Friday, July 5, 2019

Q2 2019 Portfolio Update

How has everyone been? I hope everyone is doing well.

I've been MIA for quite some time. I had an exam paper to clear and have spent quite some time unwinding after my paper. I have recently become acquainted with Chinese Science Fiction (translated to English, thank you) and it has become my new love interest! lol

I digress, financial updates first before I wax lyrical about my readings.

Dividend Income


Q2 2019 SGD Dividend Income

After a few quarters of tweaking my portfolio, there is finally dividend growth in my SGD-denominated portfolio! Weaker counters have been pruned and, in their place, are stronger counters with more predictable cash flows. I don't think the dividend growth rate is sustainable yet. I have recently sold half of my stake in Singtel and, without a suitable income replacement, I expect dividend income to drop again.


Q2 2019 USD Dividend Income

In my USD-denominated portfolio, dividend growth hit a new high this quarter. A huge chunk of the increase came from the position I have been building in Hongkong Land since last year. Organic dividend growth from US dividend aristocrats are still too minuscule to be observed. The positions in BlackRock and Medtronic have also somewhat contributed to the increase. The increase is offsetted with Kraft Heinz's dividend cut. Meanwhile, Welltower REIT and General Mills broke their dividend growth streak, so I do not expect dividend growth from them for some time.

Transactions
In this quarter, I initiated a new smallish position in Riverstone Holdings at a TTM PE of 17.02. I have been eyeing Riverstone for quite some time and the decline in prices allowed me to take a small nibble. From a financials standpoint, Riverstone has a good net profit margin (>10%), ROE (~20ish), and minimal debt. From a historical PE perspective, it remains quite richly valued still. Hence, I have kept this position small as part of my risk management plan. I intend to scale in slowly if the valuation multiple compresses further.

Next, I added to my OCBC position at a Price/NAV of 1.06 using leverage. Similar to my last quarter's purchase of OCBC, the rationale is to increase my exposure to the Singapore banking sector. OCBC was selected as it is undervalued relative to its peers.

As mentioned above, I sold half of my stake in Singtel following the run-up in price towards the end of June. A longer term outlook on their dividends seemed hazy. The intense competition between telcos does not inspire confidence in me. If I am wrong in my analysis, I still have half of my stake in Singtel.

I participated in the Preferential Offering for Frasers Centrepoint Trust and applied for excess units as well. I was allotted all the excess units I applied for. As a result, Frasers Centrepoint Trust now occupies one of the top 5 positions in my equity allocation.

I have also opted for scrip dividends for both OCBC and Raffles Medical Group.

Over at the US side, I exited my entire stake in Kimberly Clark at a TTM PE of 25.59. Kimberly Clark's top-line has been going nowhere, its dividend growth rate has been declining, and earnings are somewhat fueled by share buybacks. Its payout ratio is on the riskier side and I do not want to take any chances. Commentary by management has always been focused on cost-cutting and expense control, which is not something desirable. After holding Kimberly Clark for 2 years and 4 months, my annualized returns are 0.5% (attributed to my small stake and commissions eroding almost all of my returns).

I added to my position in Medtronic at a TTM PE of 24.85. I initiated a small position in Medtronic in Q1 2019. I intend to build this position up slowly.

I initiated a new position in the Tracker Fund of Hong Kong to gain exposure to the Hong Kong market. Initially, I wanted to hand-pick stocks in the HK market as well, but on second thoughts, I realize I do not have the strength nor the time to do so. The HK Tracker Fund should suffice.

I have also added to my silver position in this quarter.

It might come as a surprise to readers, but I've initiated a new position in Ethereum this quarter. In fact, I have been interested in cryptocurrencies even way before the crypto bubble. In one of my old blog posts from 2016, I shared about my readings on the subject. After mainstream consciousness drove the prices of various cryptocurrencies into the stratosphere, I had no choice but to sit on the sidelines. It was not until my friend Rolf's post on the subject made me realize that the crypto market has probably bottomed out and it may be a good time to buy. "Why Ethereum?" could be one of the posts I might consider doing up in the future.

Net Worth breakdown
Compared to Q1 2019, my cash allocation decreased from 41% to 34% mainly due to the purchase of equities in the market sell-off and the payment of my balance transfer debt. Equity allocation increased from 37% to 43%.


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 and HKD holdings to SGD at the end of the quarter, the following table shows the percentage of each stock from only the equities allocation of my net worth (arranged in descending order).


Stock Name
Percentage
AIMS APAC REIT
8.22
Hongkong Land
6.57
OCBC Bank
6.57
Frasers Centrepoint Trust
6.39
Parkway Life REIT
5.73
DBS Group Holdings Ltd
4.91
The Tracker Fund of Hong Kong
4.67
SPH REIT
4.04
First REIT
3.92
Mapletree Industrial Trust
3.81
BlackRock Inc
3.55
Thai Beverage
3.14
SGX
2.99
SATS Ltd
2.96
Singtel
2.65
Capitaland Mall Trust
2.48
ST Engineering
2.35
Raffles Medical Group
2.01
Capitaland Limited
2
Medtronic PLC
1.99
Mapletree Commercial Trust
1.97
Dairy Farm International Holdings
1.82
Japan Foods Holding Ltd
1.81
JM Smucker Co
1.79
Frasers Property Limited
1.77
Frasers Commercial Trust
1.58
ISEC Healthcare Ltd
1.28
Frasers Logistics & Industrial Trust
1.14
Welltower Inc
1.04
Sheng Siong Group Ltd
1.04
Riverstone Holdings Limited
0.93
Kraft Heinz Company
0.78
QAF Limited
0.69
General Mills Inc
0.67
Hormel Foods Corporation
0.51
Abbott Laboratories
0.21
  
There has been some changes in my top 5 holdings. Singtel has finally been kicked out of the top 5 (Yay!). DBS was kicked out of the top 5 after I subscribed to Frasers Centrepoint Trust's Preferential Offering, bringing the latter into my top 5. Close at 7th place is the Tracker Fund of Hong Kong. Medtronic's allocation increased from 0.75% from the last quarter to 1.99% this quarter.

REITs have been on a tear lately. Similar to my outlook from the previous quarter, I will still be holding on to them for income. 
Similarly, the market flow into consumer staples has made it difficult to add to my consumer staples counters. I totally missed out on selected utilities I have been eyeing when the market rebounded. 

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: 29.67
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).

Compared to the previous quarter, my Interest Coverage Ratio has an insignificant drop from 30.35 to 29.67 while my Debt-to-Equity remained the same. Looks like I have been buying more using leverage lately.

Emergency Fund
Same thing month-in, month-out. Stacking cash to build a stronger financial buffer against recession and unemployment.

Insurance
I have also signed up for a term insurance plan with a critical illness rider with Singapore Life. With this addition, I am covered with Hospitalisation & Surgical (H&S) insurance, Personal Accident insurance, and a term insurance plan with a critical illness rider. The underlying motivation to get the new plan is to obtain coverage for an area in which I am lacking - critical illness.

From a cost perspective, it would have been better for me to get a similar plan from Aviva. However, Aviva's customer service and responsiveness just plain sucks. After multiple phone call follow-ups and emails, things were still not moving. In the end, I gave up on them.

The way to get Aviva to move, a blogger friend shared with me, is to expose their inefficiencies on their social media page for all to see. That will definitely get them moving! LOL!

Anyway, I digress. The premium for Singapore Life's term insurance portion is fixed while the critical illness portion escalates with age.

Singapore Life is one of the newer kids on the block, so I did some digging. A cursory search on Google revealed that they acquired the portfolio of Zurich Life when the latter exited their business in Singapore. Singapore Life's shareholders include US Dividend Aristocrat Aflac Inc, which I have came across before.

Work
My contract got renewed to end of Q3 2020. Hence, there is additional visibility in forecasting and allocating cash flow from employment.

Capital Allocation Thoughts
Same as per last quarter, I will be adopting a defensive stance in portfolio management.

I have also begun to think deeper into portfolio construction and the role that each constituent component play in the grand scheme of things:

1). Instead of the STI ETF, would I generate more returns if I invest into an ETF that tracks the Hang Seng Index (e.g. Tracker Fund of Hong Kong). I have come across quite a number of people who bemoaned the "dead-ness" of Singapore's market and the peak growth of Singapore's "bluechips". In contrast, the Chinese market seems to be still growing.

2). Should I convert my SG portfolio into a REIT and bank portfolio since Singapore is a REIT haven and have strong banks (relative to other nations)? With this secure base, I could use the income generated to invest in non-REIT and non-bank market leaders of the various sectors in their respective exchanges to balance things out (e.g. the US market and its dividend aristocrat consumer staples sector, the Malaysian market and its glove industry, Canadian market and its energy sector, etc).

3). Conceptualizing my portfolio as a container of multiple sector ETFs. For example, my nano financials ETF currently consists of DBS, OCBC, SGX, and BlackRock. Should they be equal-weighted? What should be the weight for each component in each nano ETF be? Currently, I'm thinking of overweighting large-cap stocks relative to mid-cap and small-cap stocks for their "apparent safety" (this is not foolproof). What is the maximum cap for each component within a nano ETF and what is the maximum cap for each nano ETF in my overall portfolio?

4). Drawbacks from such an approach include commission fees and complacency pertaining to the destruction of small positions.

5). Now with cryptocurrency in my portfolio, what is the hard cap for it? If there is a mass adoption of cryptocurrencies in the future, what is the middle ground I could take today?

For now, I have some provisional answers to the above questions. As my thoughts have not been fully fleshed out yet, I will refrain from elaborating at this juncture.

In the interim, the focus is on maintaining a healthy level of cash to make occasional purchases when valuation permits. The focus is on sustainable dividends, which could either be used to build my cash position further, pare down debts, or to add to dividend stocks. Once net worth increases, the absolute cap of my allocation towards cryptocurrencies would naturally increase. Setting a cap prevents me from over-investing into cryptocurrencies at any point in time.

Readings
I think I broke my reading record in this quarter, lol. I never was that hungry with investing literature, so you know where my priorities lie, lol.

Books completed:
- The Paper Menagerie and Other Stories by Ken Liu
- Broken Stars, edited and translated by Ken Liu
- The Garden of Evening Mists by Tan Twan Eng
- The Three Body Problem by Liu Cixin (1st book in the Remembrance of Earth's Past Trilogy)
- The Dark Forest by Liu Cixin (2nd book in the Remembrance of Earth's Past Trilogy)

Currently reading:
- Death's End by Liu Cixin (Final book in the Remembrance of Earth's Past Trilogy)

Bought, but haven't read yet:
- Grace of Kings by Ken Liu (1st book in the Dandelion Dynasty Trilogy)
- Wall of Storms by Ken Liu (2nd book in the Dandelion Dynasty Trilogy)
- Ball Lightning by Liu Cixin
- Invisible Planets, edited and translated by Ken Liu
- Waste Tide by Stanley Chan/Chen Qiufan

Man, the reading is damn enjoyable!

Thanks for reading! Time for me to head back to reading! =P

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