Two wrongs made him a bright investor

Two wrongs made him a bright investor

He's only 25, but Mr Cheong Wen Quan holds or manages more than $1 million in investments after spending just eight years dabbling in stocks.

His investments include Thai snack company Tao Kae Noi, Singaporean tourism company Straco Corporation, American multinational technology company Microsoft and Chinese conglomerate Fuyao Glass Industry Group.

Mr Cheong, a business management undergraduate at Singapore Management University, started investing at 17.

At the time, he wasn't old enough to get his own Central Depository (CDP) account, so his father signed up on his behalf and gave him $5,000 in capital to start.

"Over the last eight years, I've had my parents, relatives and friends pass me their spare cash to invest on their behalf. They saw I was passionate about it because that was all I talked about," he says.

He has received a total of about $600,000 - most of it in 2012.

"Although I was a little uncomfortable handling so much money, they told me to try and make the most of learning about investing," he adds.

And he did - even though it meant learning from two bad decisions.

The first was when he sold off his stocks too early.

PREMATURE

In May 2013, Mr Cheong bought 200,000 units of Malaysian-based Riverstone Holdings, a natural rubber and nitrile glove manufacturer.

"The price was $0.50 and I planned to sell once it reached $1," he says.

Fifteen months later, the price hit his target and he sold everything.

It turned out to be a premature move. At the end of last year, Riverstone's share price hit a high of $2.60.

According to a report by the National University of Singapore's Investment Society, the spike can be attributed to the crash of the Malaysian ringgit.

The report added that the company is expected to grow due to the "global ageing population", which leads to a higher demand for healthcare services and therefore, gloves for medical procedures.

Mr Cheong says: "I did a lot of research... but I didn't re-evaluate the company (and compare with my initial research) before selling it off.

"If I had checked how it had operated in the industry and how well the company did, I would have seen the potential it had to grow." According to Mr Cheong, selling early cost him a potential profit of about $260,000.

But waiting too long can also be a mistake - as Mr Cheong learnt.

In February 2014, he bought shares in MTQ Corporation for $1.60. MTQ is a local company which provides engineering solutions for oil field and industrial equipment users and manufacturers.

In June that year, oil prices started to drop. As a service provider to the oil and gas industry, the company suffered during this crash. "I was down by about 15 per cent, but I refused to sell because it was painful to 'lock in my losses'," he says.

He had hoped the share price would rebound, but he ended up losing more when he finally sold everything in August last year at $0.43.

"I never thought oil prices would drop, especially because it's a commodity," says Mr Cheong, who spent $110,000 and lost about $80,000.

But these costly mistakes have made him a better investor.

He says he got interested in investing after reading a book about value investing, an investing style adopted by American business magnate Warren Buffett, whom Mr Cheong calls his idol.

"One of my tricks is to analyse a business from an owner's perspective - studying the company's competitive advantage, its competitors and the industry in which it operates - to try and decipher how the company will survive.

"Also, I try to get a more complete picture (of the company's position) by talking to stakeholders and competitors.

"Gathering all this helps in establishing the company's pricing power and its ability to sustain abnormal returns (to shareholders) in the long run."

He did so with Straco Corporation and it paid off.

In July 2013, he bought about 600,000 units at $0.30. He has since doubled his investments in the company. The share price is now $0.79 and he plans to hang on to the stock.

"All that I've managed to accomplish, I owe to the people who believed in me and the mistakes that I've learnt from along the way."

See also: Student, 21, manages entire family's investment portfolio of $100,000

Mr Cheong's tips

READ & RESEARCH

Mr Cheong Wen Quan says he wished he had started reading about investing earlier in life.

"It's good for new investors to always be curious," he says.

"Read more about the industry, its dynamics and understand the business as if you are the business owner."

He also says you should educate yourself by speaking to those who have invested in the company which you are looking to buy into.

He adds: "It will also be beneficial for an investor to check if the company has treated its shareholders well (in the past).

"Some simple due diligence will go a long way."

ASK QUESTIONS

When it comes to popular stocks, Mr Cheong says he would question why these stocks are attractive.

"I always ask myself, 'If a stock seems attractive, why do you think the other person is selling it to you?'

"Another question I ask myself is, 'Why am I right and the other person wrong?'."

Mr Cheong says investors will buy into a company if they think it is going to do well.

"But just before I buy the stock, I'll ask myself why the seller doesn't think this company has the potential to soar."

IF YOU'VE GOT NO TIME...

"Always focus on protecting your downside, but if you have no time to do extensive research, there is another way," he says.

Investors can cut their losses if they don't develop such a high-risk portfolio.

He says: "If you have no time to do your research, it's probably best to buy a low-cost index fund (such as one that invests in all small stocks or all Asian stocks)..."


This article was first published on July 17, 2016.
Get The New Paper for more stories.

More about

Purchase this article for republication.

BRANDINSIDER

SPONSORED

Most Read

Your daily good stuff - AsiaOne stories delivered straight to your inbox
By signing up, you agree to our Privacy policy and Terms and Conditions.