ACADEMICS IN THE field of economics or business who are also stock investors are not all that uncommon. But it’s pretty uncommon for most of us to get to know one of them and to get a peek into how they pick stocks.
How do they apply their expertise in a field, and academic rigour, to the wildly ambiguous and volatile world of investing? If there are just only a few things you want to know, your list would surely include: What stocks are they hot about?
You will get what you want, because we recently got to know Brian Tan, 37, an assistant professor at the Nanyang Technological University. Currently, he is the course coordinator of Strategic Management at the Nanyang Business School, and teaches strategy to undergraduates.
He is among the 30,000 or so unique visitors who surf to our website every month, and we recently had some small correspondence.
Eventually, we recognized his facility in expressing his investing views in writing and asked if he would do an email interview, and he obliged.
(This is Part 1 of our story. Part 2: BRIAN R. TAN: The 5 stocks I like most are ....)
Tell us about yourself, starting with your academic background…
Well, I have a Ph.D. from the University of Washington, Seattle with a major in Strategic Management and a minor in Entrepreneurship, Psychology and Statistics. I graduated from the University of Washington in 2007. Prior to that, I did my BBA (Honours) at the National University of Singapore, with a major in Finance and a minor in Marketing. I graduated with first class honours and was Valedictorian for my graduating class of 1999.
While I am in academia and have done well academically, I’m actually not a “die-hard” fan of academia per se. I really disliked the education system up until university because I felt it was overly rigid in thought. Fortunately, I had some very good teachers who made overall education experience quite pleasant.
At the JC level, I had to fight to enter the commerce stream because I could qualify for the science stream. Quite similarly, I had to convince people that my choice of business administration as my university course of study made more sense than law because I was interested in both but had a preference for business administration.
It just didn’t make sense that I had to fight to do what I wanted; as opposed to what society/family/friends felt was best. I also had to fight the “correct methods of learning” in school up until the university level... which turned out to be an extremely wise move because my method of learning turned out to fit the university experience perfectly.
I feel that the most important thing that academia has contributed is to enhance my grounding in philosophical logic. A lot of what I’ve learnt at the undergraduate level paled in comparison to my doctoral training. I had always felt that it was easy to apply knowledge and frameworks to real-life situations. However, until I did my doctoral training, I never really realized how much more there was.
What have you done in your career?
I’ve only held 3 meaningful jobs/positions to date. The first was an internship at P&G, which I normally would write off (Internships and part-time work, etc tend to have very little meaning). However, this internship proved to be very meaningful to me because of the best practices which I had observed in a top-notch company.
I believe that I have internalized some of these practices, which I had to understand deeply because I did an internal strategic audit for the Singapore and Malaysian offices, as well as come up with the Emergency Action Plan for these offices. It turned out to be a very good thing that they decided to ask me to do an internship after awarding me with a sum of cash for my exchange programme to the Stern Business School in New York City. This experience helped me to understand the professionalism that exists in the world of business and have influenced my own decisions when conducting business dealings.
After my graduation from NUS, I worked with the Boston Consulting Group as an Associate Consultant. Again, this proved to be a really good experience. The people that I worked with were smart, sharp and effective, and the job scope was pretty much what I wanted.
However, there were certain aspects which I didn’t like too much. None of it had to do with any issues with BCG per se. Rather, it might have just been me. I didn’t really feel like I was ready for the corporate world yet. There was always pressure to be on top of your game (I do enjoy doing stuff well, but I witness a lot of over-promising and unsubstantiated claims) and I felt like I was losing a part of myself.
I had previously grounded myself very firmly in my beliefs and principles (since secondary school in St Patrick’s) and I found myself being less humanized because of these pressures. Simple things like meaning what you say when being polite to waiters were being lost, and it really irked me.
My advisor at NUS (Dr. Kulwant Singh, a really nice and sharp individual) had advised me to join industry when I had expressed my desire to do a Ph.D initially. He had advised that the roads to academia and industry were two very separate paths and that the opportunity costs of switching was great. Before deciding to enter academia, one had to rule out industry to an extent. I agreed to his logic, and that was the reason why I joined BCG (being the best of class in an industry I had real interest in. Should I decide to move into academia, I know that I’ve based it on the most relevant benchmark). Besides, consulting is a skill-set that can be leveraged in the world of academia and fitted my personal interests.
I joined the Nanyang Technological University as a Senior Tutor about 18 months after BCG. That was about 10 years ago, of which 5 years were spent overseas. The people at NTU are great and I enjoy working with my colleagues very much. However, there are some very strong reasons for me to leave the university when my bond ends next year.
I’ve started planning for possible exit strategies and have got myself involved with a few business ventures and ideas. Nothing big or extremely interesting but just things which I enjoy being a meaningful part of, and something to actually get experience in running and dealing with business development and management.
Basically, I wanted to get my hands dirty and to see how I can actually apply all of my training to the real world. So far, the results have been very good, and I have found that the difference between planning and implementation is actually much smaller than even I had expected. One of my ventures was even an overseas venture, and I picked a difficult country to operate so that I could really practice and get my hands dirty... but that’s another story. =)
What do you do outside of work?
I have lots of hobbies - basically anything that is game oriented. I still play strategic games on my computer and online. These include turn based games that are real-time oriented. I actually use this platform to fine tune gaming strategies that can very easily be applied to real-life investment decisions.
I also love playing card and board games (like bridge – contract, variable/floating, German, two-man), although I dislike playing card games with money involved. I feel it detracts from the game itself. I’m very into sports too, although my involvement has been reduced somewhat. I still play soccer and badminton quite often, but I like almost all types of sports including wakeboarding, tennis and canoeing. Other than that, just chilling out and getting a good massage works wonders for my psyche.
Q: In this bear market, is your investment portfolio holding up well?
Well, I’ll need to first explain about my portfolio a little. It’s been a passive portfolio since 2002 but I began tracking its performance only since the start of 2006. Right now, I’m trying to convert it to a more active one. In the passive portfolio, I’m invested mainly in small caps, and a lot of these are S Chips purely because these seem to offer more upside after all things have been considered.
Year to date, my portfolio is down about 25%, which is acceptable to me. Historically, my portfolio (total gains) has returned me about 19% annualised (and this calculation includes the 25% downside for this year). I’ve been tracking returns on a yearly basis (and I break them up into market timing gains and portfolio gains). I’m hoping that the change from a passive to an active portfolio will enable me to enhance my returns significantly.
My portfolio is systematically derived using a base structure with the main idea that small caps have the potential to offer better returns if selected carefully.
I then develop specific modules around this structure to give me potential systematic gains (e.g. choosing a good S Chip or small cap over the run-of -the-mill stock; buying into S Chips because I believe the market have over-discounted S Chips).
Other examples include a market psychology module that would enable me to capture on sudden price upswings, and a self psychology module to develop a strategy that will enable me to overcome personal biases and fears (I tend to be conservative) when capturing potential price swings, etc.
Effectively, I try to develop as many modules as possible to achieve systematic gains. I do not really tamper with my portfolio except during periodic checks (normally half yearly) or when there is significant market movement. I had to do this because I wanted to concentrate on my doctoral studies during that period.
>> Part 2: BRIAN R. TAN: The 5 stocks I like most are .....