how were your purchases from Qoo10 and Lazarda delivered to your house?

5.  Have you been receiving more e-statements from banks, brokerages, CPF, utilities, etc. Of course its to go green and save trees and all. But wait... If more corporations do that...

6.  How much to send a normal letter by mail these days? Hang on a minute! When was the last time you licked a stamp!?



If the reasons we buy into a stock is because of a Slow grower or Stalwart play were no longer valid... What do we do?

Lower we would buy more?

Really???


I mean if its an Asset play or Turnaround play, that's another story. 


But buying in as a Slower grower or Stalwart and hoping its an Asset or Turnaround story, that's making it up as you go along...

Using hope as a strategy is in the same arena as using voodoo, astrology, or feng shui for investing.

Can't say they don't work as they do work sometimes... But its like pissing in the snow on a dark winter's night out in the widerness. 

We know we are making a difference; its hard to tell though.

LOL!








46 comments:

  1. Smol,

    Cyclical and turnaround are confusing. I am guilty of fudging between the 2 before.

    Cyclical not as easy as it seems. I got burnt with sembcorp. U might get the assessment of market cycles right but your entry and exits wrong. YZJ, Venture and Sembcorp are all reminders of cyclical play go haywire. Buying alpha company at downturn only profitable when the tide turns.

    ReplyDelete
    Replies
    1. Sillyinvestor,

      There's a reason why Peter Lynch shared his stock classifications - each have their own unique skill sets to master.

      Not everyone can master all 6 at the same time! If we can, we'll be the next Peter Lynch ;)


      You are right that cyclicals are not easy.

      Look, if the O&G companies knew that crude will fall below USD 50, they wouldn't take up so much debt to expand so furiously. Now some may even go bankcrupt before the next upswing in cycle.

      So if industry insiders (CEOs, Chairmans, Board of Directors) got it wrong, what more to say about us retail investors?

      Delete
    2. Hohoho ... oil companies having mini recovery ... but very overbought now ...
      http://schrts.co/SskPUA

      Disclaimer: Vested (until stopped out).

      Delete
    3. Spur,

      For swing traders, there's money to be made by buying the dip or selling the rip. There will always be retracements. Markets don't go up or down in a straight line.

      As for trend traders, we have a lot in common with investors in cyclical industries - its all about getting the long term trend right ;)

      The hardest part of being a trend trader is ignoring the "noise" in price movements :(


      Delete
    4. I don't envy those running the oil companies or those tackling industry disruptions....

      As traders, investors & speculators, we can always cut loss or stop loss & move on to the next "bad to less bad" uptrend.

      If I'm in management, the company will probably collapse during hard times .... provided I don't run road first!! Hahaha!!!

      Delete
    5. Spur,

      Going forward, I won't be surprised more graduates will apply to be civil servants to hide out the disruptions!

      But for those brave souls that embrace disruptions, that's where the future opportunities lie!

      乱世英雄。

      Be the disruptor!

      Delete
    6. Hi SMOL,

      There's fintech, insuretech, medtech, manutech, etc.

      I wonder why there's no psytech, soctech, Archaeotech, Anthrotech, etc? Hmm. Oh right! Must depend on their wordsmithing abilities to craft beautiful narratives.

      Delete
    7. Unintelligent Nerd,

      Fintech is something we should keep a close watch on.

      Its impact on our banks is not something to be scoff at. I'm sure big daddy and our 3 banks are making sure we are the ones stealing other people's lunch and not the other way round.

      You think why cashless payments was brought up during the National Day Assembly?

      I suspect some alarm bells were rung when China is ahead of us...


      Delete
  2. Some are happy with 4% panadol. Okay lah. They didn't ask for the Sky. Happy can liao

    ReplyDelete
    Replies
    1. CW,

      Somehow I have a feeling if you haven't got your 10 baggers, and only have your 4% panadols, I think you'll be still working today and have nothing to write about much ;)

      I mean 4% might as well voluntarily put money in CPF SA?

      At least don't have to go through the sleepless nights in seeing your portfolio being decimated by more than 50%...

      And why would anyone jio you out for kopi?

      Your readers want to learn how to get 10 baggers or how to secure panadols?


      But I can empathise as some people really cannot understand. So you follow what Warren Buffett does:

      "Don't hurt your little brain... Here's a lollipop, go suck on it."

      Delete
  3. Hi SMOL,

    Some of our US counterparts are still holding on to HCP. "Dividend aristocrat" mah.....

    Heng that time I didn't ownself slap ownself. I almost said in my blog that people need to eat food one....so consumer staples are evergreen stalwarts. Look what happened to some consumer staples....management don't really know how to respond to changing consumer trends.......

    ReplyDelete
    Replies
    1. Unintelligent Nerd,

      There's no such thing as buy and forget.

      Even Walmart. That's the stalwart of the stalwarts. But now has to contend with this new big online competitor as in Amazon that has muscled its way into groceries retailing!

      I'm sure there are retail investors in Walmart that insist the "fundamentals" have not changed...

      If price goes lower, they will buy more!

      LOL!


      Delete
  4. "When was the last time you licked a stamp!?"

    Errr .... they've been stickers for long time liao ... no need to lick. :)

    ReplyDelete
    Replies
    1. Spur,

      Oh dear! All my mails today are from corporations sending me junk mails - and they are by franking :(

      Free I must pop into a Post Office!

      Cannot be they stop issuing stamps. Selling stamps to collectors is a money earner!

      Stickers? They're not stamps... Where got collector's value in that!?

      I have not received any mails with a sticker before...

      Man! I'm really behind the times and a caveman!

      And I used to be a stamp collector!

      LOL!


      Delete
    2. SMOL, no need to go Post Office just go to SAM machine to buy some stamps. :P

      Delete
    3. Rainbow girl,

      I got a big sigh of relief after visiting the website of Singapore Post - still got sell collectible stamps!

      Ah! So that's where the "sticker stamps" that Spur mentioned came from - SAM machines ;)

      No collectible value in that. Horrible invention. I missed the old days where I have to sweet talk my receptionist to give me the old envelopes of office mail to acccess the stamps. Parcel posts and overseas mails the best!


      I also found out the charge now is 30 cents for normal mail.

      The last time I remember was 22 cents. I stuck in time, but now updated :)

      LOL!


      Delete
    4. I bought old stickers at 22 cents. Now can still use them. Wow a whopping 36% return. The only problem is I don't have people to send mail to.

      Delete
    5. Early Retirement SG,

      Think of it another way. Singapore Post got your interest free loan from you all these years. And if don't use your sticker stamps, thanks a lot for the free cash!

      36% return your head!

      Delete
  5. SPH is an interesting case study. Is it a media company or property firm when its profit from the property segment is now more than 50%? After winning the Bidadari bid and starting its foray into healthcare, it will be fun to see if this phoenix can rise from the ashes.

    SingPost Centre retail mall (?!) is expected to open in October 2017.
    "The Group will begin to progressively recognise rental income from the second half of FY2017/18 as occupancy ramps up towards a steady state."

    ReplyDelete
    Replies
    1. Kevin,

      What do retail investors do when they've ran out of ideas or clueless what to invest in?

      Buy a REIT and receive the dividends as passive income of course!

      Or even better for those that got more serious money, buy a rental property and collect rent!

      Now why would I invest in a company that pays high salaries and bonuses to management and its board to come up with the same ideas as any Tom, Dick, and Harry retail investor?

      Really?

      I mean do we need a MBA to come up with: Buy property; collect rent?

      Delete
  6. The latest tech craze is AI and EV. AI + EV = self drive car.

    What's next?

    And someone says EV car can last and last with very little maintenance.

    Petrol driven cars will become dinoursar?

    ReplyDelete
    Replies
    1. temperament,

      France, Britain, and now China have decided to ban production of petrol cars in the future:

      http://www.straitstimes.com/business/electric-vehicles-set-for-boost-as-china-plans-petrol-car-ban


      As for driverless cars, I think that would take even longer...

      The most logical start for driverless cars would be for the long haul container truck deliveries. Driver fatugue has caused lots of accidents. Plus the fact computers don't need to rest and sleep. Lots of productivity gains and savings here! Never underestimate the corporate thirst for profits!

      Driveless taxis govts will probably put them last due to the social and political costs... Imagine all the taxi, Uber, and Grab drivers being made redundant?

      Hong Lim Park will get pretty crowded!


      These discruptions are nothing new...

      In the 80s, newspaper typesetters lost their jobs when computers and desktop publishing took over their roles.

      Same for bus conductors being made redundant with electronic ticketing.

      Soon MRT drivers will be a thing of the past with driverless trains.

      Its just that the pace of change is so much quicker nowadays!

      We are lucky in that we are out of the matrix voluntarily.

      The trend is that more and more disruptions will come... And that's not fun for PMETs who were brought up using straight line extrapolation expectations :(




      Delete
    2. i understand DTL SMRT is already driverless.

      Delete
    3. temperament,

      They are upgrading the "legacy" NS and EW lines so that they too can be converted to driverless.

      Now the train doors of the NS and EW lines have been "automated" - no need to be manned by the train driver.

      Step by step towards driverless trains.

      That's why there are signs warning passengers not to rush into the train when the doors are closing.


      When I were in Shanghai, there was a sad case of a passenger who rushed in while the doors were closng, got caught between the doors, and he was torn apart when the train sped off...

      Half his body in the train; the other half on the platform...


      Delete
  7. @#$%$^&$*@!!!

    my lesson was only 2 months old! cutting M1 that cost me more almost 150K! you should have post this earlier la!

    #@$*&^@*^@#@!!

    ReplyDelete
    Replies
    1. i was fighting for almost 3 months and suddenly i realise i'm fighting the wrong battle. does pay TV has a future i ask!

      Delete
    2. coconut,

      Finally! Got one appreciative reader for my "wu liao" posts...

      LOL!


      Tell me about it! I wish I had such mental clarity 15-20 years ago too!

      What to do?

      I learn from the bitterest method of all - through crash got sound experience :(

      In consolation, at least I didn't let a learning opportunity go to waste :)


      In a twisted ironic sort of way, letting my Jurong Tech went to zero turned out to be a great "investment".

      No more using "hope" as a strategy for me now!!!


      Wah lao eh! $150K!?

      ^&%$$%&*()*%#!!@##$$$@!!

      I would say so too!






      Delete
    3. only 150k! Cheap already! i was averaging down from somewhere like $2.20 haha! total telco bet losses around 100k, make some on singtel and starhub.....

      Delete
    4. many investor (me included) don't realised the economic landscape had change, with the widen (and speed) of internet accessability and the rise of p2p engagement, many of the traditional business middle man model like the SPH, ComfortDelgro, and SingPost, and also telco are on the long term decline.

      who need these companies services in 5 years time?

      Delete
    5. coconut,

      Great!

      You can joke and laugh about it that means you haven't lost your head ;)

      Money lost can be earned back.

      If confidence and self belief shaken, that's more damaging.


      That's the trouble with experience.

      We are looking at these "blue-black" chips like we looking into the mirror - but we see the reflection of us 10-20 years back!

      Youths that don't know what cannot be done will beat us flat...

      That's why I try to "stalk" these brazen youths and avoid youths that are fan boys of old fogeys like us!

      LOL!



      Delete
  8. don't care what type of stock play...pay dividend can liao
    black cat gray cat...can catch mice are all good cats.
    am i too simplistic?

    ReplyDelete
    Replies
    1. Ang Kong Kong,

      You are being cheeky with words.

      Dividend drop from 8% yield to 2% is still dividends. But will you still treat it as "good" cat?

      Its a bit like making $1 in net net profit from your business practice after 12 months, and saying got make "profit" you happy already ;)

      Don't we want our dividends to GROW with each increasing year invested?

      Dividend growth stocks are not the same as high yielding dividend stocks ;)

      Income investors go for the former; yield hogs go for the latter.



      Delete
  9. i agree.

    i like SPH quite a lot a little too late.

    Just enjoy a few years of dividend and a little "capital growth".

    Now SPH ????

    ReplyDelete
    Replies
    1. temperament,

      SPH definitely was a Stalwart 10 to 20 years ago.

      But going forward?

      Is it a media, property, or rojak holdings company?

      Print is slowly dying... Will its online transition replace the loss in print revenues? Will Singaporeans pay for online subscriptions when they can easily get their news from other websites/channels for free?

      If we interested in its property arm, isn't investing in a pure property counter be more efficient?

      Markets tend to give "rojak" conglomerates a price discount to its valuation...

      Of course SPH won't fail! Not when big daddy is still around. And I don't think big daddy will discard SPH like it did to NOL ;)

      Maybe SPH can transform to be like Jardine? With its hand into many pies in different industries?

      That's where diversity in views come in handy!

      Those who believe SPH is the next Turnaround play will act accordingly.

      Those who find SPH no longer meeting its role as a Stalwart in their portfolios will do so likewise.

      A Stalwart should not give heart pain or sleepless nights to its investor; a Stalwart should calm the nerves ;)

      Delete
  10. cheeky or not, nevermind lar. isn't having fun one of the purpose of your blog?
    anyway on a more serious note, consistent dividend payers are definitely more stable than non committed.
    its just that in singapore its not so straightforward as say in the US when they are so many good dividend payers and growers that have an unblemished paying history of 25yrs or more.
    singapore's market is still too small.
    personally(i say personally), my way of counteracting this is to have 20-30 higher quality good dividend payers and align them such that we get cash flow throughout most times of the year.
    u are right, dividend yield might drop. 8%->2% is quite drastic.
    singpost 6.25c to 2c is already quite more than enough for me, hope i don't encounter your example. to avoid such drastic cuts from having a big impact in ones cash flow, the way out is have too much of a counter, however good that it might appear at the start.
    sph. i think there are still good things about it, we just got to sit tight and hang on, and just make sure that if these good things do not materialise, we don't get affected too much.
    cheers!!!

    ReplyDelete
    Replies
    1. Ang Gong Gong,

      Of course we are having fun!

      That's why I used the word "cheeky" and not "disingenuous" ;)


      Ah! Another koala or panda nothing but Singapore only stock specialist!

      I see you were not active during 2008/09 when not only REITs were cutting or suspending their dividends, most dividend counters were conserving cash to meet an uncertain future.

      Even our dividend paying banks were quite busy in having Rights Issues to shore up their balance sheets...


      You investment style suits your financial situation.

      You are not dependent on your portfolio for growth; your business is the accelerator of wealth ;)


      Portfolio gets a haircut to -50% and dividends get cut by -90% you won't lose sleep. Got holding power to wait out the storm.

      But if your business revenue drops -50%, you'll surely sweat bullets!!!

      LOL!


      You're a Business Owner ;)

      (Yes, I'm sucking up to you; and I'm thirsty...)

      Delete
  11. I am waiting for CDG at $1.50, SPH below $2 and Singpost at 80cents....Like you said, business owner don't care and does not need the dividends to eat! Have, buy! Don't have, does not matter!
    I do not want to pay fair value for stocks, I want discount!call me cheapo!LOL

    ReplyDelete
    Replies
    1. WolfT,

      Most people only understood half of the "big money is made in my sitting tight" nugget of wisdom by Jesse Livermore.

      You got the other missing half - sitting tight until the price comes into your "buy zone" ;)

      In retail, we say a merchandise well bought is a merchandise well sold!


      Don't sweat the small stuffs. Why focus on saving a dollar here and a dollar there like a miser?

      The trick is when it comes to big purchases in our lives - property, car, education, investments - if we get these right, everything else will pale in comparison ;)

      Cheapo is good when it comes to investments! Its called Value Investing ;)

      Delete
    2. If during a good time (now), SPH is at $2+ or less.
      I sure as hell won't be buying it.
      If general market is fair or going up, and some company stock is going down. That's a big problem.
      At good times, good stocks go up.
      If SPH goes down in good times, then in bad times what's it gonna be doing?

      Delete
    3. Early Retirement SG,

      Well, that's for those who bought SPH now because its "oversold" have to ask themselves.

      Its called Relative Strength ;)




      Delete
  12. SPH about $2 is not really cheap if U noted how its price was during 2008/2009.

    i mean Limbo Rock time, how low can it goes?

    Or what's the new "mean price" for SPH going to be determined by the Mr Market?

    And Mr. Market is almost always right.

    i definitely not going against him.

    ReplyDelete
    Replies
    1. temperament,

      Eh... SPH price during the low of early 2009 was $2.32...

      You started way longer than us. Perhaps you were thinking of the 97 Asian Financial Crisis price?


      I'm a trend follower.

      If long, if price don't go up, I no buy.

      If short, if price don't go down, I no sell.

      I've no clue what is reversion to mean price, intrinsic value, or fair value price.

      I'm just a leaf in the wind ;)


      Delete
    2. i suppose you are talking about short to very short term trading?

      Delete
    3. temperament,

      No.

      Trading can be in seconds, minutes, hours, days, weeks, months, and years.

      Yes. A 20 year trade is still a trade ;)

      Why sell if the price keeps going up?

      But if the price tanks...

      I'm out!

      Delete
  13. i know i buy because i think the share price is going up.

    Sell leh, i think i know why but it may not be correct.

    ReplyDelete
    Replies
    1. temperament,

      Surviving through 2 bull/bear cycles (Nasdaq 2000 and Lehman 2008), my trading and investment philosophies have evolved between the pounding of hammer and anvil.


      At 70, you are still questioning and challenging your convictions; and that I think is the kind of traits all competent investors have.

      Spirit of craftsmanship.

      ;)


      Delete

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