Cacola Furniture

[Aspellian]

Another crap company..

Published July 11, 2009

Trading halt for Cacola

Fast forward a year ago - many analysts swear by this furniture company being the most upside because of its lowest PE among others. Things are cheap for a reason. As prices dropped form $0.30 to $0.07, what will a typical investor do?
1) Cut loss early? 2) Hold on and forget? 3) average down? 4) or sell when cannot take the pain anymore and lose 70% of capital.

Apparently now on hindsight - Even 4) seems like a wise choice as one will have recover part of the capital.

What lessons can we learn from this episode?
- stocks are cheap for a reason - so what if its a low PE company (unless you are very very good FA/Intrinsic Value guy aka WB)
- when prices drop, usually there are reasons - always listen to Mr Market (let the Force be with you, not against you)
- Cut loss is to buy insurance - cos you never know when you will lose 100% of capital
- By holding on and on and on for years through recession and next bull run doesnt always work - time doesnt heal all pain, some companies may dropped dead
- averaging down may kill at times - on times it doesnt kill, you can brag about how well you have done. if you lose 100%, keep quiet, focus only on bragging of instances on great war stories that averaging works!
- dangerous to buy small cap company.
- avoid S-chips - enough "lao-jiaos" have warned time-and-time again that S-chips in spore are fourth-five rated and could be filled with fraud or weak governance or no moats. S-chips spore have lower valuations compared to HK/SH listed (as spore analysts always compare using this method) because they are really fuxked up. just that spore investors are gullible.
there are enough failures of S-chips already - please be warned. there are still many S-chips time-bombs walking around attracting retail investors because of their super-low PEs.
- after biz fundamentals change - avoid them like plague - do not fall in love, or have big egos feeling that biz performance will turn aorund.

why so much comments from me on cacola? because i was no.4

[Edit to change "I am no.4" to I was no.4]. As i swear i will never be no.2,3 or 4 ever again!! ]

[winston]

I think the mistake is "why buy this company in the first place" ? What's so special about them ?

Would an anticipated slowdown create more demand for their products ?

WB: Buy good companies at fair prices not fair companies at good prices

[Musicwhiz]

Aspellian,

Sorry to hear of your situation with Cacola. But it's good you bit the bullet and cut loss. An associate of mine was also touting this company some time back, based on some bullish (and they are seldom not !) analyst reports.

My first question asked already ensured I would not invest in Cacola - what competitive edge does this company (or any other furniture company for that matter) have which makes it a worthwhile long-term investment ?

Some casualties along the way - HTL, Koda and even Lorenzo is not doing too well (local companies).

Regards.

[Cheng]

I almost invested in this company because at that time, it was trading at 20% below net cash. (graham value play) I was undecided between Cacola and Koda. (not vested in either companies)

In the end I listened to lao jiao's(everyone) warning about S-chips' dubious financial statements. The management alone also does not qualify as shareholder friendly because they are hording lots of cash and not paying out dividends. I thought about it and it does not meet either Buffett's nor Graham's nor Fisher's management requirement of "managment's approach to shareholders". Lucky me, I skipped looking at them.

It might be a good play unless one has significant vote to control management and thereby unlock shareholder value. (provided that their cash where really there) Small ant like me cant do much in this big jungle.

[kennynah]

[quote]It might be a good play unless one has significant vote to control management and thereby unlock shareholder value. (provided that their cash where really there) Small ant like me cant do much in this big jungle. [/quote

hahaha.... c'mon...how many folks here have the financial power to become a major shareholder? it's almost always buying an insignificant amount of shares that will never have a say in how the management runs the company...

peoplelike WB wont need to worry about management capabilities bocos if he doesn't like the curren team of top mgt, he simply replces them....so, i alays say...wana invest like WB...you've got to be in his league...else, blindly emulating those great investors, present and past, is not practical...

i must have learnt this from a smat person along the way...

有样学样，不经过大脑，是行不通的。。。

[Cheng]

It might be a good play unless one has significant vote to control management and thereby unlock shareholder value. (provided that their cash where really there) Small ant like me cant do much in this big jungle. [/quote

hahaha.... c'mon...how many folks here have the financial power to become a major shareholder? it's almost always buying an insignificant amount of shares that will never have a say in how the management runs the company...

peoplelike WB wont need to worry about management capabilities bocos if he doesn't like the curren team of top mgt, he simply replces them....so, i alays say...wana invest like WB...you've got to be in his league...else, blindly emulating those great investors, present and past, is not practical...

i must have learnt this from a smat person along the way...

有样学样，不经过大脑，是行不通的。。。

Well it's the truth, we are not in the same league. Principles still apply and strategies have to tweak a bit. I'm not shooting myself for this haha...

Buffett would classify this play as "workouts".

[bluechipstamp]

I was undecided between Cacola and Koda.... Lucky me, I skipped looking at them.

Just curious, what's wrong with Koda?

I think it's a known fact that all furniture coys will be facing some tough times ahead (even behemoth Ikea is retrenching). But assuming you can find a good furniture company, when do u think is the best time to invest in it? When business is roaring?

[Musicwhiz]

I was undecided between Cacola and Koda.... Lucky me, I skipped looking at them.

Just curious, what's wrong with Koda?

I think it's a known fact that all furniture coys will be facing some tough times ahead (even behemoth Ikea is retrenching). But assuming you can find a good furniture company, when do u think is the best time to invest in it? When business is roaring?

When they can differentiate themselves in terms of product positioning and market segment and have a clear niche or base of customers without resorting to price competition.

That's probably what will get my attention, assuming it happens.

[Cheng]

I was undecided between Cacola and Koda.... Lucky me, I skipped looking at them.

Just curious, what's wrong with Koda?

I think it's a known fact that all furniture coys will be facing some tough times ahead (even behemoth Ikea is retrenching). But assuming you can find a good furniture company, when do u think is the best time to invest in it? When business is roaring?

Koda is facing very tough competition in the furniture business. Currently now they are trying to shift their customers to Asia side. Previously they were very focused on US and Europe markets. So when this crisis happens, they were hit hard.

Koda's management is very good. I don't think I have any problems with it, management is very prudent and cost conscious. They are always shareholder oriented. It is still in my watchlist though, the type of management that I would like to have.

[helios]

Received letter of demand from IW Asset for sum of HK$21 Million.