Saturday, December 31, 2011

December 2011 Portfolio Review and FY 2011 Year-End Review

For this year-end review, I will be doing a comprehensive review of various aspects of my portfolio, covering cost, yield and also benchmarking against the STI during various months of the year. The reason for this is to get a better understanding of how my portfolio has been growing to date and over a period of two years, and how my returns have been affected (if at all) by the recent crisis. Another aspect which I will be looking at is the benchmarking as it would indicate whether I should simply stick to index funds or whether I should doggedly continue my pursuit of analysing individual companies and investing in them. Obviously, if my stock-picking skills are so bad that they stink, I would be better off saving my own time buying into ETFs than wasting it on futile analysis. At the same time, at the end of each section, I will also include my 2012 plans and aspirations.

Portfolio Growth


Portfolio growth tracks the growth in my portfolio over the last two years, and it was interesting to compile this to see how I had injected money and taken money out during this period. I started the year 2010 with a portfolio cost of about $151,000, and at the time the market value of the portfolio stood at about $160,000, with a gain of 5.9%. A total of about $51,000 was injected into the portfolio during 2010, and though it looks like there were no withdrawals, a quick glance at last year’s portfolio summary actually showed two divestments – one of FSL Trust and another of China Fishery (for a loss and a gain respectively). The proceeds were immediately reinvested into other promising companies, and 2010 actually ended with a portfolio cost of about $202,000 and an unrealized gain of 20.2% translating into a portfolio market value of $243,000 as at end 2010.

Looking back on hindsight, the performance for 2010 was way better than for 2011, largely due to the Europe Crisis which broke out in 2011 and caused a sharp fall in overall market prices. If we just base on share prices alone, the performance of the portfolio would definitely pale in comparison for 2011 compared to 2010, as the average gain was 13.7% for 2010 across twelve months, while for 2011 it is a mere 8.8%. But note that the money injected into the market amounted to about $40,000, which was comparable to 2010 if you factor in the turbulence in my personal life during 2011, as compared to a relatively calmer 2010. Of course, looking at the market value of the portfolio as at year-end 2011, it was severely affected by the economic turbulence and political uncertainty in Europe, and therefore just registered a gain of 3.2%, for a market value of $250,476.

Moving forward, the aim for 2012 is to at least maintain the capital injections (of around $50,000) as per 2010 and 2011, accelerating only if markets fall substantially, akin to the doomsday scenario of October 2008. From the lessons learnt from the last bear market, I have positioned myself to be always prepared for a major crisis with sufficient cash to take advantage of opportunities. At the same time, as an investor I have to continually keep a watchful eye on the performance of the businesses of the companies in which I own shares. Assuming I inject a decent amount into my portfolio, the cost by the end of 2012 should be around $300,000.

Realized Gains, Full-Year Dividends and Dividend Yield


From the above table, it can be seen that 2011 registered an overall realized gain of $5,600 from the divestment of Tat Hong and GRP. Recall that 2010 also saw a net realized gain of $9,400 but this was due to a larger gain offsetting a smaller loss (gains from China Fishery offsetting losses in FSL Trust); therefore I do consider this an “improvement” of sorts as both divestments resulted in gains, albeit much smaller in quantum as compared to last year. However, readers should note that both divestments this year have been classified as “investment mistakes”, and those who wish to know more details can visit the relevant posts under this category to read up.

As for scrip dividend, thus far only MTQ is offering this scheme among the six companies within my portfolio. For 2011, a total of 2,206 shares were received as a result of me choosing full scrip over cash dividend, and a further 1,000+ shares will be received by me on January 6, 2012 when MTQ’s interim dividend of 2 cents/share is credited to my CDP account in scrip. The scrip price determined for this round is 73 cents/share.

For the entire year of 2011, a total of $14,744 in dividends was received. Note that this does include special dividends from three companies – SIA Engineering (10 cents/share), Boustead (3 cents/share) and Kingsmen Creatives (0.5 cents/share); thus it should not be taken as an “indicative” year. If the special dividends were stripped out, total dividends would fall to $11,540. Based on a monthly average of $1,229, the blended yield is about 6.08%, slightly higher than the recently reported benchmark inflation rate of 5.7% for November 2011. If I assume all dividends revert back to base case (i.e. no change from 2011 for next year, just based on interim and final dividends), then yield may fall to somewhere around 5%+ of cost. Though this will be lower than inflation, it is still quite a respectable long-term yield as headline inflation is not expected to remain above 5% for an extended period of time (historically, it has hovered around 2-3% per annum).

The target for 2012 is to at least maintain the dividend yield, as it is expected that it would be a rougher and more uncertain year. Absolute dividends are expected to remain fairly constant (minus the special dividends), so cash flows should be relatively stable. Depending on whether additions can be made to the portfolio, it may help to bump up the dollar-value of dividends somewhat.

Benchmarking Against STI


The table above is a pretty new one in the sense that I had never before compared my monthly performance against the index before. Since 2011 I have been posting up my monthly XIRR performance against the index’s performance, and obtained a difference which represents whether I had outperformed the index (+) or underperformed it (-). A very interesting observation arose from the above table – for a value portfolio which I am maintaining, apparently the out-performance increases when the index is plunging, rather than rising. Notice that when the index had dipped below the 3,000 mark from August 2011 onwards due to the onset of the Europe Debt Crisis, that was when the portfolio had its best out-performance against the index. The second-widest margin of out-performance was in September 2011, when the portfolio registered a +11.6% gain over the STI, due to the share price resilience of companies such as Boustead, MTQ and Kingsmen Creatives. Amazingly, the largest gap thus far has been achieved at this point in time, with a +12% gain of my portfolio (-5%) over the index (-17%). I am not sure if this out-performance can be maintained in 2012.

One should also note that share price resilience is also a direct result of business resilience, meaning businesses which are adequately capitalized and enjoying steady business even amid hard times can qualify to be considered as “stable” and thus act as suitable investments through good times and bad. Companies which generate consistent free cash flows and which have a strong balance sheet will also see less share price volatility in general, except for the occasional desperate seller who will cause prices to move erratically due to the low liquidity. It is my intention to seek out more of such stable businesses which embody both growth and yield characteristics for my portfolio in future, and which are trading at undemanding valuations vis a vis their future prospects and cash flow generation capability.

Below please find my portfolio as well as corporate summaries for December 2011:-


1) Boustead Holdings Limited – There was no news from Boustead for December 2011. The interim dividend of 2 cent/share was received on December 16, 2011.

2) Suntec REIT – There was no news relating to Suntec REIT for December 2011.

3) MTQ Corporation Limited – There was a minor announcement from MTQ on December 15, 2011 about the liquidation of a subsidiary, MTQ Subsea Technology Pte Ltd, which has been dormant since 2008. Other than this, there was no news from MTQ for December 2011.

4) Kingsmen Creatives Holdings Limited – There was only a minor announcement on December 12, 2011 of a change in shareholder in Kingsmen Korea as a result of the issuance of 7,500 new shares to Mr. Daechul Lee as part of alignment of his interests with the Group’s.

5) SIA Engineering Company Limited – There was no news from SIA Engineering for December 2011.

6) VICOM Limited – There was no news from VICOM for December 2011.

Portfolio Review – December 2011

Realized gains have remained at $69,500 due to an absence of any dividends in December 2011.

For the month of December 2011, the portfolio has decreased by -5.0% (using XIRR in MS Excel to compute) against a -17.0% fall in the STI; thus my portfolio performance has outperformed the STI by +12 percentage points. This was a better performance compared to November 2011, when the portfolio out-performed the STI by +10.7%. Cost of investment has remained at S$242,600 and unrealized gains stood at +3.2% (Portfolio Market Value of S$250,500).

As mentioned previously, January 2012 shall be my last month of blogging, as the intention is to shut down the blog as my workload increases and I increasingly look to more time with my family and friends. I shall probably do a post reviewing and summarizing my investment journey these last 4.5 to 5 years in the middle of January, and my final post on this blog shall be my Jan 2012 portfolio review and summary. Be assured, however, that historical entries will still be preserved and accessible to all, and that this link will still remain active even if no new posts are made.

My final portfolio review (and post) will be on January 31, 2012 (Tuesday).

20 comments:

Harry said...

Hi, I came across your site and wasn’t able to get an email address to contact you. Would you please consider adding a link to my website on your page. Please email me back.

Thanks!

Harry
harry.roger10@gmail.com

Raymond said...

Good year for 2011 doing a whole lot better than the STI.

However, a more accurate comparison to the STI would include the dividends, and if you use that, the STI return would be -15to -16%%, a few percentage points better than what your graph had indicated.
My calculation was done with XIRR using the STI ETF ES3.SI, where there were 2 dividend payouts in the year and the dividends were re-invested.

Sgbluechip said...

Hey MW, why are you retiring from blogging?! Just blog less and not so frequent lah!

Just a comment of using STI as a benchmark. You may want to consider using STI ETF as a benchmark as the index do not take into account dividends from companies which over the long term grossly state the actual return of STI.

For the past 10 years, STI index value annualized return of 5% PA. If we include a modest 3% average return, even without factoring compounding, STI would have returned 8% PA.

Just a thought.

financiallyfreenow said...

MW, it will be sad to see you go from blogging! Maybe you can blog less frequently and keep your posts concise to unlock more family time? Like you said, pls keep the old posts in your blog for our reference. Your posts are so informative.

hyom said...

Hi Musicwhiz,

I think you have done admirably well for 2011 despite being negative for the year. If it is any consolation to you, I am also down for the year.

Your performance is good not only because you beat the benchmark index, you beat the Asian hedge funds as well. Asian hedge funds lost an average of 8.7% in 2011 through November.

http://www.sfgate.com/cgi-bin/article.cgi?f=/g/a/2012/01/04/bloomberg_articlesLXB5XI0UQVI9.DTL

It is a pity to see this blog being shut down. Nevertheless, I respect people who have the courage to put up their portfolio to scrutiny by the public.

Hope you maintain your outperformance to the index and hedge funds in the years ahead.

Singapore Man Of Leisure said...

Hello Musicwhiz,

There's a season for everything.

I very happy for you! At each stage of our life, our priorities and interests will change. Glad you have listened to your heart.

Your family and friends will be glad you honour them over "others".

And knock them dead in your career! Woo hoo FTW! (Learnt this lingo from today's Sunday Times)

Where the wind blows I follow. I mentioned it in my non-New Year resolution post. I think you will appreciate what I tried to say - it's not meant to be taken literary ;)

Go and enoy yourself! If and when the wind blows you back, we will benefit even more with:

Musicwhiz 2.0!

Musicwhiz said...

Hi Raymond,

Thanks for the heads up. Using the STI ETF would have produced about -16%, you say? That's not very much different from -17% by using the index. I think either one can be used as a proxy for the general market level, but it's interesting that the reinvested dividends only "improved" the performance by about 1-2 percentage points. Do you happen to know what the yield on STI ETF is?

Thanks,
Musicwhiz

8percentpa said...

MW, Sg investment blog space will never be the same again w/o you.

I must say blogging less really helps. I gave up trying to maintain 1 post per week and now only post when I feel like it. It does takes away a lot of the mental stress.

Having said that, it's your decision. Move on and have fun. I would love to keep in touch with you. Do email me ok?

xtam.sg@gmail.com

PS: Your blog is one of the largest traffic drawer to mine, I will be losing traffic *sob*, but, seriously, it was great, so long and thanks for all the fish!

Jojo said...

Hi MW
Congratulations on your performances. I'm sure we will all miss your post.

Please stay in touch at hey.jojos@gmail.com

Cheers

Jojo

Musicwhiz said...

Hi SGBluechip,

Thanks, my decision is based on not just workload, but also the fact that I have more or less internalized the process of investing and therefore do not need to keep a "diary" of my thoughts anymore (which is pretty time-consuming!). My priorities also lie with family and my social life.

Wish you well in your life, career and portfolio!

Regards,
Musicwhiz

Musicwhiz said...

Hi FFN,

You're most welcome. Yes, I will keep the old posts here as an "archive" of sorts, for anyone who visits to read as reference. I am glad that this blog has helped many and inspired others like yourself. Yours is a great blog too, keep up the good work!

Cheers,
Musicwhiz

Musicwhiz said...

Hello hyom,

Thanks very much for the link - actually I had not realized that it was such a bad year for Asian Hedge Funds until I read the article! Anyhow, I do see this as an anomalous year for me in that I managed to "beat" the index by +12%. Suffice to say this kind of performance is pretty hard to match consistently, and I am certain there will be some years of severe underperformance. I am definitely not arrogant enough to think that I can repeat this easily, haha!

So far for 2012 (as of this post), I am already trailing the index by about -6.5% as the index has surged by 5.5% but my portfolio has actually decreased by -1%. Of course, it's only January but it goes to show that performance can fluctuate wildly depending on how the index and individuals stocks move. I am heartened though, to know that the underlying businesses are still solid and that I can have a good night's sleep!

You are right on the portfolio - not many I have seen put their portfolio up in public for scrutiny, and for so long. I have done so since 2007 for more than 4 years, and have tracked it consistently month by month while giving reasons for my BUY and SELL decisions. I would encourage others to do the same if possible too, if only for the sake of learning from mistakes and gathering constructive feedback.

Regards,
Musicwhiz

Musicwhiz said...

Hi SMOL,

Haha thanks, I really appreciate your candid style of writing and admire your carefree attitude. Perhaps I take life a little too seriously at times and cannot stop to smell the roses! Thinking too much about compounding money, getting a decent return and building wealth certainly saps a lot of time and energy!

But yes, I do hope to "blow" my loved ones and friends' minds with my career, and overall allocate more time to them in place of blogging.

And well, assuming I do come back someday to blog, it would certainly be a new version of me - what you calll Musicwhiz Ver 2.0! Maybe even Version 3.0 perhaps? Overhauled and much improved? Haha!

Musicwhiz

Musicwhiz said...

Hi 8percentpa,

Yep you're right it's a personal decision to stop blogging. I agree that blogging at your own time, own target takes away a lot of the "stress", but it is still time-consuming and requires a lot of thinking and analysis (well, in my case particularly haha).

I didn't know you derived so much traffic from my blog, hehe. Don't worry the link will still be active so future readers visiting would still be able to link to yours! I hope to be able to continue to attract readers long after I stop, as a testament to the quality of the content!

Regards,
Musicwhiz

Musicwhiz said...

Hi Jojo,

Thanks for the compliment.

Sure will stay in touch.

Regards,
Musicwhiz

hyom said...

Hi Musicwhiz,

The average Asian hedge fund lost 8.7%. However, the equity-focused hedge fund tumbled 19%. This is even worse than STI.

http://www.businesstimes.com.sg/sub/news/story/0,4574,472937,00.html?

So, your outperformance over the average equity hedge-fund manager in 2011 is an astounding 14%. Congratulations!

The January effect is strong this year. STI has beaten me flat too.

I am not so sure if it is a good thing to put up the portfolio for public scrutiny. Getting constructive feedback is not guaranteed. I remembered in 2008, there were some unkind remarks about your performance which was totally uncalled for. I do not think you can benefit much from it. Glad that you bounced back in 2009 and thrived thereafter. I think the best constructive criticism was found in Valuebuddies forum by d.o.g when he was back to his old habit of tearing apart other people's stock picks. You had the admirable attitude to take it in your stride when he did that to you. Some forummers in the old Wallstraits did not take too kindly to that. Actually, not many people take kindly to criticism if their best ideas(at least what they think) are attacked.

When a person puts his portfolio under public scrutiny, if the stock picks are good, he is inviting competition at his own expense by giving out his best ideas for free. If the stock picks are bad, he may get sarcastic remarks like "Not everyone can be Warren Buffett". How to benefit from remarks like that? Even if he gets constructive feedback, he may not have that magnanimity to accept good advice when his best ideas is torn down humiliatingly in public.

FoodieFC said...

Noticed your last part saying that you are gg to stop blogging at the end of this month. All the best to you!

Huat AH!

Musicwhiz said...

Hi Hyom,

Haha I wasn't actually expecting to compare with hedge funds, but thanks for the statistic anyway! I think it's sufficient for me to beat the inflation (first priority) and then the index.

Yes, I guess the so-called January Effect has caught me off-guard too, and has not thrown me much opportunity to collect shares.

Yeah I do remember the Afralug and Value Buddies exchanges where d.o.g. took apart my Ezra, China Fishery and Swiber. He told me I made three bad choices because of poor balance sheets and cash flows, and cautioned me not to do so again. I heeded his advice seriously because I know he meant well, and his arguments made sense. The endowment effect is not strong enough in me to make me "fall in love" with my stocks and ignore sound, logical reasoning. Hence, I made the decision to overhaul my portfolio in 2009-2010. It came a little too late, sadly, if I had accumulated companies like Kingsmen, MTQ and VICOM much earlier, I would have got them at bargain basement prices. But I guess better late than never.

I also do agree criticism on the Net is seldom constructive. In fact the forum was much better in the sense that people were civil (most of them, at least) and intelligently argued and pointed out flaws in logic and reasoning. I guess the 2008-2009 experience made me wary of people who just posted comments to take a pot shot at me, and apparently there are tons of such people.

So I guess stopping this blog has its advantages as well. I can relax and go about my own investing without worrying too much about what others think. I have a proven methodology and exeuction style and just have to work on my analysis and decision-making.

Wish you luck on your job search!

Regards,
Musicwhiz

Musicwhiz said...

Hi FoodieFC,

Thanks for the well-wishes. Happy New Year and take care too!

Cheers,
Musicwhiz

james said...

reinvesting dividends is always a great idea.