*Pictures are available on the original site.

My 2018 review

Every year, I’ll try to read a number of books and pick a quote that really helped me in my investing. The quote that I’d liked to share for this year is a classic:

An investment operation is one which, upon thorough analysis, promises safety of principal and an adequate return. Operations not meeting these requirements are speculative.
- Benjamin Graham

This quote is an apt reflection of my investment view, which I will talk about below.

Business
Business has been bad in the construction industry and once again, I’m reminded why I don’t want to be in a company with high Capex and low pricing power. Aside from the cancellation of high speed rail, trade war and additional stamp duty, the threat of disruption is especially real for us right now.

Fundamental Scorecard underwent some pretty major changes this year. We’ve launched our newest scorecard, the Moat Scorecard, which is pretty awesome (you can check it out here!). The Moat scorecard allows one to identify companies with a competitive advantage and is suitable for long term holdings.

Investment
To me, investing is about putting money to work. I’ve always been on the look out for opportunities to exchange capital for return generating assets (no bitcoins) – i.e. they must have an intrinsic value.

When exchanging your capital for a source of cash flow, an investor should try to understand:
- where the cash flow is from (circle of competence)
- how much you are paying for it (valuation)
- how stable it is, future threats and growth (Moat / fundamentals)
- who is managing it (management)

A good opportunity would have the following criteria:
- A sustained high rate of return.
- A high rate of re-investment and opportunities for growth for compounding, failing which,
- A management that is good in capital allocation with history of increasing shareholder value by doing buybacks at the right price, or as a last resort gives out dividends.
- Have manageable leverage so that one feels comfortable holding it for long term.
- A price that provides both safety of principal and adequate return.

There is no substitute for buying quality assets and allowing them to compound over the long term. Patience can produce uncommon profits.
- Philip Carret

The Moat scorecard has been immensely useful for my own investing. Whenever I have any idea or read on any stock, I’ll just pop the scorecard up and take a look to see if something interest me. A monthly scan of the index also gives me a view on the market. Most importantly, it denies 80% of my speculative ideas by giving me a realistic view of the company.

Whatever methods you use to pick stocks, your success will depend on your ability to ignore the worries of the world long enough to allow your stocks to succeed. No matter how intelligent you are, it isn’t the head but the stomach that will determine your fate.
- Peter Lynch

Returns vs STI performance
*STI has dividend of around 3.5%, which you can add to the figures below.

2016 : 9.25% vs -0.07%
2017 : 69.77% vs 18.18%
2018: 31.69% vs -9.78%

Portfolio size

2016 : $90,000 including cash holding
2017: $155,000 including cash holding
2018: $205,000 including cash holding

Capital Injection
There was no capital injection for my portfolio in 2018 as I’ve started a US fund with a few friends. My returns are calculated on initial capital at start of the year + any capital injection.

E.g $10 return on $100 (starting capital) + $10 (capital injection) would be a return of 9.09%.

My thoughts
Working in a local SME forces me to be prudent. Earning below average wage with no / low pay raise, 1 month bonus (if lucky), a capped wage ceiling and lack of job security means I’ll have to invest properly.

My current portfolio is around $200,000 as compared to $150,000 at the start of the year. 32% is a spectacular result and I do not foresee myself achieving that in the near future since the market is no longer undervalued. In fact if I were to say it myself, a large part of these short term returns is due to luck.

Instead, I aim to achieve a long term return of about 8 – 10% for my current holdings. I am holding cash of around 12.5%.

For budding investors, I would recommend choosing an investment style suitable for your character. In the book The World’s 99 Greatest Investors, 50% of the 99 investors adopt a value based approach. You may have an advantage if you’re born with the disposition for value investing. Beyond that, it’s crucial to read and learn as much as you can to form a broad overview of the business and investing world. These forms the building blocks for your investment thesis.

Everyone has weakness. The main difference between unsuccessful and successful people is that unsuccessful people don’t find and address them, and successful people do. That is why, as one of our manager has observed, reflective people are much more successful than deflective people.
- Ray Dalio

Don’t be in a hurry and have a fear of missing out, even though it’s hard when everyone else around you seems to be making money. After all, it doesn’t matter how fast you run if you do not know where you are going.
Invest simply and focus on the fundamental.

Wishing all a Merry Christmas,

John

https://www.simpleinvestorsg.com/my-2018-r...

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25 likes
35 comments
kc_30

wow. your score card system is quite something. I'm also exploring a means of backtesting but so far it is difficult for me.

kyith

You damn strong

kyith

Reply to @Simpleinvestorsg : hmm i would have thought the markets are correcting right now so valuations should be more attractive.

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GrowthInvestor

mind sharing what stock u bought? why so secretive?

TUBInvesting

Reply to @GrowthInvestor : To be honest, my returns are not as great as him. His discipline is so much higher than me.

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CoryLogics

Simple Investor not Simple at all...

Simpleinvestorsg

Reply to @CoryLogics : Thank you, I try my best to simplify because it's hard to make
correct decisions when there are too many factors involved.

theintelligentinvestor

Wow, I am most impressed! CAGR of 34% will put you as world-class investor! I would love to know what you are holding.

Though it is over a relatively short 3 years and you are saying it was due to luck. But I don't think so, there must be something in your methods that you are doing it right. Especially 31% in this crazy year is really outstanding return. This is the type of returns that remind me of an unknown fund which started 1956 in Omaha! haha

theintelligentinvestor

Reply to @Simpleinvestorsg : Agree, having the right mindset is more important. We may be holding all different stocks in our portfolio. But if the principles are the same, ie buying with mos. Then in long run, the rewards will be there if we get it right.

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danteo

What kinda investing strategy do you adopt?

Simpleinvestorsg

Reply to @danteo : Value & quality. Quality would most probably drive long term returns.

lieck

i doubt you can achive the kind of return in Sg market...lol

lieck

Reply to @Simpleinvestorsg : wow I mistaken it as US equity return..bravo!

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kc2024

Congrats! Amazing performance for 3 consecutive years!

kc2024

Reply to @Simpleinvestorsg : Definitely on the right track.

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3Fs

Congrats for a fruitful year.

It's not been easy for you working and hustling around the market looking for undervalued companies and also starting a US fund.

Greater things are awaiting for you.

Simpleinvestorsg

Reply to @3Fs : Thanks 3F, you always have kind words for everyone! I've benefited lots from your open sharing as well.

minx99

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