Change Horse Strategy: SIA to SATS (塞翁失马)

Posted on March 28, 2020 Written by
SIA C6L SATS S58 SGX

Nightmare of a long term investor is to hold on to a weak fundamental stock with declining share prices over the decade, wasting both time and capital. It is painful to cut loss halfway, therefore many retail traders (especially those who follow tips to invest) may initially plan for short term trading but when encountering global stock crisis falling from high stock optimism, making losses, forced to be a long term investor since then.

Singapore Airlines (SGX: C6L), SIA, is not a giant stock nor junk stock, under-performing in business (see details of SIA stock in another earlier post), both long term investors (hold for 10 years) or short term traders (hold for 1 month) may make significant losses. So, some investors may be mentally conditioned (despite having option) to subscribe to new rights and bonds issues to avoid future share dilution, investing more new capitals in unknown future of SIA in competitive airlines industry.


Many people may think big names (especially blue chip stocks with decades of history) equals to strong companies. SIA is a big reputable company, therefore some may think it is also a good stock investment, especially backed by Temasek, 55% major shareholder.

There are at least 26 Temasek / GLC stocks in Singapore including Singapore Airlines and SATS, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

Temasek stocks portfolio also affect about 15% of STI index stocks, which has strong impact on Singapore stock market. Here are 30 STI component stocks:
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), HongkongLand (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

We may study Temasek portfolio (about 40 global stocks, about half are giant stocks, half are non-giant stocks, based on Ein55 giant criteria), focusing on top 10 Temasek giant stocks, buying them at low optimism prices (could be lower than Temasek’s entry price for some stocks now), selling them at high optimism prices in future, protected by Temasek (eg. even for non-giant stocks: Olam, SIA, etc).

Temasek has a giant stock, SATS (SGX: S58), spinoff from SIA many years ago. Although both SATS and SIA are low optimism stocks (both related to airlines industry, suffering in Coronavirus crisis), SATS is a much better opportunity than SIA to buy at low optimism.

SATS controls about 80% of Changi Airport’s ground handling and catering business. SATS has 2 main businesses (about half each), gateway services and food catering services (including to non-airlines sectors). Similar to SIA, SATS is also affected by airlines sector crisis due to Coronavirus spreading, over 90% flights are down, business will be affected in next 12 months. However, in a longer term, SATS has 2 times stronger business fundamental than SIA. The performances of 3 key financial statements over the past decade are exactly opposite for SATS and SIA:

Income Statement:

SATS = increasing earnings

SIA = declining earnings

Balance Sheet:

SATS = increasing equity, declining debt / equity

SIA = declining equity, increasing debt / equity

Cashflow Statement:

SATS = increasing free cashflow

SIA = declining free cashflow

At current share prices, SIA is about 4.9% dividend yield (potential value trap, crisis is crisis), SATS is 5.6% dividend yield (crisis is opportunity).

For SIA investor who holds to SIA stocks with losses but could not sell due to loss aversion, may sell SIA and buy SATS on the same day with same capital remaining (fine even if 50% loss), transferring the fund (soul) from a old horse (SIA) to a young horse (SATS) which has a brighter future and strong energy than SIA to climb higher for capital gains in long term.

This is Dr Tee (Ein55) powerful “Change Horse” Strategy, suitable for those “stubborn” long term investors holding losing stocks for many years. This is a strong Personal Analysis (PA) method as an investor could tell husband or wife that they never actually sell the stock (eg. SIA), just change the stock name to SATS, offspring of SIA. This is important for those who assume sell a losing weaker stock implies immediate loss, they could continue to hold the stock but through transfer of capital to another giant stock, future winning probability would be higher than continue with than the weak stock (may be worse if double the investment with average cost strategy with new rights).

SIA vs SATS may not be the best example to illustrate “Change Horse” strategy because SIA is not a junk stock and SATS is a giant stock but suffering Level 2 (sector) crisis of airlines industry. This strategy will be even more powerful if readers could apply changing a junk stock with a strong giant stock in a promising sector (low optimism in stock prices but not having crisis in business or sector).

A mistake (eg. making losses in stock investing) is not a mistake if one could learn from the mistake, not too late, even knowing after this article. It is a blessing in disguise（塞翁失马、焉知非福）if an investor could learn to overcome own biggest enemy (oneself) to change a weak stock with a giant stock immediately. SATS may not be the best example to “change horse” as there are over 1500+ global giant stocks based on Ein55 giant stock criteria, one may select 10 giant stocks aligned with own unique personality to form a dream team stock portfolio.

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Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

Learn further from Dr Tee valuable 7hr Online Course, both English (How to Discover Giant Stocks) and Chinese (价值投资法: 探测强巨股) options, specially for learners who prefer to master stock investment strategies of over 100 global giant stocks at the comfort of home.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

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Invest in 4 Credit Card Giant Stocks (Visa, Mastercard, AMEX, Discover)

Posted on February 27, 2020 Written by
credit card stock visa mastercard amex discover

Would you like to pay by Card or Cash or Cheque? When Dr Tee was still a university student about 30 years ago in US, this was the common question asked at that time. During university time, as a student without income, I was “given” or mail directly to home, a few credit cards each year (the T&C was to use it to activate, else just discard it to reject). Until today, the question is still about the same but having more choices for electronic payment.

With increasing cashless and credit payment over the decades, both credit card companies and banks (issuers of credit cards) can make a lot of profits with fees paid by merchants. At the same time, consumers are tempted to purchase more (pay later, sometimes with discount), therefore merchants could gain back the “losses” of fees paid to credit company.

So, technically, the more one spends, the more everyone gains, until one day, when there is a credit crisis (eg. during global financial crisis: dotcom bubble after year 2000, subprime crisis in 2008-2009), then when consumers spend less, then the lower gains (not even loss) to the credit card industry, would induce a crisis in credit card company share prices.

Here are 4 credit card giant stocks with strong business fundamental behind each of them which requires 2 main investing strategies, cyclic investing or growth investing:

1-2) Visa (NYSE: V) & MasterCard (NYSE: MA)

Visa or MasterCard? This is the question asked 30 years ago, still asked today, could be 30 years later by most merchants for payment. This is a duopoly, dominating the credit card industry for decades. They have a wide global network of payment which is a strong economic moat, younger competitors are hard to get nearer.

For both Visa and Mastercard, the share prices has gone up about 20 times (yes, 2000% profit) over the last decade since recovery from the last financial crisis. Visa is relatively more defensive than Mastercard.

Both credit card companies are more suitable for growth investing strategy (Buy & Hold), buy low during global financial crisis and hold for long term capital gains. Even for short term, sometimes they are suitable for momentum trading (Buy & Hold for a period of time, eg weeks or months), but more suitable for bullish stock market with strong uptrend (Buy High, Sell Higher)

3) American Express (NYSE: AXP)

Technically, American Express (AMEX) is not a credit card (a charge card instead). For convenience, we group it under credit card stock for comparison. AMEX is more costly to merchants (higher fee), therefore the coverage is not as wide as Visa or Mastercard.

AMEX is considered a relatively weaker (among 4) credit card giant stock, growth is slower. It is more suitable for cyclic investing strategy (Buy Low Sell High), share price has gone up about 10 times over the past decade since global financial crisis.

4) Discover Card (NYSE: DFS)

Discover Card is still considered a “young” credit card, despite Dr Tee has used it about 30 years ago when I was still a student in US. I like Discover card 30 years ago as I remember it could give about 2% cash rebate which was a new idea at that time (getting cash back by spending) but now very common in many other credit cards.

Discover card is listed under Discover Financial Services (DFS.NYSE). It is a giant credit card stock with strong fundamental but more suitable for cyclic investing (Buy Low Sell High), share price has gone up about 10 times over the past decade since global financial crisis.

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Warren Buffett also has 3 credit card companies shares (AMEX, Visa, Mastercard) under his stock investment portfolio. When others in the world are spending money, these credit companies including Warren Buffett are making money around the clock, every second.

As a retail investor, you may not have the capital as Warren Buffett to buy so many stocks. Therefore, we need to be selective in stocks for investment. You can start your investment journey to establish a dream team portfolio of 10 best stocks in 10 promising sectors / countries, leveraging on the next global financial crisis to buy low, either sell high or hold long term in future.

Drop by Dr Tee free 4hr investment course to learn how to position in global giant stocks with 10 unique stock investing strategies, knowing What to Buy, When to Buy/Sell.

Learn further from Dr Tee valuable 7hr Online Course, both English (How to Discover Giant Stocks) and Chinese (价值投资法: 探测强巨股) options, specially for learners who prefer to master stock investment strategies of over 100 global giant stocks at the comfort of home.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Dr Tee Investment Course (Stock, Property, Commodity, Forex, Bond)
Filed Under: Market Cycle Investing, Stock Market Tagged: , , , , , , , , ,

When Growth Stocks are not Growing with Less Cashflow

Posted on February 10, 2020 Written by
growth stock cashflow

Some growing companies (especially in China but also applied to all countries including Singapore) depend on operational cashflow (which depends on high populations with lower prices to create a network of customers) to expand and pay for expenses, eg. transportation, F&B, consumer products, etc. When this cashflow is disturbed (eg. few people spending or shopping due to serious Coronavirus), the business or sector would go into short term cashflow bottleneck, if dragged longer (eg more than 6-12 months), some which could not get the loan, may need to close down, declare bankruptcy.

So, growth company supported with strong assets (eg. property & cash) is more likely to last through the winter time, even without additional loan as asset could be converted into cash. Another close example is Oil & Gas sector crisis over the past 5+ years, most company could last for the first year of oil & gas crisis but then weak companies would start to close down due to weak assets with little cashflow (fewer customers), eventually game over. Mobile bike business is another recent example, burning money to expand but could not last long as debt is increasing faster than cashflow growth.

Cashflow to business is similar to blood to human body. Cash is similar to blood, need to circulate (cash to produce products / services, earning more cash in return) more a healthy body or company. Sometimes, blood transfusion (take loan) is required to sustain a weak business but if dragged too long, the company still cannot last or recover, investors have to suffer permanent loss.

Investor has to balance between growth investing (earning /cashflow), value investing (high asset, low liability, strong net asset value) to avoid possible business crisis which may end up a permanent loss (Hyflux could be another example). For a giant stock, crisis in share price is fine (due to fear), as long as business is still strong (either growing income/cash or strong asset). A growth stock may do well in normal time but it may go into real crisis under certain condition, therefore an investor has to evaluate risk vs opportunity.

Learn from Dr Tee on balance among Growth Investing, Undervalue Investing and Dividend Investing in stocks: www.ein55.com

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