Foremost on the list is that USA’s economy has rebounded and it definitely on the mend, even as unemployment rate continues to creep up and housing starts continue to drop. Lagging indicators are often used to determine if the recovery is truly under way, and if an investor is trying to pre-empt the recovery by watching out for such news in order to determine when to purchase shares, he will feel left out and sorely disappointed. As we have witnessed, both USA and Singapore had exited the recession in 3Q 2009; but the stock market rebound occurred in May 2009 and was sharp and sudden; hence the idea of properly timing the market as to when to enter is again rendered moot and futile. Nevertheless, I do know of friends and peers who continue trying, and I wish them luck in finding the “Holy Grail” in market timing.
In Singapore, it was reported that sales of private residential properties hit just 811 units for October 2009, down from 1,143 units in September and 1,805 units in August. While market watchers agree that October is usually a slow period, I cannot help but wonder if the recent measures taken by the Government to cool the market by increasing supply had anything to do with it. It is also in my interest to see prices for HDB resale move downwards as I have friends and relatives who are searching for an affordable HDB to buy but are being priced out of the market by the high COV levels. Higher private residential property prices also means that buyers who purchase such units have to take up higher leverage and financing, which may lead to problems 5-10 years down the road should interest rates rise. An article in the Sunday Times November 22, 2009 highlights this issue of affordability and prudence in purchasing a home, which many young and excited couples may not have planned or considered before-hand.
Just to comment on cars, COE prices have remained super-high (in my opinion at least), with cars up to 1,600 cc ending at S$17,189 and for cars above 1,600 cc ending at S$18,389. This makes it quite impossible for me to even consider a buying a car as the prices are simply amazingly high. I recently read about the newly launched and heavily promoted Volkswagon Polo, which is a 1.4L car and selling for a hefty S$63,000+. It seems Singapore continues to hold the record for being one of the most expensive countries to own a car. In line with my strategy to watch my cash flows, I am unable to reconcile (to myself) how I can own such cars as the cash flow drain would be enormous.
Anyhow, my portfolio did not see any changes for November 2009, as I was busy building up more cash through dividends while continuing my research for a suitable investment opportunity. I received dividends from MTQ, GRP, Suntec REIT and FSL Trust this month, amounting to about S$1,500 in total. Next month, dividends from Tat Hong and Boustead are due and will provide a boost to cash flows as well.
For November 2009, corporate updates and result announcements for my companies are as follow:-
1) Boustead Holdings Limited – I am in the midst of doing a detailed analysis on Boustead, part 1 of which was posted 5 days ago. Parts 2 and 3 should follow-up soon so watch out for it, but I may blog about other issues along the way as well. An interim dividend of 1.5 cents/share was declared.
2) Suntec REIT – There was no significant news for Suntec REIT for November 2009. The dividend of 2.92 Singapore cents per share was received on November 26, 2009.
3) China Fishery Group Limited – China Fishery released their FY 2009 results ending September 28, 2009 on November 26, 2009. I will be doing a detailed analysis and review but only after I finish up with Tat Hong and Boustead (too many things on my plate haha). In other related news, Pacific Andes International Holdings (PAIH) listed in Hong Kong mentioned that finishing touches were being put on their new super-vessel The Lafayette, and it was ready to set sail to the South Pacific along with 5 super-trawlers and seven catcher vessels. It is able to operate all-year round as it can freeze the fish on board once the vessels bring in their catch, and can re-fuel itself too. According to estimates from PAIH, profit margins for CFG may increase from 35% to 50% as a result of the increased efficiencies. The Group had spent US$100 million on the vessel, so I’d say it better be as good as they claim! There is also the question of sustainability of fish resources in the South Pacific once this vessel is deployed there, and in the interests of conservation and “saving the earth”, I may also have to consider if this could be a potentially “non-green” initiative which the Group has taken on.
4) First Ship Lease Trust – On November 23, 2009, FSL Trust (FSLT) announced a proposed issuance of US$200 million in senior notes due 2016. They are using the rest of the month to market the notes to international investors, and will keep shareholders updated on material events. The dividend of 0.23 US cents per share was received on November 26, 2009. There are some sources which state that FSL Trust is asking for "just below 12%" yield on the bonds, which are supposedly callable after 4 years.
5) Tat Hong Holdings Limited – Tat Hong released a very dismal set of 2Q 2010 results during the month, and saw their Balance Sheet and Cash Flow Statement deteriorate further. I guess it was quite a tall order for me to expect them to be immune to the financial crisis, but the drop in revenues and even larger fall in earnings was shocking and bewildering, to say the least. I had expected them to be able to hold up better as they had invested in a “rental” business model and were supposed to have learnt their lessons from past financial crises. An interim dividend of 1 cent/share was declared for ordinary shareholders and for holders of the RCPS. I shall be doing a review of the 1H 2010 results in subsequent posts.
6) MTQ Corporation Limited – There was no news from MTQ for November 2009. The interim dividend of 1 cent/share was received on November 24, 2009.
7) GRP Limited – There was no news from GRP for November 2009. The dividend of 1 cent/share was received on November 19, 2009.
Portfolio Comments – November 2009
November 2009 saw no changes at all to my portfolio, and I have been happy to remain vested and building up cash in the meantime. Realized gains have increased from S$26.6K to S$28.4K as a result receipt of dividends from Tat Hong, MTQ, GRP and Suntec REIT. Unrealized gains remain low at +7.5% as a result of recent purchases, but overall gain has remained steady at +28.4% of adjusted cost of S$135.4K. This was mainly due to increases in realized gain due to dividends which offset the drop in unrealised gains due to market weakness across second-liner companies.
My year-end portfolio review will be done on Thursday, December 31, 2009. At the same time, I will also be doing a special full-year review of my investment decisions and comment on the investment performance of my portfolio. It’s time to get candid and honest about my mistakes and misconceptions.
24 comments:
I find your comment on market timing very ironic.
You mentioned that the markets took off in May 2009 this year and you seemed to imply that it cannot be timed.
Look at any stock index chart since the peak. You will see that the chart consistently showed a series of lower lows and lower highs made in a downward staircase movement. It was not until May 09 this year that this pattern was convincingly broken and using simple price observation, one would be able to see that from then on after break through resistance, it made higher highs and higher lows consistently.
I am amazed that someone who seem intellectual and thinks a lot cannot see the obvious. Simple chart analysis coupled with seeing the worst is behind us after the banks were saved should have told you that the trend is up and time to be back in the market.
Hi James,
I find your comment very amusing.
With due respect, I WAS in the market. If you had gone through my portfolio reviews over the months, you would have noticed that I was buying back in Oct 2008 as well as March 2009.
But the fact that I was buying does not mean I was trying to time anything. I purchased based on valuations and future prospects.
And I would also like to point out that it was only AFTER the huge 5-day run-up in early May 2009 that it became painfully obvious that "higher highs" were being made. By then, most people would already have been left high and dry.
Temper your words with some courtesy, please. You are starting to sound very sarcastic.
Cheers,
Musicwhiz
High and dry, look at how much the stocks have moved since then?
When you buy a small cap stock say at 5x pe then compared to a blue chip stock say at 15x pe and when both have moved up respectively does this mean you were right because of value principles or because the overall market has moved? How do you know that it is your value principles that made you money?
I am not being sarcastic but stating the obvious which you are missing.
Simple economics, when a stock say consistently cannot move past a certain price for a long time and suddenly it is above to move past that price on volume, what does it mean? It tells you that the demand supply dynamics has changed which then leads to higher prices. Thus you may find a stock has value to you but if there is a big seller who is consistently willing to sell at a certain price, the stock will not move period. Understand that when this whole trend comes crashing down it will all end in tears in 2010 as it inevitably would, trend followers would have cashed out for a huge profits while value investors will continue to wait another cycle.
What you see in the market now is mass psychology in the reverse and all things being equal, stocks pe of 5 and 15 will all move up.
Does it ever occur to you that sometimes for the small cap stock, they trade at 5x pe for a reason, because of their lack of scale and when the bull market takes its full course, its get rerated to 10x pe but then that is its peak. Never mistake a bull market for your financial accumen. In a bull market, you will not know whether it is your value skills that made you money or a rising tide lifts all boats.
Food for thought.
Hi James,
What you have said is, though enlightening, definitely not groundbreaking. It has been mentioned many times by many people not to mistake a bull market for brains or stock-picking ability. So I am not trying to prove I can pick stocks very well; in fact the aim is simply to preserve capital (i.e. not lose money) and to grow my capital at a rate higher than inflation. Of course you can argue that there are other ways of doing it, but this is a process which I keenly enjoy. Someone once told me to enjoy the process of investing, and I am happy to say "I am".
What you say about demand/supply does not exist in a vacuum; it is based on expectations of future profits and growth and this comes about from a business perspective; and not purely from sentiment alone. You talk about PE as if they exist on their own; but PE is a moving target because aspects of a business change and profits change as well. So PE can adjust upwards or downwards depending on earnings expectations. Couple this with sentiment and economic strength and you get what is known as "reasonable" or "excessive" valuations. I think your discussion is useful though simplistic because it does not account for a myriad of factors which affect valuation.
While lots of people (including yourself) have mentioned the downside of investing (buy and hold) versus "market timing", I believe it's a matter of how well-equipped you are to "time" and also your skill and knowledge as well as temperament. For me, I will not practise a method which is not suited to my temperament or psychology, no matter how attractive it sounds.
Value has served me well thus far and I believe it will continue to serve me in future.
By the way, being sarcastic is not in the things you say (i.e. content); it's in the way the things are being said (i.e. expression). Just take note.
Regards,
Musicwhiz
Take gold for example. It is one of the most intriguing commodities. Try using value techniques to ascertain the value of gold.
Many well know hedge funds have piled into gold including none other than John Paulson famed for his billion dollar gains from the subprime crisis. This is essentially a bubble in making and more so when Barrick Gold a large gold producer just announced that they will no longer hedge a portion of their gold production to take advantage of higher prices.
Instead of trying to think about what the price of gold should be, all one has to observe is the price action of gold whose all time high used to be US$1000. Note the price action of gold after it crossed the US$1000 level recently, 20% gains in a short time. Yes what I am saying is nothing new or groundbreaking but it is the simplicity of demand and supply dynamics that value investors sadly ignore to their disadvantage.
That is the reason why Anthony Bolton in his book said that if really pushed, he could entirely manage a portfolio entirely based on price charts.
You are essentially going through the same path I went through 14 years ago but true enlightenment can only be achieved when one is prepared to look at the reality of this world. The market is made up of people and people do not change which is why price action can be used to make money consistently.
Hi James,
My opinion on Gold is simply due to the weakening USD - it has nothing to do with fundamentals or even value investing for gold if you ask me.
Regarding the use of price charts as suggested by Anthony Bolton, I respect that he has his own methods for consistently making money.
I also respect that you have your views on making money using the folly of others, and through price action.
But ultimately, I am afraid we have to agree to disagree.
Thanks,
Musicwhiz
All right then.
But just be aware that this bubble in the market will once again end badly and if you do not protect your profits through other means other than to wait until your company results, you may yet sit through another bull bear cycle.
Rgds.
Precisely the point I am trying to convey. Gold price is not about fundamentals but can be traded by understanding crowd psychology. So the same goes for the stocks you own. You think fundamentals affect. Yes but only to the extent of where it is approximately priced historically. Other key drivers are really the demand and supply of stock. Stock is in demand now because of the massive liquidity in the markets seeking a home. So the alternative way of looking at things is that at any point in time, stocks are always fairly priced and only move when there is a shift in demand supply economics which you are witnessing now.
Hi James,
Thanks for conveying your thoughts, they are appreciated. I concur with your view on Gold, but sadly I am probably not as smart as those who can spot such trends before they occur. I readily admit my areas of weakness; but will strive to build on what I am good at instead.
As for hedging my positions, yes I will sell if I find that a company is grossly over-valued. To determine that however, is more an art than an exact science.
Therein lies the challenge in investing; which I am happy to embrace.
Thanks,
Musicwhiz
Ironically to catch the trend in gold, all you need is to look at the chart of gold and just pick out the all time high price then buy when it crosses the mark. The news in the media would have highlighted that to anyone shouting out that gold has crossed 1000.
Same goes for stocks that break to an all time high soon after a major market trend begins. Look at the chart of Tencent 700.hk listed in Hong Kong soon after it broke out of its all time high early this year and look at where is it now.
All you need is just a few hours of your time reviewing the stock charts of stocks that have high new all time highs and their performance shortly after at the beginning of a bull trend. Now if you can spot the consistency of the price performance of stocks thereafter, don't you think you are really missing out on something simple yet very powerful.
Or how about Green Mountain Coffee listed in the US, ticker GMCR, see what happened when it broke out to all time highs in March this year.
When a stock is able to break out to all time highs at the bottom of a major down trend, it tells you the underlying strength of the demand for the stock.
Spend some time looking at these examples and spend some time thinking about why something so simple works? You will be surprised at what you can learn. In any case, what is a few hours wasted looking at all these numerous examples? Even if you want to conclude it does not work and want to use value investing for a lifetime, a couple of hours diversion is no big deal in the bigger scheme of things!
Well James,
I have no issues with you articulating your views here, since you seem to want to continue this discussion even though I reiterated for us to "agree to disagree". It's fine for me to hear your views, but I can choose whether or not I wish to act upon them.
I would also like to point out that the media is not always right and sometimes following so-called herd advice blindly can lead to significant losses. So yes, everyone was "right" about Gold crossing US$1,000 and making new highs, but how about the people at GS who predicted oil at US$200 per barrel back in 2008? They literally had to eat their words.
While it is very tempting to keep pointing out stocks which have made new highs due to momentum, this happens in any stock market all over the world and it is very easy to quote examples AFTER the fact.
The idea, of course, is for one to be able to identify such "trends and movers" before they move, and not use examples based on hindsight to illustrate the merits of timing and momentum investing. Thus, it would certainly be helpful if you could point out, in advance of course, several counters which you feel will make new highs in the coming months/weeks. This shall be a good testament that your method works and possibly lend credence to the fact that what you are suggesting is a viable strategy.
Till then, have a pleasant evening.
Regards,
Musicwhiz
1818 hk Zhao jin Mining which has just made a new high. I am long today.
This is not in hindsight and not prediction. You buy only when it breaks out. Anyway, will not bother you anymore.
Thanks James for your comment.
Ultimately, at the heart of it all, I feel our philosophies and psychologies are different. Thus, the (apparent) disagreement.
I wish you well, and thanks for sharing your knowledge and information.
Cheers,
Musicwhiz
no disrespect to any parties, but good call on zhao jin mining...
No reply necessary but thought that I should at least provide another stock which just hit a new high. As it happens. So no hindsight necessary.
3393 HK Wasion Group
james, ok if you could send me an email? thought i could talk to you abt a few things regarding this high-impact investing method of yours. im also trying to learn. my email is wozhaodaole@gmail.com
btw, i thought wasion wkly chart doesn't look tight enough in the last couple of wks. and volume is either flat or trending up, instead of down...think breakout may not last. but i may be wrong.
Hi James and Simon,
Appreciate if you will take your discussion(s) offline. Please don't take the comments box as a place to post stock picks or for rambling discussions on trading. I believe this was not the intention of my blog.
Thank you.
Musicwhiz
When I posted a comment(in fact I posted quite a few before on the subject of sustainability for this company)on this company earlier, "green" or "save the planet" are not what I am looking at. These are another issue and topic.
Human consume seafoods for thousand of years, it is also the same for logging. Both are sustainable because of renewable. That is not the same for metal/coal mining and oil/gas as they are non-renewable resources. But currently, my understanding is, of all 4 major mining industries --- oil/gas, metal/coal, logging and fishery(all are considered as mining) fishery is the one that is most fragile, unsustainable and with almost all major developed countries seafood stocks has collapsed. What left are mostly from developing countries. Even Japan, an outliner is facing this problem.
If you wish to understand why this is the case(From your posting I assumed you haven't), trying reading some good books, sources and exercise good thinkings.
A simple one like if what I pointed out is true, then China fishery must be very special to able to earn ROE of 30% and above for a considerable long period. But will it?
Try the website for MSC certification. I believe it is a good place to start because it is a balance between for profit organisation and environmentalist.
http://www.msc.org/
JAMES!!! START A BLOG AND EXPLAIN YOUR METHODOLOGY!
I THINK IT WILL BE A WINNER!
Or can go to wallstraits and tell your story?? :) I'm all ears!!
Donmihaihai,
'fishery is the one that is most fragile, unsustainable and with almost all major developed countries seafood stocks has collapsed. What left are mostly from developing countries. Even Japan, an outliner is facing this problem.'
i think this is music to the ears of china fishery shareholders....
think about it. less competitors and less fish around the world, sustainable demand, doesn't this sound like a big moat? in fact any china fishery shareholder wishes that all the fish stocks around the world disappears, except for Peru!
i can answer your question and i think china fishery is truly a very special company indeed!. =)
Hi Simon,
Lets say it is true that Peru is the only place where fish stocks has not collapsed(of course it is not true) and China Fishery Group is the only license holder to fish here. So China Fishery happily sell their catches to the market but suddenly found out that the market has already flooded with cheap fish from acquaculture. What going to happen? Sell cheaply or differentiation? Is wildcatch really value higher for a generation that grow up eating firm fish. Just like do we prefer wild pig?
I don't know the answer but it is certaintly not going to be as simple as what being suggested by you. Then do you think an international/foreign company can continue to fish in Peru when Peru know that they hold the last "gold" in the ocean?
The question I put forward earlier is on whether they are mining the capital or interests. Mining the interests in not as good because it depend on how high is the interest rate and how much capital in the ocean. Mining the capital is of course great until there is nothing left.. So what next? move their vessels to other places(rape and go)?
Hi Donmihaihai,
I actually agree with what you said long before you posted it here. I had read articles on sustainability of fishing resources and about depletion of the oceans due the rampant "raping", so this topic is not new to me. I am curious though as to where you got the ROE of 30% number from - this is NOT what I would expect from any company much less China Fishery. A more reasonable figure of 5-10% is already considered very decent.
Thanks for the links and I will read them. I've been busy these few days hence sorry for the delay in replying to your comment. And yes I assure you I will exercise "critical thinking" in my future posts.
Thanks,
Musicwhiz
Hi Wealth Journey,
Could I kindly request that you refrain from using CAPS when you post comments? I understand you may be excited but it doesn't look good when you are perceived to be yelling.
Thanks for your understanding.
Musicwhiz
Hi Simon,
That's pretty simplistic thinking, I would say. Fishery isn't just about one company owning all the rights or access to an area; and fish don't simply come from one particular source. If they did, then the Earth has a very very serious problem! Fishing may end up as an organized oligopoly with a few major players in the end, but Donmihaihai questioned the sustainability of fishing resources and I think he has made a valid point.
Copeinca is a competitor I benchmark China Fishery against and they are much larger in terms of size and scale. The recent ITQ system will limit damage to fishing systems and will help boost EBITDA; but overall I still have to assess if what China Fishery is doing is ethical and takes into account marine sustainability.
Regards,
Musicwhiz
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