Year End Portfolio 2010

Happy New Year Everyone! Hope that you guys had a wonderful 2010! :D

I have been busy with a lot of other stuffs except blogging haha... If you are lucky, you might be able to catch me chatting in LP's blog.

Made a grave error in overstating the returns for Kingsmen and above is the edited 2009 portfolio. Taking into account of this error, which I only managed to detect it today! I have severely underperformed the STI ETF in 2009 by 18.7%! However, I usually perform better in bear markets than in bull markets.

Recall the performance yardstick.

Yardstick

Like most things we do everyday, we should have a yardstick to measure performance. I hope to do better in bear markets than in bull markets as I'm looking for companies with good future prospects at depressed market prices. I would be happy if my portfolio can outperform the STI ETF by 10% each year. For example the STI ETF this year gained 22.1%, I would do well if I can achieve >32.1% gain in portfolio for the year. I also consider in a year whereby my portfolio is down 20% and the STI ETF down 30% to be a better year.

The STI ETF ended the year 12.5% higher including dividends than where it ended in 2009. Dividends received was $0.06 or 2% at $2.97, 2008 market close. I outperformed the market by 28.9% which makes the score, 3 for me and Mr Market 1. :)

Is this luck or skill? Only time will tell. I've stayed with Mr Market for one cycle (bull-bear-bull) for the past 4 years. I guess to convincingly say that one is good, one should at least go through 3 cycles of the boom and bust. How long is one cycle? Nobody knows, it varies and is not exact science. Read uncle88's blog, quite funny haha...

Regards,
Cheng BSM (B.StockMkt, SG)

Ps: This title is made up and has no value whatsoever. Lol!

Year End Portfolio 2009

Dear all, sorry for the delay in my portfolio update and the lack of posts. Have been very busy in school. 2009 is a good year, I have gained more knowledge, became much wiser and met many more valuable friends! I am forever grateful to them. :)

This year I did not perform as well as I would loved to. The STI ETF gained 66.3% including dividends while my portfolio only gained 58.8% this year, underperformed the STI ETF by 7.5%. To recall, my goal is to beat the STI ETF by 10% every year. Annualised return was 28.3% and hopefully I can improve further.

Cashed out $10k to give some to Mom and went for a holiday to reward myself. Still have around $4k which I would transfer into my trading account.

I will post the lessons learn't in 2009 at a later date.

Always keep an open mind, doesn't matter if it's TA or FA. Sometimes both will work and sometimes both doesn't work. Depends on how you use it. LOL!

Wishing everyone a happy tiger year! (And Yes! It's my year again, haha...) :D

Year End Portfolio 2008

2008 is a tough year for all investors. Experts have mentioned that this financial crisis is more severe than the great depression of 1927. I don't know how long the bear will last, but I'm sure the market will rise again. Nothing is new in market cycles, the boom and bust, top and bottom. History repeats itself because greed, fear, hope and ignorance will always be there in the emotions of the market.

It's a fruitful year for me and a great learning experience to ride this bear market. I've grown wiser and hopefully my capital allocation skills have improved. Made many investor friends this year. They are all very successful in their own ways and I wish them well and a prosperous new year in the years ahead. They have taught me a lot and have given me great insights in personal finance and how to enjoy life. I would like to thank them personally. (pappy, dream, san jie, uncle88, kk, superfriends I've met this year and online friends...etc etc the list can go on and on :P) You can chat with us at pappy's blog, it's getting crowded haha...

I'm happy with the past performance as I've met my target of beating the STI ETF benchmark by 10% for 2 consecutive years. However past performance is not a good indicator of future performance. I feel that I'm quite lucky and would like to be lucky again. Only time will tell, after 5 years if I've not met my target, would be better off investing in the STI ETF itself.

Cheers and Happy New Year to all readers! :D

Mid-Year Portfolio 2008

Performance of STI ETF (16.5% loss for 1H08)

Mid-Yr 2008 closing price (30th June): $3.030
Dividends: $0.06
2007 closing price (31st Dec): $3.699 (adjusted for 1 to 10 stock split on 10th Jan'08)

Performance of Chan Partnership: (11% loss for 1H08) (37% overall gain)

Sold ChinaACorp: $2,455.93(initial capital-trading fee) -$1,168.82(47.6% loss)= $1,287.11

Comment: Sold off the speculative stock ChinaACorp. Risks are high so I dare not put in a large amount. Speculating will never happen again. Never! See what it has done to me. HAHA!

1) SBSTransit (4.9% loss)

Bought: $6,900 (capital injection)
Value at 30th Jun'08: $6,510- $46.31(trading fee) +$97.50(dividends)= $6,561.19

Review: SBSTransit have dropped to their 52weeks low due to high oil prices. A blue chip stock trading at 13-14 PER, cheap in my opinion. Public transport pie may actually grow bigger as drivers find fuel price increase and ownership of car hard to cope. Foresee revenue increase as they will raise prices again in the near future. It is not easy to satisfy both shareholders and commuters.

2) Kingsmen (120.9% gain)

Bought: $6,000
Value at 30th Jun'08: $12,300 -$45.62(trading fee) +$1000(total dividends)= $13,254.38

Review: Business fundamentals still intact. Looking forward to listing in Mainboard. Stock definitely undervalued at $0.41. The discount to fair value might help to increase number of shareholders despite the 2 to 3 stock split. Having at least 1000 shareholders is one of the requirements to go to Mainboard. Fair value of Kingsmen $0.60. Foresee more contracts coming from IR.

Total value at 31st Dec'07: $16,810.31+ $6,900= $23,710.31(adjusted for capital injection to compare against 2 different periods)

Total value at 30th Jun'08: $21,102.68

Overall gain: $21,102.68/$15,400(total injected capital)=1.37=37%

Summary

In the first half of the year STI ETF loss 16.5% in value and the Chan Partnership loss 11% in value. I beat the market by 5.5%. Not impressive because my goal is to beat the market by 10% every year. Read my earlier portfolio post on yardstick. However, I am not bogged down by short term results.

Low returns are attributed to weak market sentiments due to high oil prices, inflation and US sub-prime issues. An opportunity for value investors to buy cheap.

"We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful." Warren Buffett

"Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." Warren Buffett

An update of myself

I have to apologise for the lack of updates to dear readers who have benefited from reading this blog (although it is not much, these are just the basic foundations of value investing). Busy with school work was the primary reason and laziness being the secondary reason. I've actually cut down on a lot of activities and allocate more time to school. Most of my brain cells are now directed towards Anatomy and Physiology. I'm studying Physiotherapy at NYP if you are wondering. It is a 3yrs Diploma and 1yr Degree overseas course. Currently Universities in Singapore don't have this course. Yep! I'm climbing towards the plan that I set up for myself. Graduate with a degree and set up a healthcare business. With the accumulated profits, I can further invest in businesses.

Recent portfolio changes and updates

I will be doing a mid-year review of my portfolio at the end of June. My mom has decided to invest her savings with me and it will be officially called The Chan Partnership. I've sold off my losses in ChinaACorp. A loss of ~$1400, about 10% of my previous portfolio not including injected funds from Mom. This will be my last and final attempt on speculation and deeply regreted it. With the extra funds, I bought SBSTransit giving close to 7% annual dividends at 13X PER. Although crude oil prices will continue to rise but I foresee that the public transport pie will get bigger in Singapore. Margins will be offset by growing commuters as more people realise the high cost of maintaining a car in Singapore. It is not a fantastic investment but it is a safe one with an adequate margin of safety. Mom, your son will be extra careful with your hard earned money! d:D

Kingsmen continues to do well and I'm positive about their business prospect with more IR projects coming in. Much more emphasis is also placed on the designs of retail outlets to attract more customers. I think Warren Buffett said this before 'a business that helps other businesses make more money is a great business'.

The focus now is not really on the sub-prime issue but on inflation which affects everyone globally. It is increasingly challenging for value investors to deal with inflation as we need to adjust our calculations on the value of businesses accordingly. Time may actually be our foe if the price of the business remains stagnant for years even though we know the value of the business should be worth a lot more. Inflation eats into our profits as buying power of money decreases.

Portfolio 2007

Straits Times Index(STI) closed at 3,482.30 higher for the year 2007, which is an increase of 16.63% excluding dividends.

The 10 year annualised return for the STI is approx. 8.93% taken from fundsupermart. The average investor who diversifies would also expect to get almost the same results like 9-10% p.a. over the long term.

The STI alone is not a good indicator of measuring performance because investors cannot buy the STI. Instead investors will have to buy streetTRACKS Straits Times Index Fund(an exchange traded fund-STI ETF) listed on 17th Apr'02 designed to track the performance of the STI. Its objective is to replicate as closely as possible, before expenses, the performance of the STI. To provide a fair computation of the performance of the STI ETF, we should use its NAV from 3rd Jan'03 $14.05 as a base. The closing price for STI ETF for the year is $36.99. Total dividends received for the last 5 years is $3.33. Hence the annualised return for STI ETF is 32.7% and 37.4% including dividends, excluding management fee of 0.3% p.a. Also take note that the STI ETF is approximately 1/100th of the STI.

Some may ask why the large discrepancy in the annualised return of the STI and STI ETF? The reason is that STI ETF is only set up 5 years ago and these 5 years are bullish years. Another reason is that the STI ETF closed at $36.99 which is $2.17 or 6.22% higher than the STI. Market sentiments are still bullish which contributes to the bidding up of prices higher than the STI. As such I should also provide the previous 5 years annualised return of the STI which is 19.47% excluding dividends. To conclude, the management of STI ETF did 13.23% excluding dividends better than the STI by trying to mimic its share holdings.

STI ETF vs investment funds that invest in the Singapore market

To prove that the STI and STI ETF are no pushover, let us look at some of the funds that invest in the Singapore market. On average some of the funds like Aberdeen Singapore Equity, Schroder Singapore Trust and UOB United Growth Fund managed an annualised return of 20-22% over the last 5 years. The funds managed to beat the STI by 1-2%, however if fund management fees between 1-2% p.a. were included, their performance were only average or maybe some below average. Needless to say comparing the funds with STI ETF. Only DBS Shenton Thrift managed to get close with 29.88% annual returns over 5 years and 2nd runner up would be Lion Capital Singapore Trust with 26.06% annual return over the last 5 years too. Hence none managed to beat the STI ETF which did no stock pickings but merely imitate the stock holdings of the STI. This further proves what Warren Buffett said that it is better to invest in index funds as only 1-2% of fund managers globally managed to beat the index. Index funds also charge much lower management fees than investment funds.

Note: Fund % figures were taken from fundsupermart between the date of 31st Dec'07-2nd Jan'08.

Yardstick

Like most things we do everyday, we should have a yardstick to measure performance. I hope to do better in bear markets than in bull markets as I'm looking for companies with good future prospects at depressed market prices. I would be happy if my portfolio can outperform the STI ETF by 10% each year. For example the STI ETF this year gained 22.1%, I would do well if I can achieve >32.1% gain in portfolio for the year. I also consider in a year whereby my portfolio is down 20% and the STI ETF down 30% to be a better year.

Stock holdings

1) Kingsmen (145.9% gain)
Bought: $6,000
Market value at 31st Dec'07: $14,400-$45.62(trading fee) +$400(dividends)=$14,754.38

Reason why I buy: Bought at low P/E, industry leader, foresee many contracts in IR and F1, improving earnings and unnoticed by the market.

2) ChinaACorp (17.8% loss)
Bought: $2,500
Market value at 31st Dec'07: $2,100-$44.07(trading fee)=$2,055.93

Reason why I buy: Purely speculative by listening to Dad saying some 'big shot' buying tonnes of it. Could not find its financial statements. Formerly Acma Ltd.

Total portfolio market value at 31st Dec'07: $16,810.31 (97.8% gain)

Past performance is not a good gauge for future performance.