Looking at stocks vs companies

It has been a hectic week for me. Next week’s schedule would be more hectic. Finally have some time to write something. I enjoy reading up news on companies, and articles on value investing.

“Lethargy bordering on sloth remains the cornerstone of our investment style: This year we neither bought nor sold a share of five of our six major holdings.”   — Warren Buffett 1990 letter to shareholders

The principle of value investing I feel runs contrary to how I normally deal with work. For my work, action normally brings rewards (nobody is gonna pay you for doing nothing). However, in investing, often it is inaction that pays the bigger reward (rather than trading frequently). Nevertheless, time is required to study and read up on the companies you are investing in, and to know as much as you can about them (but not too much – otherwise you may be too attached to the company to see its flaws).

“If you buy a business just because it’s undervalued, than you have to worry about selling it when it reaches its intrinsic value. That’s hard. But if you can buy a few great companies, then you can sit on your ass. That’s a good thing.” Charlie Munger

Note: It is about companies and not stocks. So what is the difference, one may ask – aren’t they the same (sometimes I do use both the terms interchangeably).

Well, if I am to focus my attention on stocks, this past week would not be pleasant. Read here. For the past week, there were 4 consecutive days of losses, and overall my portfolio has suffered some minor paper losses. It is very hard predicting the swings of the market. I think I get more stressed thinking about it, and I definitely do not want to spend my weekend worrying about it. Nevertheless, there are stocks in my portfolio that went against the tide – eg. Riverstone and Sun Hung Kai.

However, if I read about the companies, things start to make more sense. Yup there are the unusual surprises when one read about the recent quarterly reports. Even if there are slight hiccups in the earnings, if one stretch the time horizon long, it would not look significant. While glancing through the recent quarterly earnings of the companies in my portfolio, I am glad to say that most did better (can’t say the same about the stock prices):

1) CapitaLand (read here) Slight dip in PATMI

2) SMRT (read hereSMRT posts profit of $91.0 million in FY2015 with improvement in Bus results, but Train suffers first ever quarterly loss.

3) Riverstone (read here and hereRiverstone’s net profit surges 68.6% to RM27.0 million for 1QFY2015 driven by increased demand and product mix 

Of course there are companies which did not have a good quarter. For instance Sarine Technologies. A 90% drop in net profit. Read here. That is expected when I bought the stock.

Like what Warren Buffett said – his favorite holding period is forever. Note- it is not buying any stock and holding forever. It is picking investments that can last forever. However, I doubt all my stocks in my current portfolio are the ‘right’ stocks. It is a never ending process to fine tune the portfolio, to weed out the bad from the good. To read up on any news you can find on the companies.

It is always not easy to sell stocks (esp. at a loss), and I will only sell when the fundamentals have deteriorated or when I need the cash for emergency or future opportunities eg. property or for creating a sizable war chest.

In gist, it was nice reading and writing a post during the weekend!

 

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About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat.
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