Value Investing 101 – My Durian Purchase

Value Investing 101 – My Durian Purchase

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With all the hype around rising stock markets and new asset classes like crypto-currencies and tokens, value investing has probably fallen off many people’s radar as it seems very boring, old-school and a slow way to get rich. After all, who wouldn’t want to make 1,000% p.a. “investing” in Bitcoin? Put S$50k in today and have half a million by the end of 2018!!! 🙂

While the extreme scenario above may actually play out (please remember me when that happens, dear reader friend), we want to share a durian analogy to illustrate the philosophy behind value investing which we think is a stable and timeless way to building wealth.

[Note 1: If you don’t know what durian is, see this wiki. Another link (can’t believe they said it smells like gym socks!!!)]

[Note 2: I call it value investing because that’s the commonly used term. By default, all investing should be value investing…otherwise it’s called overpaying. Haha.]

[Note 3: Sipping coconuts goes very well with eating durians as it counteracts that heavy/hot feeling. Try it!]

Back to the analogy.

Besides the rise of the stock market and cryptos, the price of durian has been on a tear over the past few years. We remember paying S$12/kg for Musang King durian a few years ago, then it rose to S$18/kg and then last year it was like S$28/kg if we’re not mistaken. As a durian lover, naturally we started to feel the pinch in our pockets, so as any rational person would…we bought less durian as prices rose and almost stopped completely the past 2 years. After all, why pay more for the same fruit?

Now imagine our glee when, the past month or so, Musang King prices finally dropped to S$18/kg and other varieties like D13 down to S$12/kg. We basically pigged out. In this month alone we’ve spent over S$400 on durian purchases. Would we buy more if prices dropped even further? Why of course dear durian uncle!

That basically sums up value investing. Buy when prices are low relative to the value you get. Don’t chase as the price goes up. Simple…

However, when it comes to things like stocks or gold or property, somehow that common sense rationality goes out the window and people only get interested to buy when prices have already risen and are thought to keep rising. When prices are stagnant or if prices start to drop, people start to get jittery and dump that asset. They’re doing the opposite of what they should!

You’ve been informed.

If you’re interested, do read up more about value investing and know that there are various categories of value investors to suit each individual’s temperament. For a bit of fun, let’s class value investors according to their durian habits.

  1. Cigar butt investing – This person buys overnight durian before it goes bad and just before the seller needs to throw it away. Modus operandi is to extract any remaining value at rock bottom prices. Very Graham-Dodd.
  2. Philip Fisher growth investing – This person does scuttlebutt research to find out the best places to buy durian or the best types to purchase. Maybe it’s via speaking to other customers, or reading forums online, or doing the legwork to visit various shops to compare. MO is to find out all available facts before making a purchase. With stocks the idea is to buy quality and hold forever, but I think that can’t apply to durian. 😉
  3. Activist investing – This person goes to durian shops and tries to push/bully management (i.e. the owner) into improving the value of the durian purchase. MO is to push for changes to extract value. Give a special dividend (ask for free durian on top of the purchase), do spin-off of your subsidiary (give me free/discounted mangosteen ), cut costs to improve profits (give me a discount).
  4. Relative value investing – Not really a recognised school of value investing, but this person goes…hmm, D13 is S$12 and Musang King is S$18, so I should buy D13 as it’s a better deal. MO is to buy what appears cheaper vs the rest.

Hope you’ve enjoyed our story and we wish you luck on your investment journey.

p/s: We realise that spending S$400 on durian isn’t the most frugal of all actions but our thinking on this is that:

On the journey to FIRE, it’s wise to take time to smell the durian… 😀

What about you? Have you taken advantage of the low prices to purchase any durian this season? Do you believe in value investing or is Bitcoin the way of the future? Please do share in the comments.

Author: Mr.C

Mr.C – our resident investment expert and the muscle behind this entire movement for Sipping Coconuts. When his nose is not buried in anything financial, he’s either sailing or cooking or with the kids and always with a beer or a coconut nearby!

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