Alibaba...... Treasure Cave Looting continue 2018

Alibaba continued to be my favorite "treasure Cave" in 2018. However unlike in 2017, I'm very conscious about BABA high share price. After a good 100% run up from base $90, this stock is no longer considered "under value" based on my assessment. Hence, I deployed a totally different trading strategy for this time. I don't feel "Buy and hold" trades will be the right strategy as compared to my old trade in 2017 (Refer to my previous posting on Alibaba). My "short term swing" trade strategy kicked in early 2018.

I had make several short term trades from Jan to June 2018, whenever I felt the price was right at that moment. It turn up to be right calls to loot this "Treasure Cave" again and again. Within 6 months, my trading profits net at $18,997 after minus commission.

After June, I stopped making new trades on this counter and took a break from the market. There was a shift in the macro economic conditions, trade war heating up and the market indices were reaching its peaks. I was hoping for a market correction to happen. Mr. market presented a great opportunity to trade again when the correction really took place in Nov/Dec. Without hesitate, I "ransacked"/buy call on this Treasure Cave again at end of 2018. I will write about this on different posting later. 

 " Having a clear "Exit" strategy is the most important plan that every investor should know before making new trade."

I will write about Singapore Market on my next posting.

-WILLIAM CHENG WL

  

Alibaba....... Great "Treasure Cave" Discovery in 2017

Most of us may know this story as Alibaba and the 40 thieves. How he discovered a cave full of treasure. Below is the story recap from Wiki:

One day, Alibaba is at work collecting and cutting firewood in the forest, when he happens to overhear a group of 40 thieves visiting their treasure store. The treasure is in a cave, the mouth of which is sealed by a huge rock. It opens on the magic words "open sesame" and seals itself on the words "close sesame". When the thieves are gone, Alibaba enters the cave himself and discreetly takes a single bag of gold coins home. 

Well, I did found a "Treasure Cave" through my investment journey in 2017. The cave called "Alibaba", a NYSE stock listing with ticker "BABA". I got interested in this stock after watching their single day gala 11.11 events. Since listing in 2014 around $100, this stock hovered below $100 for sometime in 2017.

I noticed this company has a very high growth rate >50%. It had been very consistent in net profit growth year over year. The characteristic I like about this company is the business model and the economic moat they build around their core business. Their business model which focus on B2B and B2C online e-commerce are the future trend with great potential for multi year growth. Looking at what Amazon did to US marketplace, you know Alibaba's valuation is compelling. Alibaba has a strong economic moat which no one else can challenge their dominance for very long time. They are no.1 in China and the next biggest competitor is miles apart in comparison and not profitable.

So making the story short, the quality attributes that I like about Alibaba are:

1. Right business model at right market trend
2. strong economic moat - King of the jungle
3. high growth rate, >50%
4. Low PEG ratio <1.0
5. Very profitable, positive cash flow

I know Alibaba is unappreciated by the market and I should grab this opportunity uncovered this "Treasure Cave" before others do. I started buying Alibaba (Shout "Open Sesame") when it dipped below $100 and continue to accumulate more along the way. The share price continued to move in upward trend as they started releasing positive results and forecasts in their quarterly earning.

I set my exit plan in motion when the share price hit above $170 to $180. I felt the share price had risen so much that it had outrun its potential earning growth. The PE ratio expanded too fast. It was time to sell and looked for other "Treasure Cave". So, i finally called for "Close Sesame" by the end of Nov 2017.

With the share price increase almost 100% since I first started investing, I make a nice return on my investment for a period of 10 months. This was one of my best "treasure Cave" I ever discovered for that year.

- WILLIAM CHENG WL

         

Facebook 2018....being poked?

Investing in Facebook had been one of the most interesting event this year. From U.S election scandal, data privacy leaks to catastrophic earning forecast creating a roller coaster ride in share price. this ride is not means for "faint-hearted". So, hold your breathe and be thrilled......

Facebook is the lowest PEG ratio among FANG stocks in the beginning of the year. This company have great business moat in their own turf and competitors are non existence. The only social apps that gaining tractions is Instagram. Instagram is so popular among the millennial, however FB has nothing to fear, Instagram is part of FB's lunch menu.

Facebook as a company with great attributes:

1. Market leaders
2. Economic moat
3. high positive cash flow
4. no debt

Based on my conviction, I projected that Facebook will hit at least $200 by April when they announced Q1 results. I started to accumulate the stock between $178 and $184. After massing a huge positions, now I waiting for my lunch to arrive. But then, bad news comes.... the US election and data privacy scandal surfaced causing the share price dropped very fast. Within 1st week, it dropped 10% and following 2 weeks it hit the low point of $149. At this point, my losses already hit more than >USD10,000.

I was too slow to response to this new developments. Regardless, I noticed there was no fundamentally changed with the company's ability to generate great profit. I'm stayed with my conviction not to cut losses as I'm confident that it will recovers when the dust settles. True to my predictions, the stock start to recovers after Q1 earning announcement. I decided to par down my holdings between $178 and $195 to make a small profits.

This events had damaging effects on my psychology and ego as well. A great lesson learnt. Even if you have done your homework and you convince thing could never goes wrong, there are still many unpredictable events which beyond your control. The only thing you can control is your response to those unforeseen events. And for the records, Facebook continues with its bullish charge hitting $218 as I predicted early this year, and then stumbles back to $170s. As I looked back to this trades, I'm hoping to make a wiser moves in the futures. An epic lesson learnt in 2018.

- WILLIAM CHENG WL

 



         

Discovering the first Pot of Gold.....

My investment journey begins when I bought my very first iPhone. It was an iPhone 3G in 2008. I couldn't understand why army of fans willing to queue up weeks ahead of iPhone launched year after year. As I dig deeper into the company's background, I was amazed by the founder, Steve Job. How he saved the company from the brink of bankruptcy and turn it into the world biggest corporation.

I'm truly converted since then. However, I did not put my first dollar on the table until many years later. From 2008 to 2012 was my investment's dark age period. I did not dare to venture into the stock market as I'm still trying to decipher the 2008 financial crisis. In 2013, I muscled enough courage to make my first investment in Apple Inc. at around $480 before 7-for-1 basis split. After the split, the cost will be closer to $68. What happened next went down in history ..... as my 1st Pot of Gold.

   

I will leave the details for my future posting. In this blog, I will share my insight of my stock selections. How I select stocks to buy, the rational behind the stock selection. The timing of entry point and the reason for exit. I will share my principle and rules for investing as a journey, both winners and losers in investment decision. My stocks search mainly focus on 3 markets in Singapore, Malaysia and US. 

I hope you will find this blog inspiring as you begin your own investment journey. I will end each of my posting with a lighter notes, a selection of my favourite music collections. 

Have a good weekend and happy investing.

- WILLIAM CHENG WL

"Not Good Enough" by Tia Lee