Thursday, July 20, 2017

Q2 2017 Portfolio Update

It's midway through July and here I am typing out my Q2 2017 Portfolio Update. I have the necessary data but I was too lazy to slice and dice the data and organize it into a coherent post. Guess I'll be doing it today.

I'm using Kyith's Stock Portfolio Tracker and dividends received are presented in a yearly format. In my last quarter update, I had to manually slice and dice the data in order to present the same information in a quarterly format. I spent yesterday night writing a R script to automate that process. Now quarterly updates will be that much more simpler.

Here are the outputs of my R scripts (history of dividends received by Year/Quarter in SGD and USD, respectively):

Moving forward, I foresee a huge drop in the dividends received. I did some thinking in end April/early May as to how I would react to a market correction. Previously, I was convinced that come hell or high water, I would just average down on every single counter that I own. It was at that point that I realized I need a huge boatload of cash to really make it viable.

Let's assume the following fictitious scenario. Say you have 1000 shares of counter A, which trades for $1. Come recession, counter A drops 50% to $0.50. You add another 1000 shares at $0.50 to "average down." What gives? You effectively double your position size in said counter and the average price is just midway between both purchase prices. To tilt the average price towards the recession price, you need to pump in even more cash, with increasing amounts of cash yielding a decreasing impact on the average price. This is a simplistic scenario, but it made me confront an ugly truth. Do I even have cash in the sidelines that equals my portfolio size waiting to be deployed? Nope.

So, I began selling a portion of my portfolio. Am I right? I haven't the faintest idea. 

In the following cases, returns are computed using Excel's XIRR function.

Complete divestment
Counter: STI ETF
Holding Period: 21 Months
Returns: 4.87%
Thoughts: This is me being "desperate" to deploy my cash and to "make my money work hard for me." I entered the STI ETF at a high, and averaged down once when it hit the bottom. This is the end result. Compare this to the next case.....

Counter: Nikko AM STI ETF
Holding Period: 26 Months
Returns: 9.60%
Thoughts: Interesting eh? This is me using the POSB Invest Saver to DCA into the Nikko AM STI ETF. The difference in returns compared to the above is huuuugggeeee!

Counter: Hong Leong Finance
Holding Period: 14 Months
Returns: 10.87%
Thoughts: I lucked out on this one. I've been eyeing this counter while it was languishing at its 52-week low. Instead of buying it, I was happily chasing REITs at that point in time (higher yield mah!). It was only when the stock price shot up that I panicked and entered at a much higher price. This news also helped me to exit the counter with a profit. I just hope I won't make the same mistake of chasing a stock up again.

Counter: United Industrial Corporation
Holding Period: 4 Months
Returns: 28.33%
Thoughts: Meant to be an asset play, but I'm not sure how well do asset plays fare during recessions. With a minuscule yield, it's better to re-enter at a lower price than to average down.

Counter: iFast Corporation
Holding Period: 10 Months
Returns: -2.41%
Thoughts: I entered this counter when it dipped below its IPO price. That was when it was at its 52-week low. Then, it hit another 52-week low, and then another, and another. As such counters are hit hard during corrections, I cautiously averaged down with a token sum. The big guns are supposed to be fired in market corrections, not as and when the stock price goes down. When its fortune finally reversed, I vacillated as to the price of divestment. I could have waited until it broke even, but I found it more comfortable to have cash back in hand first. This brings me to......

Counter: T Rowe Price
Holding Period: 2 Months
Returns: -1.73%
Thoughts: In corrections, mutual fund companies are hit quite hard. This is further exacerbated by the outflow of money from mutual funds to passive ETFs. Still, the firm is doing quite well (relative to its peers). This sale shows my priorities. In a correction, I would allocate my money to higher-yielding S-REITs; "patching the wall" on T Rowe Price is the least of my concerns.

Counter: Mandarin Oriental International
Holding Period: 2 Months
Returns: 31%
Thoughts: This news probably bumped up the price. And also, I'm playing it cautious by taking profits and having more cash on hand. Last I checked, the hospitality industry doesn't fare that well in recessions.

Counter: OUE Commercial REIT
Holding Period: 21 Months
Returns: 8.79%
Thoughts: This is the very first hand-picked stock I purchased. Back then, when I was more uninformed, I relied more heavily on the discount to book value. It's sheer dumb luck that it turned out well.

Partial Divestments
Counter: Accordia Golf Trust
Sold 2/3 of my stake

Counter: Croesus Retail Trust
Sold 2/3 of my stake (this was before the announcement of the potential privatization by Blackstone)

Counter: Sheng Siong Group
Sold 1/2 of my stake

Counter: Lippo Malls Indonesia Retail Trust
Sold 30% of my stake

Counter: AIMS AMP Capital Industrial REIT
Sold 50% of my stake
Thoughts: Phew! At one point, this counter took up a whooping 20% of my portfolio. With its reduced size, I am now less jittery.

Counter: Frasers Centrepoint Limited
Sold 50% of my stake

All counters which were partially divested were sold at a profit (inclusive of capital gains + dividends received).

The Bleeding ones
J.M. Smucker and Hormel Foods are bleeding, but this is no cause for concern.

QAF and Raffles Medical Group are bleeding because of poor self-control on my part. That's what I get when I can't wait for a better entry price and try to nibble on them.

Vicom and Neratel are the two longer-term underperformers in my portfolio.

That's all for now. It's time to busy myself with my career, school, personal development, and other hobbies while I build my war chest. That way, I won't be too upset having killed the golden goose.

Tuesday, July 18, 2017

Using to assess the state of US retail REITs

Retail REITs are an interesting bunch. Besides analyzing the REIT's financial statements, unitholders and potential unitholders could also consider heading down to the properties to observe first-hand how the REIT is faring.

Is the mall thriving? How is the traffic like? How is the ambiance?

For the Singaporean investor interested in some of the retail S-REITs, getting answers to such questions is fairly straightforward:

Vested in CapitaLand Mall Trust? You could visit Plaza Singapura (and many others).

What about Frasers Centrepoint Trust? Head down to Causeway Point (and many others).

Starhill Global? Go to Wisma Atria and Ngee Ann City lah!

SPH REIT? Your pick. Either Paragon or Clementi Mall (or both, if you are that keen).

Things, however, are not that straightforward if you are considering retail REITs whose properties are situated on foreign grounds. Though you may have access to their financial statements and annual reports, one glaring disadvantage is that you are not able to get a feel on the ground. It is possible to analyze the REIT on quantitative grounds, but their qualitative aspects are that which elude you.

This uncertainty is further exacerbated by the current narrative of the "death of retail." According to the financial talking heads, the rise of Amazon is the death knell of the retail sector (and their landlords). US retail stocks and retail REITs have been bashed badly, with some firms about to belly up.

So, where can you get your hands on the qualitative data? 

At that website, you can find commentaries by people who visit these "dead malls" in the US. If you manage to find some REIT-owned properties reflected there, you might wanna consider incorporating the findings to your analysis.

Let's use Simon Property Group as an example. Simon Property Group is a blue-chip, high-end retail REIT with properties that are not geographically limited to the US. Even in this trying economic times, Simon Property Group still managed to increase their dividend payout (see here). In addition, in the Q&A section of their Q1 2017 earnings call, the CEO seemed pretty confident about the business.

Meanwhile, over at the DeadMalls site, there were a few entries that made mention of Simon Property Group. As the majority of these entries made a passing remark on Simon Property Group (e.g. somewhere in the history of the mall, Simon Property Group owned the mall), I disregarded them. Almost all of the remaining entries concerned mall divestment. The only noteworthy finding is that Simon Property Group defaulted on the loan of its St. Louis Centre property, which was then bought at bargain price by another individual.

Hope this helps. Have fun juxtaposing the quantitative and the qualitative data together.

Tuesday, July 11, 2017

Consumer Staples: Yummy, but could be yummier

On-and-off, I have been monitoring the US consumer staples sector. This sector has been going nowhere but up, denying me opportunities to create meaningful positions in this sector. Well, it looks like things are finally changing. 

Let's just stop to smell the flowers. Amaranthine beauties don't bloom everyday, ya know? (Pun intended).

It is good to keep myself occupied with both work and school work. That way, my itchy fingers wouldn't meddle with stuff that's not meant to be touched.

So, what's with the consumer staples sector? Popular explanations include the fear of Amazon extending its tendrils into the sector (acquisition of Whole Foods), changing consumer preferences (millennials and their preference for healthier, organic alternatives rather than meat and processed products), and food scares.

Of course the old guard aren't just standing by and doing nothing. Hormel Foods have acquired Jennie-O Turkey Store (to cater to consumers who are turning to turkey meat instead of red meat), Applegate Farms (organic meat), and Muscle Milk (sports nutrition). J.M. Smucker have entered into the pet food business to tap another new market.

In the mean time, I'll be keeping an even closer watch on this sector from the side lines. Most probably, I'll try to read up on cyclical commodities (I know nuts about Archer Daniels Midland's raw material/food production industry).

Vested in J.M. Smucker and Hormel Foods.

Sunday, July 2, 2017

Of sweet potatoes and tapiocas: what the young has not experienced

My grandmother lived through the Japanese Occupation. During that time, life was difficult and food was scarce. What is taken for granted today, such as meat products, were a luxury in those times of trials. To subsist, my grandmother relied on the lowly sweet potatoes and tapiocas. It is not much, but it could keep the hunger pangs away for another couple of hours. Come lunch or dinner, she is greeted with the same source of nourishment.

From a third-person perspective, these situations evoked a reflective response in me. First, there is a sense of gratitude and thankfulness for what I currently have. I have never experienced a situation similar to what my grandmother experienced and I sincerely hope I never will! When was the last time my breakfast-lunch-dinner were sweet potatoes and tapiocas? Uh....never? Similarly, when was the last time I had plain rice with gravy (or curry) only? Also never. What about white bread for breakfast, lunch, and dinner? Okay, you know the answer by now.

Second, knowledge of such experiences forces me to confront the reality of the dining table in such trying times. It seriously doesn't matter what kind of food there is on the dining table, just that there is food to eat for today. Food to nourish, food to grant the body enough life force to live and fight for another day.

Fast forward to today, I don't see the same grit, force of character, moxie, determination (and various other synonyms) in some of my peers around me. As I have shared in my last post, there is a possibility that I might be retrenched due to the questionable work ethic of my fellow contract staff. After that episode, they have yet to buck up in their work. Just this week, there were a few more potential research participants who could have entered the study but failed to enter because of their inaction.

In this post, I hope to distill the underlying attitudes that some of these peers have towards work, their financial health, and life in general.

1). "There will always be someone to bail me out": One of my colleagues (the same guy from this post) remarked that it is impossible for us to get retrenched. After all, our bosses are kind souls from the social sciences and would redirect us to another project in the event of the current project's demise. Another remarked that they could rely on their parents or their boyfriends. As for myself, I rather stand on my own two feet. Everyone has their fair share of financial commitments and it would not be appropriate to dump them on your loved ones.

2). "We are young, so it is easy to find jobs": Sure, you could count on your youthfulness, but are you sure that the jobs that are available in the marketplace are the jobs you would want? From my conversations with my peers, remuneration is THE MOST important thing. My field is known for its low remuneration. The higher-paying positions in a low-paying field are, obviously, over-subscribed. These jobs tend to go to people who are either well-connected and/or academically qualified. No connections/skills? No higher-paying jobs lor! Don't like the remaining jobs? Too bad!

3). Extrapolating earnings into infinity: My fellow contract staff/colleagues really lucked out on this one. Despite not having any research experience, they were awarded with this job as their first job out of university (data collection personnel are not required to know the theory/research design/hypotheses/etc of the study anyways). As I have shared before in this post, my current company pays very generously (for social science grads anyway). Still, there were a couple of times where my colleagues lamented that their pay, bonuses, and benefits could be even higher. Mind you, they did this in full knowledge that their peers had far suckier pay than them.

I'm quite certain that when they do have to leave this organization and their pay regresses back to the social science mean, they won't be feeling like Pixar's Buzz Lightyear anymore. To infinity and beyond? Nah, can stay afloat (inclusive of lifestyle inflation) should be quite good for them liao.

4). Confusing reading about money as saving money and saving more money by spending even more money: Unintelligent Nerd, what talking you? Let me unpack that. Does liking the Facebook page of some popular finance websites result in financial literacy? You mean there's no hard work involved in learning how to manage your personal finance?!?!

Some *cough* personal finance *cough* site says that Restaurant A is having $5 discount today. Tomorrow, Restaurant B is having 5% off. A day after, Restaurant C is having a 1-for-1 promotion. Fast forward 13 days later, Restaurant Z is serving a complimentary dessert for every main course ordered. How could you not have restaurant meals everyday? If you don't seize the opportunities presented, quite "stupid" right?

Me? I'll just continue taking a measured approach. My emergency funds + war chest + work ethic + qualifications spamming + my attempt to learn from my elders should serve me well.