Investment theme: Life and Death

I came up with this idea of having investment themes and the companies when a headhunter sent me a JD weeks ago before LKY passed away so this was not inspired by him in any way. He has lived a fine life and his legacy is unparalleled. I have the utmost respect for him. In fact, his death makes me think of my life and whether I've been living my life to the fullest.

I've been busy lately as FA lags behind TA given that even if I uncover a gem, it may not be the right time to mine the gem. Thus I'm like doing FA every damn day while waiting for an appropriate time to buy and then sell.

After so much reading, thinking, analyzing and what not, I'm pooped up to blog but here goes since this post is long overdue. I decided to take a look at stocks that cater to Life and Death and uncovered these two gems in the ASX. Currently AUD/SGD is low and could get lower. I don't know as I'm not a FX expert but I would rather not have to contend with FX swings.

The only problem I have with ASX is that I would have to buy a large chunk so that I can hedge forward. I'm not that thrilled about FX risks so I would say that I would have to buy a basket of ASX stocks rather than going big on just 2. Options are out with Interactive Brokers since there's no AUD/SGD option and I'm not going to take on a third currency such as USD or GBP which may not end up reducing my risk!

Source: BAL website

Life: Bellamy's Australia Ltd (BAL)
BAL is what I would term as a growth stock although ACCICB feels that growth has more or less plateaued whereas I feel that it still has some legs to run. It has just IPOed last year at A$1 and the price is now A$2.80 which is close to its 52 week high of A$2.91.

It has excellent reviews from mothers with many switching to BAL rather than use the other brand given by the hospital. Australia has an excellent reputation when it comes to produce and all things natural and that's exactly what I was gunning for. The trends for mothers increasingly buying organic formula milk for their babies are growing and they are doing pretty well in China.

I also liked the fact that they sell their products through their website and interestingly quite a number of their top executives are accountants which could be good since communication wise shouldn't be an issue.

Source: IVC website

Death: InvoCare Limited (IVC)
On the other hand, IVC is a stable company that provides essential services aka providing cemeteries, funeral parlours and crematoriums in Australia, New Zealand and Singapore. They have been growing through M&A in particularly in New Zealand and just started up their business in USA.

The business is a simple one but what interest me was that they have this prepaid scheme whereby you can basically purchase your funeral plans before you actually pass away. They have been investing part of the proceeds from this scheme to generate higher returns which is an excellent move.

I also read that the costs of funerals are going up and people are actually profiting from buying and selling of funeral plots in Australia! As the current CEO Andrew Smith would be leaving end April this year, I would probably not take a position until some time has lapsed and everything seems to be hunky dory with the new CEO.

Alrightey, back to FA as I settle down with my bedtime story on yet another new company ;)

Comments

  1. In SG, BAL seems well liked by mother's from online reviews. Usual price is affordable at $34.50 range and the other famous imported organic milk is france manufactured - babynat at $37 price range. Where product safety is a major concern in China so it has very high chance of doing well there. Product listing cost is very expensive in SG so BAL must be selective but going aggressively into every retail, pharmacy outlets. BAL must also take notice that it is very saturated children milk market here in SG as competition is very heated up; whereby various brands focus points milk products are on safety, brain development, healthy digestive and so on. So when BAL and babynat have clean branding on its products but competitors branding are very attentive focus as they are cluttered with words like HA, Omega 3 & 6, Taurine, Choline, Nucleotides, DHA, ARA, Prebiotics etc etc. May the best (organic) milk producer survive. Meanwhile whilst on aggressive expansionary mode, it needs to not losing focus on cash flow. Negative A$10.3 mil operating cash flow at 1H15; l hope it can improve bringing down its Receivables even though it claims collection days is in line with industry standrds. Its employment costs is amazingly good but it must bring back up its gross profit margins. Domestic australia sales more than doubled but it can only command a 14.1% market share; probably another saturated organic milk market there.

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    1. Wah, Money Honey, you are going or have invested in Aussie stocks? I'm still thinking about it...

      It is doing well in China with mothers ordering from their website and shipping it over. In SG, it's being sold in NTUC and Cold Storage if I'm not mistaken. I like the fact that real mothers are giving good reviews on forums etc. That's the best kind of advertisement especially when even in Australia, mothers recommend BAL as compared to another brand which is given out in hospitals. I think the growth would be outside of Australia not withstanding that home ground is still important.

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    2. i have not mustered enough courage going overseas. My preference is still local stocks.

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  2. I can see IVC share price is doing well at $13.26 currently. It even reached 52-week high at $14.17 recently (3rd-March). Prepaying scheme is okay but be careful of customer's feelings should you later taking advantage of it and getting customer to cough up more money for added services. IVC paid $102,000 fine for insisting customers to pay extra for memorial plaques. Market share is surely not a concern for IVC as it is the he largest private funeral, cemetery and crematorium operator in the Asia Pacific region. It is now trying to make it big in the US starting from South California. Over the years IVC has been increasing its dividend rate so wonder its stock price has more than doubled over the last five years from $6 mark back in year 2010 to where it is now. Singapore Casket is 100% owned by IVC. Buying a so-called niche in-advance and pre-planning it in SG is quite common especially for the chinese communities. IVC seems to be a good investment decision.

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    1. Yup I read about the rap on their hands for the memorial plaques but they are pretty much market leader so although it bothers me, I think for a short term trade it's ok with me but with a new chief coming on board, I'm on the fence.

      Actually I was surprised that Singapore Casket was owned by them but it's a good dividend payer so it caught my eye. I guess I'm not at that age where I plan to buy such niche in advance. Thanks for letting me know!

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  3. see how good their gross margins and ROIC is. see if their administrative, sales costs are consistent.

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    1. I think I have the figures somewhere but to be honest unless the numbers are seriously warped, they don't bother me since my holding period is really short nowadays ;)

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