Back to the Future...

If you can go back into the past, would you have change your decision?

If you have a chance to right a past regret-wrong, would you have

  1. done it?

  2. keep it the way it is

It always confounded me when I read an article where the subject replied that he will never change any part of his life.

Really?

Don’t you not have any regrets in your life?

Don’t you want to make a better decision?

I know I would have done a lot of things differently if I have my current brain for my previous self.


There are many companies which I had regretted buying.

The good thing about investing in the public market is that you can reverse that regret quickly.

That could not be done for investing in the private market.

Since we cannot reverse every regret-wrong, then maybe it is useful to do some post-mortem analysis to understand if the decision was made rationally with the information at hand during that moment of time.

I am going to dwell on the decision making for First Service Holding (FSH) again.

For the exact detail, please read my previous post.


At the point of decision making, I know that

  • the property management (PM) sector is highly valued at PE of 25x - 40x.

  • a small company known as FSH is valued at PE 7x - 10x in 2020.

  • FSH revenue is highly recurring across 3 business segments

  • majority shareholders are buying FSH shares on the market

  • executive team are buying FSH shares on the market

  • while related to Modern Land (ML), ML do not own any shares in FSH

  • the shareholding structure looks very clean

  • FSH had just acquired an external PM firm and ML (related parties) will constitute less than 50% of their revenue (post transaction)

  • revenue and margins will increase due to the acquisition

  • since FSH is one of the smallest players, they could be an acquisition target

If given a choice again, would I have bought FSH?

Of course not!

But did I make the best decision with the information I had then?

I think I did.

In addition, because I am new to the industry and the company is relatively new, the weighting for the investment had been kept small in relative to my portfolio

Looking back…

Between Evergrande collapse and my subsequent article on the 28th September to 7th October, I have around 7 days to invalidate my theory on FSH and close the position.

I wonder why I did not do that!

Instead of seeing that the impending collapse of Evergrande will be bringing about many pains for all the players in the industry, I had focused on the upside of a possible M&A.

For a probable upside, I had underprice a definite uncertainty.

In my article on Falsification, I had argued that one should always be seeking out information to invalidate your theory and I am guilty of not following what I preach.

Instead of seeking confirming evidence to prove the theory, it would be better to look for evidence disconfirming the theory telling us why it ain’t so.

As investors in the public market, there is always a chance to correct our regret-wrong and that is something I need to keep reminding myself on.

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