Saturday, March 29, 2008

2008 Q1 Portfolio Update

As Q1 is almost done, I shall provide an update of my portfolio here. My portfolio currently contains:


Sino-tech Fiber
China Precision Tech
Fujian ZY Plastics
Sihuan
China Hongcheng
Cacola
C&G
Karin
Valutronics

Transactions made since last update:
Bought and Sold: Dutech
Bought: Sihuan, C&G and Cacalo
Partial Sold: Fujian ZY

As seen, my portfolio did not change much since the last update.

Bought Dutech as the price is attractive at around 2007 historical 6.x PER. However, the position is not large, as I am waiting for futher price drops. Dutech was sold later to raise cash for other purchases.

Sold a minor portion of Fujian ZY to raise cash for other positions.

Have added more shares of Sihuan, C&G and Cacalo in the portfolio as the prices of these stocks fallen to attractive levels.

Year-to-date, my portfolio returns are negative at around -15%, more negative than STI (-12%).

Thursday, March 20, 2008

Book Review : Investing The Templeton Way

Investing The Templeton Way is authored by Templetion's grand-niece, Lauren and her husband, Scott.

The book would be a splendid addition to a value investor's library. The book elaborates on Templeton's principle of buying at maximum pessimism and his way of thinking in his recent exploits of the market (for example, shorting the Internet stocks in early 2000)

Some interesting points are:

1) The book contains two analogies to explain how buying at maximum pessimism. One is the lemonade example, and the other describes how Templeton's grandfather's bidding strategy for farmland. That is to bid only when there are no bidders for the farmland. In this manner, the purchased farmlands were bought at a very low price and hence, a profit was almost guaranteed when the farmlands were sold some years later.

2) The right question should be "When is the outlook most pessimistic?" and not "When will the outlook be good?"

3) Diversification will be helpful if one is using borrowed money. This was illustrated when Templeton uses borrowed funds to purchase every small caps below $X dollars, so as to profit enormously from his divergent views when compared to the prevalent market view.

4) Always use real data (and not press commentaries) in your decision making process. This is seen when the book describes how Templeton uses comparison of current P/B and P/E against the historical P/B and P/E to derive the conclusion that the market was very cheap in 1979-82.

5) Patience is a necessity. Investing in unwanted stocks requires patience as it may take a few years before the stocks take off.

6) Be flexible. Templeton recognizes that bonds are good buys at Mar 2000 and he bought zero-coupon bonds using borrow money (carry trade) at that time, which further amplifies his returns.

7) What you learn may be transitive. The book has described how Templeton identifies Japan as an investor's paradise before many other fund managers and how Templeton is able to use the same insights to spot Korea as the investor's paradise. Templeton invested in an unit trust holding only Korea equities during 1998 Asian Financial Crisis.

In short, if you are a value investor, you should read the book.

Monday, March 17, 2008

Beating CPF's extra 1% and its regulations

If you do not know, from 1 April 2008, you will not be able to invest the first $20,000 in your Ordinary Account. (See here) This rule is because of the additional 1% government is offering us.

The extra 1% will only push up the net returns to 3.5%, probably half of what one can get in a 20 year MSCI world stock index (assuming it's 7%). It seems that the government is forcing the younger adults with long time horizon to miss out on higher returns in long term investing, rather than letting the young adults to choose themselves (in other words, having an opt-out option for the extra 1% in OA).

And not to mention that the 3.5% return is lower than the current CPI inflation rate.

As the April 2008 falls nearer, I have decided to utilize the bulk of my CPFOA to buy some stocks, especially in the current bargains galore season. The chosen stocks will be those with P/NTA less than 1 and property owning companies (to safeguard against inflation).

Currently, possible candidates so far are Orchard Parade, Singapore Land and Hotel Grand Central.

Hopefully (and likely), in five years time, the return from the above candidates would beat the 3.5% handily.