Introduction
Welcome to the Contra Turtle Show, where Singaporeans build towards financial freedom through long-term investing. In this episode, host Contra Turtle interviews his friend and mentor, Sergeng, who has been a significant influence on his investment ideas. The episode aims to uncover Sergeng's investing background, methods, and philosophy, while also emphasizing that the information shared is not financial advice and that viewers should do their own research.
Sergeng's Investing Background
Sergeng's interest in investing began in his junior college days when he was studying economics. He realized that some of the assumptions taught in class did not make sense to him, particularly the idea that people would invest their spare money in bonds or fixed income. This led him to seek out information about how money works and to discover Warren Buffett and his circle of investor friends and mentors.
Sergeng's first introduction to the stock market came from a book he accidentally picked up at a bookstore. He was looking for Benjamin Graham's The Intelligent Investor, but instead, he found Philip Fisher's Common Stocks and Uncommon Profits. Although it was not the book he was looking for, he found it to be a valuable introduction to the stock market and learned the importance of looking at stocks as pieces of businesses and the long-term relationship between stock prices and business performance.
After reading Common Stocks and Uncommon Profits, Sergeng developed an interest in investing and finance and began buying books about the stock market to educate himself. When he was choosing a course of study in university, he decided to pursue engineering instead of business or finance because he believed it would be easier to learn about investing on his own. However, his interest in investing was rekindled during a summer internship when he came across articles by The Motley Fool.
The Motley Fool is an American company that is well-known for giving investment advice through its newsletters. In 2012, The Motley Fool set up a blogging network and invited writers from outside of finance to write about investing-related topics. Sergeng decided to give it a try and wrote a few articles for them. The team liked what he was doing and invited him to attend a one-day conference in their offices in Virginia.
At the conference, Sergeng met the team that was trying to bring The Motley Fool into Singapore. They were impressed with his knowledge and passion for investing and offered him a job. Sergeng joined The Motley Fool Singapore in January 2013 and helped them write articles about the Singapore stock market and stock markets around the world. In 2016, he launched the first investment newsletter, where he picked stocks from Singapore and around the world and recommended them to subscribers.
Sergeng's Investment Framework
Sergeng's investment framework is based on the idea that stocks are pieces of businesses and that a stock's price will eventually reflect the underlying performance of the business. He looks for businesses that have the potential to become much larger over a long period of time and uses a six-step framework to evaluate them: 1. Fast-growing revenues: Sergeng looks for companies that are operating in either a large market that is growing or a small market that is growing rapidly. He believes that companies with a lot of room to grow have the potential to generate strong returns for investors. 2. Strong balance sheet: Sergeng looks for companies with a strong balance sheet and minimal or reasonable levels of debt. He believes that companies with a strong balance sheet are better able to withstand economic downturns and other challenges. 3. Management team with integrity, capability, and the ability to innovate: Sergeng believes that the management team is one of the most important factors in a company's success. He looks for management teams that have integrity, are capable of running the business effectively, and have the ability to innovate and adapt to changing market conditions. 4. Recurring revenue streams: Sergeng looks for companies with recurring revenue streams, such as subscription services or customer behavior that leads to repeat purchases. He believes that companies with recurring revenue streams are more stable and predictable than companies with one-time revenue streams. 5. Proven ability to grow: Sergeng looks for companies that have a proven ability to grow their revenues, profits, and free cash flow over time. He believes that companies that have a track record of growth are more likely to continue to grow in the future. 6. High probability of generating strong and growing free cash flow in the future: Sergeng believes that the value of a company is determined by the amount of free cash flow it can generate in the future. He looks for companies that have a high probability of generating strong and growing free cash flow in the future.
Sergeng's Investment Style
Sergeng's investment style is growth at a reasonable price (GARP). He looks for companies that are growing rapidly but are not overvalued. He believes that by investing in companies that are growing rapidly, he can generate strong returns for investors, while also minimizing the risk of investing in overvalued companies.
Sergeng's Investment Philosophy
Sergeng's investment philosophy is based on the idea of long-term investing. He believes that by investing in companies that have the potential to become much larger over a long period of time, he can generate strong returns for investors. He also believes that it is important to be patient and to hold onto investments for the long term, even during periods of market volatility.
Sergeng's Investment Performance
Sergeng has a proven track record of investment performance. Between 2010 and 2020, he achieved a 19% CAGR performance for his stock portfolio, which beat the S&P 500, which only did 12% CAGR in the same time period. He also warned about problems at High Flux in 2016, which was a good two full years before the company actually suspended trading in 2018.
Sergeng's Investment Ideas
Sergeng has shared several investment ideas with Contra Turtle, including MercadoLibre, Meta, and Netflix. He believes that these companies have the potential to become much larger over a long period of time and that they are undervalued.
Sergeng's Use of Technology in Investing
Sergeng uses technology in his investing process, including ChatGPT and other AI chatbots. He believes that these tools can help him to quickly and efficiently research companies and to generate investment ideas.
Sergeng's Thoughts on the AI Trend
Sergeng believes that the AI trend is still in its early stages and that it is too early to tell whether AI products will end up being commercial successes. He also believes that there is a risk that all the third-party users of Amazon and Alphabet's AI hardware end up actually spending on building something that would have no real commercial value in the end.
Sergeng's Thoughts on Retirement
Sergeng does not believe in retirement. He believes that it is important to have something meaningful to work on at all ages and that he hopes to continue working on the fund and the blog for the very long haul.
Conclusion
In conclusion, Sergeng is a highly respected investor with a proven track record of investment performance. His investment framework, style, and philosophy are based on the idea of long-term investing and the importance of looking at stocks as pieces of businesses. He also uses technology in his investing process and has shared several investment ideas with Contra Turtle. Overall, this episode of the Contra Turtle Show provides valuable insights into Sergeng's investing journey and philosophy and is a must-watch for anyone interested in investing.
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