October - A Bear Killer? Taking Stock of My Portfolio

I often times do not like to take a short term view to markets. My investment horizon as I'm sure would be the same for many of you is for years to come, even to the point of the retirement age. Nonetheless, it would be interesting to see what Oct has in store for us as traditionally Oct has been a pretty strong calendar month - so called "bear killer" month.

This being the beginning of the month for October I'm taking stock of my portfolio returns, sorted from best performer to the worst:

As can be seen above, both Raffles Medical and ComfortDelgro which are growth oriented stocks still performed in recent months, even returning a decent profit. The REITs portion of the portfolio also held up well, registering moderate drops. Singtel has seen some recent volatility but overall is still holding up quite strongly. OCBC has seem some pressures especially from short sellers, terming this as a service counter and putting heavy selling pressure on it. However, in the LT I expect the price to revert upwards to its longer term mean. Jardine has disappointed and continued to do so. Its exit from the STI Index certainly did not help as well. Sembcorp Industries took a severe beating due to the plunge of oil prices, although I feel that the stock should recover strongly once oil prices head back upwards, a scenario I am more inclined towards especially over the next two years.

Back to the markets!

Signing Off

Transitioning Stock Investor

Interesting Dilemma: Sharing my Thoughts

Good Saturday morning folks!

It's election fever here in Singapore as we are in the midst of our elections to vote for the next party to be in parliament. My vote is still undecided as a myriad of topics emerge for both deliberations and considerations. Usually in the past, there is an 'election effect' that we would see for Singapore stocks. However, with the current overall market volatility this effect has been completely dilluted.

Nonetheless, I remain steadfast in having strong belief in our local companies. More so of the ones that I have invested in. In recent weeks I have been faced with a dilemma.

- Do I average down only on some of my heavily beaten down positions?: OCBC Bank (11% down), Jardine Matheson (11% down) & Sembcorp (17% down).

- Or do I maintain allocation discipline and add evenly across all names?: Currently I have 8 names in the portfolio which has not changed for the last 6 months: OCBC Bank, Sembcorp Industries, Jardine Matheson Holdings, CapitalandMall Trust, Mapletree Commercial Trust, Singtel, ComfortDelgro and Raffles Medical.

- Or do I add positions to the ones that have continued to hold up well?: Comfortdelgro and Raffles Medical, both positions are the top performers in my portfolio.

As I type this and with limited resources at any one point, I'm still pondering on the next step to take. However and I say this with immense pride, I am glad that I rejected the urge to panic sell or to re-consolidate certain positions indiscrimately. With proper planning and selective stock picking, it became apparently clear and more so during the recent market madness that the companies which I have chosen are solid names that I would want to add even more when markets rotate.
So I'm glad my decision moving forward is skewed towards where to ADD rather than where to SELL as there is no impairment I see at all to any of the 8 businesses that I have stakes in. Nonetheless and on the flip-side, in a bullish market if any of the positions have risen to levels that I feel are prime for trimming, the appropriate rebalancing will be done. This was done a couple of times on both the Comfortdelgro and Raffles Medical positions earlier this year (for those of you who have been following my blog you may have read those earlier posts).

So remember, to empower your portfolio you need to have faith in the companies you put your hard earned money in. Not blind faith I have to reiterate, but faith stemming from hard work and research in the companies you own.

If you are new to investing and would like to construct a portfolio for a start, you may wish to follow my selections and get updated via this blog. However, please do not take this as buy-sell recommendations but they are suggestions on how to construct a proper stock portfolio. This will hopefully set you on the course to a better financial future and less reliance on your active work income.

Ending off with sharing some of my dividend updates for Sept below:

*Dividend Update for Sept
- Scrip reinvestment elected: OCBC Bank $360
- Scrip reinvestment elected: Jardine Matheson US$38

Signing Off and Have a Great Weekend
Transitioning Stock Investor

Thoughts on Sembcorp Industries - 2 Aug 2015

It's been a pretty interesting week hasn't it. I hope many of you have solid portfolios, that in spite of the recent volatility has held up well.

I recently have been receiving a few queries on Sembcorp Industries and my views on the company. As you may know I am currently holding unto 3,000 shares of this company with an average cost price of $4.26. To be very honest, although I do feel uncomfortable seeing the recent stock price plummet, I still am very convicted in this position. Now do let me make some points on why I say this, with some caveats obviously.

1. Correlation of Sembcorp Industries and Oil Prices
- Now, we know that Sembcorp Industries owns a large share of Sembcorp Marine and we have seen the recent poor numbers from the latter company. I did a correlation study of Sembcorp Industries with the price of oil, over time. What can be seen pretty obviously is the high correlation of oil price to the price of Sembcorp Industries. What I also noticed is the convergence of the stock price to oil and based on current values, the stock price still has some way down to go if it does converge.

2. Oil Market in General
- Now, in relation to the point above we need to understand the oil market and its dynamics. I could go on and on but in summary what I can describe the market is there are two main factors: Supply and Demand.
-Supply of Oil: This is closely controlled by OPEC in which there are key parties like Saudi Arabia, Russia, Kuwait, etc. The current dynamics is this, the Saudis refuse to cut production to prop up oil prices because they want to maintain market share. They also want to force out the shale oil drillers in the US because when oil prices are low, they go below the production costs of shale oil and as a result if these shale oil drillers are unable to sustain low prices and margins, they need to shut down. And the Saudis have large pockets to wait this out. However, you also have countries like Russia which need oil prices to recover to prop back up their economy.
-Demand of Oil: China has been slowing down and as such the demand for oil. Some countries are also exploring alternative energy sources which may affect oil demand albeit not in the forseeable future.
Summary of Oil: There are a myriad of other things about oil that I can nag about, however in summary what I can say is this. I expect oil to stay low, but probably come back up by next year. It is anybody's guess but I really dont see this scenario panning out for too long. And when oil does shoot back up, which it has done many times before, this stock is well-positioned to capitalise on that.

3. Sembcorp Industries's valuation and businesses
- Similarly, we can scrutinise all of their businesses to a fault and come to a premature conclusion. But I won't. However, what I can observe is that the current valuations of Sembcorp to me are very fair. I say this being fully aware of their relatively high debt levels, declining margins, etc.
- However, let us not forget these factors:
a. Sembcorp Marine is still one of the world's best offshore rig builders with superior management and a rather long history.
b. Secondly, utilities is still a necessary business model and in spite of domestic pressures, the company has expanded overseas like India to build their businesses there.
c. Most importantly I still do not see any impairment to their business models. Yes, they have lower orderbooks and declining margins, but it is obvious that these are highly correlated to the concerns on oil prices. Do I see this as a long term impairment? Clearly not.
d. The businesses that Sembcorp is in require high levels of capital investment and are large moats with high barries of entry. I love that for any business.

In summary, what I can comment about Sembcorp Industries is that even though I see declining profits currently, I don't have much concerns on it going forward. In times of uncertainty, we really need to dig deep and ask ourselves our initial reasons for investing in a current company and whether those reasons remain intact. They clearly do for me in this company as I wait out patiently for oil prices to rebound and as a result recover the margins for this well-managed, world class company that    will soon prove its detractors wrong. There is no signs of impairment of the business and more importantly its management and any near term price concerns will be shrugged off and/or good reasons for adding more positions in which I am planning to do so probably.

Comments are most welcome!

Signing Off
Transitioning Stock Investor

Thoughts on Jardine Matheson Holdings

Good Thursday Folks

Since I have recently purchased some shares of Jardine Matheson, what better time to write about the company.

The Jardine group is indeed a complex web of companies with Jardin Matheson owning part of Jardine Strategic and vice versa. This structure was purposefully formed to prevent adverse takeovers something which the group was subject to previously. 

I shall not dwell too much about the company's long history or further corporate complexities as it is simply too long and complicated to elaborate here. I will just share 3 points that helped make my decision to take a tiny stake in the company.

1. Valuation

- The current valuations for the company all look within range and are values that I am comfortable with paying for. P/E is around 12x and P/B is around 1.1x, both of which are reasonable levels for me.

- The price has also dropped around 15% since the beginning of the year, which also makes this a relatively discounted price for me.

2. Business Model

- The group has a diverse range of businesses. Again I like the fact that when I buy this company I have access to Astra, Dairy Farm, HK Land, Jardine Lloyd Thompson, Cycle and Carriage, etc. These are all great businesses in which alot of us have a good deal of exposure to both on a regular and long term basis.

3. Cashflow US$

- The company has grown its dividends steadily over time and these will be in US$. With the eventual rise of interest rates in the US$, we should expect to see a nice headwind in terms of dollar strength. This gives me a nice potential FX kicker for future cash flows (dividend and capital gains) which will be in USD and translated into SGD at potential higher values.

There definitely were some concerns that I had with regards to the investment. The group is quite tightly held by the Keswick family so alot of its fortunes are tied to the ability of the family to grow the large and complex group of businesses. There is also the FX exposure in US$ which may go against me in future in the unlikely scenario that my hypothesis about future FX rates is incorrect.

Nevertheless, I like the company and its potential enough to take this initial position. I'm really glad to have bought into this stock and I hope I can add on more in future.

Also, I've decided to stick to just the 8 companies that I own at the monent and just continue to add unto those for the forseeable future.
Remember it's the quality and not quantity that counts!

Signing Off

Transitioning Stock Investor

Portfolio Update - June 2015

Good Sunday Morning Folks!

Today's an interesting day as I sum up my portfolio for June and share the recent developments for the month.

In terms of portfolio additions, as shared earlier in the month I have added 1 lot of Singtel at $4.13. Subsequently in early last week, I added another lot of Sembcorp Industries at an attractive price of $3.91. Overall, I'm quite glad with the prices I paid for both companies as I thankfully managed to capture the downside of the price curve for both stocks. I also now see a nice recovery in the price of Sembcorp and hopefully the price recovers even further.

In terms of portfolio subtractions, I took profit on 2 lots of ComfortDelgro just last Friday before the market closed, locking in a 18% (36% annualised) profit. This leaves my current holdings of the counter at 2 lots. I pondered extremely long over this decision and as can be seen I seldom try to take profits as I do hold my holdings over the LT. However, I do have some concerns on the overall market with the bubble in the Chinese 'A' share market + Greek talks I found that it was a good opportunity to take some money off the table especially as I had made some good percentage profits already. I continue to overweight this company and will definitely accumulate more in future on price dips (this also means I am still overweight transport as an industry and I seek to maintain that).

Finally, in terms of dividends it was a really good month for me as other than May & August, June sees the most dividend payouts as I saw dividend inflows from Mapletree Comm. Trust, Raffles Medical and OCBC (both of which I elected to receive dividends by DRIP).

Here's a summarised look of my holdings and dividend records and trends at the end of June 2015:

Transitioning Stock Investor - Portfolio Holdings June 2015

Transitioning Stock Investor - Portfolio Dividend Trends June 2015
*Note that future dividend trends are projected based on historical dividend payouts

I still love the look of my portfolio and struggle to find good companies to add unto it. As such my near-term strategy over the next 6 months is to continue to find good opportunities to add unto my current holdings and to increase my dividend stream consequently. That's it from me this weekend and have a great week ahead!

Signing Off

Transitioning Stock Investor

Sembcorp Industries - Updated Holdings

Hey Guys,

Quick update. I added 1 pop of Sembcorp Industries today at the price of $3.91. This brings my average cost of this counter down to $4.26 from $4.43. This position I'm fairly confident should pay off, especially when the following happens:

- Sembcorb's share price converges with the price of oil.
I did a simple comparison of the share price vs WTI oil and there is a obvious divergence seen. I expect some levels of convergence, something which when extrapolated over time has shown to recur  consistently.

- Market realises that Sembcorp is good value currently
All ratios, be they P/B, P/E etc all point to good value for the company

- Sembcorp's businesses pick up
I know we have all recently read their declining margins, businesses not doing well, falling revenue and asset turnover etc. However i like their overall business and strongly feel that they will revert to mean in the long run. Most of their businesses, marine included are fairly important and I expect again mean reversion in the LT.

Shall monitor the market closely for other developments but feeling glad on the addition today. Again one must take a long term view for this view to true play itself out positively.

Signing off
Transitioning Stock Investor

Stock Portfolio

After my short introductory post, I would like to share my current stock portfolio as a baseline to work with.

Below, is the snap shot of my stock portfolio positions as of today, 24 May 2015.

Stock Name	Percentage	Amount	Holdings
Singtel	12%	$8,560	2 lots
ComfortDelgro	17%	$11,960	4 lots
CapitaMall Trust	10%	$6,600	3 lots
Mapletree Comm. Trust	5%	$3,123	2 lots
Sembcorp Industries	12%	$8,400	2 lots
OCBC Bank	31%	$21,134	2 lots
Raffles Medical	13%	$8,735	2 lots
Total	100%	$68,512

This is how it looks like in a pie chart

Below, is the snap shot of the industry exposures of my stock positions as of today, 24 May 2015.

Industry
Telecommunication	12%
Transport	17%
REIT	14%
Industrial	12%
Finance	31%
Healthcare	13%
Total	100%

I am a strong advocate of Benjamin Graham and his views on value investing and I try to apply his principles as much as I can in my stock investing. 

You may observe that my portfolio is rather focussed and does not have many different holdings. To me, 7 - 10 stocks represents the optimal number to hold as it allows me to study each company in detail and really understand each business that I'm investing in. This number might increase probably as my investable amount increases over time, but I'm most comfortable with the 7 stocks for now.

Also, for the 7 stocks that I hold, I have spent considerable amounts of time, research and analysis on each individual name and their respective business. It ranges from various valuation metrics (EV/EBITA, P/E, P/B, DDM, etc) to the usage of Porter's 5 forces to evaluate each individual company. So each stock which I hold and eventually choose to add, stems from hours and hours of prior research before. Of course, it cannot guarantee that a handsome profit will always be made, but it gives me confidence that my portfolio is something that I can hold for the long-term and the likelihood of me deriving good profits and dividends will grow over a sustainable period of time. 

Remember, I choose to invest and not speculate. So I will tend to avoid speculating on trends or hold positions for too short a period, unless the stock has moved to a point whereby it is either not fundamentally good enough to hold or the priced has moved in a way that makes a partial liquidation sensible. I wish to be investing full time and I aim to stay the course for that.

So that's it, my very first post on my portfolio. Hope you like it and I look forward to share more moving forward. Comments and suggestions are most welcome! 

Happy Sunday!