The recent Dow sell off had sent shockwaves around the world. The sell off has triggered the 10% stop loss for Emperor Capital. Also, the sell off created many major opportunities for us to pick up undervalued stocks, mainly, Capitaland & Yanlord Land.
Capitaland have been on our watchlist for a long long time. It’s a strong blue chip stock in the property development industry which we believe will benefit from the recovery in property prices this year. Furthermore, Capitaland is grossly undervalued for a blue chip company. With a PE of 9.75 and NAV of $4.38, it gives us a huge margin of safety at our entry price of $3.60.
As we can see from Capitaland’s chart, it has hit a high of $3.87 in January 2018 in speculation that the property sector in Singapore will rebound. The trend is similar across many developers like City Developments, UOL and many more. The Dow panic caused it to drop all the way down from the peak to the support level at $3.45. Recovery in prices and frequent share buybacks by the Capitaland’s management up to $3.67 per share prompted us to enter this stock with it’s juicy margin of safety and potential rerating of the stock.
As for Yanlord Land, it was a case of insider buying and the perfect Dow crash that prompted us to look at it. Yanlord Land is also a property developer listed in the SGX, however most of their businesses are in mainland China. As it is an S-Chip, we were especially careful when researching and limited our risk by allocating a smaller portion to it.
The CEO bought back the shares aggressively from $1.58 all the way to $1.886 spending more than $5 million on Yanlord shares. That prompted us to dig deeper into the company. We realised that their 9M2017 results were actually fantastic and we were speculating that the FY result will be even better considering the CEO major buying of the shares.
Also with a PE of 5.7 and a NAV of $2.252, it presents us a juicy margin of safety as well. Knowing that the CEO bought so many shares, we entered Yanlord at $1.60. True enough, the FY results was good and they declared a higher dividend for the year. What we are speculating for Yanlord is that the CEO could be trying to privatise the company given the good business and how undervalued his company is right now. Only time will tell if this is true.
having a watchlist of stocks and to capitalise on the stock market panic have gave us a favourable entry into these 2 stocks. As the saying goes, buy when others are fearful and sell when others are greedy. In actual fact it is never easy to do so. It was actually the clear margin of safety that gave us the conviction to enter the market when it is still suffering from the sell off.