Thursday, August 24, 2017

Festina Lente - Make Haste Slowly (Almost a year down the road)



I had written about my pivot to a ETF based exposure to a global financial portfolio almost a year ago. A link to the old post is here below.

https://sgx-stocks-sti.blogspot.sg/2016/10/festina-lente-make-haste-slowly.html

Here is an update on the performance and holding period.

ETF % Portfolio Target Weight Annualized Return Holding Period (Years)
Lyxor Europe 10US$ (JC5) 2.70% 19.00% 6.44% 2.30
STI ETF (ES3) 3.39% 1.00% 5.84% 2.40
Lyxor H.S.I ETF (A9B) 2.44% 2.00% 12.29% 2.03
DBXT MSJAP US$ (LF2) 2.05% 7.00% 10.31% 0.80
SPDR DJIA10 US$ ETF (D07) 4.82% 12% 13% 1.25
DBXT ASX200 US$ 10 (LF1) 4.58% 2.00% 10.48% 0.82
Lyxor Nasdaq US$ (H1Q) 4.21% 11% 18% 0.58
SPDR S&P500 US$ ETF (S27) 9.00% 12% 9% 1.33
DBXT CSI300 ETF (KT4) 6.00% 7.00% -2.40% 1.21
CIMB S&P Ethical Asia Pac Opportunities ETF (P5P) 7.65% 4.00% 20.83% 0.89
iShares Barclays USD Asia High Yield Bond Index ETF (O9P) 14.42% 20.00% 1.39% 0.65
CIMB Asean 40 ETF (M62) 6.85% 3.00% 7.23% 1.09

The weights are nowhere close to where I want them to be.
Unfortunately, markets don't co-operate in that sense.

I am close to bumping against the limit for the China ETF.

In terms of opportunities, right now, I do not see any ETF investment opportunity, as in the last 3 months or so, none of the ETFs have gone down.

This is because I am trying to follow

1) Add to an ETF which is under-performing.
2) Ignore the performing ETF
3) Use Investment addition to re-balance the portfolio weight rather than through active sales, i.e. avoid trying to time the in and out as all I want is global exposure to a set weight

I think it was Charlie Munger, who said, we are paid to sit tight and wait, so, that is what I am doing.

I must admit though, while the results are satisfying, the process is about as exciting as watching paint dry, which I guess is the objective i.e. make it boring, so that you do not take action !

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

Wednesday, May 31, 2017

Did Financials Out-perform REITS ? (Round 1)

I had posted about an ST article saying Financials favoured over REITS, a few months back.

The link to the old article is below.


My take then that chances are that this call by "Experts" was a case of performance chasing.

My investment hypothesis is that financials will not outperform REITS.

Hence the evaluation was to examine the performance of this portfolio against the three banks at periodic intervals to evaluate whether this call was correct.


I created a mock SPH REIT Index Portfolio for 100K SGD.

About four months have passed since the article.

Hence, I pulled up the performance till End April 2017.

Simply put, do not believe "Experts".

REITS have out-performed Financials.

Of course, this could mean nothing.

Financials may or may not out-perform REITS in the long run, short - term or medium term.

But, that will only be evident or obvious in hind-sight. 

I do not know the future, neither do you and probably, neither do the "Experts". 

Full Disclosure : I have a small position in Keppel REIT and Cache Logistics Trust.

Disclaimer :- 

I am not an investment professional.
I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.Nothing written here is an invitation to buy or sell any particular stock.At most, I am handing out an educated guess as to what the markets may do.The market will always find a new way to make a fool out of me (and maybe, even you!).Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.


I am not immune to that, so please understand that any past success of mine will probably be followed by failures 

Sunday, May 14, 2017

One Ratio to rule them all - Update on the Low EV / EBITDA portfolio

I had done a post on a low enterprise value ebitda portfolio for Singapore.

Details are there at this link


The original investment hypothesis was that

a) This portfolio will outperform the market
b) It will exhibit lower volatility and draw-down.

I wanted to check how this portfolio is holding up.
The portfolio is amazing as it significantly outperforms and shows lower volatility and lower draw-down.


It is amazingly up by 23%, while the benchmark STI ETF is up 18%.


That is 5% out-performance in the last year plus.

Full Disclosure : I own positions in BRC.

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

Friday, March 24, 2017

Market Musings: One Chart for Evaluating the High Yield Bond Market in Singapore


One area of controversy in the market is high yield bonds. 

A few investors I speak with are running for the exits, a lot of people waste no time in telling you that you are downright stupid for buying high yield bonds. Very few (around 2 or 3 people) are saying that while it is not the best buying opportunity (and cite July 2015 as the best) for high yield, high yield bond funds are worth a place in your portfolio.

I had written about high yield bond etfs before and here is a link to that post.

https://sgx-stocks-sti.blogspot.sg/2016/04/opportunity-or-value-trap-evaluation-of.html

What is the outlook for high yield and how should investors position portfolios amid such mixed sentiment? 

Every picture tells a story, so I am sharing a chart that may help investors evaluate the current high yield opportunity.

Full disclosure, this post was inspired by a blog post on State Street Global Advisors who had done something similar for the US market.





Stocks and High Yield Bond ETFs diverge, but actually delivered the same returns in the last five years. In summary, while stock ETF (ES3), the Straits Times Index ETF had higher highs and lower lows, over the last five years, both have delivered virtually the same returns.

If you factor in that the yield on the high yield bond etf (O9P) is actually 7.43%, while that for the STI ETF is actually 2.97%, you would probably have benefited from holding the high yield bond ETF.

To repeat what I had said almost a year back, 

From Morningstar report

Volatility Measurements

Volatility 5.11 %
3-Yr Mean Return 7.91 %

Sharpe Ratio 1.39

The Sharpe ratio in the past three years means one has obtained 1.39 return for every dollar risked.

I do understand that Sharpe ratio is ex post and cannot be used for ex ante calculations and there is no reason to expect similar behavior in the future.

Risk Measurement 1 Year 3 Years    5 years
Standard Deviation 6.17        5.11
Positive Months        6          24       35
Negative Months        6          12       15
Worst Month       -2.44        -3.11      -20.46


I will gladly accept a worst month of 2 to 3% down for a upward slope of positive risk adjusted returns.

I am not trying to "sell" the idea of buying this ETF, all I am saying is that it seems like a reasonable risk reward scenario,

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

Monday, January 23, 2017

Financials Favoured over REITS



I am sure, some of you may have seen this article in Straits Times last week.

http://www.straitstimes.com/business/invest/financials-favoured-over-reits

The accompanying graphic shows clearly that financials outperformed reits in the trailing two months.

Experts opined that in future, financials will out-perform REITS.

A classic case of performance-chasing!?

However, I thought, let us evaluate this call over a couple of years.

So, without further ado, i created a mock SPH REIT Index portfolio for 100K SGD.

Here is a link to that portfolio.
https://www.google.com/finance/portfolio?action=view&pid=12&ei=jrmFWLHsKo66ugS6k6PADg

My take is that chances are that this call will prove to be a case of performance chasing by "Experts".

The investment hypothesis is that financials will not outperform REITS.

The way I will evaluate is to examine the performance of this portfolio against the three banks at periodic intervals to evaluate whether this call was correct.

Full Disclosure : I have a small position in Keppel REIT and Cache Logistics Trust.

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.


I am not immune to that, so please understand that any past success of mine will probably be followed by failures 

Tuesday, January 10, 2017

The Long Wait continues (For Sing Holdings shareholders)

I had written about Sing Holdings back in 2014. 

The old post is here below.


I had done an update on this in 2016.


Now, we are here in 2017 January.

My assessment in 2014 was

"However, chances are Sing Holdings will stay at this level for a year till the mood for property stocks improves, it will improve over a long enough time, but that wait is likely to be quite long"

 After the 2016 post, if you ask me, what has changed in the last one year, 

The closing price as of Jan 9, 2017 was 0.32.

The closing price as of Jan 12, 2016 was 0.32.

In short, there has been no change in the prices.

Shareholders of comparable firms like Sim Lian, Chip Eng Seng and Oxley have gained anywhere between 6-40%.

Would anything change? And is this a good time to buy in to the share?


Short answer is it seems unlikely.


The past year saw bumper results with very high increases in terms of sales as well as earnings per share.


However, the reward in the form of dividends to share holders was low , i.e. the dividend has increased from 1 to 1.25 cents.


So, your only hope is that the market discounting goes from the current price to book of 0.5-0.6 to around 1.


Yes, this has happened in the past, but, chances are it seems less likely to happen in future.

Chances are that Sing Holdings will stay at a depressed level for a few years till the mood for property stocks improves, it will improve over a long enough time, but that wait is likely to be quite long, and we are talking in terms of probably a decade of holding it and probably in that decade there will be two windows in which it will appreciate to around book value.

From an opportunity cost point of view, it would be a waste to sink budgets in to this counter when there are better horses for one to ride.

Full Disclosure : I have no position in Sing Holdings and no plans to establish one.


Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.


I am not immune to that, so please understand that any past success of mine will probably be followed by failures