Today, I want to share with you my personal experience on how I achieve it
in one of my Singapore stocks.
The Central Provident Fund (CPF) Investment Schemes in Singapore allow us an option to invest a certain amount of our Ordinary Account to enhance our retirement nest egg. The CPF board pays its members 2.5% interest per annum for the money in their Ordinary Account. So, if the members have confidence that they can find stocks that can earn them better than 2.5% annually before they intend to use the money for other purposes like property investment, they should invest in those stocks.
The Central Provident Fund (CPF) Investment Schemes in Singapore allow us an option to invest a certain amount of our Ordinary Account to enhance our retirement nest egg. The CPF board pays its members 2.5% interest per annum for the money in their Ordinary Account. So, if the members have confidence that they can find stocks that can earn them better than 2.5% annually before they intend to use the money for other purposes like property investment, they should invest in those stocks.
My OCBC bank CPFIS quarterly statement showing the stock (BWL) in my account
I bought
97,000 shares of Best World International Limited (BWL) through CPFIS on 16 Dec 2008 at 20.5 cents apiece. I sold
all of them at 64.5 cents
apiece on Friday, 22 April 2016. This 3-bagger achieved for me a compound
annual growth rate (CAGR) of about 20%, taking into account the dividends paid
to my CPF account over the years. This, to me, is no mean feat as Warren Buffett
has achieved a CAGR of 19.6% in his 40 years of investing journey.
I bought it then because of:
- Company had been giving consistent dividend of more than 3%, which was better than CPF’s 2.5%;
- Company had been almost debt-free and the bosses bought their own company's shares occasionally;
- Company had the vision and plans to expand the market to cover Thailand, Indonesia, Taiwan, Myanmar and China; and
- The price dropped drastically partly due to the 2008 Global Financial Crisis.
I sold it because of:
1. The
trailing price-earnings ratio is slightly more than14x which, to me, is not
attractive anymore and I should be able to find another stock that can give me
higher returns than that;
2. In
order to give me a CAGR of 20% investment returns for the next 10
years, BWL has to maintain an earnings per share CAGR of
38% which is a tough call even though I know it may be possible; and
3. The
price came down more than 10% from its peak of 72.5 cents on the same day I
sold the stock.
The price of BWL may still go up further after I sold it. What we need
to know is that we can never be accurate enough to catch the peak but we have to
try to eat the best part of the meat. I may buy BWL back if its price declines
to a level that I find it attractive again. Come what may, I will just maintain
my discipline to stick to my proven strategies.
So, the two takeaways for today
are:
1. The
greatest difference between a stock market and a casino is: You will lose money
in the casino if you gamble for a long time as time is always your enemy. You
will win money in the stock market if you buy a good stock or an index Exchange
Traded Fund (ETF) and keep it for a long time as time is always your friend in
the stock markets.
2. The reason to sell a good quality stock must only be that you can find a better stock elsewhere or that the stock has not been attractively priced by the market.
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ReplyDeleteThe price of BWL may still go up further after I sold it. What we need to know is that we can never be accurate enough to catch the peak but we have to try to eat the best part of the meat. I may buy BWL back if its price declines to a level that I find it attractive again. Come what may, I will just maintain my discipline to stick to my proven strategies.
So, the two takeaways for today are:
1. The greatest difference between a stock market and a casino is: You will lose money in the casino if you gamble for a long time as time is always your enemy. You will win money in the stock market if you buy a good stock or an index Exchange Traded Fund (ETF) and keep it for a long time as time is always your friend in the stock markets.
2. The reason to sell a good quality stock must only be that you can find a better stock elsewhere or that the stock has not been attractively priced by the market