Early this month, I received an email from Alvin Chow, the founder of BigFatPurse. It was an invitation to attend his Value Investing Mastery Course (VIMC) on 21st June. Besides providing an avenue to get to know one another better, he hoped that I would be able to provide feedback on their course so that they could improve on it.
I was really surprised at the invitation because I didn’t know Alvin too well. Actually, I didn’t know Alvin at all. =p
Sure, I had visited his website before and even left a few comments on a couple of posts. But really, that’s about it. I wasn’t even an avid follower of his blog and didn’t even know that he was an author of a book on stocks trading. And it didn’t help that he wasn’t exactly active on this blog as well (sigh).
Naturally, I was pretty honoured by the invitation. But that didn’t overcome the initial skepticism in me. I have never attended any investment seminar before because I was long ago diagnosed with an allergy with regards to paying obscene fees to attend investment courses. =p
In the end, most of my concerns were allayed after I found out these two things on VIMC:
1. Stating potential returns of 10-15%, VIMC is not promising the sky
“Double your money in 2-3 years with our secret investment strategy!”
“You can earn $10,000 a month in the comforts of your home after you have mastered our xxxx trading system!”
Whenever I come across such advertisements in the newspapers, I am often amused. Because I really wonder if there are that many altruistic people in the world. If I had such a great and simple strategy that enabled me to achieve sky-high returns, would I really want to share it? Even young Warren Buffett was sore when he realised he had to disclose his holdings when he hadn’t accumulated enough of the undervalued stock.
On the other hand, a 10-15% return seems so much more realistic. Such returns would outperform the local index by 2-5% and long-term investors know that even a 1% improvement in returns could make a huge difference down the road. Advertising this way also meant that Alvin and his pals’ primary purpose wasn’t to make as much revenue from the course as possible. People with the get-rich-quick mentality would likely be turned off by such “modest” returns. This also brings me to the next point.
2. VIMC is priced at a very affordable $98
Many investment courses are priced at an absurd level – thousands of dollars or in the high hundreds, even at the entry level. But VIMC, a full-day course, is priced at a relatively fair and affordable $98.
Since there’s only about 40 participants for a session, I had calculated that after deducting some of the costs like the venue, lunch and the course notes, the 4-man VIMC team would probably each be taking home only a few hundred dollars for their efforts. To put it in perspective, a tuition teacher could likely be able to earn the same amount for a full-day’s work on a weekend.
These people definitely aren’t trying to get rich at their participants’ expense.
More about the contents of the VIMC course
And so I attended the course last Saturday.
Basically, VIMC’s Conservative Net Asset Value (CNAV) approach aims to buy stocks with their market valuation below those of the hard assets they own. For example, if company ABC is priced at $8 with 1 million shares, it’s likely a buy if you calculate that they own hard assets that are worth more than $10 million.
But instead of this simple illustration, the course would guide you through the process to calculate those figures with real-world case studies. The participant would also understand how to navigate financial reports to obtain the key figures to calculate the CNAV figures. Can be considered a useful and practical 101 class for beginners who are interested in building a portfolio of stocks.
And as we all know, investment is not simply about making a decision to buy/sell based on numbers. Besides qualitative factors, psychology and temperament comes into play too. That’s where the investment game at the end of the day tries to achieve as the class breaks into groups to compete and invest using the CNAV strategy they had learned earlier.
Since the CNAV approach discounts other assets besides cash and property, using this approach is likely to result in a portfolio heavy on property counters. One should be especially careful with this strategy during a property boom since any discounts/margin of safety could evaporate during a property downturn. This is probably my greatest criticism of this strategy. Nonetheless, this could be managed through a slower accumulation of stocks that pass the CNAV criteria or a diversification of strategies.
I would definitely have appreciated this course when I first started investing. Using the CNAV approach would probably have given me greater conviction to purchase a stock like GRP 3-4 years back. This would definitely become an additional tool for purchases in future.
It’s also interesting to note that most (if not all) of my counters would have failed the CNAV test even at the time of my purchase. But does it mean I have failed? I doubt so. As Alvin puts it aptly during the session, his strategy is just one of several strategies that could work and it’s also inevitable that some “good” stocks would be filtered out using this approach.
All in all, I would recommend this 1-day course to budding investors. Many panic when their stocks are in the red but if you know the numbers and reasons behind your initial purchase, you might even have the balls to buy more and profit from it. In time, this will likely lead to a bigger and fatter purse. =)
Christopher Ng (author of Growing Your Tree Of Prosperity) also attended the VIMC course and you can find his review here. He even back-tested the results using a variant of the CNAV strategy and the positive results can be found here.
Additional Disclaimer: I do not benefit financially from VIMC or BigFatPurse’s success. The reason for spending a few hours of my precious time writing and editing this post is due to my belief that good stuff deserves a shoutout on this blog. And even though I didn’t had to pay for my session, I am going to show my appreciation by treating Alvin to a good meal (yes Alvin, this constitutes an invite)