Saturday, May 4, 2019

Q1 2019 Portfolio Update

It has been quite some time since I've last blogged. I've been allocating my energy into developing Enreitch, my REIT web application. For those who are interested, it is complimentary. Drop me an email and I'll manually create an account for you (yes, registration has not been automated.......yet).

Dividend Income


Q1 2019 SGD Dividend Income

Regular readers might be aware that my SGD-denominated portfolio's dividend income has been declining for the past few quarters through the sales of fundamentally-weaker income stocks. After doing some overhaul of my portfolio, I have somewhat managed to mitigate the decreasing dividend income. Y-o-y, dividend income is still flat, but it beats a declining trend. The next step is to turn that flatline into an upward trend through organic growth.

Q1 2019 USD Dividend Income

In contrast, the income from my USD-denominated portfolio has been increasing due to small nibbles here and there in US stocks. In absolute terms, the amount is still minuscule. Increasing the dividend income here is much harder than I initially thought. The adage that picking a diversified list of dividend growth stocks and letting the growth in dividends compound is not as straightforward as it seems. In my much shorter journey in the US stock market thus far, 3 out of my current 8 supposed "dividend growth stocks" either froze the increase in dividends or cut their dividends. That's roughly 37% of my US stock holdings! There's nothing fancy in my US stock holdings too. They are your typical boring stocks from boring but consistent industries. More work is needed in this area too.

Transactions

In this quarter, I initiated a new position in Capitaland following the announcement of the potential merger with Ascendas-Singbridge. The purchase was funded by leverage (see my year 2018 portfolio update post) and was done at a Price/NAV of 0.72, based on the most recent quarterly earnings at the point of purchase. The rationale for the purchase is to participate in the recurring cashflow of the REITs that Capitaland holds. If the Ascendas-Singbridge acquisition goes through, the recurring income sources will be diversified to include exposure to the hospitality and industrial REIT sub-sectors as well. Even if the deal does not go through, I am fine with holding Capitaland. Over the years, Capitaland has transitioned from a developer to a developer and asset manager, with the latter being of particular relevance to my income investing style.

The second transaction I made this quarter is to add to my position in OCBC. The purchase was done at a Price/NAV of 1.15 using leverage. The move was to increase my exposure to the Singapore banking sector, which I am currently underexposed to. Furthermore, OCBC presents itself as a more compelling choice in terms of valuation relative to its peers.

The third transaction I did was to take partial profits in Japan Foods Holding. I sold off a third of my stake at a TTM PE of 21.30. I have been holding on to Japan Foods Holding for almost 3 years and I have received a decent amount of capital gains and dividends during this period. As it is a small-cap stock and may be susceptible to large drawdowns in a market crash, I decided that a more prudent move would be to take some profits off the table (unrealized gains are, after all, unrealized) and to hold on to the remaining 2/3 for dividend income and further capital gains, if any.

The fourth transaction I did was to sell a third of my stake in SGX at a TTM PE of 21.53. The rationale is to lock in some gains since SGX has ran up quite a fair bit and to hold the remaining for dividend income.

Finally, I initiated a small nibble in Medtronic at a TTM PE of ~24. Medtronic is a healthcare dividend aristocrat with a dividend growth streak of 41 years currently. They operate in the medical devices segment of healthcare and organized their business into four operating segments: (a) Cardiac and Vascular, (b) Minimally Invasive Therapies, (c) Diabetes, and (d) Restorative Therapies. As they are still growing, valuation is still on the richer side. Looking to scale in further if valuation declines or to hold on if there are no opportunities to add to it.

I've also added to my silver position during my visit to the Singapore International Coin Fair (see post here).

Net Worth breakdown
Compared to Q4 2018, my cash allocation increased from 37% to 41% mainly due to the bonus received from employment. Precious metals (both gold and silver), in SGD terms, have declined since the writing of my Q4 2018 post.


Net Worth Breakdown

As per before, "the pie chart depicts the breakdown in my net worth across the various asset classes in percentage (pie chart neither includes my CPF nor my emergency fund). To be conservative, I computed my precious metals allocation at spot price even though I am holding everything in physicals."

Current Holdings
After converting all my USD holdings to SGD, the following table shows the percentage of each stock from only the equities allocation of my net worth (arranged in descending order). The information contained will not be the most up-to-date as I've already made some transactions in Q2 2019.

Stock Name Percentage
AIMSAMP Cap REIT 8.67
Hongkong Land 8.09
Parkway Life REIT 5.95
DBS Group Holdings Ltd 5.73
Singtel 5.24
OCBC Bank 4.94
Fraser Centrepoint Trust 4.94
SPH REIT 4.3
First REIT 4.1
BlackRock Inc 4.07
Mapletree Industrial Trust 3.88
Thai Beverage 3.43
SATS Ltd 3.3
SGX 3.06
Capitaland Mall Trust 2.52
ST Engineering 2.47
Capitaland Limited 2.24
Dairy Farm International Holdings 2.21
Raffles Medical Group 2.17
Japan Foods Holding Ltd 2.11
JM Smucker Co 2.08
Mapletree Commercial Trust 2.01
Frasers Property Limited 1.95
Frasers Commercial Trust 1.52
ISEC Healthcare Ltd 1.26
Frasers Logistics & Industrial Trust 1.24
Sheng Siong Group Ltd 1.07
Welltower Inc 1.07
Kraft Heinz Company 0.92
QAF Limited 0.87
Medtronic PLC 0.75
General Mills Inc 0.72
Hormel Foods Corporation 0.56
Kimberly Clark Corp 0.36
Abbott Laboratories 0.22

Similar to what I've shared previously, I have capped the position size of Singtel in my portfolio. Increasing competition in the Telco space and commoditization of their services are not encouraging signs for investors like myself who are income-oriented.

Property stocks and REITs are over-represented in my portfolio. I will still be holding on to my REITs for income. Neither do I want to take profit nor do I want to add to them.

US consumer staples have rebounded since their lows in January 2019, with the only exception being Kraft Heinz which was hit by a whammy of bad news. This was really a bad call on my part. I had some qualms with Kraft Heinz (see my Q4 2018 post) but I still foolishly went ahead with it. Their dividend cut will hurt my USD dividend growth rate to some extent. Meanwhile, Singapore consumer staples seem like BAU (business-as-usual); some positive points and some negative points.

Debt Levels
Since I've started dabbling in leverage, I have been paying closer attention to my debt levels. Currently, my modified "interest coverage ratio" and "debt-to-equity ratio" is as follows:

Interest Coverage Ratio: 30.35
Debt-to-Equity Ratio: 0.01

With the modified "Interest Coverage Ratio" representing the total amount of cash on hand (excluding emergency funds, interest income, and dividend income) divided by the total debt payable and "Debt-to-Equity Ratio" representing total debt payable divided by equity (what I own outright).

I am still trying to get used to leverage. Hence, my low debt levels. I intend to maintain a manageable debt level and to pare down debt responsibly. The rationale for using leverage is to build assets that provide cash flow at a much faster pace.

Emergency Fund and Meta-Emergency Fund
Besides regularly contributing to our (my mum and I) shared emergency fund, I have started and began contributing to a meta-emergency for my mum. The idea is to add another layer of defence in the event our emergency fund fails in a recession.

The primary role of the meta-emergency fund is to provide some income (no matter how negligible) to help my mum pay down our housing debt, with the financial instrument of choice being the SSB. To this end, I have been contributing a moderate amount to SBBs each month since the start of this year. This is on top of helping my mum out with the housing debt every alternate month. I foresee I'll stop with the monetary help every alternate month once the stock market crash since I need all the cash I could get to go all-in! Hence, the meta-emergency fund.

Capital Allocation Thoughts
I will be prioritizing defence (emergency fund/meta-emergency fund/cash). As and when there are any investment opportunities, I will keep my purchases small. If no such opportunities present itself, I will be using cash to pare down my debt further.

With the way things are, I have been looking into sectors that I normally don't look into (e.g. industrials) for investment. Looking for fairly valued opportunities in a bull market has been tough and my itchy fingers have not been helpful as well. Perhaps some opportunities could appear in the US healthcare sector now that it is getting hammered?

I don't know.

I'll only know after the fact.

Thanks for reading!

Friday, March 22, 2019

What I bought from the Singapore International Coin Fair 2019

Attending the Singapore International Coin Fair has been a yearly affair for me. This year, it runs from 22 to 24 March 2019 (today till Sunday!). I attended the fair today and here are some pictures:


First time the Royal Australian Mint participating in the coin fair:


Pandas, Pandas, and more Pandas!





Assortment of coins


What I bought:

39 grams Silver Piedfort Proof Commemorative

2019 $1 Fine Silver Frosted Uncirculated Coin Kangaroo Series

2019 $1 1oz Merlion Privy Mark 40mm Ag Singapore Coin Special

2012 China Silver Panda, Philadelphia World's Fair of Money

2013 China Silver Panda, Berlin World Money Fair

China 70th Anniversary of the Issuance of the Renminbi

Hope you all enjoy the photos. With these purchases, cash level has dropped and precious metals allocation has increased.

Friday, March 8, 2019

Sneak preview of the Web App I'm working on

I have been spending my time working on my web application. Now that it is nearly done, I shall let the pictures do the talking. :)

Capitaland Mall Trust DPU Trend - Enreitch

Above, we have Capitaland Mall Trust's quarterly DPU trend since listing.

Capitaland Mall Trust DPU Trend - Enreitch

Wanna interact with the chart directly instead of toggling with the dropdown menus and slider bar? Sure, you can highlight selected portions of the chart directly.

Capitaland Mall Trust DPU Trend - Enreitch

....and there you have it! Hover your mouse over the data points and the info will pop out.

How did REITs fare during the GFC?

We can answer these questions as well.

AIMS AMP Cap REIT NAV per unit Trend - Enreitch

For example, AIMS AMP Cap REIT NAV per unit cratered during the GFC.

What other metrics do I have? Plenty!

Mapletree Logistics Trust Percentage of Fixed Rate Debt Trend - Enreitch

Above, we have Mapletree Logistics Trust's Percentage of Fixed Rate Debt trend. *Hint* Take a look at the dropdown menu.

In the mean time, I'll be polishing my app further. Enreitch (pronounced "enrich") will be arriving shortly to enrich your REIT analysis. REIT analysis, I hope, will be less ireitating moving forward.

Cheers! :)

Monday, February 4, 2019

Happy Lunar New Year!

A Happy Lunar New Year to all my blogger friends and readers! Wishing each of you good health, strong relationships and prosperity! HUAT AH!

Just done with my assignment. Will be splitting my time between studying for my papers, blogging, and working on my side project (which will be revealed in due time).

Cheers!
UN

Tuesday, January 1, 2019

Year 2018 Portfolio Performance and Dividend Income (Part 2)

Alrighty! The markets have closed for 2018 and it is time to tabulate my performance and continue the second part of my Year 2018 Review post. For those who missed out on part 1, you can find it here.

Net worth breakdown
There has been some changes to my net worth breakdown compared to the previous quarter. Equity allocation has increased from 35% to 39% (in light of all the nibbling I did recently). Cash allocation fell from 40% to 37%. The cash portion would have looked far worse had it not been for my bonus. Precious metals dropped from 25% to 24%.


Net Worth Breakdown

As per before, "the pie chart depicts the breakdown in my net worth across the various asset classes in percentage (pie chart neither includes my CPF nor my emergency fund). To be conservative, I computed my precious metals allocation at spot price even though I am holding everything in physicals."

Equity Performance

For my SGD-denominated portfolio:
Returns for Year 2018: -7.78%
Annualized returns since portfolio inception (March 2015): 6.48%

For my USD-denominated portfolio:
Returns for Year 2018: -3.59%
Annualized returns since portfolio inception (March 2016): 5.62%

The above computations include equities only. It does not include cash drag and precious metals drag.

Thoughts on Performance
Strangely, I am very satisfied with my returns despite having negative returns for both my SGD and USD-denominated portfolio in year 2018. The market has been red and my portfolios were not spared. Hence, what I am experiencing is pretty normal.

When I look back at my multi-year performance, I think I am doing alright in my investment journey. 2017 had been a good year and I took some profits off the table. In 2018, I continued to divest positions that I have superficially entered in as well as fundamentally weaker counters. Hence, most of my portfolio losses were realized in the early part of 2018. Had I not done so, my returns for year 2018 would be much more redder.

In life, you win some and you lose some. So far, I managed to win slightly more than I lose. This is a good sign and I hope this would persist.

As I type this post, I am reminded of what I have told myself before. The talking heads have been droning on and on about a stock market collapse. I have personally done what I can by eliminating the counters which I am unsure of or are fundamentally weak. What's left are the counters which I am comfortable holding (of course comfort comes in various degrees depending on the particular stock in question). As I don't foresee myself going completely cash, I would need to have the mental fortitude to ride it out with my current holdings and any potential stocks that I would be buying before the crash happens. I am okay with this.

Insurance
My insurance policies lacked a Critical Illness plan. I went around looking for a plan that has an option to add a Critical Illness rider and I came across the MINDEF and MHA Group Term Life plan (with a CI rider option) by Aviva. The term life portion has a fixed premium while the CI rider premium escalates with age. I have requested for a quote from Aviva and this is still pending.

Studies
Imagine my horror when the sample examination paper for one of my modules tested something that is seemingly out of the syllabus. I will be deferring said module to the following year to brush up on this out-of-syllabus topic before taking the exam.

In terms of scheduling my study time, more work needs to be done in this area. Generally, weekends are predesignated for studying and I have completed the first run-through of the entire textbook for one of my modules within 2 months from course commencement. And that is just for readings, it does not include assignments. Multiply this by two (since I am taking two modules) and time is sorely lacking. Guess I will be allocating some weekday nights to studying from now on.

Emergency Fund
With higher interest rates for the Singapore Savings Bonds (Jan 2019 issue), it finally motivated me to close a low-interest savings account that I had. Part of the proceeds went into our shared emergency fund while the rest went into......

Mother's Retirement Fund
....the Singapore Savings Bonds (Jan 2019 issue) for my mum's retirement fund. It's small, but a step forward nonetheless. On-and-off, I have been thinking of what ETFs or stocks should go here. At the moment, I think I will settle for STI ETF and Hongkong Land.

Regular readers will know that I am partial to Hongkong Land for its recurring cash flow from its investment properties. Coupled with its conservative management, slow (but steady!) dividend growth, and not being a "hot stock", it is a decent choice. My concerns at the moment is the USD/SGD exchange rate (which affects the dividends) and if the day comes when business-as-usual (BAU) is no longer BAU.

Hypothetically, my mother's retirement fund will consist of SSBs, with stocks to be purchased by me in a market crash and then transferred to her personal CDP account. That's all for now, I guess.

Current Holdings
After converting all my USD holdings to SGD, the following table shows the percentage of each stock from only the equities allocation of my net worth (arranged in descending order).

Stock Holdings

Moving forward, I intend to add on other counters such that the role of AIMSAMP REIT and Singtel becomes more diminished in my portfolio. Ironically, Abbott Laboratories, who occupies the bottom position, is almost a double-bagger stock. LOL!

Investment Strategy
I intend to continue what I am doing, which is to predominantly invest for dividends and dividend growth. In light of the market turmoil, I will focus more on large-cap stocks which have the staying power to survive an economic downturn.

My preference is to have a large number of stocks in my portfolio to reduce reliance on any particular stock or group of stocks for dividend income. I think I will elaborate more on a future post about my investing style.

As we are on the topic of my investment style, I have signed up for the investment newsletter by US blogger Dividend Growth Investor. This is not a sponsored post. The rationale is to learn of new US dividend growth stocks that I have not heard of before, try to second-guess his stock picks for the following month (to see whether my picks converge with his choices), and market time into dividend growth stocks. I don't think that is the "right" way to use his newsletter, but that's how it is for me.

As always, I am partial towards REITs, consumer staples, healthcare, and (some) utilities. It might look to be a good time to add to consumer staples if the decline in the sector continues.

That's all. Thanks for reading!