A believer in income and value investing

Mr Dennis Woo prefers long-term strategies. He says it is critical for investors to understand their own investment philosophy.
Mr Dennis Woo prefers long-term strategies. He says it is critical for investors to understand their own investment philosophy.ST PHOTO: MARK CHEONG

MR DENNIS WOO

NUS undergraduate Dennis Woo, 24, started investing in the second year of his national service when he was looking for a way to pass time while in camp.

He read up on investments and attended a few related talks, and the idea of investing grew on him.

It was not a walk in the park and he made an initial mistake of listening to stock tips blindly.

"When I first started out, I was not very confident of my own analysis. Also, I was anxious to seize market opportunities," he says.

"I entered a few positions based on stock tips, without doing any due diligence. Obviously, it was a grave mistake and I got stuck badly in a few oil and gas counters."

EARLY MISTAKES

When I first started out, I was not very confident of my own analysis. Also, I was anxious to seize market opportunities. I entered a few positions based on stock tips, without doing any due diligence. Obviously, it was a grave mistake and I got stuck badly in a few oil and gas counters.

MR DENNIS WOO, on his shaky start as a novice investor.

He says his best investment move was First Reit, which yielded a capital gain of about 20 per cent besides enjoying a steady dividend income stream for a few years.

Mr Woo and teammates Chia Yikai, 23, Chng Guo Wei, 24, and Tan Wei Ming Kelvin, 24, were second runners-up.

Q Why did your team pick Best World and pitch a "buy" call?

A From the list provided by NUS Investment Society, we shortlisted stocks with a business model that we understood and were confident of valuing.

We then narrowed down our options to those which were more "current" in the market. We decided on Best World because we believed the company still has a compelling growth story to tell even though it had a return of about 800 per cent in 2016 alone. We pitched a "buy" call because of the immense potential of the direct selling model in China, which we believed will be unlocked by the regulatory permit they recently obtained to operate there.

Q What valuation techniques did your team use?

A We employed a five-year discounted cash flow model and comparable companies analysis to derive a target price of $2.39, which represented an upside of 30.7 per cent compared with its then share price of $1.83.

Q What did your team learn from the competition?

A Our biggest takeaway was ensuring that we had a deep understanding of the company's business model and fundamentals. This was critical in developing a realistic investment thesis and building a model supported by sound projections.

Q What's in your personal investment portfolio?

A Due to my personality, I prefer long-term strategies and allocate a higher weighting of my portfolio to income and value investing.

For income investing, I tend to look for opportunities in the real estate investment trust (Reit) sector. I am holding two Reits - Cache Logistics Trust and Viva Industrial Trust - in my portfolio, with an average yield of about 8 to 9 per cent.

For value investing, I based my picks according to financial planning portal Dr Wealth's Conservative Net Asset Value and Gross Profitability methodologies. As of today, I hold about four counters - Tai Sin Electric, UMS, QAF, Hong Fok - in this segment.

I also have a smaller component of my portfolio where I trade shares over the short term, from a few days to as long as two weeks. I look for short-term opportunities in the market using technical analysis tools like the moving average convergence divergence indicator which signals momentum in trends.

Q What advice would you give to young investors?

A Do not be too hasty in your decisions. Even if you miss an opportunity in the market today, there will still be opportunities in the future. Therefore, try not to chase the market blindly or make quick decisions without sound reasoning.

I believe it is also critical to understand your own investment philosophy. For example, what kind of investment strategy suits your personality better? Long-term? Mid-term? Short-term? Income investing? Value investing? Day trading? Lastly, remember to invest according to your capital.

Lorna Tan

Stock pitch perfect

A version of this article appeared in the print edition of The Sunday Times on March 26, 2017, with the headline 'A believer in income and value investing'. Print Edition | Subscribe