Lesson #1: Respect the market. Though our investment philosophy is to focus on stock-picking based on earnings growth, its sustainability and long term prospects, yet there are times the market prices can provide leads to possible pitfalls ahead. There will always be things that we do not know but could happen be it natural disaster, war, disease outbreak, corruption or scandal involving investee company. What we have learnt is it pays to respect the market and be prepared by having a game plan. At what point do we concede that we are wrong? At what point do we accept that there could be unknowns and discipline dictates that we reduce or exit our positions? Making sufficient allowance for the known unknown is crucial.

Lesson #2: Discipline. This is always easier said than done. How can we not overpay for any investment, not to take profit too early and not to average down blindly. We have substantially increased our returns by having high weightings in our high conviction ideas. We would not have performed well in 1H2014 had we not been disciplined enough to take profit when valuation appeared rich and to buyback when prices reach attractive levels or even buying more if the company’s fundamental improves given the valuation. However, we could also have done better. We gave back a good chunk of performance in 2H2014 because we failed to foresee the severity of correction started by oil price volatility. Although we are still optimistic that our core holdings will do well going forward and the verdict is still out, we should have protected the downfall better by raising more cash.

Lesson #3: Work hard and stay focused. We will continue to brush-up our research effort. Rigorous and ongoing research would help us in avoiding pitfalls and give us the conviction to act especially during volatile times. Taking into account different times of the market, we will also review our positions more diligently and manage risks by adjusting the size of our holdings, a skill which we will continue to acquire and improve upon.