End-July portfolio analysis

For July 2016, my portfolio fell 4.8% month on month, compared to the slight gain of the STI (+0.8%). Year-to-date, my portfolio is ahead by 11.3% compared to the Singapore benchmark's hair cut of 0.6%. For July, my biggest losers were Delfi (formerly Petra) and KrisEnergy. Delfi carried out a capital reduction, returning 13.3 cents to shareholders but share price fell 45 cents. KrisEnergy has been affected by the route in the oil and gas space, following Swiber's liquidation filing and subsequent judicial management u-turn.

Prior to the Swiber fallout, a friend asked me for my opinion on Sembcorp Marine. He was thinking of accumulating the shipyard's shares, which is at the lowest in its history, in anticipation of a sudden swing upwards when oil price recovers. I told him to wait it out as the market is correcting. Upside is marginal but downside is significant, unless you are hoping for a privatisation. It is the survival of the fittest in the O&G space. Clients are not paying and there is no demand for drilling rigs, which is in oversupply. I agree that there is always a possibility of recovery, but as the shipping (NOL), commodities (think Noble and WIlmar) and property markets have shown us, the downturn is long and painful. Gravity applies. 

About a year ago, I warned readers not to buy shipbuilders and services companies. I said:

Any uptick in oil prices may not increase the demand for new vessels given a surfeit of them. For the services company, competition may prevent day rates from recovering to pre-crisis levels.

Personally, I feel that the worst of the sector has yet to come. No one really knows how long oil prices will remain low. I guess that there will be consolidation in the market as some of the E&P, shipbuilders and services companies face financial difficulties. That is another story altogether. 

This would have saved you huge amounts of money and from heartaches.