Reminiscence of a Thai stock investor.
A professional investor throughout my adult life!
I am different then other contacts you all may have as a helping hand/ideas/research in making investment decisions in Thai stocks: I don't have a journalist background or the English prose expertise that comes along with that. Instead I am a professional investor and have been this throughout my adult life! 
I observe, write, smell, sense, feel, analyze, think it through etc...all, only as seen as an objective medium term balanced investor. Not as a reporter, advocator, stock promoter & marketer or commission driven, not as a diplomat/envoy etc...
Many of us have seen again the inflammable reporting of events by the press. As usual the western media only reports this chaos from their point of view without revealing the whole picture as seen in Thailand. Its all "if it bleeds it leads".
Most of all, I invest my own capital in all the stocks I write here favorably for members. Along with many winners, I have been wrong at times but in the end overall superior performance leads the way here. This has been demonstrated in the niche of smaller cap/high yielding value investments combined with a few larger selections. The reason this is so is because of a market inefficiency which we individual investors can explore by balancing smaller with larger capitalized stocks.
Overall strong 1 Q earnings reports.
1Q ’10 earnings just reported here were overall very strong here and one of my 8 model portfolio stocks, STPI, actually rose 35% ever since the riots started in mid March. So while we are sorry and concerned to hear/read/see the daily bad news here, investor wise we are making more progress this year…so far anyway. I wonder what would have happen to me today if I too owned all those EU's. As Europe just got 20% poorer; this also since the riots in BKK started. I remember so many investors got out
Just now things are dire in Bangkok but it is always darkest before dawn.
The crisis area is confined and reduced to less then 2 square miles in a core section of downtown Bangkok, the number of protestors has dwindled to less then 3000. In the rest of the country is quiet & silently observing… everything is/works normal! So that is 99% of the country, but only 1% is being reported to the world. (Skytrain, TRT and some shopping centers in that area where shut down for the past 2-3 days). The situation seems the government will win out and is gaining ground.
One reason why the stock market is still outperforming the emerging market index year to date by a nice margin is because the smarter money sees things the way I do: while there are risks, this is not likely going to be a long term problem which will dent Thailand' overall non-tourist business now or worse, in a lasting way into the future. More likely we are now getting to a climax which looks always darkest before dawn. I am not selling out.
As reported by Bloomberg, the SET index remains up 4.2% year to date vs. a 0.5% decline for the MSCI Asia Pacific index. To date, investors bet the present violence will have little long term effect on stocks in general (which are already cheapest in Asia) or the currency which is loaded with foreign reserves (150 Bill US$ and with a firmer $ now) and no mega paper money printing machine as they are doing in the US -and now to in the EU.
Just as one comparison:
Four years ago when the current political troubles here first started, the UK pound money stood around 71 baht. It is now hovering around 46.8! Can you imagine elite/rich Thais getting out of Thai Baht due to concern of politics in recent times, only to see this alternative (UK pounds) dropping 30% in value vs. the Thai Baht currency! Morgan Stanley and other investment banks have astute marketing officers visiting Thailand forever calling on rich Thai’s with the usual alarmist prognosis’s so to have them move capital to Hong Kong or Singapore. A year ago these same published with a bearish Thai Baht report, calling for the currency to move to 36-38, only today we see the opposite happened. Everybody seemed dollar bearish and yet its the Euro which sits today at a 4 year low.
I just don’t' want you to turn bearish right near what looks like a Thai stock market resilience along with a significant potential spike up in time. Last Friday, before the looming weekend, the SET actually closed up a couple of points. On Monday it closed lower along with other regional markets. Maybe Mr. Market believes it is nearing the end?
I don't like to write about politics and wont' be drawn into this here at ts.com. I am happy to keep sharing Thai stock, investor and other select added value comments with vigor. My view is to remain invested and stick it through and even view set backs as buying opportunities but only in select/favored value shares with high dividends, as always.
The reason I get a bit frustrated like many of you, is the almost always daily characterization of problems here while then not balancing these with different grave problems in the West, but which we don't have here. Just a few days ago I read the rating US agencies will be investigated (Moody's etc..), its inconceivable to me and is to any educated Thai business person here how this was allowed to happen at such high levels over there -and how these agencies single handedly just about ignited a banking collapse -and so the world running amiss. Surely we here don’t have that sophistical baloney here.
Take Phoenix Arizona and Juarez (spelling?) Mexico. This is declared by CNN "the most dangerous area/town in the world" with unsolved killings every day on drugs, money and guns. Or the West side of Chicago, where teenagers are gunned down daily without anybody then talking, as they are so afraid in being next so its an escalating problem of criminal terrorism which goes on and on.
As to stocks, one must appreciate how lower priced they already are....I mean Thailand has triple USA’s or EU dividend yields, no financial leverage to speak of, half or less the p/e ratio's and price to book values...and yet double the likely long term economic earnings growth rates, all as compared to so many other countries. You got to go to Africa, or Pakistan, to find stocks as cheap as I can uncover them here....and Thailand is no Africa or Pakistan! This apparent stock discount attributed is under-appreciated by many novice/new investors. The institutions understand it better but are limited by the relative small capitalization size of the SET.
It is like the boy whom argues with his twin brother how much better the BMW is vs. the Volkswagen, but then forgets to mention that the BMW costs 3-4 times as much! Its all a matter of balance. Stock prices as compared to earnings/growth rates and dividends are incredibly cheap here and discount allot already, if things get just a bit better there should be a rebound. When the news is horrible and markets don't go down much anymore, it is very likely a good sign! It seems to me we are at this point.
A member who joined 2-3 years ago writes me that he has to date preserved his capital, but a bit disappointed he still does not show any profits and of course the price volatility he endured along. This so, even while in year 2008 model I posted a 40% loss, but then in year 2009 showed a 102% recovery in my 2 just previous 6 month model portfolios. This member overlooks that in 2008 and 2009 we endure the worst financial crisis in a generation -and that many Westerners lost their life savings through homes, pensions plans, permanent job losses. Anyway and inclusive of dividends today I think he is more in the black on his portfolio then ever before.
To have preserved one’s capital and this in a firmer currency, at such historical bad times, is no underachievement. While noting that both the US and now EU crisis were homegrown in the West. Along with the EU currency weakness now, its clear today that the big risks of late in currency as in stocks have been coming from the big developed countries. Comparatively this investor/member did OK, even while he started investing just as the biggest global financial crisis began. You are suposed to get going before things are all upbeat.
This made me think of some of the investor fallacies/mistakes we must all beware of:
Why do so many only get going in shares when things look bright and stocks are high already? They want to buy high and sell higher, but you are supposed to buy low and sell high. Time and time again we see this mistake in our profession. By the end of year 2003, ts.com had more members then ever before and ever since, why? Because it was the year the SET was the best performing stock market in the world.
It’s a bit like the 60 year old which awaits heart problems before starting to exercise, its no secret: you got to get going before. Rational investors must buy when securities appear undervalued which often means when the overall news is not good…like now.
The other mistake I see, is as I call it, “long term investor inertia”.
Its can be a disease always worth being aware of. Of course there are other times when I was well too early in selling out as it paid to just hold on, just look/remember BANPU. Yet, I remain of the view it pays to attempt to remove laggards even if it risks getting out at the bottom. Same with big winners, take some profits. On loosers, it may mean dribbling out over days/weeks as the daily volume is then low. Just look at LVT, UEC and TRC as one recent example were I wrote late last year to just sell out. In LVT we posted some profit very nice profits and I never looked back.
Do not just hold on by refusing to take a loss. We all make mistakes, I have made plenty…but the key is in trying in not having a big disaster on hand which cracks the other picks good performance. When I interviewed with Morgan Stanley one of the key questions they asked me was, “what was your worst investment you ever made and what did you do about it?” A great question because often one big mistake kills so many good decisions -at the same time if you never had any looser you probably where not really investing.
For sure we all sooner or later, over time, have creeping up duds in our stock portfolios. The problem of course is that we don’t know it, until often it is too late. Anyone who hopes to invest in a diversified portfolio never expecting to have a dud, is just unrealistic -or far too conservative. As this is just part of investing. They key is how long we hold on to them and/or how we best deal with these loosers, that is if we can recognize them,…and your original cost price has very little to do with this decision.
A great company can be a bad stock investment if things are just no longer so great. For example, NOKIA which is one of the worlds greatest mobile phone company lost 2/3 of its value over the past 10 years as things are still good, but no longer that great. Or, just now the Thai SET were this index is stagnant for a while despite all the bad news of late, if things get just a bit less bad, as I now think, a rally will manifest.
The opposite of this is in not letting go of winners too early. While I did state from time to time here that when a stock shows a 50% profit, I almost always view to sell half. This is especially true if the move up occurred in a short while. Surely there are exceptions (like STA, a previous model port selection, which increased 4 fold in the past 6 months). Yet often this has been a good rule of thumb. Still, I stress, it is critical to not sell winners while keep on holding the laggards. Example STPI (20.4), a model portfolio selection where we did a long company review a couple of months ago. This stock, including the 1.50 dividend, is now up over 50%, I so would be tempted to take some profits. (But not around 18 as one member asked me about last week).
They key is in not being too early as winners have to make up for some of the invariable duds we all endure, this is worth repeating. Last year this worked well with LVT where I am glad to have walked away around 3 Baht, as viewed back then. There have been many other examples over the years.
Beyond this, I don’t’ like to discuss investor strategy at length & precision because there can be exceptions and sudden news events changing things. I cannot here tailor fit decisions. There simply are no hard rules and so its important to remain tuned. Like a new opportunity/idea comes along as I am always searching...i.e., what to do with profits realized. Here postings to our active member-lounge can be timely and so helpfull added value.
Sometimes its wise to sell out some on a sudden price purge, only to then buy it back cheaper at a lower price, but if this is the strategy enter your buy-back order in right away. Recently I did this so a number of times this year with HANA, then if I lost some due to further price gains, I still have a good position on hand. Such sporadic trades on big price surges can add a significant amount to the total performance, but it assumes you follow the markets more closely, as I do to the benefit of members.
Some would state such strategy is risky because there is so a chance to loose part of the original position, that is if the stock rockets up even more. Perhaps due to my broker background along with 30,000 hours of clocked observing/investing I know this part better?
We must try to clone successes and this is mostly done by reducing if not eliminating laggards. This while at the same time accepting that patience can be a virtue. But when is this so? Here lies the art and ability to superior long term returns which also means bowing ones head; that is its ok to be wrong in front of Mr. Market and still beat him. Some investors like to always use stop loss orders but there are dangers here in loosing your position. Stop loss orders are mighty important if you have a trading strategy in place, which here I don't.
Every investor is different and so giving general strategies seems wiser. Thai stocks can and are volatile even while irrational, so at times its wise to take advantage of that by just selling out some on such surges. Nobody ever went broke taking a nice profit. STPI this week? The 50% rule (incls. Dividends) stands. (Sell ½ out at a 50% profit). Members stay tuned and registered users try to get to know us better as I can and have made a difference.
Best Regards,
Paul Renaud
