Value hunter, Value investor | Interview with Sean Seah, Founder of Value Investing College (VIC)
Sean Seah is no stranger to the investing community in Singapore. The 37 year old is the founder of Value Investing College, a leading value investing focused education provider, and has given investing talks in Singapore and around the region.
However, Sean was not always an investor, much less a value investor. ZUU online spoke with the value investing educator to learn how he embarked on his value investing journey.
Growing roots as an investor
Trained in finance and economics in university, Sean’s earliest mindset about investing was that it was a loss-making proposition. “My finance professor told us that statistically, most people cannot beat the market when they invest. It was imprinted in my mind, so I didn’t dare to invest,” said Sean.
His mindset was challenged when he started working in the military and one of his colleagues started talking about his stock investing experience. “I challenged him, saying that most people don’t beat the market, and I had the statistics to prove it, based on my own research,” he said at the time. But his friend was unfazed and showed Sean his trading account, which had nearly $250,000 in trading profits.
Intrigued by his colleague’s success, Sean decided to try and start trading on his own. He quickly lost $60,000, monies pooled from his and his friends’ savings.
“A lot of people treat the stock market like a legalized gambling den, guessing if prices are going to go up or down, and unfortunately I started the same way. I couldn’t quite distinguish between real investing and gambling,” he told ZUU online.
He was later introduced to the concept of value investing through a book written by Mary Buffett. “After reading, I realized you’re not supposed to guess whether the stock price is going up or down. You’re supposed to look at the company behind the stocks, what company you are buying and whether you want to become the owner of the company.”
“It’s a very fundamental approach and it sounds very boring on the surface, but beneath it, that is where the real money is.” Sean pointed out that much of the wealth of many rich billionaires on the Forbes Rich Lists come from their shareholdings in companies that are growing and making money.
“You don’t even need to really monitor the share price. Because as the company grows from making $1 million to making $100 million, they will give you dividends and the worth of their shares that you are holding on will also grow. That’s the idea. That’s how many people became rich.”
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An accidental teacher & business owner
Sean admitted that while he enjoyed sharing about his investing insights with others, he never planned to become a value investing trainer. He had been attending a personal development course where he shared about his investment philosophy, and the trainer later approached him to conduct investing classes. Sean decided to take up the offer, and began his career as a value investing trainer.
The idea of creating Value Investing College arose in 2015, when one of Sean’s students approached him to be a business partner to create an investing education school.
“I was intrigued by the idea because he said that we would be able to touch more lives, build something more sustainable. We could train more coaches, inspire more investors, and form a community to do it together.” With that encouragement, Sean rented an office space, hired some staff and then set up the company.
However, when his business partner left after a couple of months, Sean quickly found himself having to do it all alone. “I didn’t really want to continue to run the business, but I had employed my staff and I couldn’t bear the thought of telling them to go home and do something else.”
Incidentally, Sean found it easy to apply what he had learned in investing into his real life venture, and VIC turned profitable, expanding into more than 24 cities within a span of 2 years.
The investing school also upholds the very same passion that inspired Sean to start teaching investing to others. Sean admits that most of his trainers don’t need the money he pays them to teach because they make so much more through their investing. They joined VIC to share their investing ideas and stayed for the investment community that VIC has built up. “This is what VIC stands for.”
How to never lose money in Value Investing
Sean told ZUU online that he is obsessed with Warren Buffett’s number 1 rule, to never lose money. “It’s virtually impossible not to lose money, because when you invest, there is risk,” Sean explained. “The question is how you can reduce the risk to the point that you almost cannot lose money.”
To reduce his investment risks, Sean follows with 3 layers of safety.
“The first layer of safety is to choose a company based on good fundamentals. If a company is good, if it is making money, has a lot of cash and very little debt, the chances of them closing down is very low.”
“The second layer of safety is, to buy the company at a low valuation. If the company’s price is already cheap, even if you lose money, you will lose very little.”
“The third layer is diversification. Even if you find a good company, and it’s at a very low price, you don’t invest everything into the company. You should diversify into at least 20 stocks, or invest a maximum of 5% of your total investible capital into any individual company. If the company really closes down, you lose only 5%. On the other hand, if you buy another stock that gives you dividends, it can easily cover back your losses, and as a whole portfolio, you will have very little risk. Your risk is reduced and you don’t lose money.”
See how diversification and value investing can fit into your investment portfolio.
Using value investing principles to make life decisions
Sean’s value investing principles even spills over to the way he makes at life decisions, regarding his family, his health and even his family car.
“When I make certain decisions, like between attending a business meeting or going to my children’s school recital, I ask myself, which will matter more in 10 years time? Maybe this business meeting will not matter much, but my children will remember that I was there for them, even 10 years later. So I use a long term perspective to make my short term decisions, which is what value investing is about.”
“Even for my health, when I make food choices, or decide whether I should exercise on a weekly basis, I ask myself, how do I want to feel 10 years later, and what should I do today to ensure that 10 years later I can achieve the result that I want. It’s a very fundamental approach.”
Sean also added that he and his spouse are considering upgrading their Honda City sedan for a larger Honda Odyssey to accommodate their family, as COE (Certificate of Entitlement) prices have fallen in recent months. “I don’t need the car to be very fanciful, I just need the car to bring us places. The sedan works for our family of five now, but we need to think about whether the car will continue to serve us in 3 to 5 years, when the children are bigger.”
On the other hand, he is quick to concede that he is not as thrifty as Warren Buffett has been known to be, and is willing to spend money on things that will benefit his family.
“I believe money is a resource and it is meant to be used. I’m not out to be the richest man on earth, I want my money to be a resource for my family. So we go for family holidays, to enjoy ourselves. But everytime we do, I will do my due diligence by getting 3 quotations, shop around for the best deal and make sure that I am paying the right price for it.”
Sean’s best investments
“Most of my best stock picks are situations where I am consumers of their products,” said Sean.
One of his earliest most successful investments was in sportswear company, Nike. “I bought into it in 2005 when it was $30, and sold it when it rose by over 200%. Sadly I sold it too early. If I didn’t do that, I would have made 700% to 800% today.”
Another successful stock investment for Sean was Usana, the health supplements company of whom Sean was an existing customer. “I was taking their health supplements and it was really making me feel healthier.” Usana’s share price took a beating when public opinion turned against another multilevel marketing health company, Herbalife, for being an illegitimate pyramid scheme.
“Whether you like network marketing businesses or not, their business model is excellent,” he observed. “They don’t need big offices or physical shops which involve a lot of cost. They just recruit promoters, and they do their business through network marketing. Every time they go into a new country, they can expand very fast. That’s where I said to myself, I may not like to do network marketing as a promoter, but I would like to be an owner of a network marketing company.” Usana’s share price rose by nearly 4 fold since he purchased its shares in 2011.
A third successful stock pick came from a rather unlikely source. Sean heard about 800super, the Singapore listed waste management company, from a security guard who was making small talk with him at an office lift lobby. “I hadn’t heard of this stock before, but I was intrigued. I realized that they collect rubbish from HDB blocks and housing estates. And I asked myself, 10-15 years later will they still be around? Will they still be making money? The answer was, ‘Yes’. He bought into the company when its share price was at 30 cents. It has since risen to $1.20.
At present, 50% of Sean’s current investment portfolio is in cash, because of the high valuations of the S&P 500 index. “This is a rule I set for myself, I will inject cash into the market when the valuation of the market is low. If the market is expensive, I will take more cash out, because there is a greater likelihood that it will crash.”
This, he says, is part of the major review he does every 7 to 10 years.
For the rest of his portfolio, 30% of his portfolio is invested in Chinese technology companies and Vietnam based companies. The last 20% is invested in dividend stocks in Singapore, Australia and Japan.
Now’s the time to stop speculating and start investing in value.
Debunking Value Investing’s Number 1 Myth
Perhaps the biggest myth Sean has heard over the years, is that it takes a very long time for an investor to start making money. “Value investors always look at the long term perspective, how a company will be in 10 years, so many people have the idea that they will only make money 10 years later,” said Sean. “That’s not true.”
Sadly, this myth is often perpetrated by admirers of the icon of Value Investing, Warren Buffett. “People look at Warren Buffett, who is a billionaire, but who is also over 80 years old. And some think you have to be 80 years old to be rich through value investing.”
“The truth is, though we buy a company that will last at least 10 to 20 years, you will start to receive dividends when the company starts to make money. When their share price starts growing, you will start to make money as well.”
Sean gave a very interesting dating analogy to debunk this myth.
“When deciding which partner or which girl to date, I feel you should date someone who has the potential to become your wife or spouse 10 years later. So you look at the long term perspective. But that doesn’t mean you only enjoy in the long run. Even in short run, when you date a good partner, you can enjoy your time together, go on nice dates together.”
“So this is the way I look at it, you enjoy the benefits in the short run, even though you analyse it in the long run.”
Advice to new investors
As the founder of Value Investing College, Sean’s advice for new investors was surprisingly refreshing.
“I know that the correct thing to say is to read books, go and attend our courses and things like that,” he said laughing. “But I feel that the best way to learn, is to start investing.”
“You can invest with as little as $100 or $200. Once you put real money into the stock market, you become an investor participating in the stock market. When you do that, everything either becomes clearer to you, or even more confusing to you, but at least you get started.”
“That first $100 or $200 in the stock market is not to make you rich, it’s to give you experience and buy you a lesson. I think that is the most important.”
Keen to learn more from Sean and his trainers? Start with the Value Investing College.