I read another article, “Insas Deep Value Investing: Assets value (liquid assets) and Earning play” on the asset investing on Insas by a diehard investor of the stock, our Mr SSLee. But sadly, the writer got mocked, hammered and belittled again by many forumers, big or small included. “Big” are those seemingly knowledgeable, well experienced and who seemed to have made a lot of money in the stock market. “Small” are those appears to be novice and newbies who just like to hantam others without knowing much about investing and this category forms the bulk of the critics.
Interestingly, my name was mentioned in the article with some of them my own words and I presume I was ridiculed too. But it is okay for me as in the internet space, there are many kinds of people, and many kinds of investors who have their own opinions and different investing strategies. But is their constant ridiculing on the writer in his writeup on Inss, or the asset value investing strategy justifiable?
Let us base on some facts, rather than simply hantam the writer as I opine that the writer has given his opinion based on facts, and hard facts. His article is appeared in the link below,
Yes, most of the material presented is facts and true facts. No one has disputed those facts. The stock is severely undervalued. Can anyone dispute that? Put in your facts and argument if you think otherwise, instead of just shouting like the one below,
[qqq3 On Insas....Insas rubbish hunters think they find diamond....but most of the time, market is correct , rubbish hunters are wrong....just that u do not know u are wrong because u lack the skill set to analysis the thing properly.]
This character has been spewing this venom which I can say easily tens of times in i3investor. Of course, there are others who are truly knowledgeable and experienced investors commenting that Insas is a “value trap”, which I think they do have a legitimate reason for saying so. But what is a value trap?
Goggle Investopedia gives the following definition,
“A value trap is a stock that appears to be cheap because the stock has been trading at low valuation metrics such as multiples of earnings, cash flow or book value for an extended time period. Such a stock attracts investors who are looking for a bargain because they seem inexpensive relative to historical valuation multiples of the stock or relative to the prevailing overall market multiple. The trap springs when investors buy into the company at low prices and the stock continues to languish or drop further.”
The whole lot of above applies to Insas, except for the last sentence which I would like to dispute that in the case of Insas.
First consider in the future, will the stock price “continues to languish or drop further”? I sincerely don’t know as I have no crystal ball in front of me, like many seems to have. But I will argue that it is unlikely. But that would be another part of the story which I wish to talk about it in my later articles on Insas if there is any interest on it.
The only thing critics can say about Insas is it has been a value trap in the past. But is it true, or is it just a perception?
To answer the question, let us look at the share price performance of Insas in the past. One should not take the share price of Insas in isolation; one has to compare with other stocks and a broad benchmark. Do you agree? I will go ahead and do it.
First compare the two stocks promoted by the critic above voraciously in the last three years, telling everyone in i3investor to sailing and margin in them. They are Jaks and Eversendai. These two stocks were also promoted heavily using the “Golden Rule” investing in i3investor in the last three years, yes, the unbeatable earnings investing strategy, the “only one” acceptable in investing.
Table 1 in the Appendix shows the comparison of returns of Insas for the short, mid and long-term as compared to the broad KLSE Index and those “Golden Rule” stocks. For the short-term of one year, Insas share price fell 8%, under-performed the broad market of -4.5%. For the past one year, most stocks dropped in price anyway. Even a blue chip like Maybank also fell about the same magnitude of 7%. However, in contrast with the “Golden Rule” stocks, Jaks fell 31%, and Sendai -49%. In the mid-term of 3 years, Insas share price has risen by 23%, compared to the flat broad market and the 9% rise of Maybank. Again, compared with the loss of 14% of Jaks, and the flat price of Sendai, Insas performed much better.
What about the long-term? As an investor, we should be more concern about the long-term return, shouldn’t we?
Insas’s share price rose 100% in ten years. Using the rule of 72, its compounded annual return, CAGR is 7.2%, nothing to shout about. However, its 10-year return is better than the 43% return of the broad market and the 49% return of Maybank. On the other hand, the share price of Sendai fell by a whopping 73%, and that of Jaks by 9%!
Tell me, if Insas is a “rubbish stock”, how do you consider Jaks and Sendai? Who actually “do not know u are wrong because u lack the skill set to analysis the thing properly” as criticised non-stop, again and again like a broken clock by the commentator above?
The figures 1 and below show the return comparisons of the three stocks for the 3-year and 5-year period. The green line is the share price movement of Insas, dark blue line for Sendai, and the light blue for Jaks. I could not reproduce the 10-year return from gurufocus, don’t know why.
As a record, I seldom just talk about the share price movement of a stock in isolation as it has not much value in it. This article is just to dispel some untruths and the constant ridiculing and hammering of other investors or investing strategies without facts.
As I have presented, Insas doesn’t seem to be so bad after all in the past. I believe it will do much better than the other two stocks and the overall market in the future. There are no hanky-panky of the management and major shareholders such as doing jobs for their private company without paying for years, and rewarding themselves with huge amounts of free shares and discounted private placements etc. Insas may not be a great company with good growth in earnings. However, the asset value of the company has been increasing rapidly over the years as shown in Figure 3 below and it is way undervalued.
The assets are mostly marked-to-market in cash and investments. There also has not been cash burn in any of their business segment, etc.
More importantly, there are other ways of investing out there which have been proven successful, if not more successful.