Money & Investing: Singaporean Soldier Foils Champ's Effort; Defending Stock-Contest Champ Dethroned
September 28, 2001
By ERIC BELLMAN
Staff Reporter of THE WALL STREET JOURNAL
Alexander the Great has fallen.
Andrew Alexander, the Hong Kong hedge-fund manager who won four consecutive Weekend Journal Stock-Picking Challenges, has been dethroned by a 22-year-old corporal in the Singapore Armed Forces named Wong Hoong An.
That's no mean feat. Mr. Alexander had a streak of victories stretching back two years. Along the way, he trounced dentists, Buddhist monks and Internet executives, not to mention the five professional fund managers we paired him with. All the while, his portfolio of play money grew, even during the bleakest moments in the market. But he was no match for the military. "It just wasn't our day," reckons the former champ. It doesn't sound like he is plotting a comeback either. "I see a potentially extended period of economic uncertainty where markets lack clear direction," he says. Indeed, considering the heightened anxiety stemming from the recent terrorist attacks in the U.S., all our stock-picking contestants will face radically different market conditions.
But that doesn't seem to frighten our new champ, who is still flush with victory. Uncertainty was something he bet on six months ago, when the contest began. Rather than head to defensive stocks, like the former champion, Cpl. Wong boldly decided to short-sell big players like Sony Corp. and Pacific Century CyberWorks. His pessimism paid off -- his portfolio rose 11%, while Mr. Alexander's fell. Not so shabby, considering Asian markets declined 13%.
"I should be the fund manager," says the cocky corporal. "It's my turn to win now."
Every three months Weekend Journal chooses two professional fund managers to go up against two amateur investors. Six months later we check back to see who won. (At the three-month mark when we start a new contest we take a peek at the interim results of the previous one as well.) Each contestant starts with $30,000 in imaginary money to buy or short-sell up to three stocks from the Asia-Pacific region. The investor with the biggest gain (or smallest loss) after six months is invited back for another round.
The soldiers are only the second group of amateurs to beat the pros. Earlier this year, a pair of cab drivers racked up their second win against the fund managers. The overall score is pros 4, amateurs 3.
Joining Cpl. Wong on the layman's team this round is Dennis Goh, another corporal from the Singapore Armed Forces. In the professionals' corner are John Band, a director of ASK-Raymond James Securities India Ltd., which helps manage the India investment for offshore funds in Bombay, and Simon Ross, fund manager at AIG Global Investment Corp. Japan Ltd. in Tokyo.
Rattled by the market's recent plunge, most of the contestants are stocking their money away in defensive shares that don't depend on a global recovery to rally. All but one of them are shorting shares, betting that the worst is not yet over.
Mr. Band has charted the Indian market's development from the time when foreign investors were first allowed in 10 years ago. He says it is a good shelter during a global recession because most of its companies aren't dependent on export revenues. "India is such a self-contained economy that it is pretty impervious to shocks in the world," he says.
He likes companies that are inexpensive, growing and have potential news on the horizon. His first pick is construction and cement company Larsen & Toubro Ltd. It is trading at 11 times earnings per share and he expects to see its profits rise 35% this year. The company may get an extra boost from government spending on new roads, ports and power plants. His second $10,000 goes to SmithKlineBeecham Consumer Healthcare. Analysts expect its profits to grow 34% this year as its health-drink mix Horlicks gains in popularity.
His last $10,000 goes to short-sell shares of Zee Telefilms, which manages English and Indian-language stations in India and abroad. The channels are losing viewers to slick shows from Star Television and Sony Television. Plus, the company may be forced to flood the market with new shares to raise money to put up a satellite. And Zee is one of the few Indian companies exposed to a global slowdown because of its channels in Britain and the U.S.
Mr. Ross in Tokyo is also glum about the future. He is splitting his portfolio evenly between two plays: shorting a major Japanese retailer and buying into a little-known tech company that's too small to have big problems. He thinks shorting the ailing Japanese department-store chain Daiei Inc., which is struggling to pay off debt, is a smart move in this economy. Daiei lowered its profit and sales forecasts last week and Moody's Investors Service downgraded its credit rating to show that its bonds are in danger of defaulting. Daiei's management and lenders have tried for years to salvage the company, but they may have to give up in the next six months, Mr. Ross says. "If the bankers let it go it will fall to one yen," he says.
The other half of his money goes to Thine Electronics Inc., a small Tokyo company which designs chips that control the liquid-crystal displays in electronics gadgets. While it may see demand dip, it doesn't have the debt problems of other Japanese companies, Mr. Ross says, and it may see its profit potential soar in the next few months as it gets patents for promising wireless technology.
It's a calculated and cautious strategy, just the sort of thing you would expect from seasoned money managers. But the military team has been plotting some surprises of its own.
In the Armed Forces, Cpl. Goh is part of a unit trained to build bridges quickly to transport troops. At home, he reads books on investing and builds portfolio strategies. "I like to follow financial markets," says the 26-year old. "That is my passion."
For the contest he is boiling down all his book learning into two principals: He wants stocks that are cheap and growing, and out of favor but ready to bounce. He is dividing his money equally among three shares. His first pick is the electronic components maker Autron Corp., which is listed in Singapore and Australia. He likes the share because most of Autron's customers are in China, a market less likely to be hurt by a global economic slowdown or battles with terrorism.
His second pick is one of the leading tech stocks in Singapore, electronics contractor Venture Manufacturing (Singapore) Ltd. It has tumbled more than 50% from it's 52-week high and, says Cpl. Goh, it can't fall much further. But his studies taught him that Venture could be poised to rise. The electronics industry, he says, moves in 12- to 18-month cycles of boom and bust. "It has been bashed like crazy, but I think it is due for a rebound in the middle of next year," he says. His last pick is from another recently ravaged sector -- real estate. He is investing $10,000 in CapitaLand Ltd., a Singapore company that is doing better than its competitors at lowering debt and diversifying. With the share trading at less than book value, it's a steal, he says, especially if falling interest rates arrest the slide of property prices.
And our new champ, the giant slayer? He is following a three-pronged strategy: bank bashing, bottom fishing and beer drinking. His first $5,000 goes to shorting Singapore's Oversea-Chinese Banking Corp. Cpl. Wong predicts there will be more problems in the financial industry and says that OCBC isn't equipped to deal with it. "It's too Chinese, too family oriented" to move quickly, he says. "I got a vibe that things are not going to be good for this company."
The biggest slice of his money, $14,000, goes to buy United Industrial Corp. The Singapore property company can't get much cheaper, he says -- it's trading at less than S$1 -- and if it does there are major shareholders that may want to buy it. "It is very cheap," he says. "I have a strange feeling that someone is going to take it over."
He is investing his remaining $11,000 in Philippine brewer San Miguel Corp. He wanted to diversify his portfolio so it wouldn't be all Singapore stocks and still defend it from any further global slowdown.
"Chances are its revenues are not going to come down and it's a well-managed company," he says. "In bad economic times, everybody needs a beer."
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