Bye Bye BBR Holdings!

It took me almost 2 years to fully divest all my shares in BBR Holdings, but as of today (09/11/2018), FINALLY! Someone took the remaining shares from me so… for the 1st time in… 5 YEARS (yes, I’ve been an unfortunate shareholder for 5 years), TTI is no longer holding a single share in BBR Holdings.

Good riddance!

Well, I’ve written extensively about BBR Holdings, so I shan’t go back to talk about it much. At 1 point, I was holding over 2.3mil shares in BBR Holdings, and managed to divest just over half in 2017 at near it’s multi year peak. Unfortunately, with such a large stake in an illiquid company, it’s hard to divest quickly, and it took me almost the entire of 2018 to sell off the remaining.

Overall, it has been a slightly profitable investment quantum wise, if dividends are included, but ultimately, an absolutely terrible investment %-wise, considering how the markets have performed in the past 5 years. Lotsa underperformance here, when compared to a passive index.

Anyway, some dude or entity or institution has been quietly supporting the share price. I know cos some dude will buy just 1,000 shares from me within the last trading hour, covering the humongous spread. It’s an obvious attempt to support the share price. Why so, I have no idea, so you guys can postulate. I’m guessing maybe it’s gotta do with the $0.2 MTP requirement.

BBR Holdings has dipped under this $0.2 share price for quite some time (thanks to a determined seller, yours truly).

Or it could be some poor soul trying to prevent margin calls. Good for you cos I’m outta way! The selling pressure will ease for sure, cos for the past several months, I’ve been setting the tone for the selling pressure (approximately), but of course, without going that low.

Anyhow, here are some key lessons I’ve learnt:

1. Top of the list: Watch what the management does and see if it matches what they say. BBR Holdings has constantly failed to match up to what management guided for. They took write downs in key projects at a time when the environment was benign, and there were several tenders up for grabs. Of course, there’s the usual reason given: margins impacted, got to rush to meet deadlines, tough operating environment blah blah blah. When a company has sucky management, they always give the usual reasons. When times are tougher (like now), they also give the usual reasons for performing poorly. It never ends. There’s always a reason. I haven’t read of a company whereby the management put their hands up and says “ok, we screwed up folks.” (Musk did admit though, that he made some mistakes which led to more complexities for Tesla, but that’s… Musk.)
2. Beware of companies who do innovation for the sake of innovation. What do shareholders want from a company? Innovation or profits? Well, sometimes, we want innovation…….. if it leads to profits further down the road. But no, we don’t want innovation to save the world. Let Bill Gates do that. Too bad BBR Holdings doesn’t think like their shareholders. After harping on their “1st mover advantage” in PPVC technology, and spending precious money buying Moderna Homes, they secured Singapore’s 1st ever tender from the government requiring PPVC to be used. Of course, the management went on to talk about the “steep learning curve” but that reinforces “their core competency” and “bodes well for future projects”. Well, 4 years later, many competitors do PPVC as well. Some have secured PPVC projects abroad. How about BBR? I dunno wth are they doing actually. Seriously. Still struggling to secure projects, still blaming it on the “tough conditions” and still “learning”. Perhaps the most illustrative example of this is their participation in a “test bed” of floating solar panels. Company money was spent, and after that, there was an announcement that the “project has successfully concluded”, with nary a development after that. WHERE’S THE ACCOUNTABILITY? If I wanted to fund a high school project, there’re lotsa other avenues to do that! I wonder if management would do that if they had to put their own money instead of the company’s. Oh and btw, after 3 solar panel projects, the trail has gone cold. This is such a brutal joke. I won’t be surprised if BBR starts selling ice cream next.
3. Monitor industry-wide developments like a hawk. I’d give it to BBR here: the industry is indeed undergoing tough times. The thing is, I knew this was coming 2 years ago. You see, I know several private developers on a personal basis. These are small to mid sized developers, family owned, and I know them close enough to ask for in depth insight. These private developers have long stopped bidding for tenders. 1 has previously explained to me why they have been seeking projects abroad, mainly in Australia (this was last year, now, even Australia is tough). I should’ve seen the red flags. You see, these developers are separate, they don’t know each other. Yet, both told me similar stuff: with regard to construction projects, they both told me that they stopped participating because the margins are just not worth it. They also said that public listed companies still have to participate because they’re publicly listed. They have to show activity to justify the remuneration for the management. But privately owned ones are more interested in preservation of capital. Afterall, their entire family’s fortunes are tagged to their companies. With regard to PPVC, the second BBR announced they had this so called “1st mover advantage”, I checked this up with my contacts. None of them were enthusiastic. 1 went into detail telling me how much of a nightmare it’d be if there’s a leakage somewhere. It’d probably drain along the fissure lines since they’re piled up like a lego block. Another explained to me that they’d rather wait and see and let the others do it first. There’d certainly be mistakes and they’d rather watch and learn. Besides, the government policies may change after they too, learn more themselves. Finally, 1 even told me that errr, this is not even any new tech. In some countries, it’s almost routine, so they don’t see why the hype. So there. I’m not sure why I didn’t pay more attention. I guess… I was kinda willing BBR to succeed.
4. Stay away from management with strong links to academia. You’d think that those in academia are talented people. In reality, they may be… but they’d probably be lousy businessmen. They have no business running a public listed company. I won’t offer more substantiation for this, it’s my opinion, but I think history is littered with such examples. Wanna read 1 famous example? Check out Long Term Capital Management. (https://www.bauer.uh.edu/rsusmel/7386/ltcm-2.htm) In future, if I see a management with academia links, I’m staying far far away. I don’t think Janet Yellen, despite her numerous credentials, would do very well leading a company. ANY company. (That’s why these folks are in academia, not in the rough and tumble of the real world.)
5. Well, this is not specific to BBR Holdings, but… curiously, after multiple years of poor performance, dating from BEFORE I was a shareholder……. the same management remains….. and increases further in fact, with a “co-CEO”. (yup, BBR really did just that). That’s like an EPL team that got relegated, and in response, the coach decides to hire a “co-coach” instead of getting sacked. That screams of “ok-I’m-really-lousy-but-I-want-to-continue-to-be-paid-millions-yet-you-guys-are-braying-for-blood-so-I’d-just-hire-someone-to-share-the-blame”. In contrast, storied US companies like General Electric, kicked out their CEO abruptly when he failed to meet certain goals, and the turnaround of GE took longer than expected. It’s great to be a CEO of a public listed company in SGX. Your rice bowl is stronger than a civil servant’s. Do badly and it’s cos of “industry weakness”. Do well and it’s cos you’re a genius. And if someone points this out to you strongly enough, why, just sue the minority shareholder of course! Heads I win, Tails you lose, and if it lands miraculously on the side, obviously I win and you lose doubly.

OK, lastly, this has nothing to do with BBR per say, but it just so happens that I’m renovating one of my properties that has built-in PBUs. (prefabricated bathroom units). And it’s a NIGHTMARE to do so! Buyers be warned! I’m so avoiding PPVC and PBU in future. The contractors say it’s very difficult to do so and gave a ton of reason. Only very superficial cosmetic work can be done.

But if you want to say, hack the tiles, or change the entire window with the frame, it can still be done, but is very costly. I dunno if I’m being hoodwinked, but that’s what I’m told. Like changing the window frame of the PBU would crack all the surrounding tiles, and matching tiles are not available so you’d have to change ALL the wall tiles and stuff like that. And I’m told these issues are specifically relating to the fact that it’s a PBU.

So there.

Last word: You know how shitty the company is, when a long time large shareholder feels THIS elated after selling out of the position altogether. Feels absolutely great. I’ve a lot of ideas for deploying the capital now. It almost feels like I’ve just gotten out of an abusive relationship!

GOOD RIDDANCE.

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TT Fund: From -146.63% To +14.11% in 2.5 weeks!

1st up, note that TT Fund is not = my personal fund. But I retain all rights to invest it as I deem fit.

In my last post, which was barely what, 2 weeks ago?, TT Fund’s ROI has changed dramatically. And I mean dramatically.

From -146.63% To +14.11% in 2.5 weeks!

In my last post (TTI’s Personal US Fund + TT Holdings Fund Results YTD), TT Fund’s ROI was an absolutely horrifying…….

LOL. -146.63% MWR.

I got a little kick out of writing about it actually. It’s kinda funny.

That’s what a short term MWR can do to you. How is it possible to lose more than a 100%, but it is what it is. Hey man, I don’t do the calculations.

Even the TWR as shown in the previous post, was terrible:

-11.06% looks bad, but it’s certainly better than losing more than a 100%!

In that post though, I’ve wrote:

“It’s still early days, I was unlucky in timing, but it’d sort itself out in the longer term. The gains will stack up with time, so I’m not too worried. The quantum itself is small anyway. Luckily I’ve only deployed about 25% of the TT Fund’s funds.”

Well, just 2 weeks later, things are looking decidedly brighter:

Ah there. The exact same measure (MWR).

That’s what a couple of brave bets in the midst of volatility can do for your portfolio. Wonders. A >160% reversal in 2 weeks. That’s like Liverpool coming back from 3-0 down to win the Champions League 4-3 with a last min goal in the 94th min.

This crazy episode packs some lessons though:

1. In the longer term (ok ok I get the irony here. 2 weeks more is not exactly “longer term”, but I’m using the term in a generalized way), getting in at the wrong time isn’t going to be a complete RIP for your portfolio. So I’m a lousy market timer. That’s ok. It’s not part of my game anyway.
2. Having capital to capitalize when the world is running scared, is absolutely critical. Hence regardless of whether it’s TT fund or TTI’s personal fund, they’d both have a reasonable amount of liquidity at all times.
3. When it’s raining gold, reach for a bucket, not a thimble. OK, I stole that from WB. Quantum wise, I didn’t exactly reach for a bucket, but as a % of the portfolio NAV, it was a massive tank.

Even TTI’s personal fund did pretty ok throughout the volatility of the past 2 weeks:

6.49%

That’s slightly up from the 6.03% I posted 2 weeks ago. (TTI’s Personal US Fund + TT Holdings Fund Results YTD)

Yet in this 2 weeks, the MWR actually went all the way to negative (albeit just barely), before going up to 6.49% right now. So that’s how volatile it is. Imagine I freaked out and “cut loss” when it dipped into negative territory. I guess I’d be singing a very different tune today.

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The bulk of the returns came from long bets in Broadcom (AVGO), Bausch Health (BHC) and Centurylink (CTL). I was also very much long volatility (VXX) at the start of the market weakness, and took the chance to offload VXX positions and at the same time, swing to shorting VXX (not directly, but indirectly by selling naked calls)

For BHC in particular, I got real lucky and went for broke in both TT Fund and TTI’s personal fund, at the exact bottom, betting that the quarterly results will again surprise the markets. Feels good to beat Bill Ackman in this instance. LOL.

I’m not thinking that everything’s hunky dory though.

Thus far, TT fund has short positions in 2 names: Herbalife (HLF) & JD.com (JD). They’re not direct shorts, but short positions in the form of sold naked calls. None of the calls have been exercised, and all have thus far at least, either got covered profitably, or expired uneventfully. These are whatever’s remaining:

I had some shorts on Tesla as well, but quickly covered those and stayed out as I’ve come to realize that the financials don’t quite matter for Tesla. The company can be crap, I can be right, and still lose a ton of money. Simply cos a large premium baked in Tesla’s share price is EMOTION.

It doesn’t have to be fundamentally supported. It just doesn’t make sense. It’s emotional. The crowd loves Musk. Even I love Musk when I was short Tesla tbh. All that talk about Tesla’s negative cashflows and repeated capital raising, is missing out this vital point: Musk himself is Tesla.

I betcha if Tony Stark and Stark Industries were real… anyone shorting Stark Industries would be dead. Completely dead. Imagine this: Aliens invade New York, and after Stark destroyed their mothership…. imagine the news headlines!

Stark Industries share price would rocket like the prodigal Mark III suit.

Never mind that the company would probably have had to take a massive write down in the number of suits destroyed. Their missile inventory would’ve been depleted, NAV would’ve taken a massive hit, and future CFs would’ve to consider replenishment of inventory and “spare parts”.

Plus Tony would get more paranoid and probably allocate 99% of the revenue into R&D to get the new nanobots suit that we see later when Thanos came. So we know the R&D expenses and the SG&A expenses would shoot up.

Ultimately, Stark Industries earnings would come in crazily massively negative. Like ridiculously negative.

But I’m pretty sure the share price would go ballistic.

So there. This is a perfect example of Tesla.

And BTW, I think Tesla’s reported positive CFs in the latest quarter is not sustainable. Markets are going to be sorely disappointed if they think it’s hunky dory from here on.

How does 1 “play” Tesla?

By staying away.

(Or u can ask Thanos when he’d be arriving. And I’d say, prob short Tesla/Stark Industries just before the aliens invade, and cover quickly and go long at the peak of the invasion, since u know that the avengers would always win and the jubilation from the win would sky rocket the share price after that.)

Greenlight Capital’s Einhorn made the massive mistake of looking at the financials. Of being value focused… in a situation whereby the whole world isn’t. And would likely not be anytime soon.

I think Einhorn’s not wrong. In fact, I think he’s very right. But I also think he’s going to lose a lot of money being very right. And therein lies my deepest thinking:

One doesn’t have to be right to make a lot of money. It’s a complete fallacy.

One just needs to be very much different from everyone else, and THEN, have everyone come over to your different opinion. And preferably come over real soon after you’re ready.

yup. there. I’ve said it.

Right now, I’m looking real deep at a 3rd short idea. I’d probably start selling calls on that, thus far, it checks all the boxes. Perhaps I’d write about it when I’m done.