Sunday, October 26, 2014

Lowest Price to Earnings, Price to Book Singapore stocks.

I went through the SGX website and discovered that they have a new and useful section called StockFacts. This is part of the exchange's initiatives to encourage retail participation by providing research tool. The ratios were supplied by S&P Capital IQ.

Given that the information now exists, I decided to copy and paste the ratios of the listed copies for screening purpose.

I decided to multiply Price to Earnings (PE) against Price to Book Value (PB), and rank the listed companies. Based on hazy memories, academic research has shown that stocks with low PE, PB and high dividend yield are stocks that will give super returns, although they tend to be illiquid. Teh Hooi Ling narrowed it down to low PB and high ROE. I used PE in place of ROE since it is not provided by the website.

The lowest ten and twenty percent of stocks based on the product of their PE and PB are and  shown. Excluded from this list are REITS and property counters. The reason is that REITS will have much higher yield, and property counters are distressed now. 

The lowest decile.

The second lowest decile

Saturday, October 25, 2014

The first SGD 100,000 is the toughest

Most of you would have probably read this article about achieving SGD 100,000 by 30 years old and wrote or commented on it before. I I am not going to rehash the article. Instead, I want to point out some of people on the internet that have achieved this amount by that 30 years old milestone. This is motivated largely because I realise that my Singapore equity portfolio has struggled to cross that mark.

You can click through the links and I counted about 6 of them at least, who have accomplished 100 by 30, based on  trawling through the sginvestbloggers link:

I follow some of the bloggers and for those I am not familiar with, I went through some of the older posts. Granted that n=40 would be a better sample, I found some interesting points from the 6:

  • 5 out of 6 were male
  • All 6 were born around 1980
  • 5 of them possibly had slightly above-average income benchmark against graduates of their time (insufficient data for "lady").
  • The same 5 had technical degrees most likely, engineering.

Sunday, October 19, 2014

Protect your profits with a trailing stop loss?

After failing to achieve supernormal returns on the sale of Action Asia, Biosensors and FJ Benjamin, I decided to create a simple trailing stop loss Excel worksheet. What I discovered surprised me or may mean I just need to improve my Excel skills. A trailing stop loss combines for lack of a better word, three "things" we know about the stock investments. 

Firstly, we have to cut loss mechanically because our emotions makes it difficult. Secondly, while we should let our winners run, we do not know how long before they start losing steam and start declining in price. Lastly, we can only identify a peak (or bottom) in stock prices or indices only after the fact.

Using weekly historical prices, I setup my Excel as follows. 

Friday, October 17, 2014

The shrinking of balls

After getting fully vested in stocks on 13 October, the last thing I wanted to see was a stock market meltdown. The American stock market fell steeply this week and this spread globally, with the STI falling 44 points on 16 October. Given that my basket of stocks is mainly defensive,  I did not expect to be hurt badly but I was surprised to see Petra post a one day fall of 35 cents, wiping out SGD 2,500 in my portfolio's value.

That said, the timing of my recent acquisition was premised on this article by Kenneth Fisher, whom I turn to for indicators. It was written in May and argued then that the fourth quarter should see some gains amid volatility. He has been correct on the volatility part. Reading Fisher's piece that reinforced my impulse and convictions, and so I pulled the trigger on the F&N purchase

What ever left needed to be convinced about F&N, was in the form of a Motley Fool article. To a large extent, F&N replaces Etika (now Envictus) in my portfolio as the latter has already disposed of its dairy business. I am not convinced that there will be future growth in Envictus' remaining business given that they have been weak traditionally. Management has hinted at the possibility of property development, but I am skeptical of Malaysia property. I am just waiting for an opportunity to offload the stock. 

I've also been reading bad things about Super Group to the extent I am regretting my purchase, which was done pre-bonus. The Super buy was done at relative high average prices and forms the biggest chunk of stocks by original value. The chronic weakness of the stock has left a gut wrenching feel to my stomach. Nevertheless, I will probably sit on this investment for a while more. If the market improves, and the stock does not move in the same manner, I will probably let Super Group go. Two more stocks on the sell list are GMG Global and Envictus but that is for another time. 

Tuesday, October 14, 2014

Fully invested with F&N buy

I am typing this on my mobile because typing on my PC feels like working. After the many recent sales and purchases, I have utilised all the special dividend distributed by Etika and I am now fully invested.  My latest purchase yesterday was F&N. I may cash out on Etika since I am.overweight the basic consumer sector. More details to follow.

Monday, October 6, 2014

Colex: Collecting is easy, selling will be hard

Over three separate transaction, I picked up a total of 80 lots of Colex. I did this after freeing up some cash towards the end of the quarter with the tidying up of the portfolio. The main reason for me collecting shares of collect was that it had been on my watchlist since 2009 and it was one of the shares that had yet risen much since then, I thought. As per Bloomberg, Colex's share price has risen from a bottom of SGD 0.08 three years ago to its current price of SGD 0.29. To a large part, due to the lack of trading volume for this share, I believe I contributed to most of the price increases the start of October.

The business model for Colex is straight forward - provide waste management for the West side of Singapore mainly through fixed long term contracts. As long as Singapore's population grows, particularly in the West side, earnings will grow in tandem, assuming cost remains the same. The main reason for cost escalation will be manpower costs although fixed capital for the trucks will weigh down future earnings.

Wilmar: Why I Lost Money and Regretted

The chart above shows why Wilmar is currently languishing at just above $3 when at its peak in 2010, it was worth $7. After a strong run up, crude palm oil prices have come down sharply. As per the index, the CPO prices were at the 1,300 level in February 2011, but the latest end-September index is 710. The supply of CPO has adjusted to demand and prices hence have collapsed and producers such as Wilmar have a difficult time improving margins. Other producers such as First Resources seem to have de-trended from CPO price levels, but I still think the fundamentals are still weak at the moment. 

I took a big hit on my investment in Wilmar and to a large extent I regretted. This is because I bought the stock because it looked like a discount from its old days. However, the old days, like the VHS, never did come back. That is why good thinking processes must be in place to make sure silly purchases like this are kept to the minimum. Good processes such as understanding the industry's and company's fundamentals are crucial to protect profits. 

Saturday, October 4, 2014

An unexciting visit to Perth

I visited Perth, Australia, with two of my friends over one of the September weekends. I flew in by Jetstar and got out by Scoot. The Jetstar flight got delayed but fortunately, I was covered by travel insurance. Because I booked early, my total airfare was close to SGD 400. Again, I stayed over at my friend's spacious apartment in the CBD and that minimised my lodging expenses. 

The itinerary was very predictable. Everything you have heard about Perth is very true. It is quiet, slower paced and lacks commercial tourist attractions. Outside the CBD, the number of Asians who have migrated to Australia or are working here, is very high. Still, this is not as high as the number of foreigners working in Singapore.

Day 1 started very late. Our rescheduled 7 am flight reached Perth airport at 1230. By the time we got to the city center, it was 2-3 pm. Our first meal was at a local fast food burger joint Grill'd somewhere in the vicinity of London Court. The burger below set me back by AUD 15 dollar! Food photos are the good work of my friend.

Clearing stock and counting the losers - Wilmar, FJ Benjamin

It has been a crazy past few days. After months of inertia, I have finally sold off Action Asia, Biosensors, FJ Benjamin and Wilmar. I have held the first three stocks since almost the beginning of my investing journey, close to 5 years each on average. Wilmar on the other hand, was bought and sold after 20 months.

For this transaction, Wilmar and FJ Benjamin were losers. Perhaps I was too optimistic of the prospects of crude palm oil and hence Wilmar's future. I lost 18% or SGD 1,440 on Wilmar, a blow that was softened by the dividends the company distributed. Also, I could never imagined that fashion retailer FJ Benjamin would sink so deep in the red for the latest full year end, after years of small profits. I lost 14% on FJ Benjamin and again, the dividends collected over the past 4 years helped cushion the impact of capital depreciation.

The winners were not really winners. Action Asia raked in 10.5%, or just SGD 154 for me, but that was mainly because the manufacturer was consistent in its dividend payout, and after close to 6 years holding on to the stock. Biosensors, raked in 36.2%, or SGD 587 but this was mainly capital appreciation. At one point, Biosensors was my two-bagger, but after one of the substantial shareholder dispose of its stake, it began on a steady downtrend that it has yet to recover.

Thursday, October 2, 2014

Portfolio ends Q3 2.8% up YTD; high on free cash

My portfolio including the value of dividends and free cash at the end of September, increased 2.8%, versus the 3.4% increase over the similar period by the STI. Approximately 30% of the portfolio was in cash or unused dividends, meaning given the recent meltdown as a result of the demonstrations in Hong Kong, the decline would have been worst. I personally think that give 1-2 weeks, the whole issue will settle down, although the downtrend has been terrifying for some.

I did some transactions on the final day of September. I sold my two lots of Wilmar at a 20% loss of value. I also bought some 10 lots of shares in waste collector, Colex. I have since added another 43 lots to my portfolio. It is a very illiquid stock which makes me wonder how am I able to dispose of my holdings in the company without incurring high transaction costs.

Entering the last quarter of 2014, I think it is time for me to clean up my portfolio even further.