Thao Quynh – Don't Be Afraid to Take Some Gains off the Table

 

Thao Quynh has 15 years of experience in the financial service and investment industry. She was the investment portfolio manager for two European funds with US$280 million of assets under management. Prior to that, she worked as a financial analyst and research manager for leading brokerage houses in Vietnam. She started out with a university tuition loan to create the asset of knowledge and it is this knowledge that has given her financial security. She believes in diversifying across various asset classes and allocates about half of her wealth to investing in the stock market investments. Thao holds a Master’s Degree in International Business from SKEMA Business School in France and an MBA from the European Management Education Center in Vietnam. Today she is serving her country as an investment manager and portfolio strategy manager at Vietnam Holding Asset Management. 

 

Vietnamese stock market booms in youthful exuberance  

The year 2007 was a boom time for the relatively young Vietnamese stock market and everyone was excited about the kind of profitability in which returns of double or triple were quite normal.  The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. Several companies were trading at 70 times PE and 100 times PE and what is considered a bubble at that point of time.  

 

[caption id="attachment_2621" align="aligncenter" width="403"] The VN index chart had soared from around the 680 mark in late 2006 to its peak of around 1179 in March 2007. The latter year was when naïve investor Thao started to invest and got caught up in the excitement and greed.[/caption]

 

Source: Investing.com  

In the same year, Thao invested in a Vietnamese start-up brokerage house. It looked a good prospect for the following reasons: 

1. The founders were successful entrepreneurs with rich experience in leading other big financial institutions in Vietnam, one was former director at Merrill Lynch. 
2. The information was transparent and its financial statement was audited by a Big Four accounting firm. 

So all up, it had good financing potential, network advantage, and management capability. This investment was at first a big success. Two months after investing, the stock price went up around 18%. But Thao didn’t sell because, by her own admission, she got greedy and expected it go higher. She even rejected an offer to buy her shares on the over-the-counter (OTC) market at 2.5 times her cost price. 

 

Stock market bubble bursts 

Thao doubted that the bubble would burst at that time because everyone was expecting robust growth in the economy since the country had just entered World Trade Organization and that this would be a good catalyst for corporate performance and stock prices. However, the unexpected happened when that same year the Vietnam stock market showed for the first time some correlation with the US market. The global financial crisis was showing early red flags with the collapse of Lehman Brothers. Her investment went from a profit of 2.5 times to a loss of 50% in just a year and liquidity was a big factor as nobody wanted to buy after the bubble had burst. 

 

Opportunity loss 

Regret hit Thao over this investment but she decided to ignore it. She consoled herself that the stock price would recover one day. But that only happened nine years later. Thao sold her investment in 2016 at the break-even price on her initial price. But she admits that while she in pure numbers didn’t suffer a great loss, the real damage was in opportunity loss for not selling at the right time and holding on too long despite some awareness that a bubble was happening. 

 

“It did recover but nine years later. I sold my investment in 2016 at its break-even price so, although I sufferedonly a nominal loss, I had a big opportunity loss for not selling at the right time and for keeping it for too long with that awareness of the bubble.” 
– Thao Quynh

 

Thao’s lessons learned     

1.Be aware of a bubble – Typically during such times, market sentiment is overly optimistic and people go a little crazy. We should be careful about that kind of positivity. “We may get crazy with them too” 

 

2.Liquidity is extremely important – Especially when you want to sell your shares.  

 

Andrew’s takeaways 

1. The big picture matters – A lot of times investors get caught up in the small picture about a company they are investing in but even great companies can crash if there’s a shift in the industry or if there’s a bubble. This is critical to know. 
2. Over-the-Counter (OTC) markets – If a company has issued shares but it is not listed them on the stock market, there tends to be an over the counter market where you could.   
3. Vietnam is unique as a frontier market – There’s not much liquidity in most frontier markets. There are a small number of companies at the top of the market that have liquidity. But there are a large number of companies at the other end of the market that do not have liquidity. Liquidity really matters when you want to sell.