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Reflecting 10 Years of Investing

  • November 30, 2020
  • Tee Leng
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  • 4 minute read

As we approach the end of 2020, I celebrate 10 years of investing since starting my investment journey during National Service. From investing my personal money to taking up the role of managing the family assets after I graduated and subsequently starting a fund with my 2 partners.

Over the last 10 years or so, it has felt like the world has changed considerably. Similarly, my investment approach has continued to change and improve over time.

During my initial years when I was managing my own personal money, the investment approach was more influenced by Graham, where it was more quantitative – buying stocks that were trading at a significant discount to their book values. These were predominantly small to mid cap companies such as PNE Industries, Powermatic Data Systems, Memtech International, AviTech Electronics to name a few; these were otherwise known as Net Net Companies or the Deep Value Investing approach This worked relatively well for me as these companies revalued back to their fair values and I achieved annualised returns north of 10%.

Subsequently, as I graduated from University and slowly took over the role of managing the family assets, we had to tweak the strategy as the small to mid cap companies were presenting a liquidity issue and such Net Net Companies were also becoming harder to find as it is after all an anomaly for companies to be traded below their liquidation values. Having coincided with the Singapore Property Slowdown in 2016, we started buying companies that had market capitalisation that was much larger but still quantitatively cheap from a capital cycle point of view. This tweak in strategy – The Capital Cycle Approach has been written extensively by Marathon Asset Management. Such companies were like the Singapore Banks, Singapore Property Developers to Hong Kong Property Developers etc. While the strategy shifted, it still made intuitive sense to me as I did feel that in some ways it was still like similar to the deep value investing approach; hence, this shift was in no way uncomfortable.

For the most part of of these 10 years, valuations were always the primary concern. While we started looking at more qualitative aspects of a company, valuations were always the deciding factor. ‘Is this company cheap enough’, that was always the question I would be asking myself.

The problems of this strategy slowly became more apparent as the years went on where many traditional businesses were becoming disrupted; however, we still kept to the old ways as we felt that it was still working and this shift was uncomfortable. Furthermore, the deeper understanding of such industries kept us from shifting away as well. While the COVID-19 Pandemic has caused society much pain and uncertainty, it opened my eyes in connecting the dots on how traditional businesses were slowly having their value eroded over the years. It was not like I was living under a rock, oblivious to how the economy was getting more digitalised, but I still failed to connect the dots on its effect on the companies that we were investing in.

During the initial months of the COVID-19 Pandemic, I started seeing how negative things will play out in the long-term for companies that we were invested in; however, the companies that would benefit from this fundamental shift in the economy was unfamiliar territory and valuations had ran up so much. For someone whose entire investment strategy had always relied heavily on valuations, this was extremely difficult to comprehend. Despite feeling uncomfortable and unfamiliar, I knew the strategy had to shift once more.

Today, we take a largely different approach that still takes into consideration valuations, but larger emphasis is placed on qualitative aspects such as company culture / vision, management, how is the company adding value to their stakeholders etc. While I recognise that many of such companies are growth companies – companies dominating the subscription economy, I am hesitant to call it growth investing but prefer the term quality investing. While this shift was by no means comfortable, I must give thanks to friends such as Ser Jing and Kelvin Seetoh who openly shared their thinking and framework.

10 years on, I am reminded of the very reason why I enjoy investing! It is the intellectual pursuit where one is constantly trying to improve oneself and questioning how can one better themselves. This is very similar to Jeff Bezos philosophy of it’s always Day 1 at Amazon.

As we enter the new decade, I am excited with what this tweak in strategy will bring!

With this, I will be introducing new changes to InvestingNook ValueScreener as well, where I will not only be sharing on the usual companies we have been sharing but will be including more quality / growth companies as well. Existing investors will have noticed that I have been sharing on SaaS companies that I believe will benefit from the long term shift in the economy. Such companies are such as Weimob in China (a past case study we shared on) and will be featuring Snowflake a new case study that we are sharing for the month of November! For those interested to find out more about InvestingNook ValueScreener, you may check out the link below.

CLICK HERE

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Tee Leng

Tee Leng is a portfolio manager of a value-focused investment fund based in Singapore, with more than 5 years of experience. He is a frequent guest speaker at institutions such as University College London (UCL) and Singapore Management University (SMU), and at investment conferences held in Singapore and Jakarta.

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