July 23, 2020

In July 2020, I took profit on one of the largest global logistic companies in the world. Can you guess what that is?

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Here are some stats for you:

Holding period: 7 months

Stocks or options? Options

Return %? 33% in 7 months

Return $? $24,368

In this video, I focus on talking about stock selection and timing. You will learn:

  1. How to think about logistics sector?

  2. Is it possible to get 30% from the logistics sector?

  3. What is a red ocean?

  4. What is this 49 years old company? How come Eric made 30% from it?

  5. Can success be repeated?

  6. Some additional tips on how to multiply your return

90% correct transcript

So welcome back to my channel. And today we're going to talk about a case study on how I made $25,000 from a global logistics company. And this is an equivalent of 33% return on my capital. And this happened in seven months. So let's see if you can guess what this global logistics company is before I reveal it in the middle of the video. So my name is Eric Seto and I'm a portfolio manager and a CPA in Canada. If you are interested in learning more about long term investing then this is the perfect channel for you. So let's look at the industry before we start, when it comes to logistics, it is a mature industry. It has been around for a very long time, and it's actually quite simple. It's just getting goods from point A to point B. Now this can be done through car. This can be done through air.

This can be done through a train, but you get the idea. So let's look at fact number one. Now the compound annual average growth rates for logistics sector around the world is between 1% to 5% a year. Now this is a statistics from 2014, 2018. So this means whether you're looking at air, whether you're looking at ground, which is truck and rail or see the growth rate on average it's around three to 4% or so. So that means the sector itself is growing at around 3 to 4%. And this is a fact from Statista. So this goes to show that it is a mature industry, because if it is something like start up like AI, the growth will be much higher, like 30 to 50%, but that is actually not the case here. Now, when you're looking at a top 10 logistics company around the world, you'll probably recognize a lot of these names like FedEx, like XPO logistics, like ups, upsp, so on and so forth.

These players have been around for many years and they have been competing against each other. They are fighting for market share while the market is growing at around 3 to 4% a year. So fact number two, the logistics company that I invested in is founded in 1971. So it has been around for a very long time for over 49 years now, with 400,000 plus employees, are you able to guess which company that is? I'll reveal it in a bit. Now in terms of the logistics sector, it is really what consultants would call it, a red ocean instead of a blue ocean. Now, if you're not familiar with this concept, then I can explain it really quickly. So whenever you're looking at a market, a blue ocean is a market where not a lot of people are in, there's a of room to grow, and there's not a lot of blood in the ocean.

So that's why it's still blue, but as more and more competitors come in and as the market becomes more and more mature and attractive, then there starts to be competition and there's blood in the ocean. So for example, if we look at the electric vehicle markets 10 years ago, when Tesla first started, it is a completely blue ocean. There's nobody in there other than Tesla itself. Maybe perhaps Toyota Prius. That's pretty much it. So there's a lot of room to grow. And now every single car brand is basically switching to electric vehicles and it is becoming an increasingly red ocean. So that means bloody competition to take a larger share in the market. So that's a perfect quote to describe a red ocean. Now, if you're interested in learning more about business model and whether something is a red ocean or a blue ocean, then I would recommend you to read the book called blue ocean strategy by W. Chan Kim, it is actually a very classic and popular strategy book.

And if you are an investor, you know, looking at startups, if you're an investor looking at big companies, you definitely want to pick up this book. It's quite an interesting read, and it all boils down to the concept I just told you about. Now fact number three, when I'm looking at this logistics company, and if you look at the price increase year over year for the last 10 years, the average price increase is around 9% a year. Now it could have been negative, but then it is positive 9%. And if you look at the last 20 years, the average price increase is 10% a year. And for the last 30 years, it's 13% a year. So then you do see a slight slow in the growth rates, but it's not that much. It's close to a double digit growth year over year. Now, the next thing you might want to look at is standard deviation.

Now standard deviation from a statistics point of view means how much the price fluctuates. Now, in this case, I applied a standard deviation over the percentage return of the stock year over year, and for the last 10 years around 27%. So it's quite volatile. And for the last 20 years is 24%. And for the last 30 years is 24% as well. So this gives you a feel of how fast a stock is growing. It's not like Tesla where it doubles within six months. It's not like Facebook or whatnot. The industry is definitely mature. So then the question is, can you get 30% out of it? That's where it brings me to the summary. Transportation is really nothing new. It's not a new sector. It's not sexy. It's not the next big thing. It's not exciting. It's stable. So is it possible for you to get 30% return from the transportation sector by investing in the stock market?

So this is where a stock selection, timing and something called stock option comes in. Now in this video, I'm going to focus on stock selection and timing because stock options is a relatively advanced topic. So I'm not going to be covering it in this video. Let me bring you back to April, 2019. And this logistics company actually terminated its partnership with Amazon. And if you're in US, you will know how big Amazon is. So this is an extremely bad for, to logistics company to terminates its partnership because there's less business and Amazon is dominating the eCommerce space. So since then the stock price actually dropped from $200 to $150. Can you guess what that company is? So I'm going to reveal it now.

So now we can look the price chart and here is actually a screenshot from the charting software I use called tradingview.com. And here you actually see that the highest high that this stock FedEx has ever been it's around $270. And when they announced this continuation or a termination of the partnership with Amazon, it dropped from around $200 to 150. So that's actually quite a significant drop from the previous high, which is at $270. So this means the stock, may be at a discount, but you need to do further research at that point to determine and validate this opportunity. I did my research and determined that the stock was undervalued and it is a good opportunity to invest because FedEx is a very strong company in my mind, and it has been around for many years and it is still growing. So I invested in it. So here is a table of my positions. Now, when it comes to investing in FedEx, I use something called stock options.

So it's not going to be in terms of the number of shares, but what I'm showing you is really the cost of the option, which you can see on average is around 27 to $31. And my costs to invest, which means the amounts of capital I put in is around $75,000 in total. So this is in USD. And then afterwards I held it for around seven months and I exited at around $43 in terms of the option price and this equates to a gain and loss of around 33% in total. So you can see that this is actually how I exited the market. So actually exit the market in stages in this case, it's one, two, three, four, five times. And you actually see on the fourth line, there is a weird line where I have a negative 96% loss. And this is because I'm using an advanced strategy called hedging.

And in this case to protect my losses. So that is just a cost of hedging. So including that hedging costs, my net return is 33% in seven months. And this equates to a dollar value of $25,000. So, so far I put in around $74,000 into FedEx held it for seven months and my gain is $24,000. So not that for seven months of sitting around and waiting for a FedEx to go up. So what is the secret? And if I need to summarize it is actually quite simple. It's all about deep discounts and investing in a great company and once you do your research and you become 95% confident in these opportunities, then I will use stock options to multiply my return. Now this stock is actually submitted by a person within Investing Accelerator. Her name is fion and thank you fion for submitting this stock! Turns out it is a fantastic investment opportunity and people within the community also took advantage of this trade.

So here is the list of success to date. So here, you'll see Carolyn, she made 36.7, 5% from FedEx and here you will see Fion. She submitted this stock and made 32.7% from FedEx after five months. And then Mike, he actually got in at an even lower price using options, and he made 112% from FedEx after seven weeks for his first one third of the position. And then afterwards, you'll see Mike exiting his second, third of his FedEx position and made a hundred percent in four months. And then Allen, he made a 90% from FedEx in four months for 66% of his position. And then Theresa exited her a FedEx position as well for a 78% gain in three months. And Lisa also made 60% from FedEx in seven weeks. And Raman made a hundred percent from FedEx in three months. That is pretty amazing return.

So congratulations to everyone in Investing Accelerator who also participated in that investment. Now I've shown you a lot of proof and kind of walk you through what happened with this investments, you know, the bad news that we're looking for, how we're thinking about it. And even if it is in a mature industry where if you look at the macro variables, there might not be an opportunity there, but when you dig deeper and you do your own analysis, you find these opportunities. Do you still think you need to invest in penny stocks, startup stocks to make 30% a year, or is it possible for you to invest in blue chip companies and still make 30% a year? So what if you want to learn in detail, how you can replicate this success for yourself. Now, if that is the case, then my name is Eric Seto and my mission is really to help people without a financial background, like yourself, to master investing and target 30% a year using an hour a week through a coaching program called Investing Accelerator.

So if you want to learn more, you can click on the link called 5mininvesting.com/free-case-study to sign up for our free webinar, where I outline how you can do the same step-by-step within this presentation. So once you sign up, Daniel will be brought to a page where he can click on play and you can start watching the webinar call "How To Get 30% From The Stock Markets". So make sure you click play on the video. To end off, I just want to say, you mean to tell me that you can make money by pushing a mouse and opening windows and it's called stock trading. So thank you for watching and I hope you enjoyed the video. Please help support me by like subscribe and you can watch the next recommended video here as well. So I'll see you in the next one.

About the author 

Eric Seto

Eric Seto is an investor with over 10 years of experience. He travelled around the world to help with auditing, accounting, purchase and sale of companies.

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