03 Mar Rising Above Financial Storms by Dr Tan Chong Koay
Pheim is a well known name in Asia. It is a boutique fund management company headed by Dr Tan Chong Koay. Due to the stellar performance, the company was ranked number 1 by The Morningstar as at Dec 2010, for all 1- to 15-year periods, under the category of ASEAN Equity Funds. In 2015, Pheim Asean Fund had taken the top position for all the 1- to 20-year periods among all Equity Asean funds.
The company manages billions of dollars, including monies from sovereign wealth funds.
He first set up shop in Malaysia in 1994, and another office in Singapore subsequently. He was candid to mention about the prohibition order he was issued from the Monetary Authority of Singapore, which barred him from conducting fund management services in Singapore for 2011 to 2014. He explained his position regarding the window dressing incident, which he has attributed to the illiquid nature of United Envirotech Ltd. The incident is over and he has gladly moved on.
A value investor at heart, he has an eye for undervalued companies in ASEAN, especially the smaller companies.
We have built our expertise in investing in small and medium enterprises (SMEs) in these markets. Small, innovative companies play a very important role in Asia’s growth. Without them, no economy here would have real growth. Small-cap entrepreneurs, if they are honest, hardworking, dedicated and run companies with a good business model, deserve the support of investors, especially if their stock is selling at ridiculously low valuations. If fund managers don’t encourage them by investing in them, who will?
He acknowledged that market timing is a controversial technique, and not often embraced by value investors. But he explained the difference in ASEAN markets,
In a larger economy such as the US, there are many sectors, industries and companies whose cycles do not change at the same time. As such, if you carefully construct a portfolio of diversified stocks in different sectors and industries, chances are, you would perform well at any point in a market cycle. That’s diversification at work and that is the reason why some investment experts such as Peter Lynch are of the view that fund managers should waste no time in trying to time the market, as it does not work at reducing risk.However, in smaller economies, there are limited sectors, industries or companies to choose from. Furthermore, there is the complicating factor that the economies’ growth depends greatly on the inflow and outflow of foreign investment, and so on, making these markets notoriously volatile. It is evident that the stock markets in many Asian countries have experienced a major swing almost every one to three years.My investment philosophy and strategy are simple. It can be summed up as follows: A fund should be fully invested near the bottom of the market and trimmed near the peak. But it should never be fully invested at all times, as Asian markets tend to be volatile, unlike the more developed markets such as the US.
He mentioned that he got most of his inspiration from Peter Lynch, only to disagree with him on the perspective of market timing.
I read the classic investment books to find out how the gurus made their money: Peter Lynch, who managed Magellan Fund from 1977 to 1990, and Warren Buffett were and are among my favourites. Unfortunately, I did not find much empathy at first with Warren Buffett, but what Peter Lynch said about how he went about looking for the companies he was invested in struck a chord with me. When Peter Lynch was looking at Dunkin’ Donuts, he said he went and had a doughnut and coffee at an outlet. And he thught it was so good that everyone would want to have it. So he bought Dunkin’ Donuts because he thought the business was scalable. Such a sumple theory, and he made a 10-fold profit.
He is a strong advocate for contrarian actions when it comes to investing, and acknowledged the ability cannot be acquired overnight.
Very few people, probably nobody, know when the lowest point will be reached. Buying near the lows is the best you can do. Doing this, you have to go through a lot of pain. You buy shares when no one else dares to buy. Likewise, you sell shares when everyone thinks the only way for the market to go is up.
…. to go against the market in the proper sense and purpose, that is, to be a contrarian, takes firstly, conviction and secondly, discipline. Conviction is borne of knowledge and wisdom held against the odds and discipline is a trait that you do not acquire overnight. Like conviction, discipline is nurtured through time and circumstance. A person who is focused and serious about investing properly can acquire both. Practice, nurtured through time and circumstance, becomes discipline.
He has a whole list of investment quotes on this website.
Most investment books are written in the context of U.S. markets. This is a rare book by a stellar fund manager, and who has a good experience in ASEAN markets. It would definitely be worthwhile to get a glimpse about how he views investments in Asia, through many stock examples shared in this book.
Here’s where you can get the book: http://rising-above-financial-storms.com/