Sunday, June 1, 2008

My stocks portfolio - May 2008

Since middle of April to end of May, STI was trending sideways. As such, looking at a glance I don’t see much difference to my overall portfolio from previous month. That is an advantage of having a portfolio of diversified stocks. I don't have to worry too much of my portfolio on daily basis. Even if one or two stocks fall sharply, my overall portfolio will not be greatly affected. On the other hand, I am not expecting to see great returns as well.

There were four transactions made for the month of May.
Sold Sing Holdings at 51.8% loss
Sold Inter Roller at 43.1% loss
Bought Macquarie Infrastructure, average price at $0.986
Bought KS Energy, price at $2.044

Finally I made up my mind to sell away Sing Holdings and Inter Roller at 51.8% and 43.1% losses respectively. Initially I was reluctant to sell them away but after considering the fact that these companies are not generating positive net income at the moment, I don’t see how I can recover the losses in the near term.

I have no doubt that Inter Roller is a good company. But no matter how good the company is, if their business profitability depends largely on new contract, there will be no earnings if there is no new contract. And when there are no earnings, Inter Roller is unable to pay out dividends like they used to do regularly since it does not make sense to pay out dividends if the company does not generate healthy cash from operations.

I made a catastrophic mistake of chasing a hot stock like Sing Holdings. I bought it the first time when property was at a peak in Aug 2007. The other mistake was I averaged down twice without even reassessing its fundamental outlook. As I believe property sector will take a few years to boom again, therefore I decided to sell away Sing Holdings. I know I can make better use of the cash by investing in other undervalue stocks.

I learn another lesson from this experience that is during any major correction, most stocks tend to fall near their book value. I can say that at book value, the price will provide a good support for the stock. So it is wiser to buy a stock when it is near that level than to buy based on impulse decision. That is a reason why Sing Holdings is hovering around $0.42 now.

Rising oil price has been a hot talking point lately. Due to depletion of global oil reserves and increasing oil consumption, I forecast oil price to continue rising in the long term. It is an undeniable fact that we have to face in future. In order to keep up with demand, I am sure there are going to be more exploration for new oil reserves. Therefore I will expect more offshore or onshore drilling and marine activities to be carried out in future. As such, I decided to hedge my portfolio against rising oil price with oil and gas related stocks. I have bought KS Energy.

I have averaged down my buying price for Macquarie Infrastructure. Currently it is trading at a very big discount from its book value. Therefore I think it is prudent to invest more. I would say at current price, the stock has a good margin of safety and its downside is more or less protected. I did sign up for their scrip dividend as well.

I received total cash dividends of $1028.25 for the month of May. I dont intend to track the dividends payout from my stocks bought in CPF though.

NoStockModeUnrealised P/L
2ARA CASH-24.90%
13TAI SIN CASH-27.22%


la papillion said...

Hi Mike,

Read your portfolio analysis.

You should read intelligent investor by ben graham. You seem to adopt his 'buy a lot of cheap companies' philosophy. Buying companies at book value is not wrong, just make sure you diversify greatly, as recommended by Graham.

Or else, you can follow buffett's way. Concentrate your portfolio and aim to buy great companies at good prices instead of good companies at great prices.

Ku said...

Well said, la papillion, and Mike, it's nice of you to share with us your own portfolios and philosophies. It's quite informative for us investors. Looking at current market situation, guess most of us have no choice but to adopt a buy-and-hold approach and hope for a better day...

Mike Dirnt said...

thanks guys for your comments.

frankly speaking im not a book person so i dont like to read books. i learn mostly from internet and forums. but i heard good comments about intelligent investor. i intend to read that one day.

i prefer to use cheap by looking at their book value because i dont believe in valuation method like DCF. it is quite tedious analysis and bound to have errors if you put in or assume wrong interest rates. so i just make use of simple valuation by its book value. afterall, the book value is what left in a company if it folds up.

la papillion said...

Hi mike,

I know it's a little overdue, as I just happened to read your replies to the comments.

Sometimes a company is worth more when liquidated then when it's a going concern - but I find that's pretty rare. In other words, I meant that a company is usually worth more 'alive' than 'dead' because of the earnings that an 'alive' company generates.

Hence, to judge a book by it's book value might not be such a good option. Esp esp for property stocks and perhaps palm oil counters. These have a huge part of their book value in 'fair valuation of assets', which means the market valuation of their assets. Imagine if the market goes down, their so called book value also drops, so what happens to be a good bargain based on book value becomes a rather expensive buy.

Still, I'm not saying it's wrong. It's just that one needs more arsenal to meet different situations. Be more open minded on DCF. I suggest you read wallstraits articles/books by Curtis montgomery. He uses a bastardised form of DCF which I adopted. Simply, conservative and theoretically sound.

Haha, enuff crap, take care!