Monday, 9 July 2018

Education Series: STI End Q2 Quick Observations

Technically this market snapshot is not really end Q2 - its is already one week into July as I wrote this article late.

But market had some big movements on Fri 6 Jul, after latest round of property cooling measures announced on Thursday (5 Jul) night. So i might as well base this article on 5 Jul closing price, to better reflect latest market movement.

Source: Business Times, 7 Jul 2018
Q1 article can be found here.

  1. As of last Friday, there was only one company priced above 75th percentile of its past 52 week price range: Comfort Delgro. There were 5 companies in Q1: CDL, Venture, and the three banks. Venture had since registered a spectacular drop due to trade war fear and worries on tech stocks, while banks and CDL were roiled by the recent property cooling measure. 
  2. There are 17 companies within 25% of their past 52 week low. Among them, Yangzijiang, Sembcorp, Thai Beverage, SGX, and Golden Agri are all very close, or sitting on, their one year low price. 
  3. Looking at year-to-date figures, 20 companies has negative returns. Worst-performing ones are Yangzijiang (-39%), Starhub (-38%), and Hutchison Port (-28%). Same as Q1. 
  4. There is only one company that had positive double digit return this year: Comfort (+18.8%). Second place is Jardine Matherson at 6.7%. 
  5. PE ratio wise, lowest is still Hongkong Land at 3.0; highest is Golden Agri at 59.6. 
  6. PB, lowest is Hongkong Land (0.46), highest is SGX (7.43).
  7. Dividend yield. Excluding Hutchison Port at 10% (due to its history of relentless price slide and decreasing dividends), highest yield is Starhub with 9.5%, although I would be wary about the sustainability of Starhub's yield. 
Clearly market sentiment has soured considerably since Q1 due ongoing trade war fear that has just recently became a reality. Last week's property cooling measures did not help too and could further dampen the stock market in the near term. 

I mentioned in Q1 snapshot that 3,350 was a critical support for STI. It had since been broken and STI had skidded to close at 3,191 last Friday. Applying my very basic Technical Analysis, if the downtrend persist, next support is at around 3,100 where we can see some buying activities. 

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Wednesday, 4 July 2018

Silver Linings in This Down Market

Singapore stock market undergoing some rough patch now, as STI has dropped about 11% from 3,640 to 3,240.

Once in a while the market will catch a cold, and this is when all the negative news will surface prominently in media. Future looks bleak and stock market seems to be falling off a cliff. Human nature, being risk averse, will start thinking about getting out of market, avoiding the downturn until the coast is clear.

But let's remember that market always climb a wall of worries, and eventually it will recover. We were even able to survive and prosper post-2008 GFC, the worst downturn since Great Depression. It should not be different this time round.

Downturn Enables Industry Consolidation 
Very often stock market downturn precedes an industry downturn, during which the sector contracts with lower revenue and less earnings. Companies embark on cost cutting or retrenchment. The smaller companies or those with weaker balance sheets might fold.

It is during this period that the more established players can go on an acquisition spree, buying over smaller firms at distressed price. Industry might consolidate, resulting in majority of market share in the grasp of fewer larger players which are able to grow their revenue when industry recovers.

So these companies would emerge stronger and prosper thereafter. If you hold their shares, stay positive and look forward to their stronger growth few years down the road.

Chance to Buy Good Shares Cheaply
Those companies in your watch list are now trading at lower price. Should their fundamentals remain sound, outlook is still good, this is a chance to scoop some shares cheaply.

Of course, cheap is relative. What is cheap today can get cheaper tomorrow. Nobody knows where is the lowest price.

This is why I always advocate do not fire all your ammo at one go. But in two or three batches. If price rises after your purchase, all is good. If price drops after your entry, be happy that you can now buy at even a lower price. Never use up all your funds in one purchase, leave some as buffer.

In stock market, those who are far-sighted are able to earn profit at the expense of short-term focused, impatient investors. Do not be overly concerned about daily price drop, but have faith in your companies to be more valuable few years later.

Would you like to learn about Income Investing strategies for retirement planning?Sign up for my next seminar here!

Sunday, 24 June 2018

Give Your Portfolio A Health Check

Most people go for regular health check-up to ensure that their body functions well to lead a healthy life.

Similarly, retail investors should also conduct health check on their portfolio to ensure tip-top conditions. After all these are our hard-earned money and we should guard it attentively. 

But very often investors are lazy and do not monitor the health of their portfolio regularly.

Here I would share my portfolio review steps to offer you some guidance. I do such review at least half-yearly.

(Wait.. You do not have a portfolio? Or don't know what is a portfolio? Perhaps we should have a chat :) )

1 - Revisit The Reason for Buying That Particular Share
Basically this is about asking yourself some hard questions to assess if the reasons for buying that share, and holding it in your portfolio is still valid. After re-reading the latest two quarterly reports, news on industry trend and outlook, assess if the company still meet your investment criteria, or form an objective opinion if the share should still remain n your portfolio.

2 - Check The Position Size of each Stock
Meaning, what is the percentage that each stock occupies in your portfolio. Too big a percentage leaves you more exposed to any price fluctuation of that stock. Imagine if you have a share that occupies a 30% weightage, a 30% drop in share price will cause your portfolio to shrink by 7.5% which is substantial. 

Personally, I cap exposure to each stock at 15%. Unless I am extremely, highly confident about the stock pick, I would err on the safe side and stick to this limit.

3 - Adequate Diversification Across Sectors
One should maintain fair exposure to a variety of industries. Watch for lop-sided representation of a particular sector as any negative developments can lead to big plunge in portfolio value. Imagine if you were very bullish on the Oil & Gas sector 4 years ago and allocate 80% of your holdings to Keppel, Semb Marine, Ezion, Marco Polo Marine for example, things would not look good now. 

I also seen clients who had 75% of their holdings in 3 local banks. Although the three local banks are blue chip companies, that client is losing sleep now that all 3 have fell significantly in tandem during the past month.

You can learn more about the companies in key SGX sectors here

4 - Maintain a Healthy Level of Cash
Market sentiment may change very quickly. Stock prices may drop big time without warning and many of your companies or potential buys could be trading at attractive price. Having cash on hand would allow you to collect more shares cheaply, or establish new positions at low price that skew the odds of profit in your favour. 

I would not encourage anyone to go 100% into stocks at any time. Always maintain a cash buffer. I personally keep at least 10% of cash in my portfolio.

Sign up for my next sharing on market outlook and investment insights here!

Education Series: STI End Q2 Quick Observations

Technically this market snapshot is not really end Q2 - its is already one week into July as I wrote this article late. But market had som...