Value stock vs growth stock: are they really different?

Monday, 11 July 2016 09:48
Posted by owq 0 comments

From Investopedia:
"A value stock is a security trading at a lower price than how the company’s performance may otherwise indicate."
"A growth stock is a share in a company whose earnings are expected to grow at an above-average rate relative to the market."
 I have always thought that "value stock" and "growth stock" don't really mean anything. All I am concerned with is that I'm paying less for the value that I get. If I'm paying less for the expected growth of a company, then it is a value stock. Of course, it's hard to predict the future, so it's good to be conservative in case you're wrong.

Price is what you pay, value is what you get. And value is a function of all the cash flows the company will give in the future, and that is affected by growth. However, it is important to see things on a per-share basis, as earnings may shrink on a company level but increase on a share level. So rather than look at growth on a company level, we should look at growth on a share level.

In the end, it is really just buy low and sell high. A simple concept, but yet hard to act on due to our human biases.

China Merchant Pacific Holdings takeover

Sunday, 29 May 2016 17:59
Posted by owq 0 comments
Yet another one of my stocks getting delisted. Unfortunately the offer is at a discount to my cost. I suppose this is why buying at a good discount to NAV is prudent for stocks like these. I bought it at NAV last year, and it dropped due to acquisitions. Well, at least I managed to sell it at $1.03 somehow, $0.01 above the offer price. I find the offer a bit undervalued, but at least it's not as bad as the Indiabulls saga. That one is really super lowball.

Anyway, with this unlocking of capital, I put my money on Silverlake Axis. The share price dropped to a reasonable level. I think around 13-15 PE is quite reasonable for such a company. Their track record with acquisitions seem to be quite okay, and I look forward to see what they can do with Sungard Ambit.

Select Group takeover

Friday, 25 March 2016 12:52
Posted by owq 0 comments
I bought Select at around the beginning of the year, hoping to enjoy its wonderful cash flows for years down the road. Alas, it was not to be. Out of the blue, a trading halt was called, leaving me wondering whether it was going to be good or bad news. Soon the cash offer came. $0.525 a share.

It is close to a 30% gain on my cost, but I'm not sure whether to be happy or sad. At $0.525, the trailing FY15 PE is 5.25/5.02 = 10.46. Of course, this takes into account the government grants, but I still think the business is worth more than that. It is quite a high ROE business with room for growth. I would say that the PE firm got it for quite a bargain. Of course they would only highlight that 0.525 gives a high premium over the tangible assets.

Anyway, as a minority investor I can only look, suck thumb and just sell. Don't think there's any good alternative to Select in SGX. I have been looking at Neo Group for a long time, but don't think it's value for money right now. So for the time being, I put some of the proceeds into Design Studio. The rest I'm thinking of using for my REIT allocation. Looking at First REIT (which I sold earlier) as well as Frasers Comm Trust.

Is SGX really a monopoly?

Friday, 18 March 2016 21:09
Posted by owq 0 comments
I have seen people talking about buying SGX because it's a monopoly. Is it really? Sure, if we're talking about flotation in Singapore only. The market is so much bigger than that. SGX is competing against the world for listings and derivatives. And companies have many other ways to raise capital. Local companies can choose to list in other countries, a popular destination being ASX.

However, is it a good company? I haven't done much research on it, but it definitely has awesome operating metrics with high ROE and margins. Is it selling at a good price? That I'm not so sure. I think there are better alternatives at the moment.