Saturday 21 April 2012

Genting Perpetual Securities-5.125% interest

Invested into the Genting Perpetual Securities offering 5.125% interest per annum. Strong financial performance from RWS Sentosa makes this issuance a good deal instead of keeping too much cash in the bank account. Trading price as of 20 April 2012 was already approximating 2% higher than the original coupon price. Go Genting GO!

Sky Habitat shatter suburban price ceiling in Bishan

Wow....1450psf to 1800psf! Incredible pricing by CapitaLand. The robust sales of 125units during one weekend speaks volume of the extraordinary marketing campaign by CapitaLand which all developers should suck thumb and learn. Far East Organisation, CapitaLand and Hong Leong/CDL group are the big boys with lots of fats stored on their balance sheet. Hopefully, the next economic downturn will trim off some of their excess fats and make them more down to earth with their sky high pricing. Property development seems to be very much a game of hit and run for these developers. The ones who suffered are the average men in the street.

Anyway, buyers of Sky Habitat must be mainly from among the top 10% earners in terms of average household income. Such group will not be that adversely hit by the recession for any firesales of their units. I would say wait long long to those hoping for major property price crashes to land their hand on a heavily discounted Sky Habitat from either the developer or the current buyers. The ones who will be hit are those group of people who bought the other suburbia condo that the government released from government land sales.

Property is very much sentiment driven. That explains why coupled with an extremely low interest rate environment, the numerous cooling measures kept failing to "cool" the property market which is behaving like a raging bull. During Mr Mah Bow Tan time, the government has underestimated the demand for private and public housing by a huge margin of error which the new Minister Mr Khaw Boon Wah is trying to rectify. However, I do not think it is a good idea to keep throwing so many Executive Condominium sites and private condo site into the market. Once the marco-economic wind changes and condition soured, the market will drop drastically (depending on the extent of the recession and duration). Even if all cooling measures were subsequently removed, it may take many years to re-build the property market during the year of capital excesses being invested into highly priced property. This is evident from the deflated property market in the United State which will take many years to sort out.

We seems to be embarking on a perfect recipe for imminent disaster.

Dividend Yield Stock- Valuetronics

Recently came across what I believed to be an undervalued stock call Valuetronics on SGX. It is an OEM maker. Dividend yield for last year is around 10%. Since earnings for this year is also fantastic, would expect another 10% to be declared. Price earnings ratio also looks good. However, history of dividend trend reflected cyclical nature of business being in tandem with the broader macro-economics. Risk of losing all invested capital. Hence staying away for now and not sure whether to invest.

Sunday 8 April 2012

What investment strategies to use?

Now, this is a very tough topic to discuss. Despite being an advocate of dividend yield investing, this does not mean that one should be narrow minded and fixated on employing only this particular strategy. Instead one should always embrace value investing techniques as well as the buy low and sell high approach. Let me elaborate further below.

I have utmost respect for financial gurus such as Mr Dennis Ng, who is the King of Retail Investment in Singapore. By combining technical analysis and financial analysis as well as other background information on a particular stock, this increased the probability of staying one big step ahead of the market in terms of the appropriate time to buy or sell. At the same time, I am also a huge fan of Mr Warren Buffet who believes in value investing and largely ignore the irrationality of Mr Market. If a company has a solid business which is easy to understand and also led by good management as well as offer a good price relative to it's intrinsic value, Mr Buffet will invest and hold for long term. In his letters to the key managements of all the business units, Buffet always reiterate that Berkshire will be there for the long term hence business should always look at the long term growth rather than employing short term tactic to boost profits in the short run. Buffet does not engage in frequent buy and sell of the different companies acquired.

Next, cash is indeed king. Do keep truckloads of it in the bank accounts. I do not believe in staying fully invested. In the event of a stock market crash (read 50%-60% decline in prices), this will be the time to pick up stocks which offer good value. At this juncture, one should fill one's portfolio with lots of capital growth stocks such as banking counters which generally falls the fastest but jump back up rapidly once confidence is reinstated in the gloomy economy. The global financial crisis that happened back in 2008 will no doubt return. Such periods are the best time to double or even quadruple your capital. These opportunities unfortunately only appear a few times in one's lifetime and to take advantage of it when all the stars are aligned made it all the more tougher. But safe to say, any one such crisis will most likely propel one close to achieving financial independence. 

The sad fact is that recession or even depression is the only way to drastically increase your wealth. Retail investor invests only to stay ahead of inflation while accumulating enough capital for that big day. But the question that comes on that fateful day will be whether one dare to plough the market and pump the capital on such gloomy market sentiment and move in the totally opposite direction of the herd and skeptics?

Starhub - Capital Reduction or Increase in Dividends

The latest news going around in the market is that Starhub is sitting on lots of excess cash. It seems that Starhub management will be favouring more of an increase in dividend paid out rather than pursuing a capital return exercise. Either way, it spells good news for long term investor of Starhub in terms of unlocking further values from the company and re-investing the cash in other yield stocks.

This is also a good testament to the Dividend Yield Strategy rather than other investment philosophies such as re-allocation/balancing or sell high strategy. The strength of the management of a company is a very important attribute of a well run company. If we have just took a look at the current market price as well as the PE ratio  of 17.1, many experts would have recommended selling at the current high price to lock in unrealised profits or selling to rebalance one's portfolio.