Friday, 31 August 2012

Are we losing money everyday?

Today i put in an order for a manufacturing stock in the tech sector but the order was not transacted as i put in my order only at 3pm. I will shed more light on the stock next week if i decided to put in a buy order again but it is not from the list i previously highlighted here. As mentioned before, i am quite wary of buying tech related manufacturing stocks but after digging deeper into this counter, I am prepared to take a position on it as the yields are pretty  decent and regular and i think there is a good margin of safety.

I have a chat with a good friend of mine today and he has built up a sizable portfolio over 4 years from 2008. He focused on dividend-paying stocks or good FA stocks trading at a deep discount to NAV. I have to say that his strategy of 'not timing' the market and having the discipline to buy good FA stocks during good and bad times seemed to have worked well in his favor and we had an interesting discussion on passive income as we are both trying to build a stream of passive income.

Singapore Inflation Rate


The chart above shows the inflation rate in Singapore. Currently it is hovering at 4%. With interest rates in Singapore banks at less than 1%, our cash in the banks are "losing" at least 3% p.a.?!  As such, if we don't find a better return for our cash, over a period of 10 to 20 years, our cash will become 'worth less'. Seems like putting our money in the bank is actually not "risk-free" as the value is depleting over the years.

I, for one, has been as guilty for the same. I have not been utilizing the cash in the most efficient manner.  I am trying to do a projection of what my SRS portfolio will look like in year 2030. The basic assumption is as follows:
  • I will fully invest the remaining cash in my SRS by end of this year.
  • I will contribute $12,750 each year into the SRS portfolio and make investments.
  • All interest received each year will be reinvested in the following year.
At the end of 2030, the total invested capital will be $312,375, however, the ending portfolio value will depend greatly on the yields which I manage to generate from the SRS portfolio and the sensitivity table is presented below .
  

As you can see, with the effect of compounding, the portfolio will look really nice if we can get an annualized return of between 8% to 10%. Well, you can bookmark this post and come back again in year 2030 to see the final portfolio value (if i am still blogging then). hahaha. If i don't do anything to the SRS cash, it will definitely give me a final portfolio value of less than $363,576. If i manage to achieve at least 5% p.a. yield on my portfolio, i could possibly get an ending portfolio value of $587,023 or more.

Here you go, some food for thoughts for the weekend. 

Happy SRSing. 

Wednesday, 29 August 2012

Far East Hospitality Trust

It has been a frustrating 2 days as i have been trying to find a good entry point for either Far East Hospitality Trust ("FEHT") or CDL Hospitality Trust. ("CDLHT"). I was actually quite tempted to buy CDLHT for my SRS portfolio when i wrote this post, but unfortunately, i missed the boat. The chart for CDLHT actually looks very good right now... even "better looking" than FEHT.

However, with the ROFR expiring between CDL and CDLHT, my personal preference was to buy FEHT for my SRS account as it seems to have better growth prospects and a potential market leader. 

If you have been following my Singapore IPO blog, you will know that i managed to get 21 lots at 93 cents but unfortunately, they are not 'sitting' in my SRS account but my wife's CDP account.... so i was hopping to do an 'arbitrage' trade where i sell at higher price from my wife's account and buy back at lower price for my SRS account. Well, the plan failed miserably as my buy orders was not done at 95 yesterday.

So here you go, added 5 lots of FEHT at 98.5 cents for my SRS account today.

The yield play on the Singapore market continues to be very 'hot'. 

I was updating my portfolio based on the august transactions and it seemed to be shaping up quite nicely. 


The % above is based on the current value (not historical cost) and is spread across various types of REITs and industries.

I am still sitting on a bit of cash in SRS and will probably add a few more portfolio companies in the next few months or i may increase my exposure to the companies in the current portfolio. I have yet to contribute current year capital.

I am monitoring the dividend paying stocks in the following industry:
  • Healthcare REITs - Parkway Life
  • Oil & Gas Company - Boustead 
  • Ship building - STX OSV
  • Engineering - SIA Engineering
  • Logistics - Singapore Post
  • F&B - SATs
I will probably add them if i can find a good entry point. Will need the market to crash a bit?

I manage to create a nice look spreadsheet with all the stocks i am monitoring with price feeds and yields all downloaded automatically... the power of technology!  

Please share with me your list of stocks too if i missed out any interesting companies.


Tuesday, 28 August 2012

China Minzhong - The analysts don't get it?

Let's talk about an interesting topic today. Analysts reports.

I share with you a real time classic case where reports by analysts may cause you more confusion than help!?. :)

China Minzhong released its 4th quarter results yesterday. Frankly I don't know how to play this stock. It can make you very rich but it can also make you very poor, depending on how you have traded it. It is pretty volatile vis-a-vis the market. If you don't have a strong heart, i suggest you watch from the sidelines. hahaha The weekly chart below for your reference.


Lets just read the different headlines of the analysts reports issued on this company this 2 days and you can get pretty confused.

Macquarie dated 27 Aug 2012


Macquarie continues to give an outperform rating and a $1.40 target price.

Maybank-KimEng 28 Aug 12

Kim Eng went one step further. Not only did it maintain its buy rating and its target price of $1.16, it also had a sexy header on its report suggesting a possible dividend payout since IPO.



Then someone more neutral decided to come into the picture.

CIMB 28 Aug 2012

CIMB downgraded the stock to Neutral and lower its target price to S$0.78.

I always have a hard time trying to understand exactly what "neutral" means in most reports. Does "neutral means sell?" or "does neutral means I don't know?" or "does it mean invest at your own risk?". Neutral is like sitting on a fence, refusing to take a position or stand....

and finally lagi best, we have one report at the other end of the spectrum, an "underweight" rating. Probably underweight means saying sell in a nice way.

JPM 27 Aug 12


JPM says underweight with a price target of $0.70. JPM says a re-rating in future will come via a meaningful dividend.

In case you don't know what China Minzhong do, it is a vegetable grower and the various vegetables are presented below for your consumption.(source from JPM report).


Well here you go. One company, 3 differing analysts' views. Read what you want to read and believe who you want to believe. Isn't this a beauty?!

Most importantly, i give you my view so that you have another view to choose from.

My View

If you have been following my blog, you already know my biased views with regards to companies from certain countries and certain industries such as agricultural and biological assets. sorry to disappoint you ah...my views remain consistent. hahaha

Lesson time - Analysts reports

Anyway, back to my lesson today - analyst reports.

It is good to read the analyst reports for a overview of what the company is doing but do read it with a huge pinch of salt for the following reasons.

Lesson 1 - Companies only invite analysts for site visits because they want them to issue a buy report. 
If you are the management, would you invite analysts to your company if you don't have a good story to share? By the same token, the management will only show the analysts what they want them to write about.

Lesson 2 - Some brokerage firms may have other business dealings with the company and the report is just one of the many dealings. 
It is not unheard of where the 'conclusion' is already given to the analysts by their bosses and analysts have to write the reports without compromising their integrity. Business dealings include corporate finance, share placements, etc. The better governed brokerage firms will usually declare their interest in the reports issued to address any perceived conflict of interest.

Lesson 3. Treat the target price and ratings for guidance only. 
If you are in the investment line, you probably know how financial modelling works. If you don't, here is the key word in financial modelling. Garbage in garbage out. In other words, the model is only as good as your assumptions. If the analyst made some wrong assumptions, then the forecast will be hay wire and you know what assume means right? Assume makes an ass out of you and me. Hence i guess the lesson here will be to follow the right analyst (for example the award winning starmine analysts?) instead. The most important attribute any analyst must have is consistency. As long as the analyst is consistently right or consistently wrong, they are good analysts. hahaha... you don't want to follow an analyst who is right some times and wrong some times, that makes it very difficult for us to profit from their calls.

Lesson 4. Valuation methodologies are subject to changes.
The best part to analysts issuing a target price is that there are many different valuation methodologies to choose from. You can use the Price Earning Ratio, you can use Discounted Cash Flow, you can use Price to Book or when you run out of ideas, use Sum-of-the-parts! In most cases, you can probably start with the target price you want to see and then works backwards to see which methodology meets your needs. hahaha..As such, treat all target prices (including those in my blogs) for reference only. If i am really so good, probably i won't be blogging?! :-P

Lesson 5.  How i use analyst reports
Don't get me wrong and think that analysts reports are useless. They are useful and there are probably some very good analysts out there but the key is to find out for yourself, who the better analysts are.

I primarily use analysts reports to generate investing and trading ideas. The reports help me know the companies better and whether i feel that the reports had been  written in an objective manner.

I also use analysts reports to determine if i should get into certain trading positions. I prefer to long stocks with favorable analysts recommendations primarily because they will re-issue the report every now and then and that will help create momentum and liquidity to the stocks i am trading.  Similarly, it is easier to short a stock that has sell recommendations from analysts.

For long term investing positions (such as those in my SRS account), i will usually read the reports just to keep myself updated on how the company is performing and watch out for any red flags raised. It is good if they agree with my analysis but if they don't it is fine with me as well. As you can see I bought starhub a few years back when most analysts had a sell call on it. Right now they are issuing 'sell calls' again but i am continuing to hold on to it.

That is it for today. 

Happy analyzing and if you like this posting, you follow me either on facebook or twitter.

Wednesday, 22 August 2012

Technology Yields?

I don't know why. I never like technology play and has an inherent 'dislike' for it. Perhaps i have seen the dot com bubble and am naturally more wary of technology companies.

I was at Ikea on Monday and saw that the visa terminal was powered by Nera Tel. A portfolio company which i added in August. hmm... this isn't too bad, perhaps i shouldn't be so 'biased' towards good technology companies. After all, Apple has recently became the most valuable company in the world! 

Unfortunately in Singapore, there are not many good technology companies that i can think of. The closest is perhaps Creative but in my view, it has yet to produce a 'killer product' since its sound blaster many many years back. However, there are a few technology companies listed here which are actually giving good yields.

I have, in the past, considered these 3 companies, but somehow, i just couldn't bring myself to buy them even though they are trading at cheap valuations with very attractive yields. Do you own one of these companies? Perhaps you can share with me if they are worth taking a second look. I enclosed some reports for your consideration.




Happy SRSing.

Wednesday, 15 August 2012

Summer Cleaning

I decided to do some "Summer" cleaning today and purged out my position in Raffles Education. Actually I can do nothing about it since the remaining value is really not significant. However, I decided to do a "house cleaning" and clean out the 1,666 shares (from stock split last time).

Two ideas for your consideration for the SRS portfolio which i spotted long time ago but 'inaction' is sometime our biggest stumbling block towards financial freedom!

Boustead dated 29 May 12 by Kim Eng

Kingsmen dated 13 Aug 12 by Kim Eng

Tell me if whether you think the stocks are 'fit' for the Starfish SRS Fund.

Cheers.

Monday, 13 August 2012

Raffles Education - From bad to worse?

I am extremely irritated to see that the once market darling has fallen deeper and deeper into the abysses.


The Company announced that it will report a loss for the year ending 30 Jun 2012. From the chart, the stock is likely to test its 52 week low. Let's just see how much value has Raffles Education "destroyed" from its peak. You can see that from the chart below. From a high of $5 to a low of $0.37 in the last 4 years! Perhaps it's time for a change? 

 

This stock would not have made it to my SRS portfolio today. Perhaps it's time to do a autumn cleaning for my SRS account and clear out this counter? haha.

It is probably too late to cut loss but this is one stock that can teach a few lessons:

Lesson 1 - I should have cut loss and moved on. The reason why I didn't was I told myself this is a 'long term investment' and that the invested capital isn't too big. Sometimes we can get complacent when the amount is small and we thought we can afford to 'lose' that amount. We just refused to accept the loss and move on.

Lesson 2 - Hope can kill.  This is one classic case where I keep hoping things might change for the better and keep holding on to the stock. From a loss of 20% -- increase to ---> 40%, then 60% then 80%.

Lesson 3 - Luckily I didn't average down. I never like to average down and perhaps this is the trait that is being 'passed on' from the trading mentality i have. My 'loss' would have increased significantly if i have averaged down. However, i do caveat that it is feasible to 'average down' but you can only do that if you have done adequate homework on the company and you are confident about its future prospects.


Sunday, 12 August 2012

SRS portfolio at 31 July 2012

Received my July statement yesterday. 

Not much difference from my previous update except that i realised the last traded prices captured by the personal finance software from Yahoo websites may not be exactly the same as that capture by the statement, probably due to some timing or rounding differences. Anyway, attach the actual statement and made the changes to my entries in the database.

July seemed to be a pretty slow month with only a pathetic $1.83 interest received and the divestment of China Fishery at a loss. I have not been utilizing the cash balance adequately and it is still sitting at $49k. However, I made two transactions in August which is the purchase of QAF and Nera Tel, which hopefully, will add to my passive income in the SRS portfolio.

There should be more activities in August as some of my portfolio companies went "XD", which means ex-dividends.

Starhub released its 2Q results on 7 Aug. Many analysts have a 'take profit' call on Starhub. I attach a few for your reference.


In any case, I don't know what other stocks i can reinvest in if i sell Starhub. It has been giving me very good dividends in the past. I will continue to hold on to the stock since this is a 'passive income' portfolio.

Going forward, I will continue to add quality REITs and blue chip companies to my portfolio if there are any market weakness.

Good night.

Friday, 10 August 2012

Time Frame

We had a lesson on "Knowing yourself" last Sunday. Today I want to share on the topic of Time Frame. (pardon me if you get multiple emails on this). 



Knowing one's time frame is very important. Do you intend to hold this position (be it any asset class) for years, months, weeks or days. For forex or day traders, it can even be hours or minutes. 

Knowing the time frame is important because it determines the position size and risk which you are willing to take. Let's just use the various asset classes as examples. When I invest in real estate properties, my time frame is in years. This is because I am prepared to ride the market cycles to fully maximise my returns. The quantum involved is large and the use of leverage is inevitable. In addition, I view properties as a natural inflation hedge, hence I am willing to be vested in at least one property at any time. As such I hold a pretty long term view on this asset class. My parents bought their house for only $160,000. After 26 years, the same house which they stay in should be worth at least $2.2 million. They rode through the various peaks and troughs during this period but it definitely served as a good inflation hedge for them. This is inevitably more so in land scarce Singapore. 

When I invest in SRS stocks, my time frame is also pretty long because I am looking to create a portfolio generating passive income. The time frame is years unless there are fundamental reasons that change my views on the portfolio companies. I have held stocks in my SRS portfolio such as Starhub, Starhill, SPH etc for years. (This is investing)

When i trade, i usually swing trade. Hence my time frame is between days and weeks. I seldom hold positions for too long because the positions size i take is much bigger than that of the SRS. Hence each position can be between $20-$50k and the cut loss is tight at around $1-2k. You can see that in my trades in Sakari and Ezra. I could have improved my trade in Sakari by using a 'trailing stop' instead of getting out when it hits my target of > $1.40. I acknowledged that riding the profits till the trend end is one key area I need to improve on.  Sometimes for trading positions, i will get out after a while if the trades did not pan out as what i envisaged it to do but I will not let a winning position turn into a losing one(This is trading). You can either be a discretionary trader or a system trader. I am more a discretionary trader than a systematic one but i am also trying to learn how to be less discretionary and more system based. As always i am still learning. Hence what i wrote here today may change as i gain more experience.

I will elaborate more on the differences between investing and trading next time. It is important that you know the differences for yourself. They are very different concepts and can cause you a lot of confusion if you mix them up and make you "走火入魔". :-) The worst thing that can happen to anyone is a person buying a stock with an intention to 'trade' it and hold it for a few days. The stock then fall below his or her purchase price and the short term trading position become a "long-term" investment holding...hahaha I have seen too many such incidents hor..

As for IPOs, you know how i feel about them. It is usually a hit and run for me unless the stock is so compelling. The time frame is usually between day and days. IPO punting is very sentimental driven and sentiments can change very quickly.

That is it for today as I am "celebrating" National Day (another excuse not to work). 

Have a good weekend! 

I welcome letters or emails from readers. :-) Feel free if you have questions and I will try to answer them via the blog or emails. 



Thursday, 9 August 2012

Happy Birthday Singapore

The reason why we can enjoy and plan for retirement is because we have a good government. Without its long term vision, you won't see the skyline u see today. Happy 47th Birthday and may you continue to grow for many years to come.

Monday, 6 August 2012

Nera Telecommunications Ltd

I added 10 lots of Nera Tel in my SRS portfolio today at 41 cents.

As you are aware, ST Engineering tried to acquire this company for 45c per share but the deal was blocked by minority shareholders! Interesting. The stock just went XD after paying 4 cents of interim dividend. The company just announced its Q2 (or 1st half results) on July 14 (see table below) and the results were pretty impressive.No wonder the minority shareholders were upset by the 'indecent' offer from ST Engineering. hahaha. The Company is not expensive and trading at 8x PE. Its market cap of $148m is also backed by cash and short term investments of 54.3m. 


There was an interesting article on Nera written by another blogger. You may find it here for your reading.

With such strong financial performance and past dividend streams, Nera sounds like a good fit to my SRS investment criteria where i am looking for stocks that can provide me with regular passive income.

Happy SRSing.

Thursday, 2 August 2012

QAF

Today i added 8 lots of QAF at 70.5 cents each into my SRS portfolio. My order for Nera Tel wasn't done but it's ok.

The yield for QAF accordingly to a CIMB report on 4 June was around 7.2%. The report is enclosed for your information.

This is a long term holding and for generating passive income. I am not too concerned about the stock market fluctuations.

My goal for my SRS portfolio is to build up a portfolio worth at least $250,000 generating between 6-10% per annum for passive income by the time i retire. (perhaps if you work backwards, you can estimate my age?) hahaha.

6% x $250,000 = $15,000 per year = $1,250 per month.

For simplicity, i exclude the effect of compounding but as you know, compounding is the 8th wonder of the world and i am going to make sure i earn it. Happy SRSing.



“Compound interest is the eighth wonder of the world. He who understands it, earns it ... he who doesn't ... pays it.” ― Albert Einstein

Cerebos Pacific



It's always sad when good and well-run companies are being privatized and i guess Cerebos Pacific will fit the Warren Buffet's type of investments where the Company is producing excellent products and trusted by consumers.  The company has also been generous to its shareholders by distributing dividends annually and giving discount vouchers for the Chicken Essence to its shareholders during their birthdays.

I have a friend who is a loyal shareholder and has been receiving dividends for a few years and today is a bitter sweet experience for him. Happy yet sad. The Company offered a decent price which is at 'record level' to buy out this company. It will be interesting to see if the minority investors will bite into the offer. Kudos to those who have invested in this, i am sure they have been amply rewarded with dividends and capital gains.

It brings back an investment theme which I must work on. Think like a business owner. Buying good and well run companies that produces products that you like and uses frequently and pays a dividend every year. I have not done any homework below but perhaps the list can go like this:

Breadtalk - Toast Box and bakery
FJ Benjamin - Raoul
QAF - Gardenia bread 
Dairy Farm - Cold Storage, ShopNSave, 7-11
Sheng Shiong - supermarkets

What other companies you like other than the usual telcos, transport operators? 
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