What a crazy few months it has been.
I have been busy setting up and launching my new online business after the big failure from last year. Using the painful lessons learnt, I managed to make this new business profitable within just 3 weeks! (To put this in context, I struggled for 2 years with the previous business and didn’t even make a single dollar.) However, I am still far from patching up that big hole in my pocket. And this new business has yet to establish some form of ‘financial stability’.
But what to do.
KEEP ON FIGHTING!!!
While I work actively to build an income, I have not forgotten about the passive side of things.
The recent stock market rout has given us many fresh buying opportunities.
Here’s a list of stocks which I have bought recently dating back from November 2015:
- GoPro (GPRO)
- Chipotle Mexican Grill (CMG)
- Kingsmen Creatives (5MZ)
- Apple Inc (AAPL)
- Starbucks (SBUX)
- Google (GOOG)
- Master Card (MA)
- Priceline (PCLN)
- Facebook (FB)
Hmmm… come to think of it… that’s quite a hell lot of stocks. Think I better slow down a bit!
Most of these are old stocks which I have covered before. The old stocks are re-purchased again based on cheaper valuations. I will just briefly give some updates of the ones that I feel are interesting.
Chipotle Mexican Grill (CMG)
CMG has fallen in the last 3 months due to a Norovirus outbreak that affected about 153 people. This has scared away several customers and deeply affected the branding and financials of CMG. CMG has traced the source of the virus to a sick employee who had reported for work. They have also implemented additional safety measures so that such incidents will not occur again. Overall, they responded and dealt with the disaster very well by closing down stores and forsaking profits for the sake of customers’ safety.
I find this risk inherent to all F&B companies. However, CMG now has to face the tough job of winning back customers. Also, their costs have increased due to more stringent safety measures. Sales and revenue are expected to remain low throughout the whole of 2016. I feel that this is just an unfortunate incident that CMG will recover from.
CMG has fallen to a PE ratio of 27.5. One of the very few times their PE ratio sank so low was in 2008, where it reached 26.2, and 2009, where it reached 22.3. (Most of the time, it is trading around PE 45-55.)
Based on their strong track record, I am betting on this company to recover and come back stronger.
Apple Inc (AAPL)
I feel that Apple Inc is extremely undervalued based on its current price. PE 10 as I am writing this. I think the market is worrying about slowing iPhone sales or fearing that Apple has reached saturation point.
I think that Apple’s moat should be taken into account. And when I say moat – I mean the entire ecosystem of products and services – iTunes, IOS, iPhone, iPad – that Apple has managed to trap their users in. Apple also has abundant cash on hand ($216B). Possible stock buy-backs and future dividend increases could unlock more value for the patient shareholder.
I am betting that the smartphone will still be a core technology theme in the next 5 years, (- there are no trends to show otherwise!), and Apple has entrenched a strong foothold in this industry.
SBUX is a power-house stock which I have been refraining from buying. I mean, “C’mon – $7 for a cup of coffee?!”
However, I grew to appreciate it during my trip to Japan. I noticed that Starbucks somehow always manages to secure a prime, high-traffic location. (Think – SHIBUYA CROSSING).
And I wasn’t sure if it was due to bad luck or what, the best coffee I drank in Japan was Starbucks. I hate to admit it but… yeah…
What I like about SBUX is that it is a company that runs an old school business but embraces technological changes. In America, SBUX is already experimenting with paying via mobile and implementing a coffee delivery service to people working in business districts. They also give tremendous perks to their staff and have a culture of raising talent from within.
SBUX is currently trying to penetrate into the China Market and there are concerns if the slowing Chinese economy may affect them adversely.
The price which I bought at is considered – fair. I am looking to add on more to this over time to make it a core part of my portfolio.
Google / Alphabet (GOOG)
Google, Alphabet… however you want to call it. I prefer to call it Google still.
I have decided to allocate a portion of my portfolio to Google as I find it a defensive stock to carry throughout all times. Google’s lead in the search engine business has become so way ahead that they have surpassed all competitors over the horizon. Yahoo may be shutting down. Bing…huh? – who uses that?
Their recent financial reports also showed increase in ad spending thanks to TrueView ads – the irritating ones that always display before each YouTube video. (BTW, YouTube is owned by the mighty Google.)
After spending the past few years heavily relying on Google for my business, I realise how much control this alpha overlord has over the fate of our world. Being exposed to the crazy amounts of bids-per-click-per-ad has also made me realise how dependent businesses are to Google.
If Google sways in either direction, all websites and businesses must sway with it.
Besides, its ‘OTHER BETS’ in industries like cloud computing, driver-less cars, connected homes and my favourite – Online Education, makes it an exciting business to be part of.
If you can’t predict the future, follow the companies that create the future. I will be looking to make Google a core part of my portfolio if the market offers me better prices.
I bought FB again at a price of about $110. I was actually waiting for it to fall below $90 but it had to release mind-blowing quarterly results and shoot all the way up to $110.
Even then, it’s current PE is at 87, with a forward PE of about 26. PEG is about 0.8-0.7. Cheap? No?
I am pretty confident that their growth story is going to continue for quite some time. FB, like GOOG is another one of the alpha-overlords I depend on for my livelihood.
The growth story for FB is still compelling. Ad spending in Asia is no where near saturation point. They just started monetising Instagram. And they are launching Oculus Rift this year into the gaming industry to bring virtual reality back from the 90s again. Oculus Rift still has the potential to be used in several other industries like medicine, aerospace, entertainment, education…
And we are forgetting about one of Zuckerberg’s biggest, unmonetised asset – Whatsapp. Whatsapp is still experiencing staggering growth rates. My recent readings into other chat apps like Line and WeChat exposed me to the insane possibilities that a chat platform can offer.
Buying of stickers, money-transfers, dating, games… these are just some of the possibilities of monetising a chat-messaging app. Your entire life can simply revolve around the services provided by a messaging app.
Zucks have no qualms letting people use Whatsapp for free now. Why should he? He is surfing on a tsunami of cash just from the FB platform alone!
Zucks is going use the same strategy that worked so well in the past. Let users flood into a platform and pull their entire social network in. Let the apps become part of your everyday life.
Then when FB is ready, they will crank the lever and let the money-churning machine run.
*Do take note that I will sell all my FB stock if James Lye’s VR-man returns with launch of the Oculus Rift and the whole virtual reality trend. My friends think I am joking but I am dead serious.
GPRO, GPRO, GPRO
I have saved the worst for the last. I have been receiving several comments and messages from readers asking about this stock.
Funny how a high-flier easily became the crappiest of the crap performers within a span of 8 months.
I bought it again at about $19. But they had to give guidance of slowing sales and further cutting of prices by another $100 for their latest camera. Then they announced laying off about 7% of their staff. As if that wasn’t enough, they are now bogged down by excess inventory and ate some losses this recent quarter due to manufacturing mistakes.
GoPro cameras are still the number one selling cameras and I don’t think any competitors, no – not even smartphones, can threaten their position.
If they continue screwing up their own show, the competitors will inevitably catch up one day.
I have discussed GPRO frequently with other investors and we attribute their current problems to this:
Their new cameras can’t match the demand of their older cameras. Hence, they are competing and cannibalising themselves through the overheads and costs of launching the new cameras.
In Hokkien army lingo, we call it LPPL. ( I shall not elaborate what that means as I suspect some parents and students read my blog.)
However, GPRO is still well-positioned to scale into a media / distribution company.
As an armchair CEO, shareholder and pro-blogger, I should be allowed to share my views on how to run GPRO:
- Incentivise users to record video content (GPRO awards)
- Sell the video content to companies (user makes $$$, GPRO makes $$$)
- More users buy GPRO cameras to make $$$
- More video content gets uploaded and shared – Creates a lead generation machine (People watch videos and buy GPRO cameras)
- Partner with all the sporting networks and film it in GPRO
- Distribute Media to paying subscribers. (Make more $$$)
Taken from their latest earnings report, here are some key points to show that the above strategy is taking root.
- Launched the GoPro Channel on Amazon Fire TV and Fire TV Stick with a custom-designed streaming channel that will be a one-stop destination for delivering on-demand GoPro videos to millions of Amazon customers.
- Launched the GoPro Channel on the PlayStation® Network. The custom designed GoPro Channel app allows PlayStation owners to stream GoPro content on-demand, browse GoPro cameras and accessories, and more. PlayStation joins GoPro’sgrowing roster of distribution partners including Amazon Fire TV, Roku, Comcast Watchable, Sky, Vessel Entertainment, Xbox, LG and Virgin America.
- The GoPro creative community has submitted more than 86,000 content submissions and GoPro has awarded almost $240,000 for video and photo content. Winning videos and pictures can be viewed at http://gopro.com/awards.
- The PGA Tour, SkratchTV and GoPro announced a partnership that will ‘GoPro’ the game of golf. GoPro will produce episodic videos that bring fans inside-the-ropes at PGA TOUR events, giving them unique access to the events and athletes, including recently signed GoPro athlete and PGA TOUR member, Justin Thomas.
But all these progress will be for naught if GPRO cannot sell their own freaking cameras.
Dear Nick Woodsman,
Stop LPPLing yourself and get your shit together!
*I am still holding GPRO and I am looking forward to see them release their drone, Karma. I think they are still pretty much in start-up mode and need more time to get things straight. Until then, be prepared for a roller-coaster ride.
Full list of stocks I hold
Small – Medium Stocks ( <<< becoming part of Core stocks)
These are the stocks I plan to allocate more $$$ to this year.
Small stocks (Growth)
10. Sierra Wireless
12. Solar City
13. Trip Advisor
15. Gilead Sciences
16. Ulta Salon Cosmetics & Fragrance
17. Skyworks Solutions
Small – Medium (Value / Dividends)
19. Keppel Corp ( <<< don’t ask me why…*facepalm*…)
20. Kingsmen Creatives
21. Dairy Farm
On My Watchlist
Watching only, haven’t researched much or taken action.
- Frasers Centrepoint Trust
- CapitaLand Mall Trust
- Raffles Medical
- Under Armour
I don’t really spend a lot of time poring over every single stock. I prefer to spread my bets and let the management run the show. I think a better use of time would be to learn a new skill, work on a business, or build relationships.
For 2016, I am determined to build up a stronger and more stable stream of cash flow with my new business, and use the cash to either reinvest in the business or build up my stock-holdings.
What about you, dear reader, which stock do you have a lot of confidence in? What is on your watchlist?
Share in the comments below!
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