Thick & Thin Investor

Investing in stocks through thick & thin


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Reminiscence of Swiber Collapse

I always wanted to write about this.Last year, I only shared with my working colleagues. Now,I only hope my late coming analysis can reach out to like minded investors out there… Fortune tellers talk about palm patterns while technical analysts talk about chart patterns,even though I am also a believer of pattern reading, I am more into reading the fundamental patterns of a company when it comes to investing. Some companies have the traits that do not bode well for long term investors.

Let’s get right to it, here are the 3 main patterns as an observer

Given its market cap, Swiber went into significant  negative cashflow in FY 2012 and 2013.

There was a sharp increase in long term debt from $581.129 million in FY 2013 to $934.337 million in FY 2014.the higher interest of long term debt usually “eats” into profits of a company in the long haul,that’s why usually short term debts are considered first before long term ones.

The biggest piece of missing puzzle was where can you find a business that made $29.851 million in FY 2014 and yet had the financial capacity to borrow up to over $366 million from banks on the same year? Here we have it right before us.We can’t always rely on the due dilligence by banks on their credit analysis on conpanies they lent to,can we? Or we can choose do a quick simple number analysis like this one.

So when economy downturn affects any business,it hurts cyclical companies such as this in a big way. Be it bond or stock investors out there just be sure to watch out, better learn when to say No and walk away from certain unsound investments in future because all investments are not created disasterous equal. the increase in long term debt previously  and its eventual collpase meant that the company used borrowings to meet its daily business obligation. Throwing the good money after the bad usually have disasterous consequences and time will tell.


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Know your rights, know the secret passage to your FREE fundamental information as a long term investor here

Yes, in the tale of Ali Ba Ba and the Forty Thieves, everyone who heard of the story knows that the magical phrase is “Open Sesame”, and you don’t know what it is, probably you are missing out a lot of good things in life. Well, it is not really that bad and absolutely fine when you are already getting the information you need from some investing sites that promise to give you the most up to date information but the catch is you need to pay them on a monthly basis in order to be one of the “exclusive” members. Anyways, fundamental information are merely historical financial results and are lagging by nature, depending on how early those reports came out on quarterly or half yearly basis. However, someday when you feel like stop paying to those kind of public information anymore , here are alternative sites below for your consideration.

I know some of you out there may thinking there is no free lunch in this world, and they say when something is too good to be true, it probably is, but this doesn’t happen all the time and is not true when it comes getting free financial information on a specific public listed company.

Take for instance, go and search for any stocks of your interest by its symbol or its name  http://www.morningstar.com/stocks.html .

Surprisingly for whatever reason, if you happen to go  https://sg.morningstar.com, the whole stock category on the site will be missing.

The other site I would recommend is the widely known site finance.google.com used by the mainstream ,it has the anouncement of the latest news and link to the homepage of list companies.

Whether you are somebody new to investing, have a few hundred bucks to invest or just want to invest stocks in your own country, it doesn’t matter because most of the international stocks can be found in that search box and the investing opportunities will be right at your finger tips!


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Financial numbers about Sabana Shari’ah Compliant Industrial Real Estate Investment Trust (M1GU) from FY 2012 to FY 2016 for those already involved

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Recently (Jan 2017), Sabana investors are worried sick about its prospect and wondered what have exactly gone wrong when all they see is the stock plummeting since its IPO in 2012. Over here, we do not like to pin point whether the fault lies on the management or the economy, what matters to us is whether are we able to spot some of those possible reg flags so that we can get out early before things get ugly, and also to be a kind soul and help those in search of the same answers, we all know in life that we cannot leave everything to luck..

Based on Source from Motley Fool, of the 38 real estate investment trust (REITs) listed under SGX, Sabana is the worst performing REIT. The link is as below.

https://www.fool.sg/2017/01/16/sabana-shariah-compliant-reit-is-singapores-worst-performing-reit-over-the-past-year-what-investors-should-know-about-its-challenges/

Personally, I go to SGX homepage via going to Home > Company Information > StockFacts, then search for “Sabana” and leads us to  the link as follows:  http://pdfx.sharefc.com/pdfx/https%3A%2F%2Fsgx-premium.wealthmsi.com%2Fprint.html%3Fcode%3DM1GU%2526currency%3Dsgd

This is where I believe the numbers serve a higher purpose than anything else. If the managers say they can deliver certain things, we like to see the numbers for proof as well.

In FY 2014, we saw an increase in revenue, but a significant drop in net income.

In FY 2015, the net income suddenly went into red by $73.436 million, the return of equity went into negative as well. Any stocks with negative return of equity destroy the initial funds that equity holders put in since the IPO. As an equity shareholder, focus on the equity so much so that the liabilities would be able to take care of itself. This is a huge red flag because we rarely have fundamentally strong companies having difficulty to bring bread to the table, and so this leaves us to find the “bread winner” companies even more important than ever.

In FY 2016, the net income disappointed investors yet with another negative of  $62.464 million. Under the investing cash flow activities, $52.8 million primarily came from divestment of properties, we need to study such huge ticket item and why it was purchased to be divested only later on.

If there were to be any rights issue, the additional funds that go into the common equity dilute existing shareholders’ holdings and not to mention that not every investors have the additional funds to subsctibe for the rights they will be entitled to. Without subscribing to the rights leave them in a worse off position due to dilution and that their rights will expire worthless.For those existing shareholders with insufficient funds, the very least they can do is to sell off the rights to those who can afford and want to do so. When it comes to rights, 2 things that come to the mind of investor is whether the company use those additional funds to meet daily business obligation or really have good plans and can get business expand faster.If it is the former, why isn’t the company able to use internal funds to fulfill such daily operations?

What I am writing here is for general information purposes only and do not intend to serve to anyone to be a financial advice or personal advice.

 


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Why investing in consumer staples companies works in this day and age (Year 2017)?

I am treating this like a diary, an electronic one. I am writing this from my own experiences on the stocks I have seen since 2009, and realized that consumer staples are products that people still have to purchase, no matter how good or bad their financials are, the beauty of such stocks are largely appreciated and are considerably good bets to wealth accumulation in the eyes the beholder (a long term investor).

They are considered non-cyclical in a sense that you don’t have to time the market as accurately as you do on non-cyclical stocks, especially oil, gas & shipping or property developers, because they are subjected to external impacts by market sentiments or government policies affected by business cycle, which are attributed to expansion and contraction of the so-called credit cycle. Imagine companies that tell you,  they manage to get the bulk of the orders from a few top clients, suddenly they tell you the orders are being cancelled, for whatever reasons they provide, it is going to have a very negative effect on the non-cyclical stock(s) that you are holding. This is because the affected company already recorded the orders into the books as revenue and profits, any impairment(s) will bring down the expectations of the market returns, hence the market price of the stock, as it is deemed to be earning a lot lesser than what it has reported previously.

To support on my expressed opinion, refer to the link below:

http://www.straitstimes.com/business/companies-markets/sembmarine-keppel-in-deep-water-if-brazil-client-goes-bust

Usually, consumer staples companies that have proven themselves have the at least USD 1 billion in terms of its market capitalization. Not saying small cap (penny stocks) companies aren’t in our radar, it is just that earnings tend to run negative or be manipulated easily as compared to bigger cap companies which have better chance of surviving in bad times and come out stronger later , there is always a higher risk involved. Even if you are really into a specific penny stock, commit no more than 5% of your capital as a rule of thumb.

Due to its certainty of business, it has a consistent dividend payout policy, and we all know that dividends are able to attract long term investors, even though it brings down the potential of a stock growth ( probably another topic for another time). It is much preferred that the company deals more retail customers, rather than a few top clients, this reduces the risk of customers defaulting its payment. The point is a more diverse clientele of the company, it is not your diversified stock portfolio helps to bring down the stock volatility, so that one can sleep soundly at night. Anyways,  I only hear that bond investors can sleep soundly but the majority of the investors say they can, then they could be lying to you.

Consumer staples companies sell items affordable to the man in the street, they don’t sell large ticket items, customers don’t think too much when making their purchase decisions, pay up cash immediately and they have no problems forking out an extra few dollars. On other hand, cyclical company would be in for a rude surprise (Yup, not the kind of surprise earnings you are expecting)  when it locks in the sales and revenue upon orders by customers who could retract orders later, how are they going to deal with that chunk of account receivables?

While (Stock) Technical analysts have a way to decipher stock patterns mainly from the price actions (movements) and the trading volumes, the rest of the technical indicators are merely derived from price and volume, so do Fundamental analysts who go through the financial statements (health) and decide whether it’s a buy or sell call on the stocks. My point is the there are also patterns that you will notice on those income statement,balance sheet and cash flow statement.

There are two schools of thoughts between technical and fundamental analysis, I happen to be that kinda of boring person who always love to go back to those companies in the news headlines facing bankruptcy or liquidity issues, it is not like I like to see them fail but interestingly, the more you study into those group of collapsing companies, the more I seems to understand why they fail, there are tell tale signs and patterns that already should be giving red flags to investors at a five minutes quick and dirty way of at least knowing what not to buy or get out of that stock while you still have your chance. Thanks to those shaky companies, it will help us to avoid companies with similar traits as them as much as possible and appreciate the fundamental stocks out there even more.

As investing is a subjective topic, even when it comes to making investment decisions on the same stock (equity), we can sometimes have opposite opinions that go against each other, I respect that.