Ep475: Thanawit Ounsakul – Find Your Investment Style and Stick To It
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BIO: Thanawit Ounsakul is a Petroleum Engineer with enthusiasm for business and the people behind it. He is a long-term investor who has been riding the financial wave since 2006 and blogs about his investment views.
STORY: Thanawit came across a stock whose valuation seemed ok, and analysts said it would go up drastically. He bought it without further research only to make a 50% loss a year later. There was no hope of the stock rising because demand for the company’s commodity had shifted.
LEARNING: Don’t depend on quantitative analysis only; use qualitative analysis too to value a company. Buy cyclical stocks when PE is expensive and sell when they’re cheap.
“Find your investment style and try to turn it from good to great.”
Thanawit Ounsakul is a Petroleum Engineer with enthusiasm for business and the people behind it. He is a long-term investor who has been riding the financial wave since 2006 and blogs about his investment views.
Worst investment ever
In October 2011, Thanawit came across a commodity stock that went down to $40 from its all-time high of about $60. The valuation looked very cheap, with the price to earnings at less than 10x and debt to equity of less than one. Analysts were saying it would go to $80. Thanawit did some math and figured it would be an outstanding stock to buy. So he bought it at $30, then the price moved up to $45, and he just kept on buying on the way up.
A few months later, in March 2012, the price started going down, and it got back to $30, the price he first had bought it at. Thanawit was confident and bought more positions expecting the stock to rebound. But the price kept going down.
Thanawit decided to research what was going on with the company—which he should have done before buying the stock. He learned that the demand for that commodity had shifted. Basically, the sales kept dropping quarter after quarter. Because of loss aversion, Thanawit didn’t want to sell until November 2012, when he got extremely stressed about it. He spoke to one of his lecturers from university who pointed out that Thanawit’s investment was a sunk cost and advised him to look forward, not backward. So he sold his stock making about 50% loss.
- Be aware of the value trap that makes you value a company depending on quantitative analysis only without including qualitative analysis as well.
- Don’t evaluate a company based on past earnings only; use future evaluation as well.
- Let go of the looser stock as soon as you can.
- Be careful because investing is a physical activity, and many people go into it not realizing that, and then they lose control of their emotions.
- Just because someone’s an analyst doesn’t mean that they’re necessarily a great stock picker.
- Buy cyclical stocks when PE is expensive because that means they’re at the bottom of their earnings cycle, and then sell when they’re cheap.
To adopt any principle or repeat a policy throughout your life, you must feel good about it. Find your style and try to turn it from good to great.
No. 1 goal for the next 12 months
Thanawit’s number one goal for the next 12 months is to publish a well-written investment article as often as he can so that his followers can be at least one inch closer to the investment world.
“Just enjoy investment.”
Andrew Stotz 00:02
Hello fellow risk takers and welcome to my worst investment ever stories of loss to keep you winning in our community we know that to win in investing you must take risks but to win big you've got to join it you've got to reduce it to join our community and claim our podcast listener discount on my valuation masterclass boot camp. Just go to my worst investment ever.com Follow risk takers this is your worst podcast host Andrew Stotz, from a Stotz Academy, and I'm here with featured guests tonight with Uzzah goon tanowitz. Are you ready to rock?
Thanawit Ounsakul 00:41
I am already do not Andrew, thank you for having
Andrew Stotz 00:43
me. I'm excited to have you on the show. And maybe you could take a few minutes, minute or two just to introduce yourself. Give us a little bit of your about your background and what you're doing.
Thanawit Ounsakul 00:54
Absolutely. Thank you for your introduction. I am a petroleum engineer for 15 years. My first job was a field engineer working on an offshore drilling rig. In 2006. I started my first investment on the first man payload just because I wanted to save some tax. So I just start with tax having fun, and my portfolio grows slowly before it become collapsed into the Senate neck. I consider myself lucky during the financial crisis, the oil price dropped after a 10 year bulan people I knew lost their job it was tragic, but it was pure luck for me that I still have the job and the money was locked down in a tax saving fund. So I cannot do stupid thing like panic selling. But I cannot find peace in my every time I think about that drawdown if you painful and almost out of the market. But luckily then, I made an excellent friend on the lake who introduced me to the concept of value investing. At that point in time my investment become more rational and systematic. And the first book he recommended me to lead was one up on the wall state by Peter Lynch. And that book changed my thinking on how an armature like me can beat the market. So my thinking also influenced by many other value investor I chose to study Dr. NewAir Dr. Pat Boone, they also quite low model for Thai people in being the self made billionaire and set good example of simple life after you becoming rich. And not to mention Warren Buffett, Charlie Munger Howard Marks Mohnish pabrai or even yourself Andrew I study your work FEMA, you will talk about the principle that principle. So but So after all this year, I found that peace of mind is very important for me to stay in risk people underestimate the investment horizon when talking about a compounding effect. So, people want higher return without considering this. Then I took it slowly and diversify my asset into many asset. I have boring asset like cash lead. That that is just in case for emergency and I also have I do invest mostly in stock. I love mid mid and small cap growth stock tech stock. And I do invest in some Fintech startup, even digital digital asset like crypto. I like to study the stock the business and the people behind. So as we saw a I began to share my investment knowledge and my research on Facebook, Instagram, Twitter, under the name of investing. Yeah, yeah, that's about me.
Andrew Stotz 03:50
And if people want to follow your work, where's the best place for them to search you out?
Thanawit Ounsakul 03:56
You can follow me on Facebook, Instagram, Twitter, depending on which platform you are on I on on that three.
Andrew Stotz 04:04
Okay. And we'll include will include links to that all of those places in the show notes ladies and gentlemen. So if you want to follow feel free you know, I tell you a funny story about Dr. Pi boon, you know, people that you mentioned in Thailand I mean, are really venerable value investors and long term you know, investors I've done a huge amount to to, to educate Thai people, Dr. New weighed in by the PI Boone and there was another guy that I remember used to be with Dr. Beibu quite a bit Dr. preacher and he was a good friend of mine also, but I remember 1995 Dr. Boone asked me to come up to a seminar in Colorado in north northeast of Bangkok by about two hours for those people that don't know Thailand and So I drove up there. And yeah, I was just amazed was a huge crowd. And it was like 1995. I was, I moved to Thailand in 1982. I started being an analyst in 1983. And it was just such a great opportunity. And, you know, I just have been admiring what Dr. Pi Boone has done as far as educating Thai people as well as Dr. New Way. And many years ago, when I taught an equity valuation course at Thomas side, I, I asked that any way if he would stand in for my course, because I had to be abroad. And I thought, he's such a master compared to me that I thought my students really had a great opportunity. So yeah, these, these guys have really done a lot for Thailand. And I think the reason why it's also important is because so many people get trapped into the volatility of the market and the excitement of the market. And, you know, you mentioned, you know, about long term horizon. And, you know, you also mentioned about peace of mind, and, you know, building a portfolio that it's good quality portfolio and just letting go, Yeah, it's like if you planted flowers, and then as soon as they started growing a little bit, you pull them out, and you say, I'm gonna move them over here, I'm gonna replace them with some other ones, you never gonna have a beautiful flower bed.
Thanawit Ounsakul 06:22
Yeah, correct. Yes, you will have weed instead.
Andrew Stotz 06:26
Exactly, they'll come in. All right, well, now it's time to share your worst investment ever. And since no one goes into their worst investment thinking it will be tell us a bit about the circumstances leading up to it, then tell us your story.
Thanawit Ounsakul 06:41
Okay, actually, I had a lot of bad investment in my life. But one of the worst was back in October 2011 I was trying to buy $100 bill with $50 in price, Let's not mention the name of the company, but it was one of the growing commodity company at the time. So, it was very beginning of my journey when I do stock selection based on financial ratio. So, on the snapshot of that day, there there was one commodity stock that window form went down 40% from its all time high at about 60 The valuation looked very cheap price to earning less than 10 debt to equity less than one the the analysts say it will go to 80 So, I do some math and figure out okay, that will be one backer from from the analyst target price. So, I bought it in at 30 the price moved up 3540 45 I just kept on buying on the way up. So, few months. After that, everything goes out in March 2012 The price Dub 4540 back to 35 back to my started with some losses. So I was too confident and put my position and expected the liberal. So, the past kept going down even more that then I started to realize and do some research on what is going on with the company which I should do it earlier. And I have learned the demand in that commodity was shifted. Basically the sale kept dropping quarter after quarter. And I have lost aversion and so I don't want to sell you until November 2012 I feel very stressful and but luckily I talked to one of my instructor back to university he pointing out that my investment was sunk cost. So basically I have to look forward not backward. So I become the life that I have to stop the breed and come close the position at about 20 So I realized about 50% losses. So and that is the story of my loss and
Andrew Stotz 09:02
so how long was the time between when you bought it and when you sold it
Thanawit Ounsakul 09:06
is about one year or one year? Yeah.
Andrew Stotz 09:09
And what was the feeling that you felt like when you I mean obviously at some point you felt relief okay get rid of this but you know you're a smart guy huh you know you're not you're not a dummy you worked you know to try to make this investment How did you feel when it really didn't work out?
Thanawit Ounsakul 09:28
Hmm I'm actually back back before I failed it I feel so many things in my mind. I feel greedy when I buy i I can only see the upside away not not the downside was I feel irrational as well. I had an anchoring bias to the applies to the all time high place and that is not the valuation by the way. And a lot of good news when when I bought it in so it kind of caused the confirmation By asked me, and I also feel fear of missing out on on, on the on the Lally that I first bought in so that's why I bought buying more on the on the way up and buying on the dip. And but when I say I feel rational, I feel very calm and thin since I had evaluated the change in fundamentals, so I don't feel recollect I have to sell it. Yeah, stop and read.
Andrew Stotz 10:32
Yeah. So how would you describe the lessons that you learned from this?
Thanawit Ounsakul 10:36
I'm sure, actually there are so many lessons on this specific investment, but number one is be aware of the value trap, I think that is the beginner trap for the investment in commodity stock. So, when when you try to value the company from only the quantitative, not the quality that is trapped, you will have so basically a blind myself from seeing the shift in demand in coming. And this also mean that I don't have the circle of competence in the industry and not and not understanding the business well. Not well enough to see if the earning will down drastically after I beat I will buy in. And second is the quantitative valuation alone is not the only problem. But the anatomy is I did, I did it all wrong, because my evaluation based on the past earning, that is like driving the car and looking in the rearview mirror, which instead I should look forward into the traffic. So in other word, I should use the future and evaluation that imply me. The best time to invest in that stock was during the recession in 2008, where the price to earnings was high. And not three years later when I started my position. So the position I have entered was like at the peak of the cycle. And that is why the P e is really low and attractive to buy. And the last one is I realized that the fundamental has changed. But I hold on to it, which I should not do this. Like we talked in the beginning that I think it came from Peter Lynch that it called cutting flowers and what are the new ways that I should let go the looser stock? Yeah. So that concludes my lesson. Yeah,
Andrew Stotz 12:32
those are great lessons. In fact, I'm just looking at my bookshelf here, I've got beating the street up there. And when I started, you know, and 1993 that when I started in Thailand, there was no you know, internet or something. So I just had to get as many books as I can. But you remind me of another book, which I really love. And I just want to see if I can find it. There it is Hold on. And I don't know if you've ever heard of this book called your money and your brain.
Thanawit Ounsakul 13:03
Jason Zweig. Frankly, I had never heard
Andrew Stotz 13:07
this, the reason why this book, and you can see my notes in the book that I took and the stickers and stuff that I did. But basically, this is a great book, because he looked at kind of the neuroscience of investing. And he basically was able to show that when you're winning or losing in the stock market, there's an actual physical reaction that's going on in your head, in your brain and in your body. And that's when I really learned that investing is a physical sport. So when you explain about your feeling in the way that you feel, you know, I really like to help people to understand that, you know, be careful, because investing is a contact sport. It is a physical sport, as physical activity. And a lot of people go into it not realizing that and then they lose control of their emotion. And it just has too much. And I think the other thing you talked about the idea of you know, you're more, you're more relaxed peace of mind, compared to at that time. So that's one of the things that I was thinking about when you were talking. The other thing I was thinking about, too, is that, you know, you said the analyst said that the stock was going to go up or it's going to make this earnings. And as an analyst all my career, I often what I always tell CEOs, I always tell CEOs have asked me, you know, what advice would you give me, I'm listing my company in the stock market. I'm going to start meeting analysts and I always say, Never listen to analysts. Because they never ran a business. You know, they just run in spreadsheets and all that. And just because someone's an analyst doesn't mean that they're necessarily, you know, a great stock picker, but they may be a great communicator. And there's a difference. So that's a second thing that I kind of took away and then you know, I think you highlight an interesting lesson now. You're talking about a commodity. but we also have the concept of a cyclical company, which you know, oftentimes is a commodity like, let's say, oil as an example. But the thing about a cyclical company is that it usually takes it's a capital intensive business. And it usually takes, you know, if you look at Petro China, 75% of their assets are fixed assets. That's already very high, even for the energy sector globally. But the point is, is that investing in those types of projects could take three 510 years before revenue comes. And oftentimes, you know, it's very hard to deal with supply and demand at that time. And so, you know, the lesson that I take away is a reminder that with cyclical stocks, you buy when they are expensive, when PE are expensive, because that means they're at the bottom of their earnings cycle, and you sell when they're cheap. That's one great lesson to take away. Anything you would add to what I got from your
Thanawit Ounsakul 16:01
okay, I'm actually I have one funny thing about the the analyst research, no offense to you and to
Andrew Stotz 16:09
Thanawit Ounsakul 16:11
I used to heard that this target price is adjusted not only to their fundamental of the firm, but also to the column supplies. And that is the most rational thing I have ever heard about that. Yeah. Yeah, so be careful.
Andrew Stotz 16:29
Exactly. When I worked at Citibank, basically, Citibank has had a policy like, Okay, if there's 10 15%, upside from the current price, it's a buy, and it is 15%, I think it was even 10% downside, then it's a sell. This is such a narrow range, that really, you're constantly changing your target price, because somebody at headquarters made a decision that this is how we should do it. And as a result of many brokers and investment banks following such a system, which ultimately covers their ass, that's a lot of what they're trying to do, and trying to keep their analysts, you know, in line in that way. But what ends up happening is that you just end up creating a huge amount of noise. And that's, I think, you know, one of the other things I take away from listening to you, and you mentioned it from the beginning is like that, as an individual investor, who can think independently, you have a major advantage. And I think most people don't think that they think that, you know, they've got to get expert opinion on this, and that, but if you learn foundational stuff, be read some of the foundational books, you, you're also building a portfolio of, you know, 1015 stocks, you know, so that you're somewhat diversify, you're not getting all into one, you have an advantage, because there's a second advantage that you have. The first one is that you just don't pay attention to all the noise out there. And ultimately, that's what analysts and salespeople in brokerages do is they create a lot of noise to get people to train. But the other thing is that if there's one thing we can say about society today, we are a society now have a very, very short attention span, and a society of distraction. And if you can take a long term view, you're very rare. Yeah. And so I think that's a in a lesson that listening to you talk about your peace of mind, and, you know, I have a client of mine who's a family office, he doesn't care, he doesn't he wants to hold the stock for 10 years. He doesn't care about liquidity so much he's willing to get into something. And he's willing to take a very long term view and the markets not and so you have a competitive advantage. Yeah. So that's great lessons. All right. So based upon what you learn from this story, and now let's just imagine a young man or woman out there who's they got their eye on that commodity stock they see it the story they got it, you know, all that what what action would you recommend our listeners take to avoid suffering the same?
Thanawit Ounsakul 19:13
Okay, I don't think the action given by me will be general for all the people right. So, the investment is more like a style in managing the risk. So, to adopt any principle or repeating policy to your life, you must feel good with it right. So some people good speculation. So commodity might be a good cash cash machine for them and some some good at quantitative and number. Some good atma maccoby Ray, and some some also do them but business will. But if I do advise you you must find your style and try to make it from good to great And one of the best way to develop that is branding. Personally a brand from so many investors away so I try to find my style that keep give me the life that I want to leave as well. So I want to sleep at night and I want to travel during the weekend. So I blend the part I like for many, many value investor and I dropped the part I don't. So having said that they're the principal ally in buying good business and reasonable price. But that is the part I like but the part I don't like, for example, Charlie Munger, he has the high conviction portfolio but I chose not to adopt that principle because I can only see the swing in my stomach. So diversification is more kind to me, which is part of my thinking came from John Bogle. So the bottom line for anyone who listened is find your style, and help it make sure that it will help balance your investment and life and staying with Yeah.
Andrew Stotz 21:11
Find your style ladies and gentlemen, great advice. All right, last question. What's your number one goal for the next 12 months.
Thanawit Ounsakul 21:19
Um, I meant to be a during engineer. So I like to study and drill down deep to the foundation. At works I do research in engineering stuff. At home, I do apply methodology and research in financial stuff. So my, my mission in life is to inspire and empower the knowledge of the people. Hence my goal is try to publish a well allow investment article as often as I can, so that my follower can can be at least one inch closer to the investment world. And because I have learned so many valuable lessons from the other investor as well, so I think it is my time to pay it forward to the community. Yeah,
Andrew Stotz 22:06
fantastic. It's interesting that I've had a lot of students in my valuation masterclass that are engineers, it seems like the structured thinking of engineering can be applied to the world of finance. So that's interesting. Well, listeners there you have it another story of loss to keep you winning. My number one goal for the next 12 months is to help you my listener reduce risk and increase return in your life. To achieve this I created our community at my worst investment ever.com And when you join you get that special discount on the valuation masterclass boot camp. As we conclude ton of wit I want to thank you again for coming on the show. And on behalf of a Stotz Academy, I hereby award you alumni status for turning your worst investment ever into your best teaching moment. Do you have any parting words for the audience?
Thanawit Ounsakul 23:00
Just enjoy. Enjoy investment. Yeah,
Andrew Stotz 23:04
great advice. Just enjoy investment ladies and gentlemen. And that's a wrap on another great story to help us create, grow and protect our well fellow risk takers. This is your worst podcast hose Andrew Stotz saying. I'll see you on the upside.
Connect with Thanawit Ounsakul
- How to Start Building Your Wealth Investing in the Stock Market
- My Worst Investment Ever
- 9 Valuation Mistakes and How to Avoid Them
- Transform Your Business with Dr.Deming’s 14 Points
Andrew’s online programs
- Valuation Master Class
- How to Start Building Your Wealth Investing in the Stock Market
- Finance Made Ridiculously Simple
- Become a Great Presenter and Increase Your Influence
- Transform Your Business with Dr. Deming’s 14 Points
Connect with Andrew Stotz:
Further reading mentioned
- Jason Zweig (August 2007), Your Money and Your Brain: How the New Science of Neuroeconomics Can Help Make You Rich
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