First Person: Empowering retail investors 

This article first appeared in Personal Wealth, The Edge Malaysia Weekly, on March 2, 2020 - March 08, 2020.
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Lim Tze Cheng, the former CEO of Inter-Pacific Asset Management Sdn Bhd, has entered a new phase of his career. After spending the last 17 years recommending stocks and managing investors’ money, he has turned to investor education as head of research at EquitiesTracker Holdings Bhd. 

Upon assuming the role in October last year, Lim’s main task has been to equip the man in the street with investment knowledge and teach them how to make sound investment decisions with a long-term view. One of the ways he does so is by publishing research reports and making them available to the public at no charge. 

In these reports, he dives into the business fundamentals of some public-listed small and mid-cap companies such as Elsoft Research Bhd, SLP Resources Bhd, JF Technology Bhd and LSK Group Bhd. 

“These reports focus more on letting investors understand what kind of business a company is involved in and the risks and opportunities associated with it. We tell them how a company is involved in a certain industry, where it sits in the industry value chain and the nature of its business,” says Lim.

“Unlike many reports out there, we do not give ‘buy’ or ‘sell’ recommendations or target prices. We want to educate investors and let them make their own decisions.”

EquitiesTracker is an investment research and training services provider listed on Bursa Malaysia’s Leading Entrepreneur Accelerator Platform (LEAP market). It is one of the earliest investment training providers in the country and it has collected and provided Malaysian market data to local media and foreign investment research firms for more than three decades.

Apart from publishing these reports, Lim also shares his industry knowledge via webinars every couple of months, which the general public can watch online for free. “These reports and webinars can be found on EquitiesTracker’s Facebook page,” he says. 

Building on Lim’s network of public-listed company CEOs, EquitiesTracker is ramping up its “Meet the CEO” sessions that allow investors to engage and interact more frequently with the management of some of these companies. He believes that such events will benefit retail investors. 

“If you are an institutional investor, you tend to have easier access to CEOs to understand how their businesses are doing. We are putting in more effort to provide retail investors with a better platform to engage with CEOs,” says Lim.

However, these events are not free. “Retail investors who are not members of EquitiesTracker have to pay RM995 to attend a session. Members who have attended two levels of our courses get to attend these for free. It is an opportunity for them to meet the CEOs,” he says.     

Publishing a revised version

Lim has also shared his investment knowledge in a book, titled What I Learnt as an Analyst, which he published in 2018. Based on his experience as an analyst and fund manager, he teaches readers how to invest in the stock market.

The book is divided into two parts. The first covers how unit trusts work, the fees incurred and recommended strategies. The second teaches readers how to analyse income statements, balance sheets and cash flow statements. 

This month, Lim is releasing a second edition of the book, with five new chapters on various aspects of investing and his personal investing journey thus far. “It makes the book a more comprehensive read and provides greater value to readers,” he says.

One of these chapters touches on the key drivers of the local stock market, which are corporate earnings and reratings. The latter indicates that investors have a different view of a specific market’s or company’s prospects. 

Another chapter is on the qualitative factors that should be taken into account when making investment decisions. These factors include the confidence level of an investor in a company’s management team and business risks.

“I realised that one of the key things that investors need to know is what causes share prices to go up or down. They do not go up or down for no reason, even though sometimes there is speculation. I want investors to understand that profit and rating [or valuation] are the main drivers of share price movements,” says Lim. 

“I also think many retail investors have forgotten about the fundamentals of valuing a company. If you are looking to buy a stock, which is a business, you need to consider many qualitative factors such as the company’s brand values, competitive advantage and reliability of its workforce. But nowadays, some of them behave like investment analysts, focusing on forward earnings and valuing a company based on future dividends, cash flows, interest rates, among others. One should think like a businessman who wants to buy a company, and not just analyse numbers like an academic exercise.”

He also shares the lessons he has learnt, including investment biases, overpaying for a company’s growth and the unwillingness to pay a premium for companies with strong fundamentals and good prospects.

“I talk about the most challenging period in my career in 2018 and 2019. I was the best-performing fund manager locally in 2017, but everything went wrong in the next two years. Whatever stocks I bought declined and whatever I did not buy went up. That was a very stressful period,” he says.

The new edition also conveys to the man in the street that they do not need to be fund managers to become good investors, says Lim. “Whenever I go to a public event, there will be people who ask me how they can become a fund manager. What should they study or read up on? I always reply, ‘Why do you want to be a fund manager in the first place?’

“If your answer is to know how to invest and build an investment portfolio, you do not need to be a fund manager. You can learn how to invest by yourself and be good at it.”

The job of a fund manager is to evaluate various stock recommendations provided by analysts and decide on when and what stocks to buy, he points out. “For instance, an [equity] analyst tells a fund manager that he likes 10 of these companies. The fund manager’s job is to decide whether to invest in, say, six or eight of them. He also needs to decide how much money to invest in a particular stock and when to buy or sell it.”  

The job of an analyst is to research various companies and come out with a conclusion on whether the stocks are worth buying. “So, you would only want to become a fund manager or an analyst if you want to specialise in these specific skill sets,” says Lim. 

One would ask why he does not want to continue being a fund manager. He says he is an analyst at heart and likes sharing his knowledge with others. 

“I have always seen myself as an analyst rather than a fund manager. Hence, the title of my book. And I have a passion for sharing my knowledge with the general public,” says Lim. 

“Instead of playing the role of a fund manager, where people rely on me [to make their investments], I prefer that they learn to do so themselves. If they fail, it is an experience. If they succeed, I am happy for them. Everybody has to go through that journey to become a good investor.”

Lim hopes his book and research reports can help in the development of financial literacy in the country. 

 

Semiconductor sector attractive despite Covid-19 disruption 

The semiconductor sector is expected to do well due to the increased use of automation and digitalisation, which continues to gain traction globally. 

“These two trends will not be reversed and semiconductor components play a critical role in them. With the upcoming rollout of 5G networks and the wide application of the Internet of Things (IoT), the demand for semiconductors will be even stronger in the future,” says EquitiesTracker Holdings Bhd head of research Lim Tze Cheng. 

While the share prices of local semiconductor manufacturers have taken a dip recently due to the Covid-19 outbreak that has disrupted the global supply chain of various sectors, Lim remains optimistic that the outbreak can be contained quickly.

“If you look at how the Chinese government has taken action in the face of Covid-19 and compare that to SARS (Severe Acute Respiratory Syndrome), you can see that they have reacted much quicker this time around,” he says.

“In the SARS chronology, the first known case happened in November 2002. But it was only in February the following year that the Chinese government announced it. The government then issued a travel advice, instead of restrictions, to its people in April. 

“In the case of Covid-19, China alerted the World Health Organisation of the coronavirus on Dec 31 last year, which was not long after its health officials confirmed the existence of the virus. In February, cities were in lockdown and travel restrictions were imposed not only by China but also countries and airlines around the world. The Chinese government and the rest of the world have responded much faster to Covid-19.”

He points out that the current mortality rate of 2% of Covid-19 is also relatively low compared with the 9.5% of SARS. “Experts are saying that Covid-19 could be contained by March or April. Assuming that one of these predictions are correct, the impact of the coronavirus on the market will be alleviated in the next one to two months.” 

The semiconductor sector could rebound after global trade and the supply chain go back to normal, says Lim.