Stubborn and determined.
My view of the value investor here remains stubborn and determined. With the sole goal being higher long term performance -along with less volatility.
If people are not always coherent and suffer from various biases, so do markets. Due to high dividends, inefficiency is our friend. Over time we take advantage of that.
Not crash and burn, win and loose into a final nightmare. Here its long term wealth creation through a strict prodigy on sticking to low p/e’s and high dividends in what I think are at least medium term higher and diversified growth companies/industries. The only reason why I have always favored smaller cap stocks in Thailand is because they excel on average on all of those parameters and so in long term performance. It can take time and is not always even -because the SET itself is a folly full of behavioural nonsense and large cap bias due to, institutional dominance followed through the retail trading crowd.
But at some point the fizz bursts and smaller cap stocks roar ahead with vengeance, catch up and then some. It is impossible to predict these timewise and so more distant viewing higher returns are a required discipline. I remember CRANE were many may have given up -but I stuck to it and it lifted upwards.
To deviate from diversity and jump from one wagon to the next is a recipe for failure. With few exceptions so far this year the Thai stock markets’ rise has been dominant around large cap stocks, yet again. Few have beaten micro cap’s PYLON, meteoric 60% rise since last November when I pounded the buy view on it.
See my PYLON company visit report here:
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And here: DEMCO and PYLON into 2012
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I stated I much favor both these stocks for this year. (PYLON soared some 50-60% since and I then viewed some profit taking in order. PYLON just went X-all where shareholders of record last week). DEMCO dropped some 14% since allowing more buying time. You like a stock when its low to acquire more, not soaring and going higher at the same time.
With the dividend season now in full bloom the big cap bias should change and I think there will soon be a catch up into June -or beyond. These can be very sharp and near impossible to predict or buy when they soar. One of the beauties to patient early birds because one then can chose to trade them on the way up when volume and prices' soar. Which is the next one to run is a skill/luck that can back fire by missing out in a big way. At the same time it makes sense to overweigh core choices; as I have viewed in doing with these two since last year.
Realize as well that it is far better to total returns over time if stocks not run all run at once. You can sell, but then what to buy? Dump a winner for a lesser known laggard? OF course there are many I will be missing on my list but you don't have to win the gold medal to do well.
Lately I included ASIAN (4.10), CITY (2.10), TRT (5.90), SITHAI (10.10), SYNEX (5.95). As an investor I just now like SYNEX. SYNEX is particularly interesting if you can take at least a 6 month view. The earnings there keep growing nicely -and the company will soon pass through the SET, at a nice gain, their 11. mill. treasury stock the company owns. These shares must be sold by end of May '12 and its difficult to see why they should trade at lower then current price. Thism then will increase the float -and in August likely another nice interim dividend and my 6 month time objective realistic for nice gains. SYNEX own cost on those shares is a low 1.10 Baht and so the company is sitting on a 53 million Baht gain. I think this will be realized gain between now and end of May, which helps with the conviction a nice interim dividend will be paid in August. Placing back into the market these shares will increase the fee float.
Here is the information on SYNEX upcoming year end dividend:
XD Book Closing Date: 16 Mar 2012
Payment Date: 14 May 2012 00:00
Dividend per Share (Baht): 0.22
Operation Period: 01 Jul 2011 - 31 Dec 2011
A 3.67% return at a current price of say 6. Not bad for a 6 month period and likely further high interim dividend announced in August. Another example of high growth and high dividend on a domestic driven Thai growing company stock story! I now rate SYNEX with a strong buy view and so would overweigh it helped with profits from PYLON. Or profits on WORK which has also been going up.
Last year, they earned 0.56 Baht, vs. 0.40 per share for year 2010. For year 2011 their p/e is only 10.7. That is about a ¼ below the SET average p/e. Its growth rate potential/expected is twice that the SET averages and so is its dividend yield -which is starting already at high base! Similar, as with the DEMCO and PYLON choices -and others- which combined brings a mix of different industries and a likely higher average growth in earnings and dividend yields. As so often here in the past.
A key recipe in superior returns for the SET individual investor on going in motion. Over the years, and I will spare you the examples here, I have been able to bias winners often but was no better in avoiding dogs which came up along the way. Winnings in PYLON recently has brought up the question on what to do next with some of those nice profits. The overweighing question on selections is always key decision but they must not over-ride the whole. 
Diversity is important and of course I can be wrong. ***
Unlike in the past, Thai Bank deposits are now only insured up to 1 million Baht, per account now.
At last this is forcing more and more Thai savers to do something else. Trillions of Baht are sitting in iddle Bank accounts. Many brokers lead by the SET of late in making various "SET in the CITY " fairs at often choked filled attendance -and not just in Bangkok! Thai people with savings know they have to do something but remain confused.
Increasingly more, and I am barely hopeful here, these will find their way -through the trading gates of the brokers- in also partaking the above advocated investor winner theme. Bualuang for one has just hired 2 new analyst which will focus on smaller cap’s. Other brokers will feel pressure to enhance this as well but alas brokers remain short term profit driven. They just do not see themselves as new wealth creators.
In the meantime, the fault is on many Thai and foreign individual investors as well in just not willing to invest a small amount for objective professional insights/information. New members and referrals here by existing members remain elusive. At the Rotary Club in Bangkok were I spoke last September, I met a few serious SET investors, but they evidently feel they have monopoly on good ideas. For the rest, they just not believe it.
At one such a "SET in the CITY" fair, an experienced marketing officer told me without asking that "90% of trading accounts loose money over time." So many, many invariably go all out -and loose. They come and then go like a revolving door and only the few serious value investors remain viable year over year. Those 90% losers go on to bad mouth SET investing, when it was the strategy (often sanctioned by broker) which failed. One senior executive of Bualuang admitted to me theirs was the "failure of the industry". For mostly brokers are just not able/wanting/motivated to gear investors on more responsible investing -not speculating. At least some now recognize this, in contrast to many in the industry which are still in denial.
Everything makes sense in hindsight.
In the excellent book "Thinking Fast and Slow" (2011) Nobel Laureate Price in Economics Daniel Kahneman describes in lively -and with many good examples- all the shortcomings and biases of our human minds. It’s a great read for us because these are often translated into fear and greed which dominates investing choices, decisions and habits. He describes System 1 and system 2 -as different ways our minds think. We are shown again and again how many intuitive feelings and hunches (system 1) can have and are wrong, and why that is so. Trusting your intuition is more often advocated then it is right.
A grand book which would deserves a separate review and discussion. Anyway, in one paper/study quoted, titled "Boys will be Boys", they showed that men act on their useless ideas significantly more often then women and that as a result women achieved better investment results than men. (page 214). Over time one would probably have to add. Investor wise it seems men tend to give too much weight to hunches and intuitions? I would agree that in general men are more prone to this overconfidence. I bring this up here because in the past we had some posting in our lounge on this topic.
Non professional traders often fall into this trap on over conviction and "intuition"; only to take a bath sooner or later. (Also, on the SET there are no stop loss orders always a requirement to succesfull trading).
I do believe investors can trade once a stock wakes up. This for an assigned block of shares but not on the initial surge. This so to attempt to average the price cost down and so increase returns. Trading ones winners is easier then day trading.
Could it happen to me with my current strong call on DEMCO? Of course yes, but at least I have lots of supporting research, visits, evidence, industry understanding and not hunches!
But here is the clincher of that book: After describing in over 400 pages how the mind has multiple fallacies and biases, heuristics, odd and even non logical influences all describe with great style, examples and substance. The author then evidently assumes stock markets are always efficiently priced Why? Did it not occur to Dr. Kahneman that the very behavioral tendencies also creep into the pricing of stocks! Prices are made up by people where the averages are smarter -but still its humans doing the voting. Further, he assumes -as I read it at one point, on how if you buy a stock at its true current market price, you cannot make a good profit. Only so if you can buy below the market price which over the long on run -and on average- can't be done. Even if you not over and not underpay: surely you can achieve good returns.
And by the way Dr. Kahneman , prophets are often wrong because the news media picks the more flamboyant ones more often. The guys that often predict doomsday. Bad news sells better. Many wise people, while less publicist, have made more then a few wise projections/calls.
He quotes a long study on how professional money managers were not able to beat the market. The author is tough on all investor professionals: "The illusion of skill is not only an individual aberration; it is deeply ingrained in the culture of [that] the industry." So I would like to ask: how can markets be so efficient when they are priced daily by individuals/institutions which themselves are chuck full of heuristic biases. It is clear the author knows nothing on how, in emerging markets for example, institutions dominate large cap. investing and how then locals often just follow that leadership. Leaving so, a huge market pricing inefficiency on smaller cap high growth/dividend stocks.
On that note I wish all Members a very good week.
Best Regards,
Paul A. Renaud.
www.thaistocks.com
PS. Don’t forget DEMCO's “Opportunity Day” presentation on March 14 starting at 13:15 PM. (Have a Thai language speaking friend there and usually includes some good English visuals. I expect the company to show pictures of new wind turbines for the first time?).
