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Smallchange;Hotstocktip:Lookandlisten

26thFeb2012

TheStraitsTimes(TheSundayTimes)

ByGohEngYeow,SeniorCorrespondent

2012SingaporePressHoldingsLimited

Toknowwhattobuyandsell,itpaystoobserveconsumers'habits

Recently,Ireceivedaheart-rendinge-mailmessagefromadistraughtday-traderwho

lostabigfortuneintheturmoilthatrockedthestockmarketlastyear.

'Withmounting bills, and zero financial reserve left,andno job, the currentstateof

mind is like losing a wing man in Tom Cruise's Top Gun. Every day is a challenge

mentallyandphysicallytoputfoodonthetable.IneverthoughtIwouldendupinsuch

astatesinceIhadalwaysbeenprudentfinancially,'hewrote.

Forsomepeople,hismessageofdistresssimplyconfirmsthefolliesofinvestinginthe

stockmarket.Better tolockupthemoneyin thebankandthrowthekeyaway,they

wouldsay.Butthatwouldbetoocynicalanattitudetotake.Disastersdohappen,but

life goes on. And keeping hard cash is hardly the answer. Its value gets eroded by

inflationovertime.

As amarketswriter whose career started in the aftermath of the 1987Wall Street

crash, I get harried from time to time by friends and even strangers for stock tips.

Surely,theyargue,Imustbeprivytowhatisgoingon,withmywealthofcontacts.'Got

any stock tobuy ornot? Any inside information?' theywouldask. Theywould turn

awayindisbeliefwhenItellthemthatIdonotbuysharesoninsideinformationevenif

Ipossessany-andthatImakeaninvestmentonlyaftercarefulanalysis.

Still,itraisesonevalidquestion.Isitreallysodifficulttosniffoutagoodinvestment

opportunity?Doesonereallyhavetoploughthroughmountainsofannualreportsand

investmentresearchjusttofindtherightstockstoinvest?

Strangely enough, I find myself saying no, after reflecting on my own investment

experienceinthepast25years.Inoticethatsomeofmybestinvestmentideascome

fromobservingthehabitsofconsumers,includingmyself.

Oneofmybestinvestments-CerebosPacific-camebychance.Manyyearsago,Iwas

8/3/2019 Sharing Wisdom (27th Feb 2012)

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inaBangkokconveniencestorewhenaguywalkedintobuyhalfadozenbottlesof

Brand'sEssenceofChicken,thetonicmanufacturedbythecompany.Hedrankallof it

onthespot.

Thememorystayedwithme,andwhenthestockplummetedsomeyearslaterduetotheSarscrisisin2003,Ipickedupsomeofit,reckoningthatthesharewouldmakea

comeback,giventheloyaltyitsproductcommandedamongconsumers.Itturnedoutto

beagoodcall.

Thentherewasthemechanicwhoservicedmycarafewyearsago.Onthedaythat

Citigroup sankbelowUS$1 inMarch2009, Iwas athisworkshop, chattingwithhim

abouttheUSbank'splummetingshareprice,asmycarwasbeingrepaired.Butwhile

farmorefinanciallysavvyinvestorslikemyselfweretraumatisedbytheglobalcollapse

instockprices,mymechanicsawitasthebuyingopportunityofalifetime.'HowelsecanyoubuyoneCitibankshareforlessthanthecostofabowlofwontonnoodles?'he

said.

Hisinvestmentrationalemightsoundflawed,buthewasrewardedmanytimesover

whenCiti'ssharepricerecoveredinthenext12months.

TherewasalsothestrayobservationmadelastyearbyafriendatanHDBcoffeeshop

aboutthechanginghabitsatthediningtable.

'Look at the next table,' he said. I turned around to have a look, and saw a family

enjoying a meal. Nothing unusual about that. But what was unusual was that the

parentsandtheirsonwerenottalkingtooneanother.Instead,theywereeatingand

typingintotheiriPhonesatthesametime.

'Do you suppose theyhave forgotten how totalk,and they are now relatingtoone

anotherthroughtheiPhone?'myfriendwondered.

ItisascenewhichIseerepeatedoverandoveragain,whetherIaminacoffeeshopor

anupmarketrestaurant.

ButwhileImerelyswitchedtoaniPhone,likemillionsofotherphoneusers,myfriend

boughtApplesharesatwhatIconsideredtobeanastronomicalpriceofUS$320.With

Apple climbing close to US$520 (S$654), he has reaped a 60per cent profit on his

shares.

Ifeverydayobservationscangiverisetobuycalls,theycanalsoflagsellsignals.

One goodexamplewouldbe beleagueredUnited States photogiant EastmanKodak,whichfiledforbankruptcylastmonth.Asrecentlyas2007,ithadlookedunassailableas

8/3/2019 Sharing Wisdom (27th Feb 2012)

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it commanded amarket value of US$8.1 billion. That year, I bought my first digital

camera,andIneverlookedback,giventheconvenienceofstoringthephotoimageson

a hard disk instead of in a photo album. It was a change in photo-taking habits

experiencedbymillionsofotherphotographers.Soevenifyouwereadie-hardKodak

investor, itwouldhavebeentoughforyoutoignorethewritingonthewallthatthecompany'sdayswerenumbered.

AnothergoodexampleisJapaneseelectronicsgiantSonyCorporation.

When itreportedthe appointmentof Sony'snewboss,MrKazuoHirai,threeweeks

ago, The Economist noted that he was taking over the reins at a time when the

company had suffered four straight years of losses and had a TV division that lost

US$80oneachsetitsold.Youdonothavetobearocketscientisttoworkout Sony's

problems.TakeawalkdownanyelectronicsstoreandyouwillnoticehowcheapflatscreenLCDTVsetshavebecome.

WhenIboughtmyfirstLCDTVseteightyearsago,Ipaidnearly$3,000forit.Buta

brandnewsetwithfarmorefeaturesnowcostslessthan$1,000.Itmakesyouwonder

howanyfirmcanmakemoneyoutofmakingTVsets,nomatterhowmuchittrimsits

costs.

Ingivingalltheseexamples,thepointIwanttostressisthatinmakinganinvestment,

weshouldnotmissthewoodforthetrees.

Ratherthanchaseafterthenextso-calledsexycounterbecauseyouaregivenahot

stock tip, relax, take a deep breath and look around you. Sometimes, the best

investmentideasarerightinfrontofyou,ifyouonlypayattention.

Source:TheStraitsTimes,engyeow@sph.com.sg