Author Archives: Mark Susanto

20 Ticket Punch Card investing and why it is so important for me in micro-cap investing

“An investor should act as though he had a lifetime decision card with just twenty punches on it.” Warren Buffett.

“The success of Berkshire [Hathaway] came from two decisions a year over 50 years.” Charlie Munger.

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Lottery’s lollapalooza effect, a case study in hidden asset investing

Jumbo Interactive (ASX:JIN) is an Australian online lottery seller. It has a simple enough business model, yet it was the complete opposite of BPF in terms of its moat and the impact to my portfolio. It is (still) one of my best investments. The reason why it was misjudged by the market was due to 2 main reasons: internal short-term woes AND a misunderstanding of the strength of its business model.

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Not a Bulletproof moat

Bulletproof (ASX: BPF) is a cloud services provider in Australia and New Zealand. It has 3 main businesses: private cloud, public cloud and professional services. In a nutshell, the company has previously been growing revenue and Earnings before Interest Taxes, Depreciation and Amortisation (EBITDA) significantly through organic and inorganic growth. However, things have taken a turn for the worse.

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[#throwback] Small Caps and Micro Caps: An Outline

This is another old article I wrote for my uni investment club. I’ve learnt a lot since I wrote this piece, especially after working part-time during uni in a extremely well run microcap fund. (Although I am currently working full time as a management consultant, my interest in stocks and investments have never waned). An update to the below article:

  • My previous thinking to the advantages of micro-caps and small caps to uni students are just plain wrong.
    • 1) Cheaper brokerage cost per share does not create any advantages because on an absolute basis (the brokerage cost itself), there is no difference between microcaps and large caps. To effectively evaluate brok
      erage cost, you have to see it as a % of total amount.
    • 2) Amazing price growth potential is just looking at 1 side of the coin. Microcaps are by nature a more volatile and less liquid asset class than large caps. Hence, while it can have amazing price growth, it can also turn the other way very suddenly (as I have found out firsthand). The impact a large buyer/seller has on the share price is more pronounced in micro caps due to its illiquidity. Nevertheless, you can turn this proverbial lemon, into your lemonade. Due to the large swings in price, if you do your work and have patient money, you can find some undervalued gems.
      Some large-cap fund managers found out the high volatility the hard way when large swathes of insititutional money came to the smaller end of the ASX markets over the past few years. Now, they have reversed the tide and pulled the money back to the large-caps, leaving large falls in price in some microcap shares.
  • The only advantage that I think microcap has is that due to its structure, it is more inefficiently priced and attracts less large/more sophisticated investors
  • My portfolio is now predominantly micro caps and is more or less a highly concentrated portfolio. I am in Warren Buffett and Charlie Munger’s camp:
    • “If you are a professional and have confidence, then I would advocate lots of concentration. For everyone else, if it’s not your game, participate in total diversification. If it’s your game, diversification doesn’t make sense. It’s crazy to put money in your twentieth choice rather than your first choice. . . . [Berkshire vice-chairman] Charlie [Munger] and I operated mostly with five positions. If I were running $50, $100, $200 million, I would have 80 percent in five positions, with 25 percent for the largest.” Warren Buffett
  • I hardly go into commodities investing. This is perhaps due to lack of research and my general laziness, but I have always found it a strange business where you can do everything right and have the lowest cost of production and the right deposit, but you are still at the mercy of the commodity price

It’s a bit of a long one, so without further ado here it is below…

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[#throwback] Investing 101: Introduction to (Value) Investing

This was an article I wrote when I was in university 6 years ago for the investing club (I am getting old…). I have learnt a lot more since then, but the core ideas in the article still stayed true. Some of the examples are outdated:

  • for BHP the mining boom has turned into a bust and is undergoing its mini-revival. The stock price of BHP has stayed flat (it is at $23.67 as of 10/3/17). You would have done better buying their South32 spinoff…at the right price of course (Forager Funds  did a great write-up on it 2 years ago).
  • Warren Buffett has bought IBM, airplane stocks and Apple (another testimony of how much of a learning machine he is!)

So without further ado… here it is!

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