Friday, March 9, 2018

Book: Leadership and Self-Deception: Getting Out of the Box by The Arbinger Institute


Synopsis: Through a story everyone can relate to about a man facing challenges on the job and in his family, the authors expose the fascinating ways that we can blind ourselves to our true motivations and unwittingly sabotage the effectiveness of our own efforts to achieve success and increase happiness.

Through narrative writing, this book teach us about handling communication and interpersonal relationship. What I like about this book is it force me to reflect on the way I live and how I treat others. Sometimes we unknowingly "self-betrayed" ourselves, a situation where we had a sense of doing something that we should for others but didn’t do it. By this, we entered “into a box” where we are blinded by the true causes of problems and see others as mere objects. For example:

Tom was on a flight with open seating. While boarding, he overheard the boarding agent saying the plane was not sold out but there would be very few unused seats. He found a window seats with a vacant seat beside it. Passengers still in need of seats continued streaming down the aisle and scanning and evaluating the desirability of their dwindling seating options. Tom set his briefcase on the vacant seat and started to read his newspaper. He kept peering over the top corner of the paper at the people who were coming down the aisle and set his paper as wide as possible to make the vacant seat as undesirable as possible.

In the above scenario, we can see that Tom saw the people coming down the aisle as threats, nuisances or problems. He considers his needs as primary while others are secondary. He see people as less than they were, as objects with needs and desires somehow secondary to and less legitimate than his.

In another scenario, Tom was on another flight with his wife that was mostly full and the flight attendant was having difficulty trying to find a way to seat both of them together. When they try to figure a solution, a lady came from behind and offered her seat that has a vacant seats beside to them in exchange for one of their seat.

In this scenario, the lady do not see them as threat, nuisance or problems. She see them as people in need of seats who would like to sit together. She saw others as they were, as people like herself, without bias, with similar needs and desire.  

This books also provides some scenarios to explain that when we are "in the box", the blinded thoughts, solution and actions that we can think of to solve the problems actually make the situation worse. We blame others and in order to make our self feel good, we find negative reason of others to justify our self-betrayal. All these factors might have been the reasons that is hindering our success in work and personal life.

In summary, this book explain the definition of self-betrayal, its problems, and  its consequences which can be very harmful. After reading it, I am more aware of my own actions in order not to fall into "my own box". No harm giving this book a go!

Friday, March 2, 2018

Update- OCBC Bank, DBS Bank

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Since my last analysis of OCBC bank (here), all three local banks have released their financial year end results. Due to their stellar performances, their share prices have rallied. Since the start of the year, OCBC and UOB share prices have grown by more than 5% while DBS has soared by more than 15%, partially due to a jump in its dividend payout.

Dividend Yield

DBS has announced a dividend payout of $0.60 per share (double from previous year) plus a special dividend of $0.50 and has committed to maintain a yearly gross dividend of $1.20 per share. This has pushed up DBS expected dividend yield to more than 4% per year (based on current share price). The reason why DBS increased its dividend payout was to return excess capital that was built up due to the Basel capital reforms which has since been finalized. I keep my fingers crossed that OCBC and UOB will follow suit to ensure their dividend yield stay "competitive" to DBS dividend yield.

Graph 1: Dividend Yield
Source: OCBC, DBS, UOB
Return on Equity

Another possible reason why DBS would return so much cash back to shareholders is to improve its ROE. From Graph 2, DBS ROE is the lowest among the local 3 banks and has been decreasing for the past 3 years. This means that management is not able to efficiently generate sufficient return from the equity they are holding (e.g. having too much cash but lack of investment opportunity). If there is lack of opportunity to reinvest surplus funds to generate higher returns, then the other option is to return the cash to shareholder. As the formula for ROE is ROE = Net Earnings/Equity, by paying out more cash to shareholders will result in a lower equity and thus higher ROE. Not only that, share price will also be supported in the near term.   

Graph 2: Return on Equity
Source: OCBC, DBS, UOB

Valuation: Price to Book Value (Net Asset Value)

All 3 banks Price to Net Asset Value (NAV) ratio has continued to increase and are currently trading at the highest since 2008 financial crisis. However they have not reached their pre-crisis peak set in year 2006/2007.  

Graph 3: Price-to-book (PB) Ratio
Source: OCBC, DBS, UOB

DBS Historical Valuation

Table 4 is based on DBS historical share price from year 2006 onwards. By adjusting DBS highest historical valuation to current net asset value (NAV), it has once traded at a high of $42.13 before the 2008 financial crisis and a low of $10.61 during the crisis. This is only possible during extreme bullish and bearish market. As for its average trading price over the last 12 years, it is $23.52. With its share price currently at $28.70, it is trading in between its average and +1 standard deviation range. 

Note: The discounted valuation is after deducting its intangible assets. 

Table 4: DBS Price to Net Asset Value
Source: DBS

OCBC Historical Valuation


As for OCBC Bank, it has once traded at a high of $17.61 and a low of $6.19, which also happened before and during the 2008 financial crisis. Currently its share price of $13.06 is also trading at a range between its average and +1 standard deviation. 

Table 5: OCBC Price to Net Asset Value
Source: OCBC


Entry and Exit Strategy

Due to the recent market volatility, I have come to realize that selling shares is really harder than buying. This article (here) has rightfully pointed out my weakness ("Hesitation" under point no. 2). 

I quote:

If you purchased a stock at $40 and it goes to $60, you might be considering selling it. But if the stock retreats to $55, you might say to yourself, "It was just at $60, so I'll wait until it gets back to that."

Then, if the stock goes back to $60, you might say, "It went back to $60, so now maybe it'll go even higher." Then, if it retreats to $50, you might say, "I could have sold at $55; I'll wait for that price."


I have thus decided to formulate an entry and exit strategy for myself. The Price to NAV tables will be a guide for me to understand the banks current valuation as compared to its historical valuation. My strategy will also depends on my entry price. 

Strategy for DBS

I have bought DBS shares only recently and purely for speculation purpose due to its juicy dividend. This means that I do not have much margin of safety and thus will not hold it for long term play. I have set my current stop loss at 5% from recent high which will be at $28.15. If the share price reached a new peak, my 5% stop loss will be based on the new peak price. Of course if market continues to be bullish and reached $36.59 which is 2 standard deviation away from its mean, that will definitely be a sell signal for me.

Strategy for OCBC

As for OCBC, I have set a stop loss of $12. However, my margin of safety for OCBC is huge as I bought it at a very low price during the last market volatility. I might consider not selling it for dividend play unless if it reached the sure exit price of $16.49.  

Table 6: My DBS, OCBC strategy

Now I finally have my battle plan!