We chatted with a friend who specialise in insurance.
He will usually go into the question of asking us on what we are investing in right now. As usual we will instead try to get him to talk about his investment hoping to glean some industry insights.
Instead of talking about the insurance industry, he declared that he had gone the risk free way since the pandemic. Instead of talking about any insurance companies which we are hoping to hear, he started talking about his the investment into REITS and how he is buying more REITS positioning himself for the next cycle.
After failing to get anything substantial, we started by sharing how First Ship Lease (FSL) had done really well for us on the yield basis instead of REITs. We shared that for the past year we had almost recovered all our investment through dividends alone.
The mention of FSL shook him to the core.
He lamented on how much he had lost on FSL, reminiscing to us on how he book his losses and vowing never to look at the company again. He quickly moved the topic away and talked about how he is planning to buy into oil as the price of oil had fallen.
We lost interest and the chat ended swiftly.
We think that the FSL episode had dealt him such a strong blow that the mere mention of FSL created unhappy feeling within him. Empathising with him, we could understand why someone could hate a share counter/ company this much (just look at the chart below).
Since our article on FSL, FSL had declared another dividend of USD 1.5 cents for 20203Q.
In total, FSL would have paid out USD 1.5 cents for each of the quarter for 20194Q, 20201Q and 20203Q.
For the rights offering of SGD 4.5 cents, you would have gotten USD 4.5 cents back while retaining a share in the business!
The irony of it all is that FSL was trading at SGD 7 cents during our chat. If he had put aside his emotions and had evaluated that it is still a decent buy, he could have gotten a yield of 28% within 2 weeks!
Sometimes, the psychology of pain is too hard to bear that one cannot recognise an opportunity despite it being laid bare for you.
And human are mostly irrational in their decision making.
Did you notice that his risk free way include speculating in the price of Oil?
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Disclosure: At the time of publishing Wee Hiang has a position in the above company. Holdings are subject to change at any time. This report, and disclosure, should not be considered to be a recommendation.