June 2017 portfolio update and review

 this month, i decided to add on a subject before posting my usual portfolio update

I spotted this recent post by the boring investor about value investing and how long to wait,

and decided to share my expericnces and views on this, as I felt it was a timely update both to myself and to others who find this useful.

Readers who have been following me would find that my portfolio has grown in size to under 10 stocks to around 25.

i used to be regard myself as a value investor, to me, it means buying a stock before its intrinic value and waiting for it to unlock itself.  This post by the boring investor resonates with me. To wait nearly a decade and still ending up nowwhere is certainly not a good experience.  But at least it pays dividends so making the wait not so unbearable. What about a counter which does not pays dividend and yet is deemed to be price at 1/2 of its intrinsic value? And intrinsic value itself can be subjective according to the methodology used.

Moreover, one shouldn't forget that to reap the most out of this way of investing, is to use a focused appoach to avoid the diluttional effects of too many counters.  This attaches the increased risk to the entire portfolio should a single counter turns against the investor. To minimise this risk, one can increase the number of counters, sure, however if a counter which occupies a 1:20 portfolio stake, even if it becomes a 10 bagger,  the entire counter moves less than 50%, and that is provided the other counters do not go southwards. And how many people have the skill or the good fortune to own a counter which occupy a substantial part of their portfolio and becomes say a 5 or 10 bagger? This really describes the dilemma of value investors who use a focus approach and hold them until Mr Market realises this true value. And value investors who already done this homework in buying a value stock and if its futher reduces in price, how many can still have unwavering conviction? In my observation, many value investors will simply bail out and hop to another "value stock". They do this and repeat this until they realised their money gets less and less and find that gee, investing is not as easy as it seems. And very often, if it rises, due to broad market forces rather than individual counter unlocking effects, many would simply sell off to lock in their gains. How different is this to being a trader?

In addition, when one uses this strategy to an undervalued stock with the aim of a unlocking it when it double bag or triple bags, do take note that most of the time either he is in cash or in invested in these counters. To hold either entity for prolonged periods of time could be trying and the subsequent rewards would need to commensurate with this.

Personally, I only experienced a two bagger happening within a 2 year investing time frame in one of my stocks which happen to occupy a more than 50% porfolio size, earlier on in my investing journey. Because of this, i enjoyed a nearly 40% gain yoy. However, the time spent, the effort put it and the psychology behind this makes me feel its too risky to employ it as the porfolio grows. Time, effort and knowledge do mitigate the risk but it does not eliminate it. If the rare event of a unknown unknown happens, its back to square one, which means that the time spent is all wasted and we are all growing older and time and tide waits for no man.

So slowly, my portfolio begins to evolve to include more counters, some of which are value stocks in the sense that the sum of parts is greater than its current price, which others are simply value stocks in the sense that its yield has gone up because its price has come down, or those which are in between.

One constant which i made use of it that all of them must pay dividends and there should be a dicernible long term trend,. The latter point is more important for non blue chip stocks.

The other deliberate arrangement is that the counters are planned in such as way as to provide an more even distribution of dividends throughout the year.

In this sort of arrangement, the gains are not so dependent on indivdual counters "unlocking" in value per se, but more predictable in the sense of using dividends compound in a very regular and close sequence and yet enjoy a lowever risk mitigated my the counter number. Any counters which "unlocks" itself in this process would be an added bonus, though the focus would be the compounding power. Example would be KSH, which was sold in majority when it gained 50% recently.  LKH which was purchased at 54c is still kept, as it is still deemed to be undervalued.

This investment strategy, like the value investing one alluded to earlier, both have a low correlation to market levels, as whatever the sti, the adding goes on.






Dividend by month

1) singtel
2) fcot sgx capitacom lian beng starhillg fct sphreit cmt
3) spost  taisin lippo
4) roxy
5) fcot steng sgx  uob sph starhillg fct sphreit cmt cdg hcg lippo
6) tcil ocbc lkh
7) singpost
8) fcot singtel  plife  ocbc  capitacom starhillg sci steng fct singpost sphreit cmt lippo
9)  uob tcil cdg
10) sgx lian beng
11) fcot taisin sgx spost  starhillg fct cmt lippo
12) sph sats ksh


Remarks:


my comments:




Overall,

nothing fanciful and nothing new: dividends received will be used to reinvest in the same counters and/or the counters which are about to pay dividends soon.

No further input is necessary. Portfolio creates the income every month and gets reinvested. One reinvestment move means one more continuous stream of income in the future.

Market up or down doesn't matter too much, in fact is not a bad thing after all. Dividends provided new cash flow as compounding and dollar cost average tool.



DON'T FORGET TO ASK YOURSELF THESE QUESTIONS:


1) WILL THIS COMPANY GO BUST IN 10 YEARS?
2) WILL THIS COMPANY STOP DIVIDENDS?
3) WILL THIS COMPANY STOP INCREASING DIVIDENDS OVER TIME?