Tuesday, 3 March 2015

Two new positions for my SRS fund

I initiated two positions for my SRS portfolio today. 

Sembcorp Industries

I have been contemplating this counter since last week and was weighing the probability whether oil prices will "crash" further with Citi predicting it will fall to the $30 region

I bought 2,500 shares at $4.28 eventually and will spare you the details of how the price ran away from my various price queues ^_^ 

The key reasons for buying:

  • reasonable valuation of less than 10x PE Mulitple
  • stable utilities business giving a decent yield of ~3.6%
  • bet that oil prices have stabilized
Given its significant exposure to Sembcorp Marine, any further crash in oil prices will be disastrous. The picture below shows the various multiples at the point of acquisition (for my future reference)



With many STI Components stocks trading at high PE multiples, oil-related counters seemed like having a "fire sale" right now. 

As in all my investments, the cut loss for Sembcorp Industries is around $4 and that is likely to happen if oil prices crash below $50. My "target" for this investment is around $5.

With the above purchase, I have "maxed" out my wife's SRS account for now. 

UMS Holdings

I bought 50,000 shares at $0.52 today. This is my second time investing in this counter but it is a much bigger position than when I first bought it.

This is more of a yield play that hopefully can give me a stable and recurring income for years to come. I am more than happy if share price stays stagnant but delivers the dividend every quarter. 

Reasons for buying:

  • Company is debt free and generates high cash flow
  • Usually pays 1c dividend from Q1-Q3 and a higher dividend in Q4
  • Business seems to be recovering, especially in the semiconductor area

Again the PE is not overly expensive at below 10x PE. I haven't thought of a cut loss point yet but will be very concerned if it drop below $0.48.

So long for now. 

Happy SRSing.








Sunday, 1 March 2015

Planning for your retirement

CPF announced a series of changes in February that, in my view, make it more flexible for individuals to design their own retirement plans according to their own circumstances. The link is here

You should plan early so that you can design the lifestyle you want (assuming we all live to a ripe old age! ^_^)


Do you know which plan you are going to choose when you turn 55?

There are currently 3 plans to choose at 55 but note that the monthly payout only starts from 65 onwards. This is basically an annuity plan to pay you "till you die". 

The reason why the govt allow "property" to be "mortgaged" against the minimum sum is to prevent social issues so that you have a roof over your head while using "$650-$700" per month payout for the monthly expenses for life. 

The "normal" package is to keep $161,000 for a full payout of $1,200-$1,300 per month for life. 

Frankly I have not explored if it is a good idea to opt for "enhanced retirement sum" where I will get $1,750-$1,900 per month for life until I know how much I will get back if I "die early". Hahaha. If it makes sense, I will then opt for it. No point giving my money to govt right?

However, if you think you will live to a ripe old age, you may want to consider topping up to enhanced retirement sum using your personal savings. In that way, you can have an enjoyable retirement travelling the world! :)

Will you have enough in your CPF accounts to meet the "normal" package? 

This is one way to let compounding work harder for you. If you have no use of the cash in your CPF ordinary account and have yet to hit the "minimum sum", you should transfer them to the CPF special account up to the maximum allowed each year. 

The earlier you transfer, the better the compounding effect, so plan your retirement early and let time help you, especially when the returns in these accounts are risk-free! You can view the slides from CPF on how to transfer the balance here.



If you haven't read this post from AK, you should. He has shared how a lot of his money in his CPF SA balance is from the government by transferring the OA balances in to the SA balance early in his working life. Similar to AK, i have hit the minimum sum so there is no reason why you couldn't too. You can max out your voluntary contributions of ($31450 less mandatory contributions) if you don't mind having your money "stuck" in the CPF balances till you retire. Here is a little peek at my CPF SA, i managed to hit the minimum sum of $161,000 in December last year.



Ability to withdraw some cash at 65!


There are further flexibility to withdraw from retirement account at 65. You can first draw $20,000 at 55 and up to 20% of the balance at 65. You can also top up your spouse CPF so that he or she can have higher payout and both parties benefit for life.

This is one area which you should seriously consider because retirement planning is a family matter if you want your loved ones to be well taken care of too! Some other ways to top up the CPF of your loved one are listed here

More interest for the silver generation!

Seems like the government wants to "reward" the pioneer generation by giving those above 55 years old a higher interest and a higher CPF contribution rate.


Higher contribution limit for SRS from 2016 onwards


In a bid to encourage more Singaporeans to plan for their own retirement, the SRS cap will be increased from the current $12,750 to $15,300 next year. This is good news for those who have been taking advantage of the scheme and are in a position to contribute more. The link from IRAS is here.

Stock picks by Singapore Edge in 2014 - No horse run


The year of the horse stock pick by the Edge outperformed the index and really "no horse run" - in hokkien means done extremely well. I also include its 2015 stocks picks for the year of the Goat!

Click here for the link to a better picture and some brief reasons for the stock picks.

The reason why included the table above is for my SRS account as i could have constructed a similar portfolio using my SRS account. I keep it here for record keeping purpose, so that i can refer back and kick myself in the butt if it outperformed STI again in 2015! :-P

That is it for now. Happy retirement planning and do something your future self will thank you!





Sunday, 22 February 2015

Do you benchmark your portfolio?


The above article appeared in Saturday's papers. For DIY investors like me, there is always a "competitiveness" to see if you are performing better than the indices or the professional fund managers. Otherwise, you might as well hand over your money to them or invest in ETF.

According to the returns presented in the picture above, the professional fund managers and the STI ETF managers seemed to be doing a pretty good job where they generated a return of at least 11% last year. 

Benchmark my portfolio?

Since my SRS portfolio is primarily invested in locally listed stocks, the STI ETF and unit trust focused on the Singapore market are probably the correct benchmarks if I want to use them. 

I haven't benchmarked the returns on my SRS portfolio but if I do, the returns is probably lower than the ~11% recorded by the fund managers last year. My SRS portfolio has seriously under performed last year...sob sob... :(

Do you benchmark your portfolio?

Do you benchmark your portfolio? If you do, what is the rationale for doing this? Is it for information only or does it determine how you allocate your investment capital?

What is the inherent problem with using a benchmark?

The inherent issue with benchmarking my portfolio is that I am not vested all the time. I hold cash as part of my plan to deploy them during a crisis and I do "time" the market in some sense and it is causing a huge "drag" on the performance since cash is only yielding 0.5% per annum.

Similarly, holding cash is not an option for the fund managers.  They are paid to be "invested" all the time and holding cash in excess of redemption needs will invite questions from investors that they are paid to do "nothing". 

I once spoke to a professional fund manager with a reputable asset management firm. He said this to me "you must decide for yourself when you want to exit the unit trust because we have to be invested all the time. We can't sell and hold cash even if we believe the market is toppish and over-valued, otherwise we risk underpeforming against the benchmark.

Lesson: while investing in ETF and Unit Trust enhances the diversification effect and helps you solve the "stock picking" problem, you must be aware they will be more suitable for investors who want to stay invested at all times or investors who don't time the market and use dollar cost averaging as a strategy. (Pls note that I am not saying this is a bad strategy. It really depends on your time horizon and investing temperament). 

I seriously need to buck up and start investing...

I am not sure if you already know the blog - Lady you can be free. It is always inspirational to see a true investor, who against all odds, build up a millionaire portfolio over time and she is definitely enjoying her fruits of investment now. I would aspire to be like her. The reason why i say she is inspiring is because, she has done it and is not a 'slave' to the market. She lets time and compounding play to her advantage but of course, saving up for that initial capital is key.... 

Traders are always in and out of positions and spending time looking for the next trading idea while here we have someone who couldn't care less if the market moves up or down today or tomorrow. She can go travel in peace and then check her portfolio at the end of the month. 

I guess as i grow older, this is the lifestyle which i would want to pursue. Travel the world, sip a glass of wine, enjoy the sunset and let the portfolio takes care of your daily needs. This will be the picture which i am painting for the next 10 years.

My ten year plan

I want to retire by March 2025. By which time, i should have build up a portfolio worth more than $1m generating at least $50,000 in dividend each year.

I record my thoughts and plan down so that i can strive towards that and I want the make investing a part of my habit and hopefully, i can do it and inspire someone else to do it too

Will you walk this journey with me? 

Maybe we can encourage and motivate each other along the way! ^_^  Happy investing.

Saturday, 14 February 2015

SRS portfolio - 31 Jan 2015

I am still trying to construct a portfolio that I can hold for a longer term with my two SRS accounts. 

Seems like I made better progress on wifey' account where the Keppel DC Reit moved way above my entry price. I can moved the "stop" to around $1 with enough leeway to let it fluctuate. 


The 50 lots in my Keppel REIT is probably more frustrating. I had previously blogged about my desire to sell down part of it due to its highly levered position (~42%) should the price go up. On hindsight, letting go partially at $1.25 (from my entry price of $1.205) would have made some sense. 


Anyway the share price dropped futher last week and I decided to sell them at ~$1.22. Back to 100% cash again. 

I wish I have more time to do some research and deeper analysis into the stocks and I am actually trying to focus on more "exciting" growth stocks. 

Maybe the Chinese New Year break can allow me to do it... 

Time versus Money

Is it true that when you have time, you have no money and when you have money, you have no time to spend it. 

Worst still, what if you have no time and no money haha. Ok. Need to move to the top right quadrant of having time and have money. Pressing on. ^_^

Sunday, 25 January 2015

What is the most lucky "M" in investing?

Many of you must heard of the 3Ms in trading (which I first come across in the book Trading for a Living by Dr. Alexander Elder) and now used by many to conduct "wealth creating" seminars:

• Methodology
• Mindset
• Money Management 

The above 3Ms are applied to you, the individual. Things which you are in control of. I have come up with the 3Ms of investing which are equally important but they are things which are beyond your control and which you should also think about when you invest. 

Today I will write about the 3Ms of Investing and one of which is a lucky "M". See if you can guess it before you read futher down...

For long term investing, you need the following 3Ms

First M - Management 

I don't think I need to spend time on this. You know the importance of management. With a good management, you can trust them with your hard earned money. There are many examples of why good management is important. Apple got a new lease of life when Steve Jobs returned. Berkshire Hathaway's Warren Buffet invests only in companies whose management he trusts. Good management creates value and bad management destroys it. 

Second M - Macro Environment

The second M is the macro environment and trends which the company is in and that affects the Company no matter how good the managent is. 

NOL and SIA were in doldrums because of the competitive macro landscape in which they are in. The share price only got a reprieve and went on a rally when the oil prices crashed. It doesn't mean the fundamentals have changed but a cheaper oil price definitely will help. 

Li Ning and other offline retailers in China suffered when the retail trend and habits changed. The new generation took online shopping with Alibaba to the next level and brick and mortar retail stores started to bleed. The anti corruption drive also impacted luxury dining and retail, so in that regard, do take note if you are currently exposed to such companies in China (maybe Osim?). 

Similarly Sony Ericsson, Nokia and Blackbery couldn't react fast enough to the changing competitive landscape caused by Apple, Samsung (and now Xiaomi) smartphones. 

Third M - Mulitple Expansion

This M can be your lucky (or unlucky) M. It doesn't depend on you or the management. It depends on the market. Let me give you a simple example. 

Assuming a company has $70m profits in year 1 and the market gives it a multiple of 10x PE. That translate into a market cap of $700m at end of year 1. The company still makes $70m at end of year 2 but the market sentiments have somewhat improved and investors start to be more bullish on its future prospects in general. They decide that a fair value of 20x PE is more appropriate and because of that, the company now trades at $1.4 billion market cap. 

Without any change in anything, the company is now worth twice as much "magically". This is called Multiple Expansion. 

In a lot of cases, you never understood why or bother to find out which component contributes the most. Let me give you a simple example, Breadtalk. 

I am not sure you noticed that Breadtalk is now trading at multi year high and at a PE of more than 30x (if I recall correctly). 

It is a combination of good management, favorable macro trend of rising affluence and multiple expansion. You can actually compute the effect of multiple expansion. Just use the latest EPS and multiple by the difference in PE multiple from one year ago. That will give you the "wealth created" to you by the lucky M

Why do some sectors such as healthcare have a higher mutiple versus others such as the construction sector? Can anyone control this? Probably not. You just have to "thank your lucky stars" when you benefitted from it. 

Happy investing. 

Keppel REIT and Keppel DC REIT

Keppel Corp continued to hog the headlines with the privatisation of Keppel Land. The chart also left behind the foot prints on people who are in the know... as evidenced by the increase in volume and share price prior to the halt and announcement. There are just too many people who may have "access" to the information, such as lawyers, investment bankers, corporate insiders etc and to be fair, such information are too difficult to control. The only thing the company could do was to suspend the share trading early and they did that 2 days ahead of their earnings announcement.  Anyway, I will leave that story for another day.


Keppel REIT announced its full year results for FY2014.


While the headline figures may not look good with DPU dipping by 8.2%, in my view, the results are actually ok. Currently i have 50,000 shares invested at $1.205 late last year.

Key Positives
  • The last quarter results only consist of 2 weeks results from MBFC Tower 3. It will have full quarter contribution going forward
  • Commercial rents continue to stay resilient and the rental revisions are done at higher prices.
  • Keppel REIT has one of the youngest and largest portfolio of Grade A office space
  • All in interest rates continue to be manageable at around 2.23%
  • NAV per unit is ~ $1.41 (versus the last trading price of $1.235)
Key Concerns
  • High gearing of 43.3%
  • Weakening of AUD against SGD from its Australian portfolio
  • They only partially own some of the key buildings. Asset enhancement projects will be more difficult if they don't have the controlling stakes in those buildings
Distribution Details

I like the quarterly distributions from Keppel REIT. Based on the announcements, i will get a distribution in February.

Portfolio

The feeling is not bad... as if you owned some prime office buildings in downtown Singapore.


Share price chart


Keppel DC REIT



Seemed like this stock is off to a good start after my entry at 96.5 cents.

Happy SRSing.


Monday, 19 January 2015

SRS Strategy and Portfolio

As mentioned in my IPO blog yesterday, I updated the investment strategies for all my blogs and today i cover the SRS strategy. You can find the updated strategy here and it will be constantly updated over time.



Let me reiterate the key concepts and mindset so that you can appreciate it better.

  • Fundamentals - Stocks are chosen primarily using fundamental analysis in terms of valuation, macro outlook and earnings potential.
  • Longer time horizon - The stocks are held over a longer time horizon and not intended for short term trading. 
  • Volatility - is actually not appreciated. I would prefer to see the share price creep upwards over time.
  • Cut loss - Protecting my downside or my profit is a must and equivalent to saying "I am wrong or Thanks for the ride up" depending on the situation. In any case, I would rather lose face than lose my capital! The rule #1 of Warren Buffet. I will keep my cut loss level to between 8-10%
  • Passive income versus capital gains. I am hoping to strike a balance between investing in stocks for the dividend income and investing in them for pure capital gains.
  • Targeted returns - My targeted returns for the portfolio is actually quite simple and straightforward. I hope to achieve portfolio returns of between 5% to 15% annually.
  • When to sell ? - I will sell the stocks when they hit the "intrinsic value" or when the valuations become too rich (or if i loses patience)..
Stocks that i missed out from my SRS accounts

I missed a few stocks that i was monitoring closely in December. They are UG Healthcare at 23.5 cents and Chip Eng Seng at 85 cents. No point crying over spill milk. Stocks that are in my watchlist include Nam Chong, CWT and Ezion. These are the stocks that "passed" my FA analysis in late December last year. The thesis should still hold. 

My current portfolio

My current portfolio consist of yield stocks. I will add some fundamentally strong stocks when the time is ripe.

Yield stocks
Keppel DC REIT 15,000 shares at $0.965 (data center REIT which i blogged about)

Keppel REIT 50,000 shares at $1.205 (office sector still the bright spot but this is highly geared and i may rebalance it later)

Cash ~$82,918

Ok so long for now. Happy SRSing.

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