Things I Learned From An Asian Value Investor

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Feb 23, 2015

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It was one of those days when I got bored and just decided to try my luck visiting an investment firm. Being somewhat young and ignorant, I decided to pay a visit to one of Singapore’s more renowned value investment firms.

When I got to the place, it was everything I thought it would be. It was away from the city center (meaning lower rents) as well as simple design layout (meaning keeping costs low). Talk about value!

Inside, I met one of the founders. It is interesting when you meet someone who is more experienced than you. This person that I met has beaten the market for 10 odd years. He was an amateur turned pro.

I would like to share his short story here.

Born in Malaysia, he knew that if he kept staying in his village, he would probably not have a bright future. Hence, with six dollars in his pocket, he came to Singapore seeking a better life.

When he was working in his twenties, he finally saved up enough to buy some shares. He went to the library to read books about investing and shares. This is the same way that most of us start.

Unfortunately, most of these books were about plotting charts and graphs. Needless to say, he lost quite a fair bit of money buying those shares.

Undeterred, he continued reading books about investing until he finally struck the Holy Grail with “The Intelligent Investor”. Finally, everything made sense. He applied whatever he learnt from “The Intelligent Investor” into the Singapore local share book call “Shareinvestor”.

Just like what Seth Klarman (Trades, Portfolio) said, “This is a concept that you either get it or you don’t.” Thankfully, he got it and started buying shares based on the old Ben Graham principles of finding cheap stocks.

His record is an amazing 17% CAGR for over 10 years. He is a millionaire and is retired at the age of 42.

This is what he told me when buying Asian stocks:

  1. Buy stocks based on low P/B, low P/E ratio, high dividend yield stocks (aka Walter Schloss/Ben Graham style stocks)
  2. Don’t go for Buffett stocks. Warren Buffett (Trades, Portfolio) has got a keen eye for good businesses. Not many people have that eye. Commoners like us would do better picking stocks like how we pick our groceries. The cheaper the better.Gardens_by_the_BayAlso, the majority of Asian companies do not have the enormous economies of scale like Coca Cola or Nestle. Hence, when investing in Asian businesses, do take note that only very few companies have the advantages that Coca Cola has.
  3. Buy one stock every month. When you buy one stock every month, at $1,000 each, you would have a portfolio of 12 stocks worth $12,000.
  4. Diversify, diversify, diversify. Because you buy stocks that are cheap, you need to buy as many stocks as possible to diversify your holdings as some of these stocks will hit zero. When I talked to him, he told me that he has got at least a hundred stocks in his portfolio.
  5. Close both eyes during a recession. When the market goes down more than you can handle, take a trip to the Central Business District. You will see workers scuttling to work in the mornings. This will assure you that the recession is not as bad as you thought. The workers are there to continually add value to the companies you hold.

To conclude

I am very fortunate to have learnt that it is possible for an amateur to compound money by more than 10% p.a. Sometimes it is not all that hard. All you need is the grit to hold through good times and bad, as well as some common sense.