Thursday, May 10, 2007

Portfolio Review and Objective Analysis

For those who do not know me, I will now attempt to give a preview of how I review my portfolio and analyze my investment decisions. As I did mention before, when I first started out it was just a tangle of messy thoughts, unfocused and impulsive. I did manage to make a lot of mistakes (fortunately, they were small ones !) before I started going down the path of value investing. Most of 2005 was a mumbo-jumbo of unworthy investment and trading decisions, and only in 2006 did I begin to seriously read up on investing, psychology, temperament and analysis.

Every half-monthly, I will do a review of the companies I own. Currently, my portfolio stands at 6 companies, and I usually like to keep at most 6-7 companies as I prefer a focused portfolio instead of one where I have 10-15 companies and I don't have the skill, time and energy to understand their businesses fully. Risk is lowered when you know your companies very well and the industries in which they operate. Diversification is for those who do not value companies, and is an effective protection against ignorance (according to Mr. Warren Buffett !).

A brief summary of my 6 investments are as follows:

Ezra - Bought in late 2005, oil and gas support industry

Boustead - Bought in late 2006, multi-industry though concentrates on wasterwater solutions, engineering solutions and industrial buildings

Swiber - Bought in early 2007, EPCIC services for oil and gas industry

Global Voice - Bought in early 2006, private fiber network solutions provider based in Europe

Suntec REIT - Bought since IPO days in Dec 2004, for steady dividend income (and I like to shop at Suntec haha)

Pacific Andes - Bought in early 2006, integrated processor of fish and fishmeal related products (and because I love fish too !)

These 6 companies form my core holdings since Feb 2007 after I divested myself of UTAC at a small profit, as I was not comfortable holding on to tech stocks as it did not fit my value investing criteria (incidentally, UTAC was bought based on a TA challenge from a friend, rather than using sound value investing techniques).

Periodically, the reader will get an update and review on the companies and how they are doing. Objective analysis is important to me, so comments are welcome if you think there is a flaw in my logical argument. Obviously, since I am vested it is virtually impossible to be 100% objective, but the attempt must still be made.

The next half-monthly review will be on May 15, 2007 Tuesday after market close. Swiber will be releasing their 1Q 2007 results on May 14, 2007 after market close. My next posting will probably elaborate more into how I evaluate past mistakes and learn from them in order not to repeat them again. This will be useful to the reader who may also have made several investment mistakes in his investing lifetime to date.


DanielXX said...

My views:
While the O&G sector is hot, I feel it is not too prudent to put two similar stocks as your core holdings for that sector. Ezra and Swiber are both in offshore vessel support, employing the same asset-light sale-leaseback strategy. Should things turn down, you could see a double-whammy, particularly when both are not exactly cheap now, having been recognised by the market. Note though that I am optimistic about the sector; just to point out the risks though of focusing too much firepower on it.

Nice blog :-)


musicwhiz said...

Hi Danielxx,

Thanks, appreciate your comments. I understand the risks of being vested in 2 companies which are in the same industry. However, after speaking to Raymond Goh and reading up a little on the O&G sector, I feel that demand will most likely taper off in FY 2009, which means there is still some steam left for FY 2007 and 2008. For Ezra, they are trying to diversify into FPSO and hopefully in future, other types of vessels. The growth may not be red-hot anymore but my entry price was low, so I can afford to hold on as its core earnings are still set to grow into FY 2008.

For Swiber, they are a niche player and I see them having a durable competitive advantage as compared to larger competitors in the USA and Japan. They are based here which means lower costs and they also have a good Management team, which to me is crucial for the success of a company.

I am optimistic for both sectors too, but cautiously so. I am aware that there are many unlisted players competing for the same contracts and profits too. Thus, I have to continually assess the companies to see if they are "up to standard". Once growth slows considerably, I may decide to divest my holdings.

Once again, appreciate your feedback !

Anonymous said...

i too started off as a trader, herd animal, trying to make a quick buck. take me a decade to learn, mainly by the crash. now that i become an investor, thought maybe nice to share a little. somehow like your sharing:)

divesification is like stacking rifles, 2 is not stable, 5 probably as stable as 50.

my biggest lost should be startech, some 90% down, bought from hearsay. my biggest gain must be sgx, some 400% up, still holding.

my biggest concern for a business, not its stock price, is competition. if you look at the business of sgx, it is monopolistic in nature, like all other exchanges. got in in 2004 after blood in the streets: asian financial crisis, 911 & SARS

i also hold PacAndes, like u, got it almost 1/2 yr price, and wish you share the financial analysis - esp on the high gearing. i thought they have zero competition, until i found american seafood & copeinca, got me worried. wish they can maintain the 20% share in PRC. regards.