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Fund Managers & Market Experts Interviews (Sunday Times)
05-08-2012, 08:44 AM.
Post: #11
RE: Fund Managers & Market Experts Interviews (Sunday Times)
This is the third monthly article, and features Nikko Asset Management Asia's Mr. Ng Soo Nam.

*Note this is NOT the full interview. For the full interview, please visit the website.

The Straits Times
www.straitstimes.com
Published on Aug 05, 2012
Look for more than dividend yields

In our monthly series featuring fund managers and leading market experts, we ask Ng Soo Nam, chief investment officer at Nikko Asset Management Asia, about his investment philosophy and strategies.

By Jonathan Kwok

High-yield stocks have been in vogue since the 2008 financial crisis as investors seek steady income streams and reprieve from the volatile markets.

But while income streams are important, instead of simply paying attention to the levels of dividend payouts, Nikko Asset Management Asia's chief investment officer Ng Soo Nam, 47, believes that investors should also look at other factors such as reliable management, to ensure the payouts can be sustained.

"A high dividend yield by itself is a necessary but insufficient condition within dividend yield investing, and some other criteria are needed to complete the assurance of yield sustainability," he says.

Investors who placed their money with Mr Ng's team have not have done too badly.

Launched in 1999, Nikko's Singapore Dividend Fund has grown by an average of 10.96 per cent a year for the past three years, after deducting fees and charges and assuming that dividends were reinvested.

By this same measure, the Straits Times Index in this timeframe grew by only 7.25 per cent per year.

Stocks in this dividend fund include CapitaCommercial Trust, CapitaMalls Asia, Frasers Centrepoint Trust, DBS Group Holdings and SingTel.

The fund aims to pay dividends of 5 per cent to 7 per cent every year, spread out over four quarterly payments.

The recipient of a government scholarship, Mr Ng left the civil service in 1995 to join Schroders. He spent about 10 years there and managed the Schroder Singapore Trust, which became one of the best-performing Singapore equity funds.

The Schroder Singapore Trust outperformed the benchmark index in six of the seven years that Mr Ng managed it.

After Schroders, Mr Ng spent 21/2 years with Mirae Asset Global Investment Management (Asia) before joining Nikko in 2007.

Last year, Nikko acquired DBS Asset Management.

Nikko also has other funds, such as the Nikko AM Asia Pacific ex-Japan Fund for stocks in the region.

Q: What is your investment philosophy?

We are fundamental-driven investors. What this means is that we invest to take ownership of the profit streams of companies.

We examine closely how companies compete in order to figure out whether their profits can be sustained, or whether there is a likelihood that they may grow faster than expected.

Q: How do you decide which companies to invest in?

We have 11 analysts and fund managers who go through more than 1,000 stocks in the region, of which 500 fall into our research coverage list. We narrow these down to about 180 stocks which we may consider using for our various funds.

We are looking at companies that are relevant to the Asian growth story.

We want to be comfortable with the quality of their management, the strength of their balance sheet and the strength of their competitive advantage.

We do this by scrutinising the company's past financial and operating data, and examining the management's previous corporate governance and execution track records.

We also meet the management and do our own independent assessment of the industries which these companies are operating in.

We should be able to confidently estimate the company's three-year outlook and earnings stream at least.

So we will have a final list of about 180 stocks that we keep a tight watch on.

It doesn't mean we buy these companies straight away. We will wait for the market to deliver a reasonable price for us to buy.

Among our funds, at any time, our regional portfolio has about 50 to 60 stocks, while the pure Singapore fund has about 30 to 40 stocks.

Q: How do you decide if the valuations are good enough to enter the market?

We use matrices, a combination of price to earnings, net asset values, and price to free cash flow.

For property companies, we tend to focus on the net asset values, for tech stocks, we tend to emphasise free cash flows, while for banks, we use a combination of price to earnings and book value.

For example, when Capita-Malls Asia first came to IPO (in 2009), we didn't buy it because the price was too high.

But last year, when a big institutional investor was selling down, we started buying when the price fell and consistently added more exposure when the stock fell even further in the midst of the market volatility.

As much as we like Capita-Malls Asia's long-term growth story and the quality of its execution, it takes a lot of patience and discipline to wait for the right price to build a portfolio exposure.

We'll also sell our holdings if the stock goes up substantially, and buy when it falls back again. It's part of our risk control.
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My Value Investing Blog: http://sgmusicwhiz.blogspot.com/

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05-08-2012, 11:11 AM.
Post: #12
RE: Fund Managers & Market Experts Interviews (Sunday Times)
Quote:
(1) It doesn't mean we buy these companies straight away. We will wait for the market to deliver a reasonable price for us to buy.
For example, when Capita-Malls Asia first came to IPO (in 2009), we didn't buy it because the price was too high.

(2) But last year, when a big institutional investor was selling down, we started buying when the price fell and consistently added more exposure when the stock fell even further in the midst of the market volatility.

As much as we like Capita-Malls Asia's long-term growth story and the quality of its execution, it takes a lot of patience and discipline to wait for the right price to build a portfolio exposure.

(3) We'll also sell our holdings if the stock goes up substantially, and buy when it falls back again. It's part of our risk control.

Unquote:
i am a retailer layman investing in SGX market. As such, no matter how i try to practise as much as what is the practice "recommended" above, i am no where near them. The simple reason is sometime i am out of whack with the market due to "unstable emotions"- Fear & Greed. TongueTongue

Example:
i miss selling SPH at $3.99 during the last CD period, now i manage to sell some at $4.09 recently but missed selling some at $4.11. Yet the highest price reached now is $4.12. So i can actually sell some at $4.11 QED. But i am greedy now. After missed selling some at $4.11, i want to sell at near $4.15. and above. (Actually it's a surprise as SPH's Christmas Gift is still quite far away in time).
So you see i am trying to practise NO. (3) but sometimes due to GREED i have to sell even much lower then $4.0 as the market turns suddenly. Or hold for the next "round".TongueBig Grin
But over all i always buy/sell too early. Why?TongueBig Grin
NB:
Of course, from times to times, i KK and forget (1) to (3), that's where i lost a lot of money.TongueTongue
Now i am trying very hard to be K only. So you see i psycho myself with my signature here.Smile
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=========== Signature ===========
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.

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05-08-2012, 03:12 PM.
Post: #13
RE: Fund Managers & Market Experts Interviews (Sunday Times)
Dun worry bro Temperament. You're certainly not alone! I too lament at times when it appears I've sold too early. Smile

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05-08-2012, 08:45 PM.
Post: #14
RE: Fund Managers & Market Experts Interviews (Sunday Times)
Thanks for sharing guys.

http://www.professionalgambler.com.au
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05-08-2012, 11:31 PM.
Post: #15
RE: Fund Managers & Market Experts Interviews (Sunday Times)
(05-08-2012, 11:11 AM)Temperament Wrote: But over all i always buy/sell too early. Why?TongueBig Grin
Simple reason is because we are not god. No human can buy/sell at low/high always. As long as profit is taken, we should be contented. One thing we can be sure is, wait 20 years, 100% SPH will exceed 4.15 provided Spore is still in existence and assuming no bonus/rights issue. Smile

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05-08-2012, 11:50 PM.
Post: #16
RE: Fund Managers & Market Experts Interviews (Sunday Times)
I Buy / Sell based on Valuations vs Opportunity Cost (Alternatives). So far, over a longer time frame, have worked out ok for me.

Tho', often, in the shorter time frame, the ones I sell will likely continue to go up and the ones I buy, either stays put or even decline...Tongue
=========== Signature ===========
Luck & Fortune Favours those who are Prepared & Decisive when Opportunity Knocks
------------ 知己知彼 ,百战不殆 ;不知彼 ,不知己 ,每战必殆 ------------

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06-08-2012, 06:48 AM.
Post: #17
RE: Fund Managers & Market Experts Interviews (Sunday Times)
(05-08-2012, 11:31 PM)Bibi Wrote:
(05-08-2012, 11:11 AM)Temperament Wrote: But over all i always buy/sell too early. Why?TongueBig Grin
Simple reason is because we are not god. No human can buy/sell at low/high always. As long as profit is taken, we should be contented. One thing we can be sure is, wait 20 years, 100% SPH will exceed 4.15 provided Spore is still in existence and assuming no bonus/rights issue. Smile

No lah! i am actually very very afraid of sudden appearance of the bear in a bullish market and vice versa.
Yes! i am contented as far as i make some money.
Though often i should have made more.
Like this current market, i have sold almost all my "BLUE CHIP REITS" few weeks earlier due to "FEAR OF THE EURO SAGA"
But i still have some more to sell, sell, sell.
i am very afraid of getting caught by the "Black-Swan" bear lah.TongueBig Grin
My 2 cents.Big Grin
=========== Signature ===========
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.

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06-08-2012, 10:57 AM.
Post: #18
RE: Fund Managers & Market Experts Interviews (Sunday Times)
I had the same dilemma as Temperament, but with mindset and strategy change, the dilemma gone.

I always 100% vested, so i will not worry be in bullish market out of surprise Tongue

Always opt for stock with low debt and larger margin of safety. Low debt to ensure high survive-ability during bearish market. Larger margin of safety will minimize loses in bearish market, and quicker recovery when market recover

Bullish market, i am happy

Bearish market, i am not so worry, but wait patiently for its recovery.
=========== Signature ===========
“夏则资皮,冬则资纱,旱则资船,水则资车” - 范蠡

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06-08-2012, 11:50 AM.
Post: #19
RE: Fund Managers & Market Experts Interviews (Sunday Times)
(06-08-2012, 10:57 AM)CityFarmer Wrote: Bearish market, i am not so worry, but wait patiently for its recovery.
My only worry in bearish market is those companies try to delist themselves at cheap prices.

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06-08-2012, 01:10 PM.
Post: #20
RE: Fund Managers & Market Experts Interviews (Sunday Times)
(06-08-2012, 10:57 AM)CityFarmer Wrote: I had the same dilemma as Temperament, but with mindset and strategy change, the dilemma gone.

I always 100% vested, so i will not worry be in bullish market out of surprise Tongue

Always opt for stock with low debt and larger margin of safety. Low debt to ensure high survive-ability during bearish market. Larger margin of safety will minimize loses in bearish market, and quicker recovery when market recover

Bullish market, i am happy

Bearish market, i am not so worry, but wait patiently for its recovery.

Agree very much. But when the "price is right for a stock to sell" (my price only hoh), i have very quick fingers, lah.TongueBig Grin

NB:
Besides, if you can have more of your investment capital out of the market before the BEAR comes and visits, you will have more bullets to shoot at the Bear.
In other words, it's just as important not to be caught by the Bear (if you can) besides knowing how to sell in the Bull's market.
But some of your stocks will definitely run along with the Bear.
Mine always do.TongueBig Grin
My 2 cents.
=========== Signature ===========
WB:-

1) Rule # 1, do not lose money.
2) Rule # 2, refer to # 1.
3) Not until you can manage your emotions, you can manage your money.

Truism of Investments.
A) Buying a security is buying RISK not Return
B) You can control RISK (to a certain level, hopefully only.) But definitely not the outcome of the Return.

NB:-
My signature is meant for psychoing myself. No offence to anyone. i am trying not to lose money unnecessary anymore.

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