The Slow Boat to Ko Samui – Reflections of my Investing Journey

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The year was 1999. The ex-girlfriend and I suddenly found ourselves with time on our hands. We got our leave dates to coincide and we had two weeks ahead of us.

We had just started working and we were operating on a tight budget. Budget airlines were non-existent then, and flights were still comparatively expensive. Many places we wanted to visit were out of our reach. We had the time, but not the money.

We refused to let our leave go to waste though. Rather than sitting on our bums, we decided to get moving. With just our backpacks, some clothes throw together and a copy of Lonely Planet Thailand, we took bus 170 into JB.

We had a plan. We would head to Penang, meet a friend for lunch before deciding what to do next. We spent the night traversing the Malaysia Peninsular in a coach, arriving the next morning.

From Penang, we were faced with more choices. Buses from Komtar fan out in the direction of Bangkok, Phuket or Koh Samui. We could live cheaply in Bangkok for a week but there was only so much MBK I could take. Phuket sounds exciting enough but it is the Koh Samui that really tugged at us.

The decision was made in a flash. The coach took us to Alor Star and once we were across the border, we were herded into a smaller 12 seater bus, with blaring Thai music no less.

We kept heading north, past Hat Yai and eventually found ourselves at Surat Thani, a sleepy town off the coast of eastern Thailand. From there we were to catch a boat across to Koh Samui.

The Slow Boat

Except that it was no ordinary boat. It was a slow boat. There were no seats. Only mattresses laid on the floor. We boarded the boat in the evening with an assortment of other sleepers and we were to make landfall the next morning.

(I tried to find a picture of the boat and came across this hilarious blogpost about the sleepboat experience. It was exactly as he described).

We finally ended up in Koh Samui. Walking along the streets that evening, we chanced upon a dive shop and in a flash signed up for a Scuba Diving Course. We completed our Open Water Certification and has since went on to log hundreds of dives around the world.

When we started out on that initial bus ride, we had no idea where we would end up, much less for it to be the beginning of an fulfilling hobby over the past two decades. We went along with the flow, and when an opportunity came up, we never hesitated.

Investing in 1999

Coincidentally, I also first started ‘investing’ in 1999.

I remembered my first purchase were for four lots of Allgreen shares. They were the developer of my parent’s property then. I made the phone call via the cordless phone in the living room, to a broker whom I have never met but who happens to be the husband of my father’s colleague.

I had no idea what I wanted to do with the shares, except that I paid up for the shares and sold them a few months after for a small profit.

Over the next decade or so, I had my fair share of trials and tribulations with the markets. I dabbled with forex trading, tried to develop an option strategy based on the principles exposed by Nassim Taleb, bought and sold my first and subsequent properties.

Like the trip to Ko Samui, I had no idea where I was going initially, except to keep heading North. It is not enough to make more money, but to make more money while being exposed to lesser risks. To be a better investor, I had to be a learning machine, reading and digesting everything that found its way to my plate.

In 2013, Alvin developed the CNAV strategy. The strategy calls for investing in asset rich but overlooked companies. Many of them are trading below their Net Asset Value. We slapped on a discount factor and called it the Conservative Net Asset Value.

CNAV stocks are boring stocks, in sunset industries. Many people would not have heard of them, much less be interested to own them. Precisely because they are so ‘cold’, they are very difficult for the retail investor to even think of buying. And precisely because of this reason, they are trading at very good value.

I saw the appeal in buying companies for less than what their assets are worth. Since then, my entire equity portfolio is in CNAV stocks.

The strategy calls for diversification, so we now own more than 20 stocks in three different markets. We had a good run for the past three years, with the portfolio returning more than 14.5% per year compounded.

CNAV performance 30th Sept 2016

Factor Based Investing – why do stocks outperform?

It is not only enough to buy stocks that outperform. It is more important to know why they outperform.

Since early days, the ubiquitous Nobel Prize winning duo of Eugene Fama and Kenneth French has identified Value and Size as being factors that is correlated with outperformance.

CNAV stocks have low Price to Book ratios and are more often than not small caps. We had little idea at that time but our CNAV strategy is strongly rooted in their research.

Over the years, other academics have built upon Fama and French’s work and have identified other factors such as momentum, low volatility, high yield and quality as being determinants of performance. Alvin has summed them up in this article.

The original CNAV strategy is heavy on Value and Size and nothing else. We are now in the process of incorporating the Quality factor into the strategy to give it another dimension.

It is a fundamental shift in the way we invest. In doing so, the composition of the portfolio will change and we will be looking at counters we would otherwise disregard. We will share more once the details have been finalized.

In conclusion

From the moment we took the first bus ride, our journey to the paradise island of Ko Samui has taken on a life of its own. Till today, we are still enjoying the utility and the opportunities from our dive classes on the island.

I have always approached investing (and many other things in life) as I have with that journey. As it approaches yet another crossroad, I am confident that going down this path will eventually bring me to investing paradise.

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