Market Catalysts and Quick Portfolio Update

Looking at the current market today, there will be some short term catalysts that will be of interest.

Firstly, it has just been confirmed that an agreement has just been reached on a Greek bailout plan. This deal when voted into the Greek government will hopefully keep Greece in the Euro and Grexit will not occur. In fact, it further shows the solidarity of the Euro and keeps the other countries that went through austerity (ie Spain, Portugal, etc) happy. I see this as a positive catalyst.

In the Chinese stock market, I see a longer term systematic issue. Nevertheless, the recent moves by the Chinese government to steady the ship and prop the market up has went some way to steady the market. To me, in the long term the Chinese investor needs to learn from past lessons, but at least for now things look better than a few weeks ago. I similarly see this as a positive situation.

In terms of the local stock market, a slew of companies are poised to announce earnings with the next month. All of the stocks in my current portfolio are slated to announce earnings during this time period. I attach a nice screenshot of the positive price action today:

Watchlist of My Current Stock Portfolio (Source: sgx.com)

I await better results especially from the less performing companies: Sembcorp Industries and Jardine Matheson. I hope that my trust in these companies will pay off in terms of better earnings numbers.
I continue to be fairly confident in the earnings of the core companies in my portfolio: Singtel, OCBC, ComfortDelgro and Raffles Medical. I similarly expect the REITS in my portfolio to continue their good performance: Capitamall Trust and Mapletree Commercial Trust.

I will be taking a break from adding to positions in the current month as I continue to build my warchest. I recently sold a holding of Raffles Medical (at a profit of c.S$700) to fund a watch purchase. Oh well, all work and no play makes Jack a dull boy, but I definitely look to lessen such activities moving forward.

The markets do look very interesting now and some of the positions in my portfolio looking prime for adding, especially Singtel, ComfortDelgro and Raffles Medical. Will closely monitor these positions and update accordingly when I make stock additions. As of now, I relaxingly sit back and let the portfolio recover and continue to churn out its dividends.

Signing Off
Transitioning Stock Investor

Lessons that need to be learnt from the Chinese Stock Market Crash

General foolhardy market euphoria, Utter disregard for fundamentals, Retail Investors jumping in based on total speculation.

The above sounds all too familiar ya. Yes, the above is what I would use to describe what happened to the Chinese stock market over the last 1 year or so. Almost everyone in China who could invest, went into the stock marker with wild abandon. Chasing stock prices as they went higher. Buying stocks like it was a roulette game in a casino (red or black). Interestingly, this phenomenon was warned about in the book which I shared about in my previous post. And ex-post everytime this phenomenon occurred it was bound to end up being pretty ugly, which is what we are currently seeing in the Chinese stock market as we speak. It certainly was also a reminder of what we saw in 2008, where markets crashed discriminately and spectacularly.  

Over the last one week, around half of the stocks in the market were halted for trading by their own companies. We have seen certain stocks drop by levels that would have rendered most people bankrupt if they had marginalised their positions, something in which many Chinese investors did. Mutual funds were not spared as many of the Chinese A shares they invested in were similarly suspended. I did a quick study of some of these suspended stocks and some of the names just bewildered me (as there was a good mix of unfamiliar and relatively well known names). 

All the above just goes to show a few important points, which are closely correlated with behavioural finance. If you would like to invest and to do it well, understand the business you are buying into. Also, do not allow greed or emotions to drive your decision making. Never follow a trend based on hearsay or following your inner herd instinct. In the stock market a stock that everyone is chasing up is not necessarily a good investment idea. In fact, often times the stock price does revert to mean somewhat and you end up with a bruised position and sometimes ego. Put real effort and analysis into your investments and you will reap the harvest in the long run. Learn to look through the mess and stay focussed in finding quality businesses selling at reduced prices in the days to come.

In other words, Stay Calm and Invest On my friends.

Signing Off

Transitioning Stock Investor

Two Simple Yet Powerful Investing Lessons Learnt Over Time

Now this is something I struggle with, right. Building a warchest to take advantage of opportunities. In such uncertain market environments, it makes alot of sense to have a sizeable warchest to buy on market dips. However what I struggle with is whenever I think I have a warchest, I end up vesting into another position. Guess it takes as much discipline to invest as not to invest.

In any case, I'll most probably be looking to enhance my warchest over the next few months as a way to build up capital to invest on market dips.

In the meanwhile I'll stay on the sidelines and wait out the current market volatility. One thing I really did realise versus my previous investment experiences is that when you have a solid quality portfolio, market volatility does not hit you as badly. Yes, your portfolio does take a hit but it sure is much more bearable compared to what I used to own when I was years younger (penny and speculative positions). I guess experience really does help build knowledge over time.

So in summary, just reiterating two simple yet important lessons I have gathered as I age and become more mellowed and wise in all things investing.

One, always have a sizeable warchest to capitalise on market weaknesses. Two, always invest in quality and solid businesses that you understand and are comfortable with. Both of these help to capitalise and ride out market volatility, values which are extremely important for any investor. It really is as simple as that.

Signing off
Transitioning Stock Investor

Thoughts on the Market - with an Iced Milo Dinosaur on hand

Arrr, sipping on my iced milo dinosaur, I've decided to write this post casually and share my thoughts on the market. As I'm enjoying the Sunday break of course.

What do we have this week? Firstly, is the Greek referendum. Let's see how markets react to the decision tonight but my guess is the impact shouldn't be too much as most of this news should have been priced in.

The China stock market continues to unravel itself and its still a black box on how the market will continue to behave this week. I expect more continued volatility.

In terms of the local stock market, it's been pretty quiet and I think with the lack of much catalysts like earnings announcements and such, probably a lacklustre market environment should remain for the near term.

What's important as I realised is probably to take a break from the stress and obsession from monitoring your portfolio and to just take a break and relax. Enjoy life abit, forget about dividends, earnings, profits for the time being. Just soak in life and enjoy life's simplest pleasures, like an iced Milo dinosaur over the weekend. A break well-deserved which is good for the long term, as remember investing is an enjoyable marathon and never a sprint.

Signing off 

Transitioning Stock Investor

Value Investing - Recommended Book - Must Read for Investing Enthusiasts

I love sharing a great book when I see one and this is it, 'The Intelligent Investor' by Benjamin Graham, who is widely known as Warren Buffett's mentor in investing. I'm sure some of you have heard of or have also read this book before. 

I read it around a year ago and it was what got me started in Real Value Investing. It was a fundamental breakthrough for me as it shifted me away from how I used to 'Invest': alot of emotion, timing, speculation, eagerness to make a quick buck, short term mindset, lack of awareness about the stocks I bought, the list goes on. This book basically addresses the paradigm and helps adjust your mindset towards investing. Alot of the time the problem really lies with us and how we view investments as a whole. Even till today, as I read alot of investment blogs, I only see a handful of fellow investors who truly appreciate and value what real value investing represents. 

I would strongly strongly recommend anyone who is serious about investing and doing it well and wisely to pickup this book. Be forewarned that some parts are very detailed and complicated to understand but I shall sum up the gist of the book in 3 main points that I have understood and apply regularly.

1. View Investments as Businesses not Stocks

- This is critical. When we buy a stock we usually treat it as a ticker or symbol, something that we just play around with. This mindset sets an obstacle to true investing. When we buy a stock, we need to think of it as buying shares in a BUSINESS. We need to think of the investment as a stake in the company, as a business. We need to be acutely aware of what the company actually does, does it have long term prospects, etc. Another important point shared in the book was to identify business with large moats (ie high barriers to entry, sticky businesses, hard to replace). Additionally, de-linking the thought of buying a stock and thinking of your investment as a part stake in a business will immediately set you thinking differently and more importantly, strategically. One great example I always think of is Singtel and how people are constantly glued to their mobile phones, evolution of apple watch, 4G to 5G, etc. There is so much potential to this company based on simple representations of everyday life and use. This gives me great confidence in investing in this business for the next 10, 20, even 30 years.

2. Always Have a Margin of Safety

- Now, this is easy to understand and say but extremely difficult to apply. Basically what this means is to find stocks that are trading at a price level that is at a deep DISCOUNT to its intrinsic value. So even if you purchase the stock and it does drop, the potential drop in price is minimised. Basically buying good stuff for cheap prices (being a stock cheapskate lol). Why I say its hard is because of two things.  Firstly, it's really hard (not impossible) to find cheaply value stocks. Usually you would find them when the market corrects, dips, or there is a temporary disjoint between what the market feels about the company versus its current price. Secondly, the other problem is what you define cheap as and this is intricately linked to the calculation of intrinsic value for the stock. There are some ways taught in the book on deriving intrinsic value and one simple formula that can be used is the following:

3. Invest Long Term, be Disciplined & Patient

- Last but not least, understand and accept that investing is a long term process. Stay the course, delay gratifications and be disciplined. Invest regularly into your portfolio, reinvest your dividends into your portfolio, basically doing all the 101 things and refusing to do stuff like contra trading, market trending, speculation stuff. Learn to stay the course over tine and reap the full benefits of your investments. Remember Warren Buffett only made his billions when he was in his 50s so alot of the businesses he bought years ago, he still owns today. PATIENCE in investing is a key virtue and a very important one at that.

There are plenty of other lessons to be taken away from the book but the above 3 have impacted my investment philosophy immensely and given me a new found paradigm and empowerment to investing. This to me is best reflected in my current portfolio and I am immensely glad with how it looks and will continue to be. And it also brings me great joy to share this knowledge with you. 

Sincerely hope the above sharing has positively helped you in some way.

Have a great weekend ahead!

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

Update: New Stock Holding added!

After a long deliberation and much thought, I have added 100 shares of Jardine Matheson Holdings today at a cost price of US$57.10. Translated into S$, the amount is around $7,750.

I'm really glad to have added this stock to my portfolio as I really like their portfolio of businesses. It ranges from automotive sales, supermarkets, hotels, insurance, property, financial services amongst others.

I really have not felt so excited in a while about buying a particular stock and I am also really happy with the look and structure of my portfolio now. I'm also glad to be a beneficiary of the smaller lot sizes as previously I was not able to take positions in this stock due to its high price. I may add more positions in this counter moving forward, we shall see.

Will update my portfolio structure in due course. What do you guys think about the Jardine group of companies? Do let me know!

Signing off
Transitioning Stock Investor