Dear Fund Investors/IOU Holders,
Introduction
Firstly, a brief update on the key matters that occurred during the year.
As all of you are aware, on the 7th of March, we have adopted the “Fund Unit” method of tracking returns. Working backwards from that date, the extrapolated value of the fund units at each milestone is as per the table below.
Inception of Fund - 21 March 2017: RM1.007
End of first year - 3 January 2018: RM1.130
Today - 30 June 2018: RM0.966
In addition to the above, moving forward, the fund will be using the FBMEMAS Index instead of the KLSE Index to track performance.
Why the change?
As some of you may be aware, the KLSE Index only tracks the prices of the top 30 largest listed companies in Malaysia. As the Malaysian stock market consist of more than 950 companies, it’s scarcely a fair representative of the class of assets invested by the fund, which do not include these 30 companies.
Personally, the fund tends to swim in the waters populated by the small to mid-sized companies. This is not due to an aversion to the top 30 companies, nor a proclivity to the small and medium sized companies.
It just so happens that the lack of coverage by analyst as well as institutional funds in these areas, statistically ensured a greater probability for obtaining value, and thus far, investments that have meet the fund’s investment criteria have come solely from this area.
The FBMEMAS Index however, represents 98% of the market capitalisation of all listed companies in Malaysia, and is thus a much more accurate representation. Having said that, the top 30 companies still contribute roughly RM1.05 trillion, or 58% of the market capitalisation of all listed companies in Malaysia, which is roughly RM1.8 trillion. And thus KLSE index, by extension still have a weighting of about 58%-60% in the FBMEMAS Index.
Performance Overview
First the facts.
Since our last update on 3rd January 2018, we have officially lost our virginity, and recorded our first loss. A drop of RM0.164 or 14.52% per fund unit from RM1.130 to RM0.966. During the same period, the FBMEMAS Index have fallen from 12,930 to 11,961. This represents a smaller drop of 7.5%, and a negative 7.52% performance on our part.
However, delving deeper into the numbers, during this period, the KLSE index which constitutes 58% of the FBMEMAS Index fell by a mere 5.58%. On the other hand, the Malaysian Small and ACE Index, which represents the remaining 42% of the FBMEMAS Index, and also 100% of the fund’s investments have fallen 18.88% and 24.91% respectively, far higher than the drop in value of the fund, and thus an over performance on our part.
Having said that, I am aware that in times of under-performance, providing explanations (however reasonable), sound uncannily similar to making excuses. In addition, negative returns is negative returns. Using the Japanese stock market for the last 20 years as reference, one can actually outperform the market every single year and still lose money.
At the end of the day, as investors, we expect not just outperformance, but a positive return on our capital over the long term. And as your fund manager and largest unsecured investor in the fund, I intend to provide it.
For our IOU holders, regardless of performance, at minium, the protection of your capital and interest of 4.4% (0.4% higher than the highest FD rate in Malaysia) is guaranteed.
Performance Review
There are a few factors that contributed to the drop in value this year and they are as follows:
In the previous year, yours truly, built up a roughly 10% position in Lii Hen Industries Bhd (“Liihen”) and Latitude Tree Holdings Berhad (“Latitude”). The initial investment thesis was as follows:
The new kid on the block!
During the year, the fund have opened a new and significant position in RCE Capital Berhad. As of today, our investment in this company consist of 29% of the fund and it is by far our largest position. Here’s why.
REDACTED
General and Macro Overview
Well, what an incredible few months. PH won the elections and threw markets into a turmoil.
Coupled with the following factors,
This has caused the KLSE market to turn into a bear market, with equity prices now trading 10-20% below 200 days moving average prices.
Since the last 8 weeks, starting from just before the elections, almost Rm10 billion have been pulled out from the Malaysian equity markets by foreign investors. With a few hundred million being taken out every single day for the last 6-8 weeks.
However, long term wise, the future has never been brighter in Malaysia. It will take some time, but the long term prospects is just incredible. We are the only country in South East Asia, whose people can speak 3 languages well, and connect both high value chains like Singapore, with lower value chains like Indonesia, Thailand and Vietnam. In addition, we are also large enough to have a proper industrial base unlike Singapore.
With this renewed optimism in Malaysia, I think the listed Property Development companies in Malaysia will soon start to see higher earnings and thus and expansion valuations and higher market capitalisations.
With this renewed optimism and a brighter future, I expect two things.
Both of the above groups are of the higher income levels, will this renewed optimism in Malaysia, will start spending and investing in Malaysia again. And being an Asian country, most of us love buying property.
Currently, most property development companies are selling at liquidation value despite still being profitable! The highest gains are made when investments that were once valued at liquidation value is now being valued as business again, especially one with a bright future!
Having said that, in terms of where we are now in the credit and economic cycle, a recession within the next two years is definitely in the cards.
However, given the long term nature of the fund, our zero leverage policy, our discipline in only investing in companies that meet our increasingly strict and refined criteriass, and ensuring that our investments are generally good to great businesses with good capital structure that won't go bust in the trough and bounce back fantastically when things turn around. It makes us optimistic for the years and years ahead.
Conclusion
Overall, as your fund manager, I remain grateful for your support, and will continue working hard to continue to merit your confidence.
The current shareholding of the fund is as follows.
Name |
Percentage |
XX |
28.86% |
XX |
22.47% |
XX |
4.80% |
XX |
4.34% |
XX |
3.94% |
XX |
2.80% |
XX |
2.49% |
XX |
2.14% |
XX |
2.04% |
XX |
2.02% |
XX |
1.99% |
XX |
1.94% |
XX |
1.94% |
XX |
1.84% |
XX |
1.74% |
XX |
1.74% |
XX |
1.70% |
XX |
1.66% |
XX |
1.66% |
XX |
1.61% |
XX |
1.60% |
XX |
1.50% |
XX |
1.18% |
XX |
0.93% |
XX |
0.76% |
Cash |
0.27% |
Total |
100.00% |
|
|
Fund Performance to date |
|||
Period |
Fund Returns |
FBMEMAS Index |
Alpha |
21/3/2017-3/1/2018 |
12.22% |
4.22% |
8% |
3/1/2018-30/6/2018 |
(14.52)% |
7.5% |
(7.52)% |
====================================================================
Facebook: Choivo Capital
Website: www.choivocapital.com
Email: choivocapital@gmail.com
Created by Choivo Capital | Dec 09, 2020
Created by Choivo Capital | Dec 05, 2020
Created by Choivo Capital | Nov 09, 2020
Created by Choivo Capital | Nov 09, 2020
Created by Choivo Capital | Nov 03, 2020
Choivo, thanks for the detail update. I think your stock pick are not bad, is just now the market is bad, many good fundamental stock are being ignore by market.
2018-06-30 21:03
2 stock make up of 50%, the others spread into 23 stocks..very imbalance, it make the portfolio look lack of direction...just my 2 cent.
2018-06-30 22:12
Why are you posting this here? Shouldnt you be sending this to your fund's investors by email instead?
2018-07-01 00:06
I considered some lion, but not masteel. Too long to write, but feel free to read my article "The Art of Gambling in Speculative Stocks", i wrote something on Masteel there.
https://klse.i3investor.com/blogs/PilosopoCapital/145619.jsp
===================================================================================
Jhau65 Why not buy lion and masteel, si fu otb top pick?
30/06/2018 20:58
Given the nature of my fund, i'm quite happy that fundamental stocks are being sold down and ignored. I also happen to a stable income, low living expenses, zero debt, and no commitments. I can buy as long as they sell them cheap!
===================================================================================
Albukhary Choivo, thanks for the detail update. I think your stock pick are not bad, is just now the market is bad, many good fundamental stock are being ignore by market.
30/06/2018 21:03
qqq3, They chose me as their manager and they know what they are signing up for, if you do not understand my investing method, or trust me or the method makes no sense to you. They are free and highly encouraged to take their money out.
lizi, i wrote something on diversification versus concentration below. Feel free to take a read.
https://klse.i3investor.com/blogs/PilosopoCapital/163383.jsp
===================================================================================
qqq3 2 stocks making 50% of portfolio.....what would your outsiders say to that?
30/06/2018 21:17
lizi 2 stock make up of 50%, the others spread into 23 stocks..very imbalance, it make the portfolio look lack of direction...just my 2 cent.
30/06/2018 22:12
Gee, wish i thought of that, i mean i even have a whatsapp group with them, i could actually even just put it there! Haha
I'm not sure if you're being passive aggressive or your tone is just coming off wrong over the internet.
===================================================================================
Outliar Why are you posting this here? Shouldnt you be sending this to your fund's investors by email instead?
01/07/2018 00:06
2018-07-01 00:49
I mean, why are you posting this here? The purpose of your fund is to your investors, not to this forum, you're sharing your entire investment with this forum when your priority should be to your investors. One could easily obtain better results than your investors by copying your entire investment portfolio without giving you a cut.
2018-07-01 02:35
Some of my investors come from here as well. After reading my writings.
I generally redact what i consider to be extremely key information, out from the letter, for example, my entire research on RCE, all the good and the bad.
Most of the companies or insight in there is common knowledge, the question is whether one would even buy it given that most here is prone to short-term-ism and require earnings visibility, seeming to forget that when earnings visibility exist, one pays more.
OSK, DAIMAN, PLENITUDE, INSAS etc are very easy to understand and buy, but most won't.
My favorite kind of investor is one who has read most of my writings, thus saving me the time of explaining myself and my philosophy over several hours to ensure the person really knows what he or she is getting into.
In any event, even in extremely mature markets like the US, people are still prone to emotions, euphoria and depression. To dive into short-termism.
Everyone knows PBBANK is a good investment since 1990, but how many have held since 1990, or even since 2010 etc etc. Instead of selling it for some hot stock that just seems to keep going up?
I'll always have things to eat.
2018-07-01 03:37
It is always amusing to see people in Rolls Royce getting investment advice from those who ride the subway trains.
2018-07-01 15:02
Posted by 3iii > Jul 1, 2018 03:02 PM | Report Abuse
It is always amusing to see people in Rolls Royce getting investment advice from those who ride the subway trains.
====================================
that is how it is ....that people in subway trains can also dream big.
2018-07-02 11:48
26 years old Jho Low can convince Najib that he can solve all his problems......
2018-07-02 11:50
3iii It is always amusing to see people in Rolls Royce getting investment advice from those who ride the subway trains.
01/07/2018 15:02
===================================================================================
I drive proton wor.
2018-07-02 19:25
U may have to drive Proton for a while...
Unless u can copycat Harry's biz model...
Harry made much money from teaching people how to invest than investing/ trading in Bursa
2018-07-02 19:29
And Harry is not the only one...infact a lot of them are doing so...even CPTeh tried to do so for years......
2018-07-02 19:30
lolz... Hairy.. I pity those that spent money to learn from all these sohai. My advise, best way to learn is do it in real. If you lose, probarly this is not for you and just put in FD.
2018-07-02 21:02
Haha of course :)
If i drive proton so long still cannot hit more than 6 figures at 26, something is wrong.
If warren buffet can drive his first car till he made 30 million in 1970. I can drive my proton till i make 50 million.
Walmart boss drive 30 year old truck until he die.
I don't intend to teach beyond my articles. Which are written not so much for teaching, but to crystallize my own thinking and thought process, and self filter potential investors.
Investing is actually really simple, but hard. Just read like 5-6 books, and you will have all the investing skill you need. The rest comes from life experience, and perspective, which can be continually forged and sharpened till the day to you die.
Its the only career where you only get better and more in demand as you get older. Assuming you're actually good.
In any event, if a six sigma event happens where for 30 years the price of all my stock buys do not move up, but only down.
So be it, i know the value of what i bought. When you have enough money, money is just numbers on a screen. And i can always keep buying more.
===================================================================================
CharlesT Anyway I kepochi a bit....is yr current fund size more than RM50K?
02/07/2018 19:31
CharlesT U may have to drive Proton for a while...
Unless u can copycat Harry's biz model...
Harry made much money from teaching people how to invest than investing/ trading in Bursa
02/07/2018 19:29
2018-07-03 01:14
Jhau65
Why not buy lion and masteel, si fu otb top pick?
2018-06-30 20:58