Saturday, 4 February 2017

Portfolio Update - January 2017

*As of 31 January 2017

Counter Average Price Yield on cost(%) Weightage
Starhub
3.4700
4.60
10.61%
Singtel
3.6700
4.00
9.98%
First REIT
1.2525
6.75
7.66%
M1
2.3600
5.00
7.22%
SembCorp Industries
2.4500
3.00
6.66%
UOB Bank
17.5200
4.00
6.19%
OCBC Bank
8.6000
4.00
5.85%
Capitaland Mall Trust
1.9050
5.80
5.83%
Fraser Logistics & Industrial Trust
0.9200
7.00
5.63%
CDL Hospitality Trust
1.3050
6.80
3.99%
Keppel Corp
5.3700
5.00
5.48%
SPH
3.7500
5.00
3.82%
Keppel DC REIT
1.0822
6.17
2.94%
Capitaland Commercial
1.3523
6.15
2.30%
SPHREIT
0.9293
5.80
2.21%
Ascendas Hospitality
0.6991
8.03
1.19%
Mapletree Logistics
0.9800
7.40
1.00%
STI ETF
2.8058
3.50
11.44%
Total

4.94
100.00%

Legend
CDP
SCB

Total Invested Capital = $29,574.09

Total Expected Dividends/month = $121.12

Average Dividend Yield = 4.94%

At the close of 2016, analysts and many were predicting the poor economic climates impending for Singapore. In addition, as we look back to history, the stock market has more likely to do badly in the years ending with the number seven, remember Black Monday in 1987, the Asian Financial Crisis in 1997 and the great GFC in 2007? This all did not help the already gloomy forecasts set by economists for the year ahead in 2017. What do you guys think?

For me, one thing is for certain, if history were to repeat itself, I will be finding myself busy buying more stocks. However, it is going the opposite way right now, with STI flirting with the highest it had been in 2 years, and it was one of the best performing index in the first month of 2017. So I guess its always funny how being contrarian has been so fruitful for 2016 and possibly 2017.



And I thought I would not be doing anything for the few months to come and yet I have already started in the first month of 2017. 

The share prices of the banks had been chugging along higher ever since the surprise election of Donald Trump. The potential of easing policies for financial institutions as well as benefits from a more hawkish Fed had seen bank prices hitting the highest since 2015.



Seeing this, I have reduced my bank positions in OCBC and UOB by half, at $9.38 and $21.10 respectively. Don't get me wrong, I am not saying that banks are overvalued, but I felt that in the near term there is limited upside for banks given the still weak economic climates for businesses. PE ratios for the banks are still below 15, much better than the other blue chips which make up the rest of the STI. However, the rally in banks had been overdone, and most of the the counters are already in overbought region. I retained half of the bank shares because they had been the better performers of my portfolio, and I wanted at least half of my winners to continue, should they continue to do so.

As a result of this reduction, my portfolio value has shrunk to less than $30k. The largest position is now Starhub, which turns out to be one of the biggest laggards of my portfolio, along with M1.



Starhub had recently reported poorer results and EPS has fallen to almost 3 cents, which is almost similar to M1's EPS. The result was clearly poor in my view, and even though they had stated the dividends will be reduced to 4 cents from 2017 onwards, I think even 4 cents is not sustainable. We do not now what will happen should the 4th telco start competing full force, but it seems like it is already hitting this 2 telcos hard. In my view, I still think M1 offers better value than Starhub. However, the price of Starhub has been pretty weak lately, which I have failed to reduce my position in the small rebound it had in January. There is still 2 ways around this, they are already mentioned in my previous post:

1) Reduce positions in the telcos directly OR
2) Increase other positions to reduce the telcos exposure percentage in my portfolio.

Lets see how I eventually decide to handle this. Meanwhile, recently the Fed decided not to raise interest rates this time round, so the prices of REITs has moved somewhat upwards. However, many analysts and market watchers believe it is only just the beginning. With a saturated market in Singapore, Singapore REITs have been increasingly trying to increase their footprint overseas in a bid to boost the distributions it receives. However, increasing interest rates are likely to put a lid on the upside on REITs. The only way for REITs to continue outperforming is if the REIT has a larger pipeline of overseas properties to expand using debt, and the rate of increase in distributions must be greater than the increase in debt costs the REIT have to take into account. In an environment of rising interest rates, even having fixed rates is not going to prevent the REIT from having to pay for the higher rates as eventually they will have to pay them once the fixed rate period expires.



So do we or not still buy REITs?

Well it depends, of course. If you feel the specific REIT has growth potential to outdo the increased costs it has to bear in future, then yes please do. If not, save the money for a big BEAR market.

Don't know where to put the money?

Then just open the CIMB Fastsaver account, and that is provided if you have already maxed out the OCBC360 account, i.e. > 60k. For me, I am intending to open one for my excess funds to prepare an expansion of my warchest.



And then what?

Wait, of course. While you wait, make sure there are stocks paying you dividends while you wait. Don't just sit around doing nothing with money rotting in the bank. Basic risk allocation obviously applies to different individuals in all situations, so please plan wisely before going to do something rash.

Good Luck!

Thursday, 5 January 2017

Portfolio Update - December 2016

*As of 31 December 2016

Counter
Average Price
Yield on cost(%)
Weightage
UOB Bank
17.8600
4.00
11.05%
OCBC Bank
8.6000
4.00
10.44%
Starhub
3.4700
5.70
9.47%
Singtel
3.6700
4.00
8.91%
First REIT
1.2525
6.75
6.84%
M1
2.3600
5.50
6.44%
SembCorp Industries
2.4500
3.00
5.95%
Capitaland Mall Trust
1.9050
5.80
5.20%
Fraser Logistics & Industrial Trust
0.9200
7.00
5.02%
CDL Hospitality Trust
1.3050
6.80
3.56%
Keppel Corp
5.3700
5.00
4.89%
SPH
3.7500
5.00
3.41%
Keppel DC REIT
1.0822
6.17
2.63%
Capitaland Commercial
1.3523
6.15
2.05%
SPHREIT
0.9293
5.80
1.97%
Ascendas Hospitality
0.6991
8.03
1.06%
Mapletree Logistics
0.9800
7.40
0.89%
STI ETF
2.8058
3.50
10.21%
Total
4.84
100.00%

Legend
CDP
SCB

Total Invested Capital = $32,964.37

Total Expected Dividends/month = $136.52

Average Dividend Yield = 4.97%

Equities for the month December continued their rally from the Trump election into the middle of the month. The rally ended with heavy profit taking, particularly in the banks which were thought to be the strongest beneficiaries from increase in interest rates and Trump policies.

The strengthening USD was a result of the Fed being expected to raise interest rates for the first time this year, which they did, but what was surprising was the conviction in increasing interest rates at a faster pace than the market was expecting. But with so much uncertainty surrounding Janet Yellen's position once Donald Trump takes the White House, her words may not carry much weight in the end.



In this month of expected interest rates, it was my favourite moment. That is because the shock from the expected higher interest rates has caused the price of interest rate sensitive stocks to correct much further. This includes REITs which I was closely monitoring, and eager to add more to my portfolio.

In December, I added 2 REITs, First REIT and CDL Hospitality Trust.

Around the middle of December, First REIT dropped to its lowest in the last 6 months. At $1.255, I picked up some units which was lower than the purchase prices by Ronnie, one of the directors of First REIT, which I felt was a vote of confidence in the REIT. I was considering averaging down my position in Capitamall Trust vs First REIT, but I chose the latter because of its exposure to the healthcare segment which was deemed more defensive than the retail sector.



I was ready to purchase more units in Capitamall Trust should prices correct to $1.855, which my order had been in queue for the past month but it eventually did not trigger, much to my dismay.

In addition, I decided to purchase CDL Hospitality Trust to increase my hospitality segment in my portfolio. I decided not to increase my position in the Ascendas Hospitality because I felt the price of the REIT was more expensive compared to CDL, even though Ascendas was offering higher yields. Finally, I decided to go with past management performance on this one.



This is a short post, and I will end it off here. It has been a very busy month even though December is always considered a lull period, but not for me. Many of the people I know have already collected their bonuses, which I suppose some would have used them to put it back into the market, probably partially the reason why the markets rallied like it did in December. However, it was not so great for me, because I did not receive any bonus this year ever since I made the career switch out of the oil and gas industry. So much of the funds used are mainly from the salary I saved from the past month.


At the time of writing, the prices of REITs has increased in value, along with a general increase in stock prices, which is probably due to the Capricorn effect, for those who believe in it. I am probably not going to do anything, now that prices has risen.

Stay safe and invest wisely!