[Building Blocks]: 3 useful online resources to help with your investing journey

Living in a world connected by the internet means information are widely available just a few clicks away. No doubt, I myself have benefited immensely from the information I found online. Today, I want to share with you some of the useful online resources that will definitely be of help to your investing journey.

1) Investopedia

Investopedia was the very first website that I visited to understand more about investing. It is like a huge encyclopedia on anything related to finance. I would say that it is easily one of the top few investing websites that are easy to understand and well organised. Not only are there information on investing, there are information on current affairs, insurance and many more. The only down side of this is that it mainly focuses on the US markets. However I would recommend this website for beginners wanting to invest because their beginners’ tutorials are very comprehensive and easy to understand.

You can find tons of tutorials about investing at this website.

And if you are still clueless where to start from, I have compounded a list of tutorials from Investopedia that you should start with. Click on the link below for you to be teleported there haha.

1. Investing Basics 101: A tutorial for beginner investors 
2. Stock Basics Tutorial
3. Bonds Basics Tutorial
4. Mutual Funds Tutorial
5. Introduction to Fundamental Analysis
6. Basics of Technical Analysis

Here you go. Starting out with these few tutorials should allow you to understand investing clearer. If in doubt you can always drop a comment below and I will answer to them 🙂

2) InvestingNote

Think of InvestingNote like a Facebook for investors. It boast a huge collection of users ranging from beginner investors to the very experienced ones. Interestingly, this platform is set up by Singaporeans and was only launched recently. The community in InvestingNote is fantastic as many are willing to share about their strategies and styles of investing. What’s more? You can also find out more about the stocks you are interested in, like the information of the company, what other investors are talking about that stock etc etc.

For instance, if you are trying to find out more about Japfa, you can get a summarised information on Japfa’s price actions, fundamentals and financials on the left and the chart of Japfa on the right. Personally, I find InvestingNote’s charting platform to be one of the best. It allows you to plot your own lines, overlay them with a myriad of indicators and you can even save your drawings on the chart.

Scrolling down further, you can see what are some of the things other users are talking about and the upcoming events the company may have. It currently have information on companies in the SG, US and HK markets. But many of the users of InvestingNote mainly talk about SG stocks which are good for new investors looking to go into the local market.

What’s more important is that you can get these amazing features for FREE. All you have to do is to sign up with them. It seems like I am doing an advertisement for them haha. Rest assured I am not paid to do this. For me, this platform have really accelerated my learning on investing and hence I thought of promoting it to you guys.

3) Investment Blogs

Many investors do have their own blogs where they document their own investment experiences. Some of them are so influential that some investors buy whatever they preach. Personally, some of the blogs that I have came about have helped me in terms of understanding how different investors analyse a company, their investment strategies etc.

I think what’s really beneficial about learning from investment blogs is learning the way others analyse a company. By reading their investment thesis on certain companies, you can understand the way they think which you can apply when you are analysing the company you are planning to invest.

Here’s an article on 55 SG Financial Blogs that are useful.

For me I am a regular reader of TTI, thelittlesnowball, my15hourworkweek and TUBinvesting.

Do give them a visit! 🙂

In conclusion,

good resources are everywhere on the internet. Use it to propel your investment knowledge as much as possible. You will realise that you may not have to even pay a dime to attend courses which teach you about the basics of investing. Also, the best way to learn is from each other. Hence, I believe InvestingNote and reading of other investors’ blogs are two good ways to deepen your understanding of investing. Do note that everyone have their unique styles of investing, different upfront capital and different investment objectives. Thus, completely copying someone else’s method may not suit you. I would suggest adopting good practices and incorporate it into your own method of investing. Hopefully this post can help you realise some of the good investing resources online that will be beneficial to your investing journey!

[My Story]: How I managed to regain all my losses with one solid stock

Hi everyone, it’s been about 3 weeks since I last posted. Was away for a military exercise in Thailand. A lot have happened while I was in Thailand, the weather was crazily hot, GID outbreak in camp and I also sold one of my stock holding that gave me a 100 percent return on investment. The profits made from that investment was able to cover out all my losses incurred when I just started out investing. Today, I will be sharing more about the characteristics of that stock and the things I have learnt from this episode.

1) 100% return in just 3 months?!

Yup I was equally surprised! Some of you may have noticed that in most of my recent posts, I have been using AEM Holdings as an example. Yup this is the company that have became my very first multibagger (a stock that returns more than 100%). It all started out when I was screening for low PE stocks in the SGX. (Value approach). This company popped out in the screener which caught my eye. It has innovated a cutting edge product that no one in the world has been able to and back then its PE was less than 10 (relatively undervalued). The company have also just returned to making profits and are planning to ramp up the production of this product which means that further earnings growth is guaranteed.

Since it fulfills the basic principles I set out for a fundamentally sound company and I read an interesting piece of analysis by the guys over at thelittlesnowball.com which reaffirmed my beliefs, I vested into the company at $0.885 per share.

From the chart, I entered AEM at $0.885 per share, added more shares at $1.055, before selling them at $2. If you were wondering why did I decide to sell it instead of holding onto it longer, it was because this stock was about 60% of my portfolio. I have about $2000 invested in it. As this stock catches the attention of more people, it will become more volatile as big players come into the fray. Since I am just a small fish in this, I decided to take the money off the table and only enter again when there is a dip in prices.

Not all company can be like AEM, which gives a 100% return in just 3 months but there are certain characteristics that the company possessed.

1. Growing earnings
2. No debt
3. Frequent share buybacks
4. Undervalued

and most importantly it has major catalysts (in the form of their cutting edge products) coming its way.

2) Lesson learnt from this episode

I think the most important lesson I learnt from this episode is to be consistent in your approach. A lot of times, young investors like us tend to be swayed by our emotions. For instance, chasing the next hot stock etc etc. When we are swayed by our emotions, we tend to forget all the framework that we set in place for ourselves. Hence being consistent in our approach and calm minded are very important when we are investing.

This episode also shows that you do not need to be in many trades to profit from investing. Sometimes, all you need is that 1 stock to do the magic. Hence, when you are disappointed because you had to be force to exit a stock due to the stop loss in placed, remember that 1 win can easily make up for many small losses if you exit them early. Personally, I was down about $600 since I started investing and this was still when I didn’t learn to cut loss. In that $600 includes the 70% lost incurred from my Noble’s debacle. I am glad that my revised approach, have led me to recover from my losses and rake in a small profit.

In conclusion,

I would like to say that not all stocks can be like AEM. However, many stocks do have some resemblance to it. With enough due diligence, and a small leap of faith you may just stumble upon the next AEM. Most importantly, do not forget the framework you built for yourself while investing. Personally that has been the most important rule that led me to find this undervalued gem!

 

[Eye Candy]: Addvalue Tech’s 3Q results

It’s been some time since Addvalue Tech (AT) have announced their 3Q 2017 results. I thought its about right to do an analysis on AT’s 3Q results to see if they are on track for a turnaround as mentioned in my thesis.

Income Statement

Revenue was down in 3Q17, however 9M17 showed a 66.6% increase in revenue helped by the increase in revenue registered in 1H2017. I tried searching up 3Q results for the past 2 FYs which did not show any relations with 3Q being their weaker Q of their FY. Hence, I do not believe that their weaker showing in 3Q is due to seasonality factor. From the looks of it, AT is still not recording enough sales of their products and the effects of some of its catalysts have not kicked in yet.

The management has promised in several of their earnings statements that they are focusing on cutting costs which can be seen in the recent Q. In the blue box, it shows that the management is committed to what they said with regards to cutting down on expenses.

Net profit for the 3Q period was a loss of about 1m, while 9M17 is better compared to 9M16 despite still being in a loss.

 

 

Balance Sheet

Not much has improved in their assets, cash and cash equivalents drop by about 50% which shows that AT’s business continues to burn cash. Trade receivables and inventories are lower as well which could be an indication that subsequent 4Q’s results may not be good as well.

We can see a substantial reduction of their debt as of 31 Dec 2017. As announced by the company, they used the money raised from the rights issue to pay off their debt.

Overall, balance sheet has not improved much since my previous analysis. Fundamentally, the company is not doing well.

 

Cash Flow Statement

The business continue to register negative cash flow from operations, which means that cash is not coming into the company from the product they sell. Even after accounting for depreciation and amortization, AT still recorded a loss. This shows the inherent business is not doing well. Sales of their products cannot overcome the costs involved.

From the cash flow from financing activities, we can see that AT took a 512k loan, which was reflected in the balance sheet above. 9M 2017’s liabilities reflected a 523k in borrowings, which showed that the bulk of the money was borrowed in 3Q17. Furthermore with borrowings > cash & cash equivalents, it reinforces the notion that money continues to be borrowed to finance the company’s operations. This could be a slippery slope, if AT do not record enough cash flow from operations in time to come, as more borrowings will be required to sustain the company. If this gloomy prediction is true, we could see it’s debts balloon up again and calling for another rights issue could be imminent.

Overall, their cash flow remains a huge concern for them.

 

SWOT Analysis

Strengths

The company’s strength still lies in them being an industry leader in satellite communications terminal. Their R&D ability is strong given the example of the IDRS. Their partnerships with various big satellite players like Inmarsat and Thuraya is one advantage to their business.

Weakness

The company’s financial health remain to be a headache for investors. Weak balance sheet, escalating borrowings, coupled with poor cash flow will pull down the company if things do not start to change.

Opportunities

As I mentioned in my previous post on AT, the company have many potential catalysts in place. Their stronger foothold in China through the One Belt, One Road initiative, the development of the new IDRS product which will clock them airtime revenue and the possible disposal of their subsidiary AVC. I wouldn’t put my money on the disposal as it has been delayed for 3 years now. What I see potential in is the venture into China’s market and the new IDRS product. China’s One Belt One Road initiative would see construction of massive infrastructure around the globe and some of these places like deserts have poor communication networks. This is where AT could play a pivotal role in providing their products. Given the massive scale of the project, I believe the venture into China would be a massive lift in their revenue in time to come. The new IDRS product being the first in the world which allows operators of LEO satellites to constantly keep in contact with their satellites can give them an early advantage into the market. In some of their announcements, it was mentioned that airtime revenues will be given to AT which will provide recurring revenue in time to come.

Threats

While all the potential catalysts paint a rosy picture on the company’s outlook, the inherent weak financial health will constantly threaten the company. Many of their catalysts have not been in effect yet as shown by their dismal 3Q showing. But the main problem will be if they are able to capitalise on them. AT have all along been a strong R&D company, however, their inconsistent earnings showed that they have not been able to fully capitalise on their innovations. Weak revenue figures only emphasise that although AT’s products are amazing, it has not been able to either market it well or it has not address the customers’ needs.

In conclusion,

if anyone were to enter a position into AT now, it would be a punt for good developments within the company or a deliberate play by BBs as the company stock prices are around the lowest ever it has recorded. For long term investors, it would be good to enter into AT after some of their catalysts have come into place which should give them a stronger earnings record. Personally, I love company that have new cutting edge products as this would mean market monopoly and strong earnings but for AT we will still need to observe closely before taking any concrete actions. This should be my last post for a while, as I am going to Thailand for a military exercise. Won’t be posting for some time. Till then, good bye! 🙂

 

[Building Blocks]: Dissecting the Annual Report (Part 2)

Hi all, today I will be continuing with Part 2 of Dissecting the Annual Report. In part 1, I shared about some ways to dissect the annual report in order to find the information that you need. For those who missed it, you can read Part 1 here. Today, I will be going more in depth into the financial statements portion of the annual report. The financial statements in the annual report is an important piece of document that shed light on how the company is doing and challenges that the company may face.

The financial statements in the annual report always consist of 1) the Balance Sheet, 2) the Income Statement, 3) the Cash Flow statement and 4) the Statement of Equity. We will focus on the first 3 as the statement of equity is used less frequently.

My Strategy

Whenever I look into the financial statements of any company, I do it for 2 reasons. It’s either to identify if the company is fundamentally sound to invest or to evaluate the financial health of a company after every earnings report season that I am already vested in.

When deciding if a company is fundamentally sound, I would look for stability of earnings, debts level and their cash flow which I wrote about here. After, confirming that the company is a fundamentally sound company, I will scrutinise their financial statements further for any abnormal figures. This can come in the form sudden increase when compared to previous year’s figures or extremely high figures. As for companies that I am already vested, I always try to look out for abnormal figures when compared to the previous year.

By doing so, I am able to detect any drastic change that may happen to a company. This is because any abnormal figures usually have a huge impact on the company. For instance, when the company suddenly register a 50% decrease in Cash & Cash Equivalents in their balance sheet, you must find out what did the company spent the money on. Is it for expansion or paying down debts? Will this affect their operations etc etc. Hence it is important to always find out about abnormal figures that may puzzle you when you read their financial statements.

Alright, with that aside, we shall dive deeper into the financial statements. I will share with you the important things to look at and some basic calculations you can make to better understand the financial health of the company.

1) Income Statement

Let’s start with the income statement. The income statement is basically a summary of profit and loss for the company. It documents the revenue and expenses for the specific accounting period.

The above is an example of the income statement of a company.

Things to know:

• Revenue – a gauge of the amount of sales (look for stable or increasing revenue)
• Gross Profit  – this is obtained after subtracting costs of goods from their revenue.
• Gross Profit Margin – this is obtained from dividing the gross profit by the revenue (High GPM shows that the company have some form of competitive advantage over their rivals)
• Operating Expenses – which consists of all expenditures that are not directly associated with the production of the good or services. Expenses like R&D costs, depreciation, amortization etc (Companies with durable competitive advantage have consistent operating expenses)
• Earnings Per Share — EPS is based on net profit attributable to shareholders after deducting any provision for preference dividends and then divided by total shares outstanding. (An increasing or consistent EPS is always preferred)

 

The income statement is important in telling me if the company’s business have a form of moat around it and also if the company have been able to keep costs low.

 

2) Balance Sheet

The balance sheet documents the assets, liabilities and the shareholders’ equity of a business at a particular point of time.

Things to note in a balance sheet:

1. total assets = total liabilities + total equity
2. Current assets refer to assets that can be liquidated into cash within a year
3. Current liabilities refer to the money to be paid in less than a year
4. Non-current assets refer to assets that takes more than a year to be converted to cash. For eg, property, factory buildings etc
5. Non-current liabilities refer to the money payable after 1 year.
6. Shareholders’ equity refer to the net worth of the company
7. Current Ratio calculates the company’s abilities to meet their short term obligations. (Current Ratio = Current assets divided by Current Liabilities)

 

Important values:

• Cash & Cash Equivalents > Total Debts – I always try to ensure that the company have enough cash on hand to pay off their total debts. An over-leveraged company is a troublesome company.
• Current Ratio > 1.5

 

For me, the balance sheet is important in telling me if the company will have a problem of paying their dues.

3) Cash Flow Statement

The cash flow statement records the cash inflow and outflow of a business. The cash flow statement shows how changes in the balance sheet and the income statement affects the cash and cash equivalents.

It consists of 3 parts. 1) Cash flow from Operating Activities which records the net cash into or out of the business from their main operations. 2) Cash flow from investing activities which records the cash movement from the company’s investment. For instance, purchase or sale of a property, subsidiary etc. 3) Cash flow from financing activities records the cash movement of financing activities in the company.

Cash Flow from Operating Activities

A positive cash flow from operating activities means that cash is flowing into the company from their business. This means that net of all the expenses, the company is receiving cash from the products they sell. This is important as you want a company to take in cash from the products they sell. A company with consistent negative cash flow from operating activities is burning through cash fast and may need to take on debt in the future to finance their expenses. Hence, we would want a company to have positive cash flow from operating activities.

Cash Flow from Investing Activities

Purchase of assets, company investing their money in the market etc. These are all counted as cash outflow from investing activities. Sale of an asset etc will be register as an inflow. This section can tell you if the company is spending money to expand their current infrastructure or expanding capacity through higher capital expenditures.

Cash Flow from Financing Activities

Financing activities include payment of dividends to shareholders, paying off debts, money used in share buyback etc. In this section, you will be able to find out what the cash is used for in their financial activities. For instance, a negative cash flow from financing activities can mean that the company is paying off its debt. A positive cash flow from financing activities could mean that the company is raising money through selling new shares in the market etc.

The sum of all three sections above will give the net change in cash and cash equivalents which will be added to the amount of cash they have at the beginning of the year. By understanding the functions of the different sections of the cash flow statement we can better understand what the company is doing with their cash.

Disclaimer

Not all companies’ financial statements follow to the template I describe above. A lot of them have to be evaluated in the context of their business. For instance, although I emphasised a lot on positive cash flow from operating activities,.property developers would register most of their cash flow in the investing portion than operating activities when they sell a completed property project. Hence, the financial statement should be read in context with the industry the company is in.

In conclusion,

the financial statement is a powerful tool to better understand a company. In fact, I am also still in the process of further deepening my understanding of the financial statements. The management may coat investors with nice narratives about the brilliance of the company but you can always cross check what the company is saying with their financial statements to gauge their reliability. Understanding the financial statements will definitely level up your investing many folds! 🙂