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Post by oldman on Oct 23, 2013 11:34:02 GMT 7
.... The second phase is when the company transforms with the entry of new controlling shareholders.... Sometimes new controlling shareholders might have short term effect on the stock price, with syndicates taking opportunity to push up the price to unload. If one is interested in the stock, it might be better to buy after the hype has settled down, rather than joining the herd and get chopped. Spot on. Herein lies the challenge of investing before the herd. Once the transformation takes place, the investor has to decide whether this is for real or whether this is just a short run up. This will determine whether he sells into strength or whether he will continue buying even more. Let me share this experience. I originally invested in Eng Wah because the cinema chain had lots of strategically located properties hosting its cinema business. Most of these properties were badly undervalued and if I recall correctly, the fair value of the properties would have been in excess of 30cts per share when the shares were trading at around 6cts. Then, in May 2007 Eng Wah announced a reverse take over by TransCu and the share price rocketed to 18 cts. The management of Eng Wah was allowed to then take out the existing business plus its properties. Although the share price went up 3 fold, it was not my preferred option as I was looking forward to a 30cts exit once the original properties were revalued. But in investing in listed companies, one has to realise that he has no control over these decisions and one simply has to make the best out of the situation. I then looked at the business of Transcu and decided that this was not in my area of competency as I knew how difficult it was to find serious financing for a biotech company. Hence, I exited at around 16cts and many questioned my decision to jump off the ship when it was just about to sail. 5 years later, Transcu is trading at 0.6cts. Hence, at every transformation of a company, one has to have a clear mind and relook at the fundamentals of the company completely and make decisions based on his judgement of the new business. Much as I liked the original fundamentals of Eng Wah, I cannot be sentimental when I make such investment decisions.  |
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Post by oldman on Oct 24, 2013 6:41:15 GMT 7
If I invest in an entrepreneur but unfortunately, he then expires, I am most likely to liquidate my shares... not immediately but over time. The reason I invested is no longer valid. If I continue holding on to the stock, it is more like wishful thinking that whoever takes over him will do an equally good job. Whether this person is related to the deceased is really irrelevant. I invested in New Wave recently and unfortunately, the CEO died unexpectedly (he was in his late fifties). Though he was not the main reason I invested in New Wave, he was still one of the reasons I made the investment. As he owned a significant percentage of the company, one possibility was that someone else may take over the stake. One can then hope that this new person can transform the company even quicker. But I am not one who invest based on hope and the unknown. When the news of his death was first announcement, the share price went down. Then, it slowly climbed up as there was probably hope of change in the stake of the substantial shareholder. When the share price doubled a few months later, I took the opportunity to unload all my shares. The shares then ran up even more but I was already happy that I was able to liquidate my position and make a good profit out of this unfortunate incident. ----------------------- Oldman, I agreed with what you said. But there are problems with top entrepreneur that is already old. Take for example, Yeoh Tiong Lay of YTL Corp Malaysia. The fear that after his departure, his management team might tumble as his business diversified. Read more: pertama.freeforums.net/#ixzz2iahUVMPu |
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Post by oldman on Jul 27, 2015 10:45:27 GMT 7
I have tweaked my investment strategy over the years and now, I will only invest in companies that are run by top entrepreneurs who are wealthy enough and unlikely to want to take advantage of minority shareholders. The other situation that I will invest in are companies that are undergoing transformations in which I think will result in very profitable companies in the years ahead. I no longer want to invest in companies just because their NAV is significantly more than their current share price. I have experienced a number of situations where such company management bought silly investments and what was previously a fundamentally sound company became a money losing company with negative assets..... and all these can happen overnight. Yes, management is usually very smart but being smart does not mean that they will not look after their interests first, at the expense of minority shareholders. It was on these basis that I am no longer a shareholder in Powermatic Data Systems. Fundamentally, the company is very sound. However, I do feel that I am at the mercy of management. I have engaged management for over 8 years and am happy that they eventually gave out 1ct dividend every year. As I bought many of my shares below 10cts, it was a a decent return of capital considering the yearly dividends and the current share price of around 18.5cts. I decided to exit everything when management recommended a 5 for 1 consolidation. All they really require is a 2 for 1 consolidation as the lowest the share price went was around 10cts in the past 8 years. This is especially true if liquidity is already a current issue. As this company is fundamentally very strong, there are likely to be many supporters before it were ever to reach 10cts. Also, a more enthusiastic company buyback should mantain the share price well. I am a supply and demand investor and I don't like it when the supply will be sucked up by a heavy consolidation, especially so when I own quite a number of shares before. Saying all that, I wish all current investors in Powermatic Data Systems well and I do sincerely hope that the price goes up further. Key to me is that I moved away from this company because my investment strategy has changed.  |
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Post by hope on Jul 27, 2015 11:01:55 GMT 7
Bro Oldman
Thanks for your sharing. I learn alot from you.
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