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Day 5 - Learning From My "Best" Investment

I believe we invest with the intention of making a profit. However, there are times when our investment turns sour.


I would take this chance to share my "best" investment. Hopefully, the lessons shared here will be useful for you too.


Failures are part of life. If you don't fail, you don't learn. If you don't learn, you'll never change. - Morgan Freeman

I bought my "best" investment in 2011. It was one of the market-leading, best-in-class and deep-water container terminals in the Pearl River Delta of South China. It is also one of the world's largest container port in the world.


This company was listed on the SGX mainboard.


The company is none other than... Hutchinson Port Holdings Trust (SGX: NS8U). I bought some shares and here's a chart of the stock.



Source: Yahoo Finance

I entered at a price of $1.01 and the current price is $0.117. My loss, as of 11 April before the dividends, is 88.4%.



Thankfully, the capital I had invested only a small amount. And I had learned much from this investment.


1. Power of Dividends

Every year, the company gives out dividends. The yield was pretty attractive back then, which was about 4% to 5% if memory serves me right,


Across the years, despite the drop in price, my loss has reduced from 88% to around 38% because of the dividends received.


If the company is able to continue to give dividends, I should be able to recover my capital by 2030 (hopefully). 😅


I say hopefully because the shipping industry has hit the bottom around 2014 and has not been doing well till now. The management has reduced dividends over the years.


With the current Covid situation, I reckon the management will likely reduce the dividends further.


Regardless of how the company is performing, we can see that having dividends is a good way to reduce our losses (if our investments are in the red) or improve our profits if our investments are doing well.


2. Reasons for Investing

I could still recall I invested in HPH Trust mainly for these few reasons:


  • the port is owned by one of the richest men in Asia, Li Ka Shing

  • the port is one of the largest in the world

  • the possibility of the port closing down is very slim and it is one of the more competitive ports in the South China Sea


Looking back, you can see that it's very superficial. I didn't do any analysis of the company's fundamentals.


Despite knowing that the industry has hit rock bottom in 2014, I could have sold it. However, I chose to hold on because Warren Buffett's quote was ringing in my head.


Be fearful when others are greedy. Be greedy when other people are fearful.

I didn't take into account what Charlie Munger had shared...





I was way out of my depth when I invested in HPH Trust.


I didn't have a good grasp that business trust is very different from REITs and it's very different a conventional stock. Though all three are listed on the stock market, the mechanisms behind the tools are very different.


From here, I realised I need to expand my knowledge of the company's industry and competitive advantages prior to investing. And I had stuck to this rule each and every time I invest.


3. Staying away from IPO hype

What I didn't know back then was many local investors punt IPO. The thesis for investment is probably similar to my initial thinking.


On top of that, the numbers stated in the IPO report may be inflated.


Hence, I tend to stay away from IPO nowadays and only invest in companies after they had reported their first or second-quarter earnings.


I still remember when Facebook (NYSE: FB), Alibaba (NYSE: BABA) and Twitter (NYSE: TWTR) first IPO-ed, I stayed away from them.


True enough, the initial period of all 3 companies were horrible.



Source: Forbes Article on Facebook IPO


Source: Yahoo Finance

As you can see, Twitter shot up within the initial period but declined thereafter.



Source: Yahoo Finance

Alibaba suffered the same fate.


TL; DR

In my opinion, investing is a continuous learning journey.


Through this HPH Trust investment, I had learned that (1) dividend is a powerful way to compound your money, need to (2) have stronger reasons and understanding of the company before investing and having some level of competency of analyzing the company and industry.


And of course, (3) stay away from IPO hype.


If investing in individual stocks seems too difficult or time consuming for you, I have good news!


There is another vehicle that helps you diversify and you do not need to have the technical know-how of picking individual stocks to profit from the market. I will share more about this vehicle in the next article.


Do subscribe to this blog at the bottom of the post and stay tuned!

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