Sunday, 31 December 2017

2017 Year End Stock Take

*shares quoted in this article are for education and learning purposes only. It does not constitute a buy or sell call

How was your 2017? Did it go according to your plan? How many ticked check boxes do you have on resolution list done up this time last year? 

Here are my year end records and musing.

Overall Returns
Investment wise, 2017 is a year to remember as I had the best returns so far. My Time Weighted return for 2017 is 26.5%, including dividends. 

Individual Stocks - Positives
These shares had good un-realised profits in 2017 plus dividends:
  • Mapletree Greater China Comm Trust - 37.3%
  • Ascendas Reit - 24% 
  • Frasers Centrepoint Trust - 23.5%
  • HSBC Holdings - 22.1%
  • Tai Sin - 17.2%
Not surprisingly, REITs are the top performers of in my portfolio. They have been on an amazing streak this year, despite Fed's rate rise. This probably shows that the negativity surrounding rate rise has largely been digested by the REITs. 

I did not manage to grab hold of any of the local banks, thus missing out on their great run. However, I take consolation in having HSBC Holdings in my portfolio. I was attracted by its stature as a global giant with an attractive dividend yield. Fortunately I managed to snap it at HKD50 with a 5% yield

Some realised profits include Guocoland (22%) and Semb Marine (20%). Guocoland was an undervalued property play which I entered at $1.88 based on its large discount to book value. Favourable perception on property stocks anticipating an improving property market lifted the property sector. But I sold it too early at $2.3 after just 3 months.

Semb Marine was a speculative purchase at $1.5 in early 2017 which was sold at $1.8. 

Individual Stocks - Negatives 
I try to buy growth stocks with good fundamentals, track record, and management, when they go through a temporary rough patch. PE is brought down to a level palatable enough to start accumulating. However the flip side is that if the growth story does not play out, they would sink further. Or it would take a long time to realise their growth potential.  

One example is Jumbo. With clear growth plan via new restaurants and franchising deals in SEA and Greater China, I have faith in its management carrying out the expansion successfully. But this would take time and I am sitting on a 6% loss right now. 

I am also down 39% for M1. It was an attempt to catch the low share price due to over-reaction to 4th telco. However I may have mis-judged the industry impact and changes even before 4th telco started - stiff competition to protect market share, thinning margin and reduced ability to sustain dividends. 

And 2017 is also the year I realised my biggest ever loss in Noble Group. This episode has certainly made me learned the importance of cutting loss. And I learned it the hard way. Details found here

2018 Strategies
My strategies for 2018 can be summed up in 3 phrases: more stringent stock selection, anticipate needs of raising cash level, cautious trading to supplement returns

More selective and stringent stock selection is essential, especially when market is at a high and bull market into the 9th year. Most shares are expensive now, rendering it difficult to buy low. Against such a backdrop, there are 2 conditions for share price to continue rising: earnings has to grow to justify current valuation; or an extreme low valuation that any hint of earnings improvement or better market sentiment would trigger price rise. To identify this sort of shares require more skilled stock-picking. 

Concurrently, I will frame my mind to a 'higher risk' mode. Not just raising cash, but in other aspects of investing too: more measured pace of buying, regular re-balancing. While we can still identify gems and invest accordingly, overall now is not the time to be aggressive and go all-in to maximise returns. I need to be more nimble and stick to pre-set rules more religiously. 

Swing and momentum trading will still be my trading theme in 2018. I have carved out a small 5% position from portfolio for trading. Long and short trades in STI components with clear mid-term trend or a range-bound pattern is suitable. For example, Comfort Delgro was my trading counter during its range-bound movement between 1.95 - 2.1. Likewise for Singtel between 3.65 to 3.85. 

2017 has been a relatively easy year for equity investment. A rising tide lift many boats. Many beginners are also tasting the sweet victory of high returns. 

But let's be cognisant that such good returns would not go on forever. On average market experience fall of 10% every 2 years, 20% every 3-4 years. When that happens, one needs to have skills, experience and right mentality to survive and profit from it. Otherwise earlier years of profit would just vapourise and amount to nothing. 

So while we enjoy the champagne and music while it last, lets take this window to build up investment knowledge and competency. 

For the mantra of proper investing remains, be it bull or bear market: study industry and companies fundamentals, identify good shares, buy at a good price. Psychologically, be patient and let your shares serve their purpose. Portfolio wise, manage risks well, do not be over-exposed to particular counter and take profits/re-balance regularly.

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