Don’t Freeze

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I have always maintained that I suck at trading and timing the market. That said, from time to time, intense short term pain in the markets sometimes compel me to think about making a high percentage trade. Recent volatility in the Singapore stock market presented some opportunities for me to do just that.

This blog covers mostly the actions I did take, so a story of how I sat on my fingers might be useful learning too.

Venture Corp (SGX:V03)

Venture Corp is Singapore’s largest contract manufacturer. It is the most recent addition to the STI. Venture has been on a bull run for the past 2 years on strong earnings largely from strong contract demand.

Recently, Venture had been in a free fall mainly due the emergence of a short seller alleging that 30% of their sales are from Phillip Morris International (PMI). This was compounded by the cigarette maker’s poor earnings for its e-cigarettes division, the division most likely to be Venture’s customer. This prompted the stock to plummet from $28 to $19 in almost a straight line over the course of about 1.5 weeks.

V03

Like jumping off a cliff

It was in the $19-20 region where I was extremely tempted to take the opposite trade for a technical rebound to the $22 range. The charts kinda supported this view and technical indicators I semi-trust screamed oversold. Plus, the fact that the company had strong fundamentals added some conviction to my thoughts.

But I didn’t act. But as you can see in the chart it bounced to $22 as expected.

Whoops.

Valuetronics (SGX:BN2)

Valuetronics is a Hong Kong headquartered manufacturer with all its operations in Huizhou, China. The key product it sells is smart light bulbs like the Philips Hue. In fact, I think they are one of or the supplier for Philips Hue bulbs. It is kind of a IoT play that pays decent dividends.

Market sentiment on SG tech stocks have been heavily dampened lately due to weaker than expected guidance from their customers (Intel, etc). But the real dagger to the heart of Valuetronics bulls was Philips’ latest quarter indicating oversupply of smart lighting that will last to H2 of 2018. This prompted short sellers to pile into Valuetronics, driving the price from about 88 cents to the intraday low of 65 cents.

BN2

Another cliff

A truly monstrous decline. Having done a bit of work in the past on this counter, I knew this company could be bought into weakness due to its large cash position. Inventory issues was likely to be a short term problem with IoT being a long term trend that will only drive long term demand.

However, I didn’t pull the darn trigger as I let memories of catching the falling knife get the better of me again.

You know what happens next, as shown above.

Frasers Industrial and Logistics Trust (SGX:BUOU)

Frasers Industrial and Logistics Trust (FLT) is a REIT that invests in Australian logistics properties (essentially warehouses). It recently launched a 1 for 10 preferential offering (PO) and private placement to raise funds to buy 21 European logistics properties. These properties are mainly located in Germany, with a few in the Netherlands.

The uncertainty caused by the time delay between the announcement, to the EGM to approve the offering, to the release of the specific details of the offering applied pressure to the stock. This drove the REIT down from $1.08 when it was first announced to about $1.03 the day before the announcement of the offering details.

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Excluding dividends this represents a cost of $1 if I had bought then, inferring a solid 7% yield. Having done some work prior on the REIT, I knew the management was solid, the Australian properties were of high quality, the proposed European assets were of high quality, there was only currency risk to worry about.

In this case, it was a matter of penny wise, pound foolish. I queued an order for $1.03 almost the entire day. Even at the close, I didn’t adjust it to $1.04, where it closed for the day. As you can see above, the REIT announced the details of the PO and the price shot up.

Having missed 2 boats earlier, you can imagine I was pretty pissed with myself at missing yet another boat. I did a quick analysis of the offering and felt that at current market prices it was still acceptable to me. I promptly bought it and am looking forward to subscribing for excess rights during the PO period to further bring down my cost basis.

So at least there’s a semi-happy ending to this story haha 🤣

Moral of the story

As the investment guru Okoye from Black Panther says:

Don't freeze.gif

When you see opportunity, trust your research and act accordingly. Blink and it might be gone.

And don’t be penny wise, pound foolish.

Happy Hunting,
KK

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