Tuesday, August 12, 2014

[SGX Portfolio] Sell: Qian Hu

I bought this stock in May 2014, and again in June.

This was my thesis:
"Qian Hu: Trading at a 22% discount to it's NAV, dividend yield is about 6% on average. Not a tough business model to understand either. Rear fish, sell fish. Earning is bad though, seems like a wild card."
Well, personally I don't really see anything wrong with Qian Hu as an asset play, but the fact that earnings is negative irks me a bit. Although it is very illiquid, I actually find the illiquidity gives it a nice premium actually, especially for people with no hurry to unload the stock and selling to people buying up 50 lots at a time.

Seeing how regulations will make small priced shares such as Qian Hu consolidate or delist, I thought it is safer for me to now just sell out for a TINY profit. Like tiny. I think I made an overall profit of $3 from a $164 investment. Slightly less than 2% gain for 3.5 months. Actually, that's not too shabby! The only 2 other stocks in my SGX Portfolio that I hold under the $0.20 price requirement is CDW and Hotung Investments.

Plus, this goes back again to my feeling of the market. Things feel elevated to me and I don't want to be caught holding onto stocks that I am not comfortable holding for the long term.

With Qian Hu no longer in my portfolio, the remaining stocks in my portfolio now have a current dividend yield of 7.1%

Anyway, back to the drawing board for me. I still have yet to come up with a good screening model to help me process stocks and spit out the most attractive ones based on some different metrics.

I am thinking of having 3 styles:
1) Asset Play - Looking at discounts to NAV, high cash assets and low debt
2) Quality - Looking at FCF, gross profitability, consistency
3) Blend Approach - Self explanatory

While I would only take the top rankings for either Asset Play or Quality, those stocks that aren't very high on either of the particular rankings but possess characteristics of both seem to me like they would be much more attractive.

I mean, if you invested in a company with no debt, high cash assets, generating free cash flow, selling products with high margins - all of this consistently, plus its stock is undervalued to even it's net asset, wouldn't that be the most perfect investment in a stock already?

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