About the Partnership

I spoke to a few people about AIN Partnership, raising a few questions regarding the Partnership. I may have answered these questions casually, so let me ‘blog’ here clearly for my future reference as well.

1) Is AIN Partnership a legitimate and registered business?

AIN Partnership is a legitimate and registered business with Suruhanjaya Syarikat Malaysia (SSM), Business Registration No. 002093548-P.  The ‘Type of Business’ is stated as ‘Investment and Ownership of Stocks of Listed Company in Malaysia’.

2) What does the Partnership do?

Partners will pool their money meant for investment (not for savings purpose) into AIN Partnership to purchase and sell stocks of listed companies in Bursa Malaysia with the sole aim of earning a rate of return on its investment greater than the rate of return from the same amount of capital invested in Amanah Saham Bumiputera (ASB) fund in a given calendar year.

3) My role in the Partnership.

As the General Partner and majority partner of the Partnership, I make all decisions on the stocks the Partnership invests in. This includes analyzing the company’s financial structure, placing the buy and sell orders through a brokerage account and keeping records of our investment. Similary, I am responsible to my partners on the rate of return from the Partnership’s investment in Malaysian stocks (see above paragraph).

4) Why invest on your own? Why not just give your money to ASB/unit trusts and let them invest it for you? Or why not Swisscash/cicak tokek (gecko)/gold investment and get rich in a very short time, buy a BMW 3 Series and go holiday in Australia?

Reason is because I believe that stocks investment represents a wonderful chance to grow your money at a greater rate of return than most readily available investment instruments around us. A right company’s stock at a right price and a right time will turn your money many times over positively, letting you sleep well at night knowing the money you make now, will grow and help you live a comfortable life in the future. Some people can get rich from their ventures in what I listed in the question, but I firmly believe in stocks investment and I intend to do well in it with my partners to achieve that greater return.

5) But stocks are risky, and the price can go up and down.

Yes indeed.  But how can one reduce the riskyness? There are plenty of essays/writeups on the Internet about risk but allow me to make it simple at least from my point of view - if you know what you are investing in, why invest in it, and how do you invest in it, then you have made the risk look like a tame, cute kitten that roars at you but you know very well how to hold it by its neck and place it back in the cage. (The kitten will grow and be fond at scratching you but by then you already know how to cut their nails)

A stock price fluctuates up and down, that’s a certain. Your action as an investor is to simply look at stock price fluctuations like someone who knows very well the taste of McDonald’s Prosperity Burger and desires it, waited every year to buy it everytime Chinese New Year is near, but clever enough to buy the McValue Meal only from 12pm to 3pm any day because the price is cheapest at that time.

6) Does the Partnership guarantees positive return to its partners?

No, the Partnership does not guarantee any returns (positive or negative) to the partners nor does it provide capital guarantees. But what the partners are guaranteed of is the fact I will continue to have a substantial stake in the Partnership and I seek to preserve the initial capital provided by all partners before earning any return on it. I dislike losing money to stupid investment decisions, like everyone else too.

Dare I point out that if one is eager and joyous to see 15-20% returns on their stocks but worry and will lose sleep at the sight of losing 15-20% from stocks although their analysis, reasoning and the company is still right, then one must not invest their hard-earned money in stocks directly. To this investor, ASB is the best because they provide capital guarantees and a decent dividend return of 7-8% for the past few years consistently.

Of Syariah-approved Stocks

Upon thorough checkings and verification, The Partnership in the first week of January 2012 had just sold an entire holdings in Stock F based on the sole reason that it is not a Syariah-approved stocks as deemed by the Securities Commission. That aside, I still think that Stock F has the potential of upward earnings in years to come, as the company gain more rights to act as agents and distributors in Peninsular Malaysia, apart from their presently admirable position as a major distributor of many FMCG brands in East Malaysia.

Alas, as long as a stock of a listed company in Bursa Malaysia is not deeemed as a Syariah-compliant stock, the Partnership will refrain from employing its capital in the stocks of the company.

The Partnership Portfolio

I have explained in earlier post a brief history on the origin of AIN Partnership portfolio and where it stands now. Please take a look:

Stocks of Company	Gross Investment	Market Value	% Profit & Loss	Portfolio Percentage
A	4,300.00	5,360.00	24.65%	22.62%
B	2,562.00	2,820.00	10.07%	11.90%
C	2,660.00	2,725.00	2.44%	11.50%
D	2,552.00	2,640.00	3.45%	11.14%
E	2,453.10	2,509.00	2.28%	10.59%
F	2,384.20	2,429.00	1.88%	10.25%
Others	4,172.50	5,105.00	22.35%	21.54%
Cash	109.42	109.42	-	0.46%
Total Portfolio Value	21,193.22	23,697.42	11.82%	100.00%

* Figures in Ringgit Malaysia (RM)

** Cash includes dividends received and realized gains before being utilized for stocks purchase in the beginning of the year.

Stock A belongs to one of the senior citizens of Bursa Malaysia whom primary business is car distribution and property management. I bought them when the stock price is exactly the same as the amount of cash per share (a staggering RM4.30 per share). I should have bought more instead of placing a restriction of “maximum 25% of portfolio in one stock”. Lesson here – if you did all your research well and you have full conviction that your reasons to buy a stock are right, by all means load up at a fair if not cheap price.

A savings and loans company partly owned by Employees Provident Fund (EPF) is represented as Stock B. They made it big in personal financing in the public sector. I lived in Putrajaya and one can clearly see how these personal financing schemes boomed by the number of leaflets in the mailbox.

Stock C is a clothing brand company with exceptional growth for the past ten years in a competitive retailing industry. I like them so much that I made sure I only buy my working pants from them since I started working. What more can you do to make sure they returned the money to you as dividends?

Stock D is a Sarawak-based infrastructure company who has recorded above 20% ROE for the past five years with above 15% NPM consistently. I find no other reason to own part of the company except for how fair they are selling now relative to their growth and strong balance sheet. And oh, they started their business with swamp land reclamation.

Stock E is a vessel builder company operating out of Sabah. I have been in oil & gas industry for few years with direct exposure to offshore supply vessel (OSV) operations, and I can see the tremendous potential in it. The number of companies entering the business grew, and more Datuks than not tried to get into it. You ought to know who can profit from their ventures – the builder of the vessel that the Datuks buy.

Stock F represented a company whose chief business it acting as agents to their principal in product distribution. In East Malaysia they conquer everything from FMCG products to building materials. I’ve been a salesperson before (still am) and I can appreciate the fact that if you cannot get high margin, seek volumes. The company’s NPM was historically below near 5%, ROE was so-so at 8 – 10%. But look at the East Malaysia map – just how many more consumers can there be? Next stop – Peninsular Malaysia.

The ‘Others’ is collection of stocks that individually does not reach 10% threshold of total portfolio size, so I find it less compelling to share. Most of them were companies whose financial statements I deemed attractive, but not enough studies were made to warrant a bigger position in their stocks.

In total, there were 12 stocks that the Partnership owned as of 30^th December 2011.

A Brief History

The AIN Partnership (the Partnership) current portfolio is a continuity of my initial foray into stocks eight years ago as an undergraduate student captivated by businesses. Upon graduation I ventured into real estate investments, at the same time I placed my cash in the Amanah Saham Bumiputera (ASB) fund.  One fine day I thought “why not investing directly in Malaysian stocks?” since I already had prior experience at that, rather than letting someone else doing it for me. Yes, the ASB dividends return were satisfactory, and I have no complains at all compared to the mediocre returns by many more unit trusts fund out there. But I yearn for higher yields, as well as capital appreciation.  The realization came when the Malaysian stock market suffered in 2008. As an active buyer, the timing couldn’t come better or sooner for me, a budding investor looking to buy stocks on the cheap. By 2010, some of stocks actually gained by more than 100%, some of them lose up to 15% of its value at time of liquidation. I sold off most of my holdings from 2008 in mid-2011. Overall, I gained (I do not have proper record of these so please take it with a pinch of salt).

I revived my stocks investment in Q3 2011 via AIN Partnership, with initial capital of RM21,200 that came from myself as the Majority Partner and others. The aim of the fund is to achieve higher return that what the same amount will earn if invested in the ASB fund over a year. For guidance, in 2011, ASB yield is 8.80 sen (7.65 sen dividend + 1.15 sen bonus). The Partnership return by 30^th December 2011 is 11.8%. To give an example, a RM21,200 subscribed to ASB fund as of 1^st January 2011 with no additional units bought the whole year will see its value at 30^th December 2011 at RM22,850 (about 7.8%. ASB calculation of returns is not simple interest calculation. For more information go Google “asb calculator”). A RM21,200 placed in trust account of the Partnership in 1^st January 2011, but only utilized to purchased stocks in Q3 2011, will see its value at RM23,700 on 30^th December 2011. The Partnership met its ‘objective’ in 2011, so to speak.

However, for proper comparative and investment principles reason, I feel three years (at minimum) would be a better time frame for the Partnership to start comparing its return to others. I reckon in three years we would have enough bear and bull market with violent and mild swings to really justify the Partnership decision to manage its own funds and compare it to the performances of ASB fund. Else, we might as well liquidate and return our money to ASB fund to manage it for us. For the time being, we shall strive, and would be content with beating the ASB in terms of absolute returns between first day to the last day of a given calendar year, with no minimum commitment.