Showing posts with label tan teng boo. Show all posts
Showing posts with label tan teng boo. Show all posts

Thursday 17 September 2015

iCapital Close End Fund: The Winners and the Losers over the last 10 years

This fund has done reasonably well since inception.  Its NAV has grown from RM1.00 in 2005 to the present NAV of RM 2.80 on 17.9.2015 (CAGR of 10.8%).

Its market price is RM 2.24 on 17.9.2015, giving a CAGR of 8.4% over the last 10 years.





Who are the winners?

1.  Those who have been holding the funds since inception.  They are the winners.
2.  Those who bought in 2008 and 2009, they are winners.  They would have bought icap close end fund at a low price.
3.  Yes, the fund manager has been a big winner in this fund.  This is to be expected as managing fund is a highly lucrative business indeed.




Who are the losers?

1.  Those who bought into icap at the time of over-enthusiasm, when icap was trading at a huge premium.  Those who bought into icap in 2007 and who did not hold the stocks till today were more likely to be losers.
2.  Those who bought the stock in the last 3 years.  They would have lost due to non-performance or poor performance of the fund over this period.   They would have enjoyed a better return from investing into their risk free FDs.
.


As for foreign investors who bought into the fund over the last few years, are they winners or losers?

Taking into consideration, the loss of value of the ringgit in relation to the US and the UK currency,  they may not be winners either.



Probably more shareholders burnt than benefited.

Peter Lynch delivered great returns while managing the Magellan fund for 13 years.  Yet, when he analysed the returns to the shareholders, the majority lost money!  Similarly, I am of the opinion, even today, the majority of shareholders who had bought and sold icapital close end fund were losers.   The winners are probably a minority who bought in the early years especially the initial investors into the fund at the time of launch, and who have hold onto the stocks till today.



The Fund Manager should stay focus.

Over the recent years, the fund manager of icap close end fund has been extensively involved in expansion into new funds and new geographical territory.   His activities appear to target growing his assets under management by his company.   His involvement in Investors Days, though commendable, is of doubtful benefit to the core shareholders of icap closed end fund.

As for hard core shareholders of icap closed end fund, their single focus is on the performance of the fund.  In particular, can the fund deliver >15% compound annual return over the long term.  Hopefully, by the year 2020, the year of reckoning, when the fund would have existed for a long period of 15 years and have been through a few up and down cycles, we can make a more objective assessment of the ability of the fund manager.

It is expected that most funds would just perform about the market return or slightly lower than the market return.  Will icap close end fund be able to deliver returns much higher than this?  Will icap close end fund be able to beat the returns of Buffett's during his earlier years of his involvement in stocks?



















*Special Dividend of 9.5 sen per share less Income Tax of 25% for the financial year ended 31 May 2013 is deducted from NAV.





















Thursday 30 July 2015

Overvalued global markets



Tan warns of overvalued global markets

FORMIDABLE Malaysian fund managers who speak their mind are hard to come by. 
But you would not think of that when you meet the unassuming Capital Dynamics founder and managing director Tan Teng Boo – also the founder of Malaysia’s only closed-end listed fund, iCapital.biz.
For the record, iCapital.biz recorded a compounded return of 13.78% a year since its listing in 2005 versus 8.17% for the KLCI.
If the cash portion of RM240mil is removed, that return would be much higher. (Capital Dynamics is the fund manager of iCapital.biz).
Capital Dynamics now has three funds, with its biggest exposure in stocks listed on the London Stock Exchange. In Asia, its highest weightage are stocks listed on the Hong Kong Stock Exchange. 
So this week, when we spoke with Tan, he was again armed with some interesting contrarian insights. 
“To know whether a market is bullish or bearish, you see what kind of fools are around. In a bear market, the old fools are in the market. These are the seasoned people who have made mistakes. Today, there are a lot of new fools around,” he says. 
On a more serious note, Tan expects global markets to fall drastically. All his funds presently have high cash levels. He bases this view purely on stretched valuations. 
“Look at the last 12 months. The S&P 500 is now trading at a price earnings ratio of 20 times PE. What is more significant is that if you look at the Schiller cyclically-adjusted 10-year PE, it is now at 26 times. 
“The last three times it was at this level was in 1929, 1999 and 2007 to 2008,” Tan says. 
“When valuations are high, anything can be a trigger, and just like that, people will sell. And when markets are overvalued, you get bad returns.”
Are there anything in particular he is eyeing?
“For now, I cannot find specific stocks. I can’t buy crude palm oil (CPO) stocks. 
“CPO prices are down 50%, but stocks are at an all-time high!” he says. 
Secondly, Tan resolutely says that he is underweight on the Malaysian oil and gas sector, as well as some of the oil and gas service providers in Singapore.
“The oil and gas business is a commodity business where margins are not sustainable. Now, it appears that the barriers to entry are so low. When you have players like Eversendai Corp and Yinson Holdings Bhd, who have never seen a rig in their lives, now becoming global players, I would be very careful,” he says.
Tracking the economy 
Tan says post World War 2, inflation has been on a steady uptrend.
Thus, although the Conference Board Leading Economic Index (LEI) has been rising, he feels that this cannot be used as the ultimate indicator to track the economy. 
(According to Wikipedia, LEI is an American economic leading indicator intended to forecast future economic activity. 
It is calculated by The Conference Board, a non-governmental organisation, which determines the value of the index from the values of 10 key variables. 
These variables have historically turned downward before a recession and upward before an expansion).
“In the second half of the 19th Century, recessions took place even when there was inflation. The lack of or presence of inflation was not a consideration of recession. 
“I think we are now entering that phase. In the United States, real wages have been horrible and have not improved. 
“Savings rates are at historic lows.
“And right now, the US economy is deleveraging. Thus, not increasing interest rates will not stop the recession from taking place,” he says.
He notes that there are some clues from Japan. 
“Post 1990, there has been no inflation. While unemployment is low, there is, however, no aggregate demand. Consumers are simply not spending, and this is causing the recession”.
Meanwhile, when meeting the management of a company, Tan still prefers to look at the numbers. 
He says the best measure is still the return on capital employed.
“You will notice that most analysts or people who invest in stocks put more attention on the investment decision. 
“For us, we put the bulk of our attention on the research. 
“And when we do research, we talk to the regulators, the vendors, the competitors, then finally only do we talk to the targeted company,” he says.
Tan says it is because of this sort of analysis that iCapital sold all of its Tesco shares in 2011. 
“We felt the management was not getting their strategy right,” says Tan. 
Tesco has recently been hit by allegations of an accounting scandal and Warren Buffett is losing more than 40% of his US$1.7bil (RM5.44bil) investment. 
China
Tan has been a strong advocator of China, and this view is still just as entrenched. 
“The re-emergence of Asia is taking place, and it will be led by China, and it’s going to be earth-shattering. This re-emergence, however, will not be welcomed by developed countries and Japan,” says Tan. 
“China has all the capabilities.
“People think China just copies intellectual properties, but that is not the case. If you go back to history, you will see that the Chinese have a tremendously rich past.
“There is immense potential, and over the next 30 to 50 years, many things are going to change. 
“Values for one, will change. The corporate governance of the West will change. For example, maybe they will realise that democracy doesn’t seem to work,” he says.
“The new synthesis could be something like socialism but with Chinese characteristics. Or capitalism with Chinese characteristics,” he adds.
Tan likes what Chinese president Xi Jinping is doing to clamp down on corruption. He sees this as real courage. 
“He is now trying to bring back self-respect , where people must respect their culture. He is trying to revive Confucianism. He is aiming for a cleaner government, different values. It will not just be a case of being glorious to be rich,” says Tan. 
Tan claims that for all of Japan’s technological advancement, the Japanese haven’t invented a single thing. 
“Research shows that half the modern technologies of the world all originate from China. Football and golf, for instance, come from China.” 
There are only two countries in this world which are able to launch missiles at hypersonic speed - China and the United States. 
“The world hasn’t really seen the transformation of China,” says Tan. 
He says that if China could become something like Singapore in terms of per capita income, then the world is only just witnessing the beginning of it. 
“Every dynasty in China has spanned a few hundred years. So we are just seeing the beginning of the era of the Communist Party,” said Tan.
Hong Kong
On the issue of Hong Kong pro-democracy demonstrators demanding the right to elect the city’s chief executive via democratic elections, Tan describes their move as silly against a benevolent China. 
“The people of Hong Kong should remember that Hong Kong has always been part of China until the First Opium War. The British victories over China resulted in the cessation of Hong Kong to the UK (United Kingdom) via the enactment of new treaties in 1842.”
He says that in July 1992, Chris Patten, who was the last British Governor of Hong Kong, quickly introduced reforms that increased the number of elected members in the legislative council. 
“Why did Patten do this so close to the 1997 handover when all the time that Hong Kong was under British colonisation, the long-held British practice of no general elections was never questioned? Why do the people of Hong Kong behave so aggressively against China, but against the British, they did not dare make any noise?” he asks. 
“Britain ruled Hong Kong to selfishly benefit Britain. China did the opposite when she took back Hong Kong,” he claims. 
The next big thing
Tan thinks that whatever it is, it will be coming from China.
“If you’re talking of an Internet-related technology, it could be Alibaba (China’s biggest online commerce company) or something similar to it. The number of Internet users are three to four times larger than that of the United States and it is still growing. In fact it can still double up,” he says.
Tan says that Asia, with its three billion people, is also re-emerging, particularly India and Indonesia.
“The people of Indonesia are hardworking and creative. Now, if their new president can really enact change and lead them in the right way, I see tremendous potential for them. If India and Indonesia can start from where China started 20 years ago, the potential will be tremendous,” he said.
On oil, Tan says predicting its movement has become a lot more complex today.
This is because when crude oil moves to a certain level, renewable energies become a lot more attractive. He sees shale as just one of many factors contributing to the drop in oil prices.
“What’s clear is that the reliance on OPEC (Organisation of the Petroleum Exporting Countries) has dropped, and moving forward it will become less important,” he said.
Tan’s immediate ambition is to get iCapital.biz a dual listed global fund listed.
“As an Asian gentleman, this is a promise I have made to the share owners and I want to deliver,” says Tan., adding that what is important is how you do whatever you are doing.
“Do it the best that you can, then you become good at it. And once you become good at it, then you become interested in your career,” he says.






http://www.thestar.com.my/Business/Business-News/2014/10/04/The-cautious-contrarian-Capital-Dynamics-Tan-warns-of-overvalued-global-markets/?style=biz

Sunday 4 January 2015

Either you ignore market fluctuations or you buy and sell based on value.

It is people generally who make high and low markets, because they are optimistic (and greedy) in high markets and pessimistic (and disgusted) in low markets.  

How can you - a member representing the public at large - be expected to act otherwise than the public acts?

Does not this mean that you are doomed, by some law of logic, to buy when you should be selling and to sell when you should be buying?


This point is vital.  The investor cannot enter the arena of the stock market with any real hope of success unless he is armed with mental weapons that distinguish him in kind - not in a fancied superior degree - from the trading public.  

(1)  One possible weapon is indifference to market fluctuations; such an investor buys carefully when he has money to place and then lets prices take care of themselves.  

(2)  But, if the investor intends to buy and sell recurrently, his weapons must be a frame of mind and a principle of action which are basically different from those of the trader and speculator.  He must deal in values, not in price movements.  He must be relatively immune to optimism or pessimism and impervious to business or stock-market forecasts.  

In a word, he must be psychologically prepared to be a true investor and not a speculator masquerading as an investor.  If he can meet this test, he will be a member not of the public at large but of a specialized and self-disciplined group.

Returning to the matter of the market's cyclical swings,we must point out that the duration or frequency of these swings has changed considerably since 1921.  This is an added obstacle to the pleasing project of investing regularly in low markets and selling out in high ones.  Between 1899 and 1921 the industrial average made five well defined highs and five definite lows, an average cycle of about four years.  Since then there have been only two clean-cut swings and the intervals between low points have been eleven years and ten years, respectively.  

An investor nowadays is likely to grow uneasy and impatient while waiting for his cyclical buying opportunity to reappear.  In the meantime, also, his funds will bring him no interest in the bank and only a negligible rate if placed in short-term securities.  Thus he can lose more in dividends foregone than he can ever gain from buying at eventual low levels.  




Summary

Either buy carefully and then ignore the market fluctuations or if you intends to buy and sell recurrently, deal in values.  

Should you patiently wait for your cyclical buying opportunity to reappear?  The low-points of the market maybe 10 or 11 years apart.  While waiting for these hoping to buy at eventual low levels, you can lose more in dividends foregone; earning little income from your cash holdings.

Saturday 10 November 2012

iCAP closed end fund: 87% of shareholders voted for the status quo


 Saturday November 10, 2012 MYT 5:22:15 PM

Trio fail to get elected to iCapital.biz

By John Loh


KUALA LUMPUR: Andrew Pegge, Low Nyap Heng and a shareholder Lo Kok Kee failed to get elected to the board of iCapital.biz Bhd at its packed AGM on Saturday.
At the six-hour meeting, which started at 9am, shareholders overwhelmingly threw their support behind its fund manager andfounder Tan Teng Boo.
Some 87% of shareholders voted against the resolutions seeking board representations for Pegge, Low and Lo on Malaysia's only listed closed-end fund.
Earlier, Kingsnorth told journalists outside the AGM at a hotel here that Laxey, which owns 6.9% of iCapital.biz, had accomplished what it set out to do.
"The debate (about the discount between iCapital.biz's share price and net asset value) is good. The company is better for this.
"We are still the largest shareholder and will continue to express our views," he said.

Tan Teng Boo's interview on bfm on the latest development in iCAP

http://www.bfm.my/assets/files/MarketWatch/2012_11_09_MW_TanTengBoo.mp3


To fellow Shareholders of iCAP
Let us keep to the initial objectives of this fund.
Please cast your votes to send a decisive message in this AGM.
HandshakeHandshake

I throw my support for Tan Teng Boo to maintain the status quo in iCAP.



Also read:


Thursday 8 November 2012

How the Top 2 investors of iCAP closed-end fund might have acquired their 10.56% outstanding shares.

From the 1.1.2011 to 7.11.2012, there were 459 market transaction days.
The total number of outstanding iCAP shares is 140,000,000 shares.

The average number of shares traded per day for that period = 89,700 shares
The % of total outstanding shares transacted per day for that period = 0.064%.
The average RM value of shares traded per day for that period = RM 195,249.

The total number of shares traded for that period  = 41,277,700 shares
The % of total outstanding shares transacted for that whole period = 29.5%.
The total RM value of shares traded for that period = RM 89,814,731.


The Top 2 shareholders of iCAP as on 31.5.2012 own 9,028,491 and 5,748,600 shares respectively.
These Top 2 shareholders collectively own 14,777,091 shares or 10.56% of total outstanding shares of iCAP.

Assuming that these Top 2 shareholders started to accumulate their shares in iCAP from 1.1.2011 to 7.11.12, the followings can be inferred:

- they would have been responsible for 35.8% of the total transactions for this period.

- they would have invested a total RM 32,152,965 to acquire a combined total of 14,777,091 shares of iCAP.

- they would have invested an average of RM 70,050 per day to acquire their shares during this period.

- their average price per iCAP share they bought at was about RM 2.18 per share.


Excel worksheet:
https://docs.google.com/open?id=0B-RRzs61sKqRMG5WZU9mdXJld0E


Thursday 6 October 2011

Icapital.biz Portfolio as of 15 September 2011


Below are the latest holdings of Icapital.biz as of 15 September 2011, as published in Investor Day booklet as compared to earlier portfolio as of 22 June 2011.

Saturday 25 December 2010

Advisers: Who should you trust with your money?


ADVANCED INVESTING

Advisers: Who should you trust with your money?

Investor Education Fund

"There are no requirements for managing billions of dollars, but before somebody can trim your sideburns, he or she has to pass some sort of test. Given the record of the average fund manager over the last decade, maybe it should be the other way around." – Peter Lynch, Beating the Street

How do you find a good adviser?
Although Peter Lynch’s comment is focused on fund management, the minimum requirements to become a licensed adviser are easier to get than in some other professions that have much less of an impact on your long-term well-being. In Canada, there are many people that are eager to manage your money but it can be difficult to find somebody that will do it well.
The best ones don’t necessarily drive posh cars, wear expensive suits, or have big corner offices. But they do share these three characteristics:
  • superior service
  • consistent returns and with reasonable risk
  • a focus on your success first, before their own.
Unfortunately, too often you can only learn how an adviser measures up after you have entrusted your money to them. There is no common rating system that lets you sort out the good advisers from everybody else. But there are three things you can -- and should – check before you choose an adviser:
  • Qualifications
  • Experience
  • Performance
After all, it’s your money that’s on the line -- not theirs. Make sure you’re putting it into the right hands.
1. Assessing an adviser’s qualifications
The fact that an adviser has the basic qualifications to work in the industry will not tell you very much about their skill level. To register as an adviser, he or she only has to meet the bare minimum qualifications to operate in the industry. So when you look at qualifications, look beyond the minimum.
What to look for:
  • Check that the adviser and their firm are registered and in good standing with industry regulators. Check now.
  • Find out if the adviser has any additional qualifications, such as chartered financial analyst or chartered accountant. It takes considerable work and expertise to achieve these and other professional accreditations. This means they can offer added insight and a richer perspective to you.
  • See if the adviser has made a commitment to ongoing professional development and skills development. A person who is committed to continuous learning will more likely serve you as a valued adviser, and not just sell you products.
2. Assessing an adviser’s experience
Merely having experience in the industry does not make someone an excellent adviser. Experience may help an adviser understand and assess financial markets, but it does not guarantee the right focus on client returns. Nor does it necessarily teach advisers to focus on the long-term value of protecting their clients from the intense industry pressure to generate commissions.
The best advisers have learned, through experience, to make sure that costs are reasonable; that returns are fair; that recommended strategies and products are among the best available; and that clients feel comfortable and confident through good markets and bad.
What to look for:
Find out how long the adviser has been working in the industry and how long they have been working for this specific company. Learn about their philosophy and their company's investing philosophy.
Check that the adviser works with a broad range of products, not just one or two specialties, so they can help you find the right investments for your stage in life.
Interview a number of advisers before you choose one and ask them about their experience and investment philosophy. For instance, ask them what lessons they have learned over the years, and what they do differently today than they did five years ago (or when they started in the business). You can have a very interesting conversation with someone if you ask them about mistakes they have made and what they learned from them!
3. Assessing an adviser’s performance
It takes a long-term view and considerable emotional maturity for an adviser to balance making money for themselves with fair returns for their clients. As we will explore in future articles, most advisers are paid by commission -- and that commission often brings an incentive to make certain decisions.
The best advisers focus on returns rather than commissions. They understand the effects of fees and capital losses on client returns. They also know how to prepare clients for the volatility of financial markets.
Unfortunately, this type of adviser is less common than you think and takes a concerted effort to find. Make sure you:
  • Take the time to interview advisers to uncover their philosophy, their commitment to their profession, and the type of service that they will provide to you.
  • Make it clear to your adviser that you will monitor the relationship based on the relative performance of your portfolio against a reasonable benchmark.
Investors need to demand low-cost and market-comparable performance from their investments. This happens far too rarely today – and investors need to change this.
What to look for:
  • Make sure the adviser has good references and a demonstrated track record.
  • Check how the adviser has performed in both up and down markets.
  • Ask how long they have worked with most of their clients. Talk to at least three clients the adviser has worked with for five years or more.
  • Talk about how the adviser is paid. The best situation is where you and the adviser profit or lose together. Next best is an advisor who is paid to provide advice, but has no financial stake in the decisions you make. Neither of these are very common as the commissioned sales model is standard in the industry.
The problem with commission selling
One of the biggest enemies of long-term returns are fees. Commission selling can become problematic when it comes to fees because some of the most popular products are the most expensive for consumer because they are so lucrative for the salesperson.
For example, Canadian equity mutual funds with fees of approximately 2.5% are some of the most popular investment products in Canada. If these funds regularly provided returns that outpaced the Canadian equity market over the long-run, this strategy would make sense. However, this usually isn’t the case- only a handful of funds have outpaced the market consistently over the long run, despite the 1000s of funds (literally!) that are available.
Despite the fact that most mutual funds trail the markets in terms of return, you don’t often see full service brokers that recommend investing in an exchange-traded fund when a similar mutual fund is available. The adviser needs to get paid, and the mutual funds offer higher fees- even if it means generally below market returns for you. This is one example of how commissions create incentives for advisers to do questionable things for your portfolio.
Remember: advisers are important- but they can’t do it all
Investors need to be aware of what their advisers can and can’t do. An adviser can be great at some things, such as:
  • adding value with access to good research
  • offering tools and advice regarding asset allocation
  • helping you maintain investing discipline and focus.
In the early stages of a relationship they can help you through all of the documentation to define your investment type and asset allocation. They can help you access proven, low-cost managed and index products and help you screen out much of the bad product.
However, investors need to watch their portfolio closely and put pressure on their advisers to keep fees in line with overall returns. After all, just because somebody is qualified to do a job, or has experience, does not mean that they will behave in a way that maximizes your investment return. So learn as much as you can about an adviser before you put your hard-earned money in their hands.