Sunday, January 17, 2010

Ex-post answers

Here, I shall provide answers to two issues I have raised two years ago.

First, in my Dec 2007 book review, I have asked given the similarity of subprime crisis to the 1907 bank crisis, would the subprime crisis lead to liquidity crisis?

The answer, as we all know, is yes. And to add, I do not know the answer at Dec 2007, and I did not expect that the subprime crisis will lead to a global economic contraction.

I suppose that the lesson here is that one should not be fully invested if one is suspecting an incoming crisis.

Next, in my Mar 2008 post, I have mentioned about investing the first 20K of CPFOA in 3 possible stocks: Orchard Parade, Singapore Land and Hotel Grand Central

And, I have done what I have written at that time. I have bought Orchard Parade at around $1.05 using CPFOA funds. Well, if you look at the price Orchard Parade on Friday, you can derive my returns (around 13%).

This return is higher than CPFOA two years' return. However, on hindsight, I have invested at the worst possible time, such that I have to endured a capital loss of 50% during this two years. (This incident is an example of higher returns in exchange for higher risks)

Even though I have to suffer the temporary capital loss of 50%, I always felt that I will beat CPFOA returns in the long run (i.e. 5-10 years). To me, as I have bought Orchard Parade at 0.5 P/B, my margin of safety was a pretty high margin of around 50%, assuming that fair value was at 1x book.

While it may be debatable whether my investment in Orchard Parade in 2008 is correct in process, I believe that I am likely to make the same investment if the same circumstances happen in future.

This is because I do not know the future (or whether there will be a severe stock market contraction), and given the margin of safety, this investment is most likely to beat CPFOA in 5 - 10 years' time.

PS This post is written for personal preference only.

Sunday, January 3, 2010

Portfolio as at end Dec 2009

This is a post on my portfolio holdings as at end Dec 2009.

My portfolio, as at end Dec 2009, contains the following stocks:

Broadway
Fabchem
Fujian Zhenyun (FZ) Plastics
Guocoleisure
Metro
Techcomp
Tuan Sing
UOA

Sold: China Eratat, Valutronics, UOA (sell a little proportion of my total holdings)

China Eratat is sold to realise the declining profit, as price is falling from a mini-peak. In addition, China Eratat is bought as a short-term play in the first place.

Valutronics and UOA are sold to raise cash so as to buy other stocks.

Bought and sold: Hongfok

Bought Hong Fok. After some evaluation, I sold Hong Fok to raise cash for other stock (i.e. Tuan Sing and Broadway)

Bought: Tuan Sing, Broadway, Guocoleisure, Techcomp, Metro

Tuan Sing is bought at a P/NTA of around 0.5, with the additional consideration that its debt will be significantly reduced after its Katong mall sale.

Broadway is bought at slightly lower price when I sold it earlier. Broadway is cheap at 4.x PER and it is in a near-oligopoly industry. There isn't many HDD makers (e.g. Seagate, Hitachi etc) left. Broadway owns Compart which is a big supplier of HDD parts. Hence, this may be a low-risk stock with some upside. The upside, however, is capped if Broadway is unable to increase earnings significantly in 2010/11.

Guocoleisure is bought at slightly lower price when I sold it earlier. I just buy back a tiny proportion of what I own earlier, so as to diversify risk. In addition, I think that Guocoleisure is another low risk stock (with low price-book ratio) that has capped upside.

Bought more of Techcomp. This purchase increase my stake in the bet that Techcomp will recover from the 2008's falling yen incident, and that 2009 2H will be much better than 2007 2H. It is a risky and potentially more rewarding idea.

Bought more of Meto. Metro is another low risk stock (with low price-book ratio) with capped upside.

Returns. Using Excel's IRR (internal rate of return), my average annual returns is 20.5% from 2005-9. The real return should be somewhat higher, as IRR assumes that I puts into the new cash in my portfolio on 1 Jan every year and this is not the case.

IRR also does not display the volatility of portfolio returns. My returns are very volatile:
2007: +46%
2008: -70%
2009: +147%

Nonetheless, my portfolio returns seems to be better than STI. This means that I should probablly continue to practice self-investing (a self-flattering statement).

My returns for 2010 is likely to be lower. And hopefully my future portfolio returns will be much less volatile.