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
Showing posts with label Industry Segment. Show all posts
Showing posts with label Industry Segment. Show all posts
Saturday, 5 September 2015
Sunday, 2 August 2015
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
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
Sunday, 28 June 2015
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:
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!
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
Sunday, 24 May 2015
Topic of the Day: Portfolio Allocation
Hi Folks
Decided to come up with ocassional topics of the day. The first topic I would like to elaborate on after sharing my portfolio is portfolio allocation.
Now, you might be wondering why I chose the stocks that I had and why are the industry positionings as such.
Well, the short answer to that was that the industrial allocation was a subsequent result of the stocks that I chose. Also, I was fully aware of the importance of diversification when I was constructing my portfolio (which took me around a year to build).
So remember, before we even go into individual stock selections and drilling into numbers and reports, the importance of having a well diversified and balanced portfolio cannot be underestimated.
Tips for Portfolio Allocation:
1. Choose industries that have lower correlation and neutral to market trends
- Eg. banks versus transport represent a low correlation
- it is important to have a mostly neutral allocation as in the event of market rotations from cyclicals to consumer staples, you will not be caught flat flooted.
2. Keep the number maneagable
- Eg. It is far easier to manage 4-5 industries that you are well informed about
3. Avoid Industry concentration
- Eg. Avoid putting all your stocks in only one industry. If you only buy bank stocks and if there is a financial crisis, your portfolio is severely impacted.
That's it. 3 easy steps to build a stock portfolio that is balanced, easy to manage and with risks managed.
Comments and sharing are most welcome!
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