A Weekend at Alpha Summit

Last weekend, The Fifth Person held an event, Alpha Summit for both the public and Alpha Lab members (Yes, I am a subscriber, you can find the link here).

There were different speakers (Rusmin, Victor, Kenny and Jun Hao) covering their topics ranging from financial ratios for screening, to portfolio management, to the retail industry, to market cycles and even new case studies of companies not covered in Alpha Lab yet.

I will go through some of the highlights which made more impact to me.

On Asset light businesses

• Investors tend to do well with such companies
• Much more scalable without need for excessive capital
• Examples would be Booking Holdings vs Expedia, the former focuses on agency than merchant services which helped it to scale a lot more
• Ratios to indicate these are 
• % of Fixed Assets over Total Assets
• FCFE (Free Cash Flows on Equity)
• Some trends worth looking would be look at
• Operating Cashflows
• Free Cashflows

On the Retail Industry

• REITs would probably do well with
• Economy of Scale
• Great Locations
• Quality Management
• Many value investors usually do poorly when buying retail companies

On Portfolio Construction

• Cap each industry to 30% exposure
• Value growth companies capped at up to 20% per counter
• Situational plays at 2% per counter
• If you're starting out, 5% per counter should be a good guideline (I am using this currently).

More Financial Ratios to screen for great companies

• Initial Screen
• Revenue growth
• Gross Profit Margins
• Debt to Equity
• Return on Incremental Invested Capital
• Determine if growth has slowed or still going strong
• Observe the trends on EBT (Earning Before Tax) and Tangible Assets, both should grow in tandem
• Gross Profit to Assets Ratio
• Gross Profits are harder to manipulate
• A larger gross profit gives a company more options
• Good for companies which are spending a lot on marketing and/or high depreciation
• I am currently using this ratio as an experiment to see what would be a good filter before applying it, Victor managed to get more data on this which he shared

On Forex Risk

• Pick currencies which are stable with SGD such as Thailand and Hong Kong currencies
• USD will tend to fluctuate which is normal
• For depreciating currencies, look at export companies as they usually get paid in USD instead.

Other notable tips

• HK Families tend to do better than Singapore/China for property management
• Holding duration should be 5-10 years and more
• Distribution Channels are very important for FMCG companies
• Define Blue Chips using your own terms to select and show true quality

And even more amazing, they got the CEO of iFast, Lim Chung Chun to come and share his insights on company! :D

Another wonderful thing was them sharing their impact on others worldwide, covering the less privileged to struggling victims of civil unrest to even saving children from prostitution.

Lastly, it was finished with a panel discussion by the 4 speakers where they answered questions from both email and from the audience.

Those who are on Alpha Lab, as you know, The Fifth Person writes research case studies twice a month for various markets (US, SG, MY, TH, JP, HK, ID and London) which are either growth, value growth and deep value plays. They have introduced a new feature, which shows a real cash portfolio which they only invest in value growth stocks.

It was a wonderful event and I met other bloggers like Kyith of InvestmentMoats, Fiona of SGBudgetBabe and KK from RisknReturns plus other like minded people (Solace) too! :)

I am actually rethinking my portfolio strategy moving forward as well as probably I'll need to check my entire watchlist during the metrics they gave me. I guess this will be a KonMari of my portfolio?

Thank you guys again from TheFifthPerson for organising the event. :)

Hope to see another one like that again :)