Michael Tan, a name synonymous with successful investing, shares tips on how to survive ‘the mother of all financial crises’.
Talking to Michael Tan for half an hour is like attending a one-day seminar with him as speaker. He talks fast, gets straight to the point and doesn’t waste time – the sort of guy you would want to ask for advice on how to cope during this pandemic. He’s done it – beaten the odds with up to 1,000% returns!
How did he do it?
He’s fast to react – when people were still panicking in March just before the Movement Control Order (MCO) was announced, he’s already made plans to pivot his fully brick-and-mortar business comprising offline events, seminars, and property investment onto the online platform. And in the nick of time too – he’s lucky his associates in five countries– Vietnam, Thailand, Cambodia, Singapore and Hong Kong – went onboard with him with no issue.
The key to profit during a crisis is investment. It’s a great opportunity as there are so many ways to pivot forward.
At the same time, he collaborated with 18 partners around the world to ‘synergise online’. “In times of crisis, networking and collaboration are critical to move forward,” he shares.
Those early days of struggle and learning new things were crucial to pivot his business to the next level. Thanks to the crisis, his business exploded. It attracted at one point 10,000 viewers, a far cry from the several hundreds during their offline events. “It’s a tremendous boom that we would not have explored if not for the pandemic. So, we went from a crisis to something that helped elevate our business to the next level with a six-figure turnover within a few months,” Tan smiles.
Apart from pivoting to a n online platform, Ta n also invested in a lot of properties. “Investment is key during such times. Crises like this is not a bad thing. It’s actually an opportunity as there a re so ma ny ways to pivot forward.”
With great foresight, Tan and his team took aggressive steps to invest in both property and the money market such as the share market and cryptocurrency, and even the US market, during the recovery phase of the MCO. He also negotiated with three developers to get bulk units at a discount as many developers were impacted by the MCO with slower take-up rate and concerns on future uncertainties.
The properties he acquired were in the following categories:
1. Tourism – “It will be the first sector to recover post-Covid, e.g. in Melaka and Penang. So, we acquired 41 units in the hospitality business. The income generated from them is enough to cover our expenses today.”
2. City centres – “During crises, the best is to focus back on KL city centre e.g. Tun Razak Exchange (TRX), which is one of the best areas to invest in. In just 180 days, we acquired 180 units, all below market value, and with no money down.”
3. Property Management Firms – “Collaborative efforts e.g. with Calvin Ngai who runs a property management group managing almost 400 units nationwide. This produced a recurrent income which can sustain us for up to three years.”
4. Heritage property in Melaka – “This type of property is very hard to come by in good times. UNESCO historical buildings like these offer not just extraordinary value as time goes by but just like antiques, give a glimpse into the past. We were able to acquire several of these rare gems during this unique time.
“You can see that with every crisis, there follows a rebound. In March, while people were panicking, we analysed the situation. We knew that there would be a recovery, so we aggressively went into the market,” Tan reveals.
The result: Ta n’s investors made between 30% to 300% returns within this period of one year. “So, it’s a time not just to survive but to thrive, if you know how to play it well.”
“In the stock market, knowing where to invest rather than how much you have is key. You can make 100% – 1,000% returns. Even 30% return for me is very conservative. I have a student who’s a very conservative investor. She invested RM100K during that period and today’s she’s a millionaire.”
In the early stages, business and the money market, namely the stock market and cryptocurrency were the easiest to get into and reap massive profits. “That was the best time to go into blue chips like Genting and Maybank when the counters were red. Bitcoin now is worth three times more compared to before the pandemic. Overall, we pumped in RM19 mil in the money market and got returns of up to 1,000%.”
His decision to invest in the hospitality business paid off handsomely. He accurately predicted that the tourism sector would return with a vengeance once the pandemic eases.
True enough, during the Recovery MCO, pent-up demand for holidays and leisure activities went up through the roof with many holiday destinations fully booked during public holidays and weekends. Tan’s ventures yielded extraordinary gains during that period – until the CMCO hit again in November.
After stabilizing his business operations and ensuring a stable income stream, he looked a round to see which businesses were thriving, “because it’s not enough just to survive, we need to thrive.”
The winners were IT, technology, medical, food, agriculture and logistics. “If you are able to anchor yourself to that level, your business can make much money,” he emphasizes, further noting that the key to profit during a crisis is in investing.
“Very early on in March, we shipped several containers of made- in-China face masks from Vietnam to the US. We reaped a few thousand percent returns within one month,” Tan notes.
Even though most of Malaysia is in CMCO mode now (at the time of writing), the ga me is not over yet for Tan. In fact, the next stage has just begun.
“From this October till next year onwards, the best investment is property. Why? After the loan moratorium ended in October, we foresee a lot of foreclosures or properties sold at below market value. This is the best time to snap up properties in prized locations. Since the Recovery MCO, our group has invested about RM132.5 mil in the property market in the Klang Valley and Melaka.”
“When people are fearful, be aggressive,” he paraphrased Warren Buffett’s oft-quoted phrase, adding, “when people are aggressive, become fearful.”
“From October onwards, it’s a volatile period in terms of the direction of the Covid-19 outbreak and our political situation. But it is this very volatility or instability, that gives you the opportunity to pivot to another field such as food, technology or logistics.”
All these are inter-related, for example, agriculture provides the food needed for food supply which in turn needs a tech platform to sell, after which logistics are needed to deliver the food to the consumer.”
Key to Survival
But the future still worries Tan. Despite having survived two crises since 12 years ago thanks to mentoring from some very successful individuals, Tan laments
the Budget 2021. “The government is doing a great job helping the man- on-the-street, but more help is also needed at the business level to help the big companies and SMEs. These are companies that contribute 85% of the local GDP. If they don’t survive, there will be a lot of unemployment and it will have a negative ripple effect throughout the economy. Instead of a V-shaped recovery, we will instead see a U-shaped recovery, one tha t takes a very long time to recover to pre-pandemic times.”
The only thing that he sees can help save the day is an effective vaccine coming out at the right time. “If it comes out mid-2021, that’s a bit too late – many companies including airlines and many tourism-related companies would have collapsed by then. The government will also be cash-strapped,” he wa rns.
“The fact is we are regressing and getting poorer amid a recession caused by the pandemic. There is political instability and we are entirely dependent on local demand which do not bode well for continued growth.”
“How to survive that? I anticipate that even if there is a vaccine, the market will take several years to recover to pre-pandemic days. In the meantime, people still need food, so agricultural produce will still be in demand. Hence, we plan to be land owners and work with farmers to produce agricultural products.”
In summarising, Tan advises business owners and individuals to pivot and adapt to survive; and to continue to invest. “If you do nothing, you a re going to lose money but if you take the risk to invest, the money may grow one day and you will reap the rewards of your patience.”