CARLSBG

Added 18.94 recently.  Represent 2.4% of my stock portfolio.  Notes for future reference.

I won't bother to describe its business profile - everyone knows CARLSBG, it really doesn't need much introduction. 

Long term Chart

24 year chart.  3 phases are obvious, and should be noted:

1. 2000-2011:  Sideways range.

2. 2011-2020:  Long term price increase.

3. 2020-today:  Long term consolidation / downtrend.

In short, temporary support at RM18.90, but more than 50% chance that the patient long term investor can collect more at lower prices over the next 1-3 years.  

Not a bad Quality Stock

EPS over past 10 years grow from 60 sen to a peak of 103 sen, which is pretty decent really.  6% per annum CAGR is decent.  However, there is a divergence between the Price vs its EPS growth since 2020.  Note the big dip in EPS in 2020, to fall down to 53 sen.  So, it's business quality is okay, maybe decent, but not superior.  Still it is clearly above average relative to the average Malaysian companies.

Its DPS experience is more volatile.  Peak DPS in 2018/2019 paying 100 sen i.e. paid more than it earns. Nevertheless, depending on your start date, DPS is generally on a recovery phase after crashing down from 100 sen in 2019 down to 40 sen in 2020.  It's not a great characteristic, but it still pays dividends regularly every year. and its payout ratio is more disciplined from 2020 onwards.  This is its new phase which ties up with Price chart above where it appears to be doing a long term consolidation / downtrend.   

The dividend payout ratio since 2020 is more disciplined, with payouts ranging from 75% to 85% which I like.  I get a bit nervous when it pays out higher than 100% (because it needs more work to dig in to know how it can sustain), but it looks like financially, after COVID, it has become more cautious.  So, this part I like.

A sample of Dividend Yield over the past 10 years is shown above - ranges from 1.8% (2020 - extreme, unlikely to repeat in next 5 years I think) to a high of 5.9% (2015, also a bit on the high side).  At 18.94, if DPS is say 85 sen, then DY = 0.85 / 18.94 ~ 4.5% i.e. this looks a bit high probably due to the price being a little bit lower.

But in Technical Analysis, there's a saying that what looks like a low price, can get lower.

Hence, I'm not in a rush.

The Long Term Play Strategy

To get rich slow, aim for a longer term play.  Time is the friend of a Quality stock and enemy of the Mediocre stock.

My objective is modest, to try to earn say 9% per annum returns over next 5 years with this stock conservatively.  I don't believe in shooting for the moon - that's for my speculative trading portfolio where I have made triple digit % gains in some of them.   This is about growing your wealth slowly and safely with extremely high probability.

This means:

1. Over the next 1-3 years, take my time to buy more at lower prices - my guess is that the bias over next 1-3 years is to perhaps try to touch RM17.  We can never accurately predict prices, but I already have something at 2.4% of my portfolio, so, I scratched my itch and now, it's slowly and patiently seeing if market gives me the opportunity or not.   There is some fear, but the fear is not exactly heightened.

2. If my DY on cost is 4.5%, it means I'm looking for price gains of roughly 4.5% per annum.   Over 5 years this equals 1.045 ^ 5 = 1.25.   What this means is that:

- If my average entry price = 20, then, I need to wait till it gets to 25 in 5 years to exit and secure my 4.5% per annum price gains.

- If my average entry = 19, then, target is 23.7.

- If my average entry = 18, then, target is 22.4

3. These target prices are quite realistic, with extremely high odds of happening in next 5 years conservatively speaking.   All it requires is time and CARLSBG business model does not deteriorate (where no clear signs this is even at risk yet).  The lower one's average entry price, the larger the Margin of Safety.

The Risks

There are no guarantees in the stock market - price can crash.

There is no rule that says that the bottom is RM17 - price can crash.

There's no rule that says that after breaking below RM18.90, it will go lower - it might to shake out holders and then goes back up to shake those traders who cut loss.  Market knows where the stop losses are.  Hence, I don't bother to trade and cut loss - I have no cut loss price.

There is no guarantee that it will take 1-3 years to find bottom - it could find bottom sooner than 1 year, or longer than 3 years.

There is no guarantee that after finding bottom, it will work its way up to RM25 - it might surpass this and makes new high beyond RM40.  It might not even get back to RM25.  

In short, nobody in this world knows anything about the future of this business and this stock price, even though there are many who claims to know.  I don't know anything.

Mitigations

It's all about Margin of Safety.

1. Keep this below 4% of one's portfolio, because it's not that great a stock.  It's decent quality, but not the best quality.  If things go very seriously wrong (e.g. more than your expectations above), 4% won't hurt you.  Do enough right things, your portfolio should continue to make new all time highs as this won't be a big drag when you're wrong.

2. Don't need to chase for stocks like this, where charts are like this pattern.  You have a plan, stick to the plan, even if it's very boring plan.  Boring plans are good.

3. Your entry price (a low one) is your margin of safety.

4. Avoid making decisions that will lose you monies.  Decisions like Averaging down automatically - there is a fine balance between averaging down when price moves are expected, vs blind averaging down when its business and price action is out of whack.  The odds for the latter are low for this kind of quality stock, but not impossible.  So, take your time to assess when price crashes.  No rush.

5. If you are wrong, do nothing.  Time will make this an increasingly smaller part of your portfolio, as your correct actions elsewhere will make your winners bigger and bigger to bring your portfolio to new all time highs.

In summary

Love boring strategies.

Love boring stocks.

Live your life.

Minimally monitor prices after market closes.

Life is more than just stock price tickers going up and down.