A recent small influx of capital allowed me to move from 'standing at the bylines' to 'getting into it'. Due to some poor money management on my investment capital, I had no choice but to watch some of my 'good picks' went 'berserk'. I have been telling myself that I'll work on this poor aspect and hope to improve on it the next time. But it seems that talking is always easy.
Instead of sitting on my pile of 'new capital'. I decided to invest short-term in a stock which I've been eying for a long time. That stock is call Wilmar. I believe most people will be familiar with it. If not, please feel free to click on the link below and spend some time understanding what they do.
To sum up what their business is pretty simple. They're into the commodities sector and recently diversified into property. Let me explain on why I brought Wilmar.
Wilmar is a good company. A strong balance recent, good revenue, good cash flow. Commodities is a sector that is kinda 'resilient' to bad times, at least this is how I feel. In dad or good times, one will still need to eat, and eat means to cook (mostly). Cooking will require things like sugar, oil etc. And those are the items that Wilmar provides. Thus, we can say that Wilmar's business is sort of a 'economic moat'. We all know that Wilmar rewarded our dear Mr. Peter Lim handsomely for his investment in it over the years. Thus we can say that business and financially wise, its falls into the good company category.
All good companies will have their bad days once in a while and sad to say, Wilmar had 2 of them recently. About a year ago, Wilmar was charge with tax fraud claims in Indonesia. This causes its share prices to drop from a high of S$7 to a low of S$5.50+. It soon recovered to around S$6+ before dropping down to the recent low of S$5.35+ due to its diversification into properties and the bad timing of the China government to curb the hot property bubble.
I have been keeping a watch of it since the days of the S$7 per share. When it dropped due to the tax fraud, I was tempted to buy, but didn't commit the transaction due to fear of it might go even lower. The opportunity presented itself but I didn't take it and I was set to miss out on a good rally on Wilmar. From a low of S$5.50+, it went recovered to almost S$7. Which compute to around +20+% gain. However, the rally was short-lived as things start to go downhill from there when Wilmar announced that it is diversifying its business by going into properties in a joint-venture. The market is targeted at China, who are in the means of trying to curb it's red hot properties sector. A double whammy. The investors took it badly as one can see from the decline in price. Having told myself beforehand that I shall not 'miss' the opportunity if it comes again, I set my entry price at S$5.45. The initial thoughts was to price it at around S$5.40, but I feel that it's too low of a price. I do have to admit here that, there's a 'trying to catch a falling knife' mentality. We all know how 'dangerous' it is to 'catch a falling knife' bare handed. Most of the time, one will get cut. This time round, there's no difference. Good news is that I managed to get Wilmar. Bad news is that Wilmar close at $5.34. I was abit angry at myself for not putting in more thoughts before I set the buy price, but this is what happens when there's greed. For all the things I have said in my previous post on greed and fear, I guess I should really do what I say.
Though the outlook isn't rosy for Wilmar, I believe that investors will soon realized that diversifying business isn't all that bad. It's a risk, that may or may not reap good returns. But without trying, who knows what will the outcome be.
Bottom line for this post. Fear, Greed, Money Management and if one is unsure of what to do, never never rush it.
Caveat Emptor,
SafetyChaos
SafetyChaos
