What Britain and I have in common + Portfolio Update

 

Out of the European Union, now what?

It’s been a few months since I last posted mainly due to my tendency to procrastinate. So many things have changed during the time I wasn’t active! Two of the highlights are ORD and Brexit. It is interesting to note that my circumstance is no different from the UK’s. First of all, I am out of the army – gladly, similar to how the UK is happy (subjective?) to exit the EU. The constraints that I was dissatisfied with and imposed upon by the army like how UK having to adhere to certain regulations by being a member state of the EU are now released. However, the big question I need the answer to is now that we both are out, now what?

To be honest, I’m not feeling a great surge in my emotions. It’s not like I’m in an entirely different world, where the sun shines brighter and the grass seem greener. Having ORDed seems rather underwhelming to be honest, I guess the stresses of life just don’t disappear after NS.

Life after NS, some head to university, some head to work, some (me) just rot at home, not knowing how to adapt. I don’t have a slot at a local university, and my choice private university doesn’t start till next April. So I have almost a year to do whatever I want. Well, I do have a few plans in mind and I don’t actually know whether they are going to work out but let’s hope I accomplish something, and be it big or small, I’m always happy to actually do something productive. One thing to emphasize on though, it definitely feels better to be out.

Less talk about my personal life and more talk on my finances – what have I been doing these 4 months I have been gone? Acquiring more stocks with my warchest of course! Before I only had 25% of my warchest vested in the markets. Somewhere during March, I acquired KingsmenCreative (5MZ.SI) given its resilient performance last financial year and on the hope it’ll do the same this year. The rest of my stocks dipped after handing out dividends, but they are still green so I still sleep well at night. As of then I had vested around 50% of my money, and it was during this point in time I felt the STI was too stagnant. Given its bleak outlook ahead, I look to US stocks.

I had to find a way to exchange SGD for USD, but I couldn’t find the optimal way to do it. Interactive Broker seemed to be the best option but I simply can’t guarantee the volume traded to justify the cost ($10/mo at least) to go through the hassle of opening an IB account. So, I bit the bullet and used the SCB offered rate @ 1.358 (yikes) for convenience’s sake. If someone has a better solution, please let me know.

Anyway, now that I have my USD, I can buy companies I had my eyes on. By the way, I am so glad I did not buy anything the night UK was having its votes. There were so much rumor and speculation going around, about how the markets were up because insiders know something and it was due to the fact UK had already voted to stay. I was weak during that point, I must admit, and I almost fell to the herd mentality. I was literally on the order confirmation page of the SCB trading platform before my inner pessimist took over. I have never been more relieved in my life.

After window shopping for months, I decided to go with companies that I am comfortable with. I went with Activision Blizzard (ATVI), Electronic Arts (EA) and Berkshire Hathaway Class B (BRK.B).

To be honest I had already purchased some ATVI stocks in January when the price was at $31 in anticipation of their new game and movie, Overwatch and the World of Warcraft movie. Not being let down, the stock price surged to $37-39 level recently mainly due to the popularity of Overwatch. This has reaffirmed my confidence in the company and I’ve decided to go through with another purchase at $37.50. One of its main issues is that its new Call of Duty game might be overshadowed by its competitor.

Chart forElectronic Arts Inc. (EA)

Being an avid gamer, I am bullish on the gaming industry as a whole and despite the hate on EA being an unethical company, it is a company focused on fulfilling its role as a profit-making machine for its shareholders. I bought EA at $73.82. Just look at its growth over the past few years. It has many popular games under its name that have a diehard fanbase and crush their direct competitors.

One notable matchup is FIFA vs PES. I used to play Winning Eleven on the PSX when I was young so I’m actually rooting for PES, but it seems nowadays, everyone around me plays FIFA exclusively. I’ve seen video reviews about the latest PES beating FIFA in a side-by-side comparison, and as a game itself, PES is better. However, the fact is EA is just the better company while Konami stagnates, clearly evident at E3 2016. In the first player shooter category, its been a 50-50 between COD and BF. Initial reviews show Battlefield 1 having the edge over Call of Duty: Infinite Warfare. Compare the trailers, Battlefield 1 and Call of Duty: Infinite Warfare. Just look at the likes/dislikes – it doesn’t say much about actual gameplay and I actually preferred COD’s trailer with the Space Oddity song but I am expecting EA to take this one.

I almost forgot to mention but I also bought some BRK.B at $140.30. Boring stock.

 

 

 

The market went up but I am sad

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For the past month, the market had recovered around 300 points from a low of mid 2500 level to 2800. I tried to be disciplined by following my original plan here, but it seems that was a mistake! I originally intend to enter the market at various points as it gradually got lower but it did not occur to me to even think what to do when the market recovers from the halfway point. Now I am sitting on 50% of my war chest and around 10% gains on investments, not knowing what to do with either of it. I am currently leaning more towards unloading everything and waiting for the next drop.

Though the market seems to be doing better, there is still some apprehension here and there, especially with the upcoming US elections, where it feels like a selection between the lesser of two evils. I sure hope something big happens because this market development is suffocating, and I would be terribly disappointed if market recovers to 3k+ in the next few weeks.

The First Gamble – Was it worth it?

I got dealt a good set of cards this time

A month ago, I was in camp, bored and restless. I decided to take a look at the biggest loser list on the stock tracker I was using. At the very top of the list was the Noble Group stock which was down more than 10%. A curious me looked further into a longer timespan and realised that it had already fallen more than 80% since 2014. Lacking the tools and motivation to dig deeper into its core business or circumstance, I immediately bought it at $0.345, hoping that it would recover the next day simply through momentum.

It continued falling. Throughout early February, it went down to a low of $0.27. I debated with myself – one part of me was itching to double down and yet the conservative side of me held back. After thinking through, I decided not to do anything as I was clearly clueless about Noble Group’s core business and future prospects. During the past week, the stock rallied 25% and I sold my stock at $0.375 for a neat 8.7% profit. Not that I am unhappy to have made my first realized profit, but it left me puzzled as to whether what I did was right.

Should I have bought the stock in the first place?

Would one favor decisiveness over deliberation?

Should I have doubled down?

Or was it sheer luck I was able to have made it out with a profit?

 

Soilbuild Reit FY2015 – Results and Opinion

SR

Soilbuild Business Space Reit (SV3U) released their results for FY2015 yesterday as I just purchased several lots of this counter at $0.725 as per my strategy for this bear market.

Fortunately for me, the results were quite satisfactory as distribution per unit (DPU) increased by 4.7% year-on-year to 6.487 cents. This brings my annualized distribution yield to 8.9%. The dividend yield is really great assuming they maintain their current performance for FY2016. Business fundamentals remain strong with increment of 16.4% and 18.2% in gross revenue and NPI respectively; Decent occupancy rates at 96.8% with an average Weighted Average Lease Expiry (WALE) at 4.8 years. Additionally, in response to a higher interest rate environment, the management has fixed 97.9% of interest bearing loans through medium-term notes / currency swaps. Gearing is around 38%.

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Soilbuild Reit portfolio includes 2 business park buildings and 9 factories. One concern I have is regarding the heavier allocation of master leases to marine/offshore and oil/gas tenants. As we all know, the two industries are plagued by low demand and the poor economic outlook, so it is not really known if they are able to tide through the current environment.

Also, the management acknowledged the fact that the industrial property sector faces a challenging operating environment with a slowdown in the manufacturing sector. I’m assuming what this means is that they might not be able to achieve a high rental rate with renewal/new leases. In Q4 FY2015, it is shown that there is rental reversion of -6.6%.

Well, I am placing these issues at the back of my mind as the management seems confident to maintain stable and growing cash flow from the master leases. They mention that risk mitigation measures are in place through 6-18 months rental deposits from the lessees and that organic growth is expected through occasional rental escalations. So for now, I am just glad they are able to consistently provide stable dividends and hoping for this to be one of my core investment positions for the years to come.

 

The Haystack

Haystack

Not much of a haystack, but one day…!

This week, I came across this post which is basically a compilation of some portfolios of financial bloggers in Singapore. I find this really interesting as during 2015 where I had to luxury of time to read almost every single post on thefinance.sg, I read and explored the affiliated blog’s content. Since then, I got to know the quirks of each blogger – their style of investing, methods for analysis, manner of writing etc and I could easily recognize and tag some of the portfolio names with the related blogger. I kind of like the sense of identity that portfolio provides and so, to join in this party, I am also officially naming my portfolio – The Haystack.

There is a bit of history behind the word Hay, but that’s a story for next time. For now, I don’t have much of a portfolio given the current market (for future reference, STI is at 2630) but my portfolio page should look more complete after accumulation of my main positions later this year. Here is my portfolio as of now.

The more I get into this investing circle, the more I start to feel its a game. Similar to an RPG, you start with absolutely nothing, progressively train your character and hope to reach the end game as soon as possible – at least that is the case for me and most other bloggers. I could savor the game leisurely, explore the environment and reach end-game at 62 years old; Well, that’s usually how I play my games, and from experience, that brings me nowhere. I was thinking for once, perhaps I could show some perseverance for once and grind it up. After all, I am in it for the long haul.

Investing Zen

What I actually look like

With what’s happening with the markets currently, it’ll be good for everyone to revise their strategy which had been formulated in preparation for the upcoming bear market. By writing out my thoughts, it’ll help in clearing my head and reaffirm my own strategy.

Bear market or just a major correction, this is the first time I’ve been in one with ongoing trades. Having most of my trades going into the red and my major positions’ unrealized profits gradually diminishing day by day isn’t the most pleasant experience, but then again,  I myself was looking forward to a bear market. I made some trades earlier this week, hedging against a simple correction and hoping to snag some quick profits but thankfully, I limited my exposure and am only 30% vested, some of the trades though – might have to stay with me for a few years. The upcoming market will be unforgiving, and if you lose your nerve, the losses are permanent.

Investment Style 

Before I discuss my plans ahead, I first have to start with my investing style. I believe in high-yield dividend stocks and value investing. I would think myself as 80% dividend and 20% growth.When it comes to selecting a stock, I choose a sound investment with:

Acceptable valuation levels (P/E <~ 12)

Forseeable/sustainable income

Robust track records

Level-headed management

Low debt levels

A company with the five points above is more or less the ideal company for dividend investing. It ensures the dividend to be consistent in distribution amount and frequency over a long time frame. Getting the stock at lower prices is just an added bonus.

For the growth aspect, it’s mostly speculation in what the next big thing is. As for now, I believe it would be autonomous driving systems – but the only concern is whether the prices have already factored that in. I wouldn’t buy crazily overvalued stocks like Mobileye  at 250x P/E even with their potential. Meanwhile, Google and Tesla seem so daunting with their technical price charts, it just doesn’t seem like a good entry point. I am however, eyeing some Google if the upcoming bear brings it down further, so I’m going to be window shopping till that happens.

Investment Philosophy

Imagine an already high-yielding stock at 8% at $1, with some luck, you get 400 lots at $0.5 in a bear market. When the conditions improves and the stock recovers to $1, you have a 16% yielder right there, capital gains aside, you get $3200 on your $20000 annually! That’s a month’s bonus worth for doing absolutely close to nothing. Of course, that is assuming the dividend payout is sustainable. Scale that up 10 times and you are drawing an entry level pay monthly – some people might even consider themselves financially free!

The above is the dream scenario for all investors, and it’s not all too impossible! Just as many had lost money during the 2008 GFC, a great deal of people managed to capitalize on the poor sentiments and made a fortune the following years.

It sounds easy, people look at charts at that point and curse why didn’t they buy then. This phenomenon of people buying stocks when they are overvalued and selling when they are undervalued seems queer coming from a broader perspective – but then again, hindsight is always 20/20. To put it simply, let’s say you are at a grocery store buying some eggs and the price for a dozen is usually around $2.50. You see one brand selling a dozen eggs at $1.00,  would you buy it? I would presume most of the time not.

During the GFC, the lowest P/E DBS was trading at was 4.6x. Now, think and wonder why wouldn’t you buy one of the safest investments in Singapore at such a discount? The day DBS goes bust is the day where Singapore ceases to exist  – at that point, your money wouldn’t even matter anymore.

Always keep these very basic points in mind, assume the worst case scenario and assess the risks from there. More importantly, a clear mind is required to see that a sound investment will always recover from a down-point, no matter how low it goes.

Investment Strategy

Strategy
STI Index Allocation
2600 – 2800 30%
2400 – 2600 15%
2200 – 2400 30%
2000 – 2200 25%

Given that I am new to the market and have few significant positions in the market, this allocation applies to my entire investable cashflow, instead of just the warchest. With the STI already breaching 2750, we all are simply waiting for the next phase of the bear.

2600 – 2800 – Currently “ahead” of plans and 30% vested at 2750 (regrets)

2400 – 2600 – Underweight at this point as market recovery before falling further seems improbable

2200 – 2400 – Deploy most of my funds, stocks prices are already at a steal

2000 – 2200 – Raking in the gold, licking off my plates, whatever you call it

<2000 – Checking every single pants in the house for spare coins to throw at the market

 

Doom and Gloom

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Its only been the first trading day of 2016, and all I see is a sea of red in global markets. I’m mainly following the Singapore market and observing some US stocks but it’s been getting gloomier since Black Monday last year where I just so happened to have bought my very first stock.

I’m still holding on to majority of my warchest due to the poor global outlook but I’m getting a little tempted to start reeling in some counters I’ve been eyeing for a while. I must admit I almost lost my cool and placed two large buy orders, betting on a gut feel of a January rally – shows how inexperienced I truly am. That was until I saw red today and sensed blood in the water – an increasingly likelier chance of a market crash this year and better opportunities to be had.

Still wondering what I should do with my spare cash lying around doing close to nothing. I just got $20 from redeeming a month’s worth of SSB (woo!) so I have that going for me at least. In all seriousness though, I am considering bond laddering or just dumping the whole warchest into some fixed deposit, but those are some options which I feel are kind of suboptimal – and I’m not going to play my hand weak. Day after day for the past few months, I’m just scouring the market for opportunities; akin to the famous Nat Pagle – I can wait and fish all day! – yet not many have appeared in the same magnitude as Black Monday last year but I’ll be ready, ready to let loose the big guns for some delicious delicious profits.

By the way, I just read some article while procrastinating writing this blog about how today was the worst opening for the Dow in 84 years – I immediately lost my guts like how I lost my rights when I enlisted a year ago. I really am easily deterred by these kind of news, I mean a fact is a fact, so it’s not as if I could ignore the sheer reality of it. Flashes of crimson red flags appeared in mind, current oil prices at $35 – almost reaching 2008 financial crisis level, an abnormal lack of financial crises for a exceptionally long period of 7 years and China’s bubble popping. These are signs I tell you – like how birds fly low before thunderstorms or rats deserting a city before an earthquake, I anticipate something ominous. I guess I have to continue playing this waiting game and see how this moment in history unfolds. The truly successful people are the ones who thrive in unsettling conditions – I yearn to be one to no end.