Lesson learnt on discovering and accumulating wealth

LC Development, a counter I have been watching in Singapore Stock Exchange (SGX) has been having a great run this week. I would like to share my experience as another key element on wealth accumulation and discovery when purchasing this counter.

I have spent some time, for the last six months, coming up with a list of undervalue companies in SGX. LC Development, a small property company was also in the list with the share price at less than 50% of its Net Asset Value (NAV). It is a share with great discount but the only sore point is that they have been in the red for years. It has been going down trend since the May peak of the Singapore Stock Market, which means it is getting cheaper and cheaper compared to its Net Asset Value, but still in red. But things started to change late August as the price of the share started to pickup. Last weekend, my broker sent me his newsletter and talked about the counter again. The newsletter ignited me to go in and take a closer look at this company profile again, as they have just closed their book in June for Year 2005 and reported turning black after few years in red.

After doing my checking of the fundamental, I decided that it is a good time to purchase the share. On Tuesday, I started queuing at 15 cents per share, but the trading was so thin that even the last done price was at 15 cents, the target that I wanted, I never had a chance to complete the sales. Next day, I went in and started my queue before the market opened at 15cents. This time I was quite confident that I would get it. But the price went up to 15.5 cents and never came down. I evened up my queue to 0.155 cents in the later part of the day but never got it because the trading was still too thin. On Thursday, I started my queue at 15.5 cents and expected this time to get it. However, by the time I finished my lunch the counter had moved up to 16/16.5 cents. The trading was heavy as I learnt later because of some property they have sold that triggered the interest to this counter. Eventually, the counter closed at 17 cents. Once again ,I was left in the cold. So to make sure I would get the counter the following day, I actually started to queue at 5.16pm yesterday. This was to ensure that I would get what I wanted when the market opened the following day. This time, I had 2 queues, one at 15.5cents and another at 16cents.

I then went back home but felt bad, because personally I felt like being played out by the market for not getting the stock at a cheaper price 3 days ago at 15 cents, where now the counter have moved up to 17 cents. In my mind, I was battling with my emotion:

Firstly, I felt bad for losing the opportunity to make 2 cents per share from 15 cents to 17 cents( which is 13%) within the short time span of 3 days. Secondly, I was mad at myself for not making the decision to purchase at the selling price instead of insisiting on my lower purchase price. I blamed my persistancy of holding on to my purchase price for missing the 13% gain. To make the matter worst, on the last 2 days, this counter closed right at my queue price, and based on my calculation, the market closed right where I almost got my queue of purchase. The thought of "just missing the boat" feeling, make me feel unjustise and incredible unfairness.

What happened is that I started calling my friends and telling my wife to just blow my fustration of the last 3 days of trading. Screaming that I will get it next morning. I could'nt even have a good rest last night and could not wait for the market to open and see my trade was finally being made.

What happened on the next morning was something I never expected.

I woke up this morning and a sudden flash of thoughts came into my mind.

I remembered that LC Development had just announced a dividend which was issued at 50 cents, and I remembered that I have read this on Monady's Business Times Dividend summary table. To confirm, I searched for the Business Times and found the table, which confirmed the dividend pay out was 50 cents. Now, knowing this part of information, I had a very different view now on this company. The company net asset value was 28 cents per share, last year earning per share was 0.81 cents. Therefore, with all these numbers, how can this company pay a dividend of 50 cents, which is higher than its net asset value and his full year earning. If the dividend is true, then the comapny left only an emty shell without any value by the time they pay up all the dividend.

With this piece of thought I have in mind, the very first thing I did when I went to work this morning was to check on SGX website to reconfirm the dividend payment. To my surprise, the dividend shown on SGX website is 0.5 cents, instead of 50 cents. I told myself that there must be a mistake in either the Business Times or the SGX report. To validate the numbers, I logged into the Philip Security Website and checked out the data, and confirmed that it was 0.5 cents. With 2 vs 1 of my information telling me that the dividend issued was 0.5 cents, I SMS to my broker just to triple confirm the dividend payment. By then, the market has opened and the trading is holding at 17 cents. My broker later finally returned back and confirmed that the dividend was actually 0.5 cents and not 50 cents.

Lesson learnt:
1) Due diligent is one key element when we are in the process of discoveing wealth. the process of discovering and accumulating wealth will involve many times, your emotion and pyscology of making right decisions. In the process of accumulating wealth, when we discover a piece of opportunity, it is important to reasearch on the fundamental piece of opportunity. Gather the information and data, analyse them to ensure we are making the right choice. Every piece of information is critical, and do not miss out any. The piece that you missed may be a critical part as it might make the diffrerence between a gold mine and a trash bin. Like the case I have, if the actual dividend is 50 cents and I never realised it and bought into the counter, it would be a disaster.

2) In the world of wealth discovery and accumulation, it is all about physcology. Every time you do an investment, you will be having the ups and downs feeling inside you. The emotion control of the whole process is what differentiate between a good investor from a great one. Naturally, I still have a long way to go and a lot to learn in emotion control. The missed opportunities I felt when I keep missing my trade and the impatient caught up with me on the 3rd and 4th day of missing trade. Revenge creeped into me on the 3rd day where I placed my trade on the closing of the day for the next day purchase.

I only realised it when my mind suddenly flashed back some thoughts of the piece of news on dividend payment and the concept of Asset value of the company this morning. Subconciously, my knowledge of self-control and checking fundamental of the company, brought my emotion in check and in control. After the whole incident this morning, I realised how critical it is for us to have our emotion on check if we want to be a successful investor. In fact, I believe emotion control is important to every investment decision, not just in this incident. Also similarily important is to perform our due diligent in all situation to check up the fundamental of all even we faced, in the above situation I referred to the fundamental of the investment I am getting into. So in life nothing can be taken lightly, we must always follow the process of doing things. The porcess which you have believed in and the process which you have proven. The difference the next time may not just be money, it can be your life that are at stake.