It is Obvious, Stooopid!

I regularly re-examine my past investments. I look at moves where I lost money. I try to determine where a mistake was made. Trust me, it has always been mistakes, not bad luck.

I also look at winners. I have found that with winners, the value was very obvious. I did not have to sweat it. I did not even need a back of envelope calculation.  In fact, when I found value, I usually have to do a quick re-check to make sure I have not made any mistakes.

Here are some examples:

IMF- I have explained this in previous posts. Just to recap, I found this in July 2008 trading at $82m market cap. It has just won the Aristocrat case, and the proceeds of that case would see IMF's net cash at $68m. I was paying $14m for a $1 billion case portfolio. Since then, IMF has paid dividends in excess of $82m, if you account for the imputation credits ie I have already covered my purchase price from dividends alone.

ASW- I found this in June 2009 trading at a market cap of $16m, with no debt and nearly $4m in cash. Cashflow exceeded $1m per annum, and it was growing from a small base, and paying a dividend. Market cap eventually flew to $40m, and this investment was sold as a 2.5 bagger in about 20 months.

EPY- in March 2011, this had a market cap of $7.2m.  Its net current assets totalled $13.5m, and cash stood at $12.5m. A bidding war ensued, and this investment was sold for 48% gain in 6 months. The sale may have been a mistake, as the company has paid $4.6m return of capital since then and is still trading at $7.2m.

UOS- in Feb 2011, this had a market cap of $330m. With very little debt, investment properties on the balance sheet already totalled $433m.  Within a year, the company floated a subsidiary on the KLSE and returned $80m in capital plus $20m in dividends to shareholders. Currently trading at $400m, this investment has returned 42% in capital returns and dividends within 2.5 years.

CTE- in April 2012, this had a market cap of $7.3m. It had no debt, had cash of $3.5m on the balance sheet, and management had just announced full year earnings update of $1m. Backing out cash, this was trading at a PE of 3.8. As at the date of this post, CTE is trading at market cap of $16.5m, with $4.5m of cash on the balance sheet.  A satisfactory 133% return in 6 months is not too shabby.

As you can see, the value was very obvious in all of these cases.  Yet someone was selling shares to me.

Now, a word of caution.  I do not believe in absolutes, as there are always exceptions.  At the time of writing, there are two companies looking very cheap at first glance.  Firstly, RIS is trading below cash.  Secondly, SSL is trading at half the value of its net assets. In both cases, unlike the above winners, I am not confident at all that the value will be realised in the hands of minority shareholders.

Disclaimer: the contents of this post is not to be relied on as financial advice.  It contains my personal opinion only, plus facts that I cannot verify to be accurate.  Do your own research and seek financial advice where appropriate. I have made many mistakes in the past, and will continue to do so in the future.