Monday, January 15, 2018

If you want to be a successful long term investor, you have to be able to stomach the ups and downs of the stock market 
Its like a crazy roller coaster ride, not many can stomach holding onto 20-50% paper losses 
During the 2015-2016 oil crisis i saw many sold out in fear and waiting to get back into the market when prices bottom... but of course was never able to catch the lows, no one can..
Now 2018 i have ppl asking me if its okay to get into the market and ride the bull? 
Whats the point of going in at sti 3500? 
Even if the sti goes to 4000 and the comes down to 3000 would u be striken in fear and sell all out? 
At the end of the day, good stock picks are useless if you do not have the basic temperent or discpline to hold on to your ship pass a storm..
There will always be a storm ahead, the sail is never easy..

A word on REITS and being a land lord


We know that many investors like to hold reits for passive income, so do I 
When holding reits, we own a small piece of the asset and we just sit tight and collect the rents 
Everything is managed for us
If you own a hdb and a condo, u now move out to stay in your condo and rent out your hdb flat for monthly income right? You sit tight and relax, collect the rents and enjoy the passive income
Same thing right?
Do u need a daily quote on the value of your property? Do u need someone to tell you everyday how much a hdb or condo in your area last traded at??? Probably not..
The same applies for reits, yet i notice many people have their eyes so glued at their reits prices, up 2% down 2% omg what happened? Fed rates gonna go up faster? Retail malls gonna be empty? Oversupply of office? What is wrong?
The stock market is there to serve you, not to guide you 
For a true value investor, the volality in the market is there for u to take advantage to buy reits on the cheap or sell off on the high 
The prices on the reit is not a reply to whether the reit you are holding is doing well or not
If u want to know if your reit is doing well, check the quarterly reports 
Is dpu going up? 
If nav going up? 
Rental reversions up or down? 
Recent acqusition accreitive or dilutive?
A reit fundamentals may be poor yet the stock price rockets up 30% on the push of the rising tide, do not be fooled by mr market
Always use your own judgement
I believe some reits have gone up over 30%, way beyond their real fundamentals growth rate
I had 5 reits and have since divested 3 of them and still keeping 2 of them
I do not need mr market to tell me if i am right or wrong 
If the prices of reits go higher it doesnt mean i am wrong 
If the prices of reits go lower it doesnt mean i am right
Cheers

Wednesday, January 10, 2018

Portfolio Update for January



CCT has been fully divested as I felt its kinda overvalued and I am happy to lock in the 35% capital gains which is worth like 7 years of dividends. I believe the funds will work harder elsewhere, in which I have moved into adding more shares of Thaibev and Sheng Siong as I believe these 2 growth stocks are excellent businesses trading at a fair price for long term holdings.

During the recent oil crisis of 2015/2016 many stocks were trading cheap and I had no problems picking up bargains thus my portfolio was very spread out to as much as 15 different counters, mainly banks, reits, O&G and asset managers.

Now that the STI has gone up from 2600 to 3500 level, good deals are harder to find and as such more money is put into each available positions. In short its Focus Fire! I am comfortable holding just 8 stocks but would unlikely to go any lower... as I would still like some diversification.


I would break up my portfolio into 2 parts

Growth stocks - Thaibev, Sheng Siong, OCBC, DBS

Overall dividend yield of growth stocks is around 3%, I expect their earnings/stock price to grow at around 5-10% on average per year. Total returns 8-12%

Dividend Stocks - Singtel, CDG, CMT, MCT

Overall dividend yield of dividend stocks around 5%, I expect their dpu to grow at around 1-3% on average per year, a very conservative estimate. Total returns 6-8%


2 years back the portfolio yield was easily above 5% and close to 6% but with the bull market, my portfolio yield has fallen to 4% level and I hope that my bet on growth will pay off.
I expect a long term return of this portfolio to be around 8-10% or so.


A rising tide lifts all boats.




Tuesday, January 9, 2018

6 Solid Reasons Why I Really Like Sheng Siong


1) Super Solid 5 Year Track Record

You may notice a drop in 2013 earnings, that was due to the sale of their old warehouse which was no longer needed since they already had their own distribution center in Mandai.
If we exclude that one off disposal cost, revenues and earnings were up each year for 5 consecutive years in a row, a very impressive feat and I strongly believe they could continue this trend.

EPS was up 38% over 5 years
Revenues was up 25% over 5 years

Newbies like to chase stocks that show recent explosion in earnings, but they often fail to differentiate between a solid growth stock and a cyclical turn around... the recent super rally of manufacturing stocks is a good example

I prefer to stick to companies that show solid numbers when the economy is good but can show good numbers when we are having a recession, usually we need to look at their 5 or 10 years track record to be sure.





2) High Returns of Equity

This is the kinda high ROE stock that Warren Buffet likes

An average company makes like 10% ROE, while SS is more than twice of the average. This means that every $1 that the company retains, they would be able to earn 20 cents or more on it.. this helps to growth earnings per share over the long term.

Warren Buffet paid 15-18 times earnings and 5 times book value for COKE when it had a ROE of 30%, it was one of his best consumer stock picks.

3) Easy to Understand Business

You probably been to their supermarkets before and the business is simply selling daily goods to the aunties and uncles at a reasonable price. Warran Buffet advocates investing within our circle of competence and I am sure most people are able to understand Sheng Siong.

4) Romance of the 3 Kingdom

NTUC, Giant, Sheng Siong are squeezing out the small players as the little ones are unable to find economies of scale. The is much worries about the threat of online players, but so far the numbers show that online sales only makes up 2% while 98% of household goods are still purchased physically in stores.

5) Base Dividend Yield of 4%

We are getting a base return of 4% from the dividends alone which is pretty decent.
Its hard to predict how much earnings can growth per year for the next 5 years, I might estimate 5% per year to be conservative or 10% per year to be optimistic...

6) Zero Debt

Sheng Siong is in net cash position so its a pretty safe stock even if a recession comes, its near impossible for it to go out of business. In fact past recession was its best time for expansion as they take up more store spaces at lower rents!


To sum things up, SS is an easy to understand and solid company for long term growth.

Cheers ^_^

Saturday, January 6, 2018

Why am I looking to Fully Divest CCT?

CCT has rallied sharply in this bull market, from a 2 year low of 1.30 level to a high of 2.00 level, representing a gain of over 50%. Investors believe that the office rents have bottomed and that a strong rebound will be seen in 2018.

Do note that CCT did a rights issue last year for the acquisition of AST2, looking at the post deal numbers...my observations as follows

NAV per share falls to 1.75 level
1H17 dpu falls to around 4.23 cents, using conservative simple multiplication... my adjusted full year dpu for CCT is around 8.5 cents or so

Given a stock price of 2.00, this represents a yield of 4.25%... which is not very attractive in my honest view.. CCT is also trading towards a premium 1.2 times book value

Other smaller reasons that are pulling me to divest
- Old CEO has left... She was the one with the super track record but will now manage CapLand's international office portfolio instead, a much bigger role I guess... good for her but bad for old time shareholders like me... I do not know much about the new CEO

- I pretty much dislike companies that keep asking shareholders for money, I do not like rights issues... I complained much when CCT issued the rights and now I am lucky that the price has gone way up

- My average cost is very low at 1.4x only as I am sitting at over 35% paper gains, which is tempting for profit taking.



I had already divested FCT and Suntec, going down from 5 reits into 3 reits (CMT/CCT/MCT)
Going down to 2 reits (keeping CMT and MCT only) means I am probably bearish on reits being so underweight in this sector.

Looking at Retail/Office/Industrial reits as a whole, I estimate the higher quality ones to be trading around or over 1.2 times book value already... a basket of such quality reits also pays around 5% yield only, much lower than what we have been getting 1-2 years back which was like 6%+

If I were to fully divest CCT where would my money go?

- Park into SSB (singapore saving bonds) awaiting the next crash (I do not know when)
- Add into other dividend stocks like CMT/ST/CDG for 5% yields?
- Add into other growth stocks like TB/SS?

Well, I'm gonna observe a bit more before deciding again.. but to sum up... I really do feel that REITS are currently overvalued, and the same can be said for banks.. both area which I am heavily vested in.

Cheers

Wednesday, January 3, 2018

My 4 Key Positions for 2018 and Their Expected Outlook

$ThaiBev(Y92.SI)

With the recent acquisition of Sabeco, gearing would shoot up from 30% to 120%
This looks similar to their strategy with the FNN buyout half a decade ago

The new entity will be restructured and cash flow is milked to pay off the debt in the years to come.

As 2017 earnings was weak due to the thai king mourning, 2018 should show explosive grown in
sales and revenues.. however with the much increased leverage the debt cost, this could drag down the reported earnings... 2018 earnings may end up flattish or inching up a bit.
I believe dividend payout would continue its uptrend.

over the longer run I expect 3% yield along with 5-10% earnings growth in the decade to come, if everything goes well... by 2020 we could see their vision of becoming an international beverage player come true.

$SingTel(Z74.SI)

4th telco will be coming into play sending price war to its climax, however the digital business is showing signs of a turnaround and management has guided for single digit ebita growths for the overall biz.

With a mix of positives and negatives I think reported earnings would remain flattish for 2018.
I expect their over decade long dividend track record to be maintained.. really nothing exciting... just here for the 5% yield
https://www.singtel.com/about-Us/investor-relations/dividends

$ComfortDelGro(C52.SI)

With the acquisition of LCR and integration with Uber, cost is likely to shoot up and be a drag in 2018 earnings... I expect earnings to remain weak but should bottom out in the 1st half of 2018.
After which I expect a conservative long term earnings growth of 3% mainly coming from the rail and bus segment.

A slow grower with a 5% yield, also nothing much to be excited about.

$Sheng Siong(OV8.SI)

They currently have 43 stores in singapore with an ultimate target of 50 stores for the long term. I expect SS to reach 50 stores by end of 2019, after which they would need their china expansion to do well to continue seeing earnings growth... the china segment is challenging and could be riskier but very rewarding.

2017 was a disappointment to some investors as dividends was slightly reduced and the stock price remained stagnant, I saw this as an opportunity as I believe retaining more cash for expansion is more positive for its long term growth.

4% yield with a 5-10% earnings growth expected in the next 2 years, I am pretty excited with this position. Will take a deeper look at the company again after 2019 to see if they have matured or if they are able to expand beyond singapore to become an international player.

Cheers

Tuesday, January 2, 2018

What Should You Be Doing In a BULL Market?

The answer may surprise you, but I think its best to DO NOTHING! or just do a bit of re balancing.

Some may think that in a bull market, stocks keep climbing higher... thus its easy money to buy stocks, watching them go higher, sell for a profit... and then find another stock to repeat the steps

Often active trading is very costly as the commission costs will eat up a big portion of your gains, also by selling high and buying high to sell even higher you put yourself at great risk to any sudden correction.

If you are already mostly vested, say 70% of portfolio to 100% portfolio already in stocks.. I believe the best strategy is to just sit tight and control your excitement in this dizzy bull market. Hold on to your stocks and collect the dividends as usual, and also at the same time your stocks go higher you sit on your paper gains... at least for now...

as your paper gains grow higher, your decision or the question you should often ask yourself
"is XYZ stock currently still fairly valued or already very over valued?"

if its still fairly valued, it makes senses to continue holding the stock

if you think its already over valued, it may be prudent to shave off a bit of the position and put some cash into the warchest

Example if you have a portfolio worth 100k in stocks at the end of 2017, 2018 your portfolio goes up 15% to 115k... a balance approach could be to sell off a bit, say 5k to put 5k into your warchest while keeping the 110k stocks to carry on the ride

Overall if you are being disciplined and taking a balanced approach, in the stretch of the bull market these 2 things will happen

A) your stock portfolio value grows due to paper gains
B) your war chest reserves also grows due to dividends collected and some partial gains taken off the table

How long will the Bull market last? I do not know... maybe 3 months? 3 years? no one can 100% accurately predict

but as long as you take a balanced approach, when the next major crisis comes you will find that you have done a good job at B), thus your healthy war chest will come in very very handy

during 2015 oil crisis many investors were caught off guard, some sold off in fear and suffered big losses, some learnt from their mistakes, some held on tight and recovered... everyone will experience the next crisis differently, but to come out ahead you have to be more prepared than others.

Are you ready to ride the bull and defend yourself from the next bear?