I recently sat down with Teh Hooi Ling in Aggregate’s office – a quaint shop house along Joo Chiat Road. I must admit a certain bias towards Aggregate’s approach, reading about them in The Edge a few years ago when they struck it out on their own.

They’ve come a long way, with assets under management exceeding $200 million.

One cannot help but admire their entrepreneurial spirit in getting to this mark.

Not to mention their exceedingly fair compensation structure.

No management fee is charged. They only get paid when they deliver their results.

Hooi Ling joined Aggregate in 2013, a coup for them and a loss to Singaporeans, who had derived considerable wisdom from her unique and insightful column “Show Me the Money“.

We spent over an hour talking about her own experiences in prior career as a journalist, and her new career at Aggregate.

Among the many lessons I learnt, here are the most memorable:

1) The Way You Invest Must Compliment
Your Personality

Teh Hooi Ling, Head of Research

Some people are born traders. Other investors. Each one of us must do some soul searching, reflection and introspection to see what makes us tick.

There are many ways to invest, but the most successful investors are ones who can exploit their own personalities to their advantage.

There is only so much that can be taught.

In my previous post, I talked about the split between concentration and diversification.

Aggregate’s approach adopts wide-spread diversification, investing in over 250 securities.

It helps them sleep easy at night, knowing that a single stock will not bring down their portfolio in the off chance they have misjudged the company.

That tallies with my own thinking on the subject.

Do what you know, do what you’re comfortable with.

2) Doing The Research To Hold Long Term

Hooi Ling has done Singaporean investors a favour by collating the data on valuation metrics in stocks in South East Asia. You can check out some of her presentations here.

The persistence of the “value factor” has been widely documented in the United States and Europe, whereas much less in-depth work has been done in South East Asia.

At the end of the day, I see it as a good compliment from Aggregate.

Battle worn experience from Eric Kong and Wong Seak Eng in picking stocks using a “value approach” from their prior careers.

“From the top” research done by Hooi Ling in giving them the long term conviction that such a strategy works.

After all, investing is never easy when the markets move against you. And they will.

As Joel Greenblatt has said,
value investing works 
because it doesn’t always work.

Patience is a wonderful friend, but exceedingly hard to come by in this fast paced world.

3) The 80/20 Principle of Stock PickingThe-rule-of-80-20

  1. Price-to-Book Ratio
  2. Dividend Yield
  3. Debt to Equity
  4. Cash Flow From Operations

Price-to-book is something I look at a lot.

Reading the prior works of Graham, you notice his tendency to focus on the “liquidation values” of businesses.

Buffett on the other hand prefers to focus on the competitive moat of a business, and the future cash flow that results from it.

Of the two, I find that Graham’s approach is much easier.

Projecting cash flows into the future is not an easy feat. On the other hand, I find it a rare instance where honest management purposefully engages in operations with the intent of losing money.

Not all assets are alike of course. Cash and freehold land are much more valuable than receivables, inventories and leasehold land.

4) Weeding out Fraud

Read this to save money.

Investing in South East Asia can be treacherous. A significant number of frauds have been reported in recent years.

Among some of the more memorable ones I’ve seen are Sino-Forest, once worth $5 billion, proving that even big companies are not immune.

Hooi Ling advocates looking to see if the cash is real by examining their cash flow statements and dividend pay-outs over the years.

I recommend reading Tan Chin Hwee’s “Asian Financial Statement Analysis” and “Asian Godfathers” by Joe Studwell.

It will give you a master-class in understanding the murkier aspects of business in South East Asia. 

Ending Thoughts:

It’s always interesting to see how different investors approach the same problem of allocating capital.

One thing I’ve learnt is that principles underlying successful investors are always the same.

In the end, investors must decide on their own what works for them, and stick with it despite what other people many tell you. As Graham said:

You’re neither right nor wrong because other people agree with you.

You’re right because your facts are right and your reasoning is right—and that’s the only thing that makes you right.

And if your facts and reasoning are right, you don’t have to worry about anybody else.


I will be speaking at the upcoming Invest X Congress next Saturday on the 17th of October. Its a full day event that will be held at the Suntec City Convention Centre.

My segment will be an hour long in the afternoon, and I will be specifically talking about Deep Value Investing.

Sneak Preview of My Presentation

I dont have a lot of time, so I will focusing on what I’ve learned the past six years applying Benjamin Graham’s investment techniques in Singapore, the US, Hong Kong and Japan.

My goal is to bridge the gap between theory and practise – a problem which I faced myself when I started out in 2010.

Why Deep Value Investing?

Deep value investing is the identification of attractive investment opportunities with limited downside, and significant upside.

In contrast to “growth investing”, we look at places with pronounced mispricings –  in the unloved, neglected, ignored and feared stocks.

Our investment operations are very much “old-school” Graham type operations, focusing on liquidation plays and general undervalued situations.


Deep Value In Action

Among the stocks which you may have been familiar with are Popular Holdings, ABR Holdings (they own Swensens and Gloria Jeans Coffee), Challenger Technologies.

Less familiar names which have recently received analyst coverage from brokerages include Fu Yu, Memtech and AP Oil.

A common characteristic is how little analyst coverage these stocks received when we firs started buying them.

I can still recall many of the promising growth stories such as Tiger Airways, SMRT and Genting back in the day.

Who Am I? (Blurb from Invest X Congress)

Tay Jun Hao is the founder and editor at The Asia Report. He oversees the investment decisions of Farrer Enterprise, a family office with over 7 figures under management. The annualized returns of the US portfolio that was exclusively under his purview has since generated 27.23% per annum in returns.

In 2013, Jun Hao won the Orbis Stock Picking Challenge, a global investment management firm, with over $30 billion in AUM, beating participants from Oxford, Cambridge, the London School of Economics (LSE), University College London (UCL) and the London Business School (LBS), generating an absolute return of 55.7%, an out performance of 21.7% against the benchmark over the course of one year.

His insights and articles have also been picked up and featured in leading investment portals such as Nextinsight.com and Valueinvestasia.com.

Panel Discussion for Q & A

There will be a panel discussion at the end of the day, where I will be answering questions from the audience too.

It will be my first major scale public event since I came back to Singapore, and I hope it will be a great experience for everyone.

I hope to see you there!


Post thumbnail

I read a story on Kiplinger about a fund manager who closed up shop after fifteen years managing money due to his poor performance in the last two years.

He pretty much sums up the problem with concentration:

Magnifying the problem was my decision to put too much money into my favorite ideas.

I totally bought into the notion that it was foolish to invest in my 60th-best idea.

What I overlooked was how bad things could get if I was wrong about my second-best, third-best and fifth-best ideas at the same time.

This brings me back to one of my old post which I’ve reproduced (the original was lost in the migration).

My thinking on the subject hasn’t changed.

Is Diversification A Defense
Against Ignorance?

There’s  a train of thought among people that concentration is the way to earn out-sized returns in investing.

Buffett probably helped popularize this idea by focusing on his “twenty punch card rule”, citing that diversification is really a guard against ignorance.

Charlie Munger is as much a proponent of concentration as Buffett, and is famously known for saying that 3 stocks is enough.

Personally, I think 99% of investors are better off with a reasonably well diversified portfolio of common stocks (20 – 25) than let’s say a portfolio of 5 stocks.

One can only have conviction to hold on in persistent market declines by way of research that is both borne out of experience and hard work.

You Need 10,000 Hours

Source: Key Leadership Academy
Source: Key Leadership Academy

Malcolm Gladwell often takes about the 10,000 hour rule, and the same applies to investing.

The challenge is that one not only needs to understand a single business well, but to be able to look at it in the context of the big picture.

Investors cannot simply focus on single trees, and have to be weary of the going-ons in the forest as well. This requires concentrated effort and time to pull off – along with a sound framework.

My own personal feeling is to embrace that there are really many things that we do not know anything about, much less control.

Diversification is simply a way of me saying that there are plenty of unknown unknowns.

¨We are obviously only going to go to 40% in very rare situations – this rarity, of course, is what makes it necessary that we concentrate so heavily.

We probably have had only five or six situations in the nine-year history of the Partnership where we have exceeded 25%..“

Buffett Partnership Ltd 1966

What about Activist Investors?

Activist fund managers like Bill Ackman of Pershing Square Management, Carl Icahn of Icahn Capital Management and Jeffrey Ubben of ValueAct Capital run extremely concentrated portfolios.

Their top 5 positions often compromise of more than 50% of their entire portfolio.

But one thing to bear in mind is that unlike us, these investors are activists.

Most investors on the other hand, are minority shareholders, with very little say over managerial discretion.

Taking an activist stance allows investors to become the de-facto catalyst, bringing light to undervalued situations, liquidating positions to return cash to shareholders, re-vamping stagnant management and unlocking the “value” within.

Tracking 13-Fs of Activist Investors

One extremely efficient way of sourcing ideas is to track the 13-Fs of activist investors. The nature of how their portfolios are constructed means a good deal of research has taken place before an activist investor decides to commit.

Furthermore, the presence of activists means that change takes place quicker than slower.

This is not to say that they will always be right; there have been well recorded blow-ups such as Bill Ackman’s failed attempt at a turnaround in JC Penny.

Their overall track record (so far anyway!) has shown however that in aggregate, activists are more often right than wrong, and that their ideas are a good source of ideas that will out-perform the market.

I’ve been following the news about Glencore the last two weeks, and its been a wild ride.

Is there a mis-pricing here?

I remember hearing the pitch for a couple of commodity stocks over the years. One of them was for the embattled Noble Group by Eastspring (subsidiary of Prudential). Orbis, a fund management company I respect greatly owns a big chunk too.

While management once indicated it was a temporary setback, I am not so sure any more with even the titans of the industries coming to their knees.

One of the things that has always puzzled me is the business models of these business.

Plenty of revenue. Check. Net profits. Check.

Free cash flow? Well, that’s a different matter altogether.

Glencore’s 5 Year Financial Summary, Source: Morningstar

Every time I see a stock like that, I instinctively think about Enron (not indicating that Enron or Noble Group are frauds like Enron, just highlighting some similarities in their cash flows here..)

Coincidentally, I wrote about it six years ago here.

Enron 1996 – 2000, Source: Enron Annual Reports

Its a simple enough metric to calculate, but surprisingly robust. Cash rarely lies.

So how about our own Singapore listed Noble Group?

Noble Group Financial Summary, Source: FT


Maybe its me, but I don’t understand businesses that seem to burn ever more cash as they increase their revenue.

Ten years is a pretty long time for me to see persistently negative free cash outflows.

Still, stock prices are down so much that I had a look at them again to see if I was missing something. However, I can’t wrap my ahead around what these businesses actually do.

Simply put, I can’t figure out how it is that they actually make money.

I think this tweet pretty much sums it up:


Chart of the Week:

Twitter, @PlanMaestro

Video of the Week:

Reading For The Week:

1. How the Superwealthy Plan to Make Sure
Their Kids Stay Superwealthy (LINK)

Passing on a fortune isn’t as easy as it seems. Their research [Preparing Heirs] found that 70 percent of inheritors failed in passing their fortunes on to the next generation.

2. Millionaire (Malaysian) investor uses wealth to help poor  (LINK)

Up until then, he was an executive director in Mudajaya/IJM but gave up his position and invested his time and money in shares.

He started with only RM200,000 to dabble around with and has made money to the tune of millions ever since.

Koon said his trick to mastering the market is to be a “contrarian investor” – one who buys when everyone is selling and who sells when everyone is buying.

3. SGX: 8 Things I Learned from its AGM 2015 (LINK)

Despite the challenges, SGX remains a highly profitable company and is likely to do so in the future simply because it has a virtual monopoly.

Simply said, public-listed companies and investors have no choice but to use the SGX as it is the only stock market exchange in Singapore.

4. Buy Emerging-Market Stocks as Pessimism Peaks, Barclays Says (LINK)-1x-1


5. Traders Flee Emerging Markets at Fastest Pace Since 2008 (LINK)

Investors have pulled $40 billion out of developing economies in the third quarter, fleeing emerging markets at the fastest pace since the height of the global financial crisis.

The MSCI Emerging Markets stocks benchmark has declined 20 percent in the past three months, on track for the biggest retreat in four years.