My Successful Investment, and STC and WBL

Auric Pacific Group Limited

I bought two batches of Auric stocks in different dates and at different prices. I bought Auric stock at $0.72 on 19 January 2011 (Batch 1) and at $0.52 with subsidy of $14.72 (OCBC promotion) on 25 August 2011 (Batch 2). Over the holding period, I collected divdends too. I sold them at $1.10 on 13 Oct 2012. My return for batch 1 and batch 2 are 57.1% and 111.8%.

It is grossly undervalued stock because of the followings:

1)      Analysts stop their coverage on this stock when it bought the stake in mining. To them, it is complex to value.

2)      To most market participants, they felt that it overpaid for the acquisition of Delifrance and large stake of Food Junction. They also felt that it sold prized building too early

3)      Lippo is the largest owner of Auric. It is very passive investor by far.

Auric has huge portfolio of different consumer brands that you can find in the supermarket. To name a few, they sell Sunshine, Topone, SCS Butter. It is also local dealer for POST, SaraLee, Kraft, and etc.

How did I find it? I was finding hard an investment opportunity. When I saw vending machine selling only Gardenia near to MP office, I look at QAF Ltd (the owner of Gardenia) and then its competitors. Among them, there is Auric. Its financial statements give me an impression that it is badly undervalued by Mr Market. Its net asset is not declining at all. Its earning power was stagnant.

Despite of no visible catalysts causing the rise of share price, I bought it and sat on it like those established value investors: Warren Buffett with his 'General' category in his portfolio, Michael Burry and etc bought illiquid stocks and sat on them until they turn profit accordingly.

It illustrates that you can make money on boring, unloved, ignored, or/and illiquid stocks. If you hear anything like ‘you must avoid illiquid stocks’, it is not true to that extent. In fact, it is damn hard to resist the temptation of selling it when you hear nothing about this stock. I nearly sold it but the news of Auric appointing new CEO surprised me, causing me to cancel the sell order.

Auric made very good move so far this year by appointing Ms Saw to CEO seat. Although Ms Saw should be responsible for some MRT problems but it is not justified if people pinpoint her for all kind of problems, some of which she had no control. She is very impressive when I checked her career. Before her, SMRT was making losses. She solved it by converting empty spaces and walls into rental-collecting stores. It is indeed fitting for her to work for Auric!

When I saw recent quarterly report which she finally runs CEO position, the cost level was tightly controlled. I was wow-ed. It is flat growth on most of the cost drivers. Incredible! There is slow movement of share price rise.

The Edge featured Auric few weeks ago. It asked Ms Saw on how she would run it. She said that you see her performance. I like this comment. She is not making comments and let her results speak itself! I am pleased that Ms Saw is the ultimate catalyst, which is unexpected, for Auric.

However, I am not fortunate to sell it at higher price when it rose further after I sold. Nevertheless, I made money.

Transcontinental Realty Investors, Inc

I bought TCI shares at USD$4.52 on 11/02/2011 (US time) and sold at USD$4.70 on 21/09/2012 (US time) – the profit is 3.98%. Including transaction cost, the profit is 2.07%. It is my mistake to buy it and this money could have invested in better investment opportunity, which I discover later.

TCI has fallen so much due to disagreement with state government body over the schedule of building. I thought it is undervalued because this is only temporary one. Furthermore, there is decent margin of safety.

The state government decided to cut business with TCI and demand repayment of the cost of payment it had already paid. It is not a problem for me to press panic button. There is no big deal as TCI has sufficient asset buffer to keep it as a going concern. On the hindsight, I should have bought more stocks at lower price. The rationale that I did not is that I may have better investment opportunities in near future, which it did happen.

As many value investors and fundamental investors hold their selected stocks, they learn more about these stocks during the holding period. Likewise, I observe the shrinkage of net assets, causing a decline in asset power. Therefore, the margin of safety is diminishing over time. There are a large number of sales and purchase of assets all the time, which is necessary to improve earnings. It is not proper strategy compared to making money by having net interest income via rental or loan route. To protect our capital, it is better to sell rather than praying for luck to make decent profit. In short, it is better to look for an investment opportunity that has better probability of getting bigger profit return with limited downside than 50-50 chance of getting small return.

STC and WBL