uSPRINT Award Ceremony held on 23rd September 2015
From left to right : Mr Ong Chai Lin (Lecturer), Mr Loh Yew Hoe (DBKF Course Chair), Mr Lester Goh (DBKF Student – Weekly Prize Winner & 2nd in SP Cateory), Mr Kok Heng Loong (Executive Director UOB Kay Hian Pte Ltd) and Mr Ong Jin Zen (DBID Student – Overall Category 3rd Prize Winner).
uSPRINT 2015 is UOB Kay Hian Singapore Inter-Polytechnic Real-time INvestment & Trading competition. This was the third year the competition was being held. Compared to the previous years, this year was inter-poly and had bigger and more attractive prizes.
The uSPRINT 2015 experience was a meaningful one for me. Not only did I get to experience real-time trading first-hand, I also got to put what I have learnt to the test in a real-world situation. Learning within school is all well and good, but the competition took that one step further by allowing me to test trading strategies. Moreover, the competition allowed me to face off against many others (~1,800 students participated from 4 polytechnics), enabling me to gauge how well I stacked up against others.
Since the competition period was rather short (~5 weeks), I adopted a contrarian approach looking for the most beaten-down stocks in the past months. A conglomerate was suspected of being unable to secure funding for future operations, inter alia, which sent the stock down ~60%. Considering massive commodity headwinds (specifically, oil), on the surface it seemed like the sharp drop in price was warranted.
However, digging deeper into the financials revealed that the conglomerate was in a good place financially – they had billions in undrawn credit lines and could raise cash from asset sales if needed. Hence, it seemed like the reason for mispricing was due to an overreaction by the market (given the macro pressures, such a reaction could be justified). There was considerable margin of safety – shares were trading at ~40% of book value. Even with conservative scaling of assets, the potential for downside still seemed minimal. Additionally, the stock was heavily shorted and thus a decent level of price appreciation would result in a short squeeze, intensifying my upside – essentially a ‘sure’ win setup.
I went long the stock and the bet paid off handsomely.
In essence, the competition taught me to look for stocks that are unfairly priced as a result of investor overreaction, along with reasonable margin of safety to limit the probability of a permanent loss of capital. I also learnt that it is hard to seek alpha by going with the crowd. Substantial alpha can only be realized with a contrarian approach.
Note - The student writer achieved 2 prizes in this competition. He won 2nd Prize in the ‘Top in School-Singapore Polytechnic’ category and topped the overall rankings in Week 4.