Friday, 5 February 2016

Things I do not invest in.

Its always important to define your 'circle of competence', in addition to that, its even better to understand your limitations.

Look, I'm a 24 year old guy, been investing for 4 years have some experience looking at stocks and listening to analyst calls. But thats about it. Making huge calls on where the economy is going and predicting earnings on complicated companies are wayyyy out of my depth.

Of course that means passing up some (alot) of opportunities here and there but its fine. I'm perfectly happy to sit still and do nothing, then assuming that i know everything.

So here's a list of industries that I don't invest in.

Banks
Besides the line 'the P/B ratio of Sg banks are now < 1, the first time in 5 years or whatever' I have no other good reason to invest in them.
Do I have a clue where NIM's are going?
Do i know how the china slowdown is gg to affect NPL?
Or the weakening business climate and slowing property market affecting loan growth?

Not a clue

Do I want to find out? Ain't nobody got time for that!

Insurance
Even more complicated than banks, and sticking to my true form of failing to not recognize my limitations, i invested in AIA, will be looking to see when can i exit this dumb mistake.

Industrials (O & G)
Making a long term investment in industrials is all about catching economic cycles, oil price cycles (for O & G companies), as usual I can't even predict my lunch for tmr, I'm not expecting to predict when the next cycle is going to happen. Although I do have a hunch (we all do), I don't feel comfortable putting $5000 in it

Commodities 
Look if i want to gamble (a.k.a buy noble stock) I might as well wait for CNY blackjack, its much more fun.

Property
Same as banks, Besides the line 'the P/NAV ratio of property companies are now < 1' I don't have much insights on who is selling what, whether the government is relaxing its 12 cooling measures, so on and so forth.

Tech
Although if you closed your eyes, bought Facebook stock when it IPO-ed without reading a single shit or with the logic 'because Facebook is everywhere' you would have more than doubled your money, I never seem to be able to do that.

Things I do invest in

Telcos
Yes, with the 'forever new entry of the 4th telco', this industry isn't as steady as it used to be, but your dividends, earnings, valuation can still be easily predicted.

Consumer staples
Mostly for large branded companies like (Dollar General, Coke, Sherwin Williams in U.S) you can't really go that far wrong in predicting what earnings growth next year will be when it has been growing 5ish% for the past 5 years (hint: its going to be around 5%)


Healthcare
Same, especially if you are the middleman (hospital or pharmacist). Steady growth, easy to understand business.

Reits
Ok this one doesn't quite fit because it is tied to the property market and general economy, but with a payout that doesn't fluctuate much and easy to understand earnings (I mean they already own the buildings not sell new ones) valuation is easy. 

Tollbooths
Waste management services, exchanges, payment services are all tollbooths.
You have to use them, so the volume they get doesn't really fluctate
The charge per transaction is mostly fixed
The cost are fixed too, they already built the booth

So this is shown in most of my holdings (past/present) which shows you how I invest or screw up.

Past holdings
Visa (tollbooth)
SGX  (tollbooth)
Raffles Med (healthcare)
Shengsiong  (Consumer)
Coke (Consumer)
Aims Capital  (Reit)

Current Holdings
Keppel reit (reit)
cache logistics (reit)
oue h-trust (reit)
AIA (screw up)
Dollar General (consumer)
Sherwin Williams (consumer)
Fedex (consumer)
Stericycle (healthcare)
CVS (healthcare)

2 comments:

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