Stocks and Durians-yummy!

I like Durians. Love eating them, though I do so moderately, not because of any health aspects but more because they're pretty expensive.

I see quite a parallel between durians and the stock market.

In trying to bottom pick, we pick durians from the ground. Just don't stand under the durian tree too often; we might get knocked by the thorny durians on the way down...

In value investing, people scrutinize the business, it's financials, and it's valuations. Same for durians. If one wants to buy durians, he will scrutinize it, shake it, look at the color, look at the stem, check if the thorns are sharp and fresh. Lastly, having concluded that the durian is acceptable, we look at the price. Sometimes, durians are in large supply and we can get top grade durians at $10/kg. Sometimes, they are in short supply and cost $22/kg. So, we make a decision based on the current valuation whether to buy. If one deems it to be a value buy, we buy it at whatever Mr. Durian Seller/Mr. Market offers to us. If not, we just walk away, our banknotes safe and sound in our pockets.

We also can shop around. Stall A might be famous for it's Mao Shan Wang, but what if one wants to eat D24? Do we blindly go to Stall A? Sometimes, Stall B, which might not be famous for any cultivar, might offer D24 at cheaper prices. Same thing, we must also shop around for whoever lowers our cost. Sometimes, Stall A customers look down on Stall B customers because Stall B doesn't have a reputation. But, what matters is just the quality of the durians, no? Whether Stall A gives you aircon, more friendly staff, does it matter? I detect alot of snobbery and people turning their noses up at Standard Chartered Bank's offer of 0.20% commission with no minimum. Even though SCB might carry a bigger advantage for small players, people actually will save more when they trade more. If I want to buy $40,000 worth of ST Engineering, my commission for a traditional broker is at 0.275% which is $110+ gst. For SCB, that will be 0.20% which is $80+ gst. Of course, there are many other factors to look into; but I feel that the vibe of disdain and ridicule of SCB customers I get is unwarranted.


For durians, we must also know which cultivars are in season at the time we want to buy, which will offer us the best value for money. Say, in April, D24 from pahang is in season. We will get better value for money for D24 from Pahang in April, than say Mao Shan Wang from Perak. Sometimes, a flood/drought/whatever affects the whole South East Asia region and all durian trees, no matter how good, churn out poor quality durians. Same thing, we should look at the macro events and not just the business fundamentals of a stock. No matter how good a business is, a rising tide lifts all ships, and vice versa, a sinking tide grounds all ships. Even if a company is getting exceptional economic moat, ROE, ROI etc etc, a global economic downturn will sink it's stock price, will it not?

After all is said and done, when we bring the durian back, no matter how good it looked before we opened it, after opening, if there are worms inside, do we hold on to the durian hoping the worm will magically disappear, or do we take decisive action to throw the durian away before the worm replicates and goes into our other durians, or start to affect us?


That's my parallel of durian eating and stock picking. Enjoy both eating durians and picking stocks. Cheers!