Author: ThumbTackInvestor

TTI Portfolio Updates – April 2017

If there’s 1 thing I’d like to have right this instant, this is it:

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HUGE grass patch just beside the driveway for the kids to run around and for me to do a little kick around too. (There’s a goal post at the side, not seen in the photo)

Ah. Simply next to impossible in Singapore.

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Now, I could really really get used to staying here. This massive complex is 1 house btw.

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Apple Orchard. Rows and rows of apples.

Growing up, whilst all the other little kids say they want to be policemen, teachers, doctors, lawyers blah blah blah, what I really wanted to be, is to be a farmer.

Kinda ironic.

It sounded like the most fun job then. It still sounds fun now.

Anyway, back to investing.

Yesterday, I divested my puny position in S i2i at $2.67.

My initial investing thesis is here:

TTI’s New, Puny Position – S i2i

Which is barely 3 weeks+ ago.

The gist of it is quite simple actually. The company has to have an average share price of $2.92 over 6 months before March 2018 so that it can exit the SGX watchlist. The management is currently embroiled in a little unhappy tussle with ex business partners, and the son of one of such related parties was involved in a group that sent a letter to Si2i management recently, demanding certain changes.

So my simple postulation is that Dr Modi, a billionaire, ain’t going to let Si2i fail to exit the watchlist. It’d be almost fatally embarrassing, isn’t it?

I mean, if I’m a billionaire, Si2i has low liquidity, and I could easily buy up shares to support the share price and ensure it exits the watchlist, why wouldn’t I do so?

Particularly since an opposing party has tried to embarrass me.

You can’t put a price tag on pride.

So it’s a very simple investing thesis, with a logical and current catalyst. And since I vested, it’s worked like a charm.

Plus I noticed this in the recent issue of TheEdge:

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Pretty much concurs with my thoughts, isn’t it?

Anyway, my purchase price is $2.45 barely about 3 weeks ago, so my ROI from this little side show is a very good 9% within 3 weeks. That’s…. gotta be quite crazy on an annualized basis.

Still, it’s already starting to look like a dumb move to divest cos even as I type this right now, the share price has shot up today to $3! Uh-huh. The day AFTER I exited. No shit.

But I’m on holiday, mood is good, fantastic place, with family. So, nothing gets me down today. (OK, plus it’s a 2,000 shares position. So who cares…)

So why did I divest and leave some gains on the table? I mean, I’ve already indicated my reasons for vesting in the 1st place, and $2.67 is still some distance away from my targeted $2.92 as written in my investing thesis.

The simple reason is that I’m intending to deploy more capital in my options strategies as indicated in my previous post.

Which leads me nicely to the next part.

In my last post, I mentioned that I’d be making some changes. I’ve given a lot of thought to refine what I’m doing, and have since implemented it.

Health Checkup For TTI’s Portfolio, IPO Madness, S i2i Updates

It’s only been just under 2 weeks, so obviously any result is not reflective of longer term. I’ll have to continue to dry run it a bit, and preferably under different market environments. But the initial results have been nothing short of amazing.

In a much earlier post, I described my results:

TTI’s Options Strategy – Results Thus Far In 2017

Well, in the past 2 weeks, I have effectively doubled my cashflows from options. I’m not celebrating prematurely, because it may be just a case of a confounding factor. But I am very pleased to say the least.

At this rate, by just maintaining the same amount of capital for my options strategy, I’d effectively double my CFs every month, and that’d work out to be somewhere between $10k – $16k USD every month.

If so, I don’t see why I shouldn’t increase my exposure and shift some assets away from SG. STI has run up a lot anyway. A bit too much IMO.

It’s quite amazing how some simple, small changes can result in major changes, results wise.

I haven’t really made too big a change in my actions, but my thoughts have changed dramatically. And it’s really not ground breaking.

For example, I used to find companies with high IV, because high IV leads to high premiums right? Yet, I stuck to selling far OTM options because the likelihood of exercising is small. These options though, have low premiums. So this train of thought is really contradictory and counter productive.

I also failed previously, to relate a particular option strategy to the underlying company of the derivative. Yes, it sounds like common sense now, but I’m not sure why I didn’t think of it earlier.

There isn’t 1 silver bullet option strategy for all companies, obviously.

And all I needed is someone to point that out.

As to how to relate the strategy to the underlying company… well, I’m not obliged to talk about that here.

In this same vein, I now own 600 shares of Wells Fargo (WFC). This is a company that I’m familiar with, having analyzed and bought into it in the depths of the GFC back in 2009.

At that time, during the depths of the crisis, I bought at $9, sold half when it reached $12, and the other half when it reached $18. I then gave myself a pat on the back and thought that was the smartest thing anyone did.

Well. It’s $54 right now. LOL.

Anyway, with my new thoughts, it’s logical to go back to WFC. I understand the company better than most people, and the amount of DD needed is lesser since I’ve already done the groundwork some time ago. (At that time, John Stumpf just became CEO and now he’s kicked out)

WFC is undergoing a mini crisis of sorts currently. Their new management is still dealing with the fallout of the multiple accounts opening scandal, and the share price reflects that.

My current position of just 600 shares was accumulated at a nett price of $52.9, but this is the result of my options activity, not a direct purchase.

This means that this position is likely to keep changing in a matter of weeks. It could increase, it could decrease and in fact, it likely WOULD change.

Also, I’d miss out on Dutech’s AGM this coming Wednesday. I know there are some serious investors reading SG TTI, so please kindly drop me a mail to update me after you have attended.

I’d really love to know what Johnny Liu has to say, and what are the questions being asked.

Also, a BIG shout out to Xin Long who has kindly agreed to help me ask some questions at the AGM.

Health Checkup For TTI’s Portfolio, IPO Madness, S i2i Updates

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Last week, I sat down with a super investor one evening, who took the time to look at TTI’s strategy and results thus far, and shared his thoughts on how to “improve my productivity” (As he so gently and succinctly put it)

Long time readers would know who I’m talking about. Apparantly, his friends are readers of SG TTI too.

I can tell the said super investor spent some time understanding what I’ve done, as well as thought about what’s appropriate for me going forward. (Not every good strategy is appropriate!)

That’s something I appreciate greatly.

Subsequently, I’ve had the entire weekend to ponder about the discussion, and trying to figure out some stuff. I drew up a list of follow up questions initially, but curiously, the more I thought about it, I found myself answering these same questions.

It does require some “major surgery” with regard to my thoughts though.

The suggested strategies for me going forward, isn’t difficult to understand. No high science here (I suspect the said super investor purposely made it so). In fact, the large bulk of it, is what I’ve already been doing.

But I did overlook 1 important caveat.

And that relates to my options strategies. Instead of choosing something stable and relatively predictable, I did the exact opposite, thinking the high implied volatility would mean higher premiums. To make things worse, I compounded the mistake by opting for options that are far out of the money ONLY.

On hindsight, that’s literally like taking 2 steps forward and 3 steps back, isn’t it?

OK, I’m not supposed to talk about what’s been discussed here, or share it freely, so I shall stop here. All I can say is that going forward, I’ll be adapting these new thoughts, and it seems like my activities in the US markets will be taking an increasingly important role.

It’s all been very enlightening, and very good fun, to be honest.

This week saw the 1st trading day of a hotly anticipated IPO: UnUsUaL

MM2 Asia hived off this division in an IPO on catalist. And the share price simply went ballistic on the 1st trading day:

I don’t really bother with IPOs usually.

But I was reading this week’s TheEdge and a paragraph in an article about UnUsUaL jumped out at me:

“For the nine months to December last year, UnUsUaL’s revenue fell 28% to $16 million. Earnings, however, grew 38% to $3.8 million. Revenue was lower as the group had organised more one-off events in 2015 during the SG50 celebration period. But earnings rose as gross profit margins improved owing to less outsourcing for projects. It also recorded a $1.6 million gain, mainly from equipment sales.”

I pulled out my calculator and did some quick calculations.

Earnings grew 38%, this means it was $2.75 million before.

This current $3.8 million in earnings though, includes a $1.6 million gain from equipment sales.

Since UnUsUaL isn’t in the business of buying and selling equipments, I’m assuming this is a one off gain. So normalized earnings (backing out one off gains) would thus be $2.2 million.

This means that true earnings actually DROPPED y-o-y from $2.75 million to $2.2 million.

Revenue dropped y-o-y as well, as they’ve acknowledged.

But dropping revenue and earnings do not make for a good IPO story. So it’s time to cue for some “equipment sales”, which changed the earnings picture from a drop y-o-y to a very respectable “Earnings, however, grew 38% to $3.8 million.

Wonder if anyone bothered to ask why the equipment sales has to occur JUST BEFORE IPO? 

Yet, despite all that, the share price jumped more than 100% in a single day. PE now is something like 50 times! That’s a fact. It happened. Period.

So perhaps even if one KNOWS this fact about the earnings, it’d have been smart to still get into this IPO madness.

Just don’t be the last one holding onto the bomb when the music stops. Ah, the craziness of the markets.

Of course, my thoughts above are just from reading a single article. No DD. So perhaps there’s something that I don’t know about, something that’d justify paying PE 50 times earnings, and if so, please feel free to correct  me.

As stated here, I took up a position in S i2i about 2 weeks ago:

TTI’s New, Puny Position – S i2i

It’s not a game changing idea because of the small quantum, but as I wrote previously, I’m looking at the ROI, % wise. Not the quantum. And I’m hoping this would turn out to be the 3rd big winner for me in a row, following the successes of Dutech Holdings and Geo Energy.

Thus far, things are going as expected as the share price has appreciated 6%+ since just 2 weeks ago, and looks set to continue to race towards the target price I’ve mentioned, in order to exit the watchlist.

Interestingly, the company released an announcement:

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Now, I’d admit, I was initially negative about the proposed acquisition of the E-commerce business. But as more details are revealed, increasingly, it seems like the management managed to pull off a coup.

The acquisition is an “asset transfer” as the prior announcement put it. No cash involved, just equity dilution.

But this announcement is what got me puzzled.

Even after the asset transfer is completed, the vendor SB ISAT Fund, which is transferring the E-commerce business to Affinity, a subsidiary of S i2i, is responsible for taking care of the financial requirements of the Affinity Group.

Huh? That sounds like a very good deal for S i2i.

The financing (to be taken care by SB ISAT Fund), cannot dilute S i2i’s stake, and in fact, is totally excluded from the liabilities of the Affinity Group. This basically means that the E-commerce’s business funding, will probably come in the form of some loan from the SB ISAT Fund to the Affinity Group.

SB ISAT Fund takes on the risks and liabilities of the loan effectively, since the loans cannot dilute S i2i’s stake so there shouldn’t be any convertibility attached to them.

All this is very interesting; S i2i’s management continues to come up with weird, innovative deals. Ultimately though, the execution and subsequent results would be the key.

I’m still holding on to my puny stake while I grab some popcorn and watch the show. Dr Modi himself has continued with his share purchases, so he’s definitely putting his money where his mouth is.

TTI is off travelling for the Easter weekend coming up (again!) and I’m really looking forward to it.

Time with family is always precious.

Overheard : “Someone wise told me that 90% of stock investors lose money, while 95% of forex investors lose money. So I choose stocks.”

LOL. That gave me a good chuckle.