Monday, 12 October 2015

Hoping for a recession? Be sensitive. Don't say it out loud.

Singapore is facing a technical recession and some people are starting to say things like 'I hope for a recession so that I can buy more stocks/properties/cars on the cheap'. That is being insensitive. There are workers who depend on their jobs to put food on the table. They are living from hand to mouth. They will be in dire straits if they are retrenched. Saying out loud that you are wishing for a recession so that you can benefit from it is just plain insensitive.

Don't get me wrong. Economically speaking, corrections are healthy and recessions are actually necessary in a capitalistic world. They do happen within intervals of a few years. In fact, they are inevitable. However, we do not need to go around trumpeting that we want a recession. I admit that I also wish to buy stocks at fire-sale prices but I do not talk about recession in front of my friends, relatives and colleagues as I know they need to feed their families. Retrenchment will be horrific for them.

Humans tend to be greedy and selfish. This is something that I observed a few years back before the Singapore government started to implement a slew of property cooling measures to stop the property values from skyrocketing. When I spoke to some friends and relatives, they have very different views. Those who already owned a property did not like the cooling measures because the value of their houses are not increasing fast enough. Those who are looking to buy their first property were supportive of the new measures because they want to buy affordable flats. From their own perspectives, both camps were right.

So, it is alright to have your own agenda and plans to benefit yourself. But please try to be sensitive to the people around you. Have more empathy and spare a thought for others.


DK

Saturday, 10 October 2015

Stock Selection process for your long-term portfolio

I would like to share how I usually take to select stocks for my portfolio. I assume you already have some emergency funds (covering 6 months of expenses) stashed away for a rainy day.

Planning Stage
Have a long-term financial plan written down on paper. Visualise your major financial goals & commitments in phases of 3-5 years. You should tell yourself, "Ok, I want to have xyz amount of assets by the time I hit 30/35/40 years old". If you are looking to start a family (mid-30s), you probably prefer more stable defensive stocks like the blue chips. Or you might even want to reduce the allocation of cash on stocks. On the other hand, if you are still young and single (early 20s), you might want to take more risk and go for a mixture of dividend plus growth stocks and ignore bonds until you are older.

Screening & Selection Stage
Once you are clear what you want to achieve financially, it is time to screen the market for stocks which fits your criteria, or at least come close to your criteria. These are the main figures that I focus on when read the balance sheets of companies which I am interested in.
  • Type of industry (sunrise - healthcare & logistics or sunset - newspapers & snail mail)
  • Debt
  • Revenue
  • Earnings
  • Free Cash Flow
  • Dividend payout ratio
  • Yield
  • Dividend growth
  • P/E ratio within the same sector
  • Management execution track records (mergers/ acquisitions/ joint-ventures/ AEIs/ rights issue/ private placements etc.)

As for REITs, I look at these figures;
  • Gearing
  • Weighted Average Lease Expiry (WALE)
  • Debt expiry profile
  • Land lease expiry profile
  • Rental reversions track record
  • Quality of assets (location, age  and design of the properties)
  • Type of assets (retail, commercial, industrial, healthcare, hospitality etc.) 
  • Management execution track records (lease renewal/ acquisitions/ AEIs/ rights issue/ private placements/ capital-recycling)
I would suggest starting from the STI. Treat it like your shopping list. Even the companies on the reserve list are solid choices too. Some people prefer to simply buying the STI ETF at regular intervals. I am more selective, so I am only vested in certain companies from the STI such as Singtel, Starhub, CMT, SATS and ST Engineering.

A list of the latest STI component stocks.


STI Reserve list:
  • CapitaLand Commercial Trust,
  • Singapore Post
  • Suntec REIT
  • Keppel REIT
  • M1
I guess this is what the experts would call 'due diligence'. Fortunately, I thoroughly enjoy this screening process. However, I do understand some people are too busy or lack the interest in analysing balance sheets. They prefer to automate their investments. For these people, I would recommend either the POSB or OCBC regular investment saving programmes.


DK

Wednesday, 7 October 2015

How Dividend Knight started his investment journey

Some of my readers are curious about how I begin my investment journey. So, let me fill you guys in.

It started back in 2013 when the markets were volatile and bearish due to 'QE tapering tantrums'. After following some financial bloggers like Dividend Warrior, MusicWhiz, Investment Moats and AK for a long time, I decided to take the first step towards building my own dividend portfolio. Their portfolios inspire me, especially Dividend Warrior's version.

I am in my late thirties with no family commitments. So, I was able to utilise most of my salary, bonuses and savings for investment. Before I know it, a sizeable portfolio was built within 2 years.

My aim is to achieve $2k per month in dividends by the time I celebrate my 40th birthday. I hope all of you would join me on this amazing journey and hopefully be inspired too.




DK

Tuesday, 6 October 2015

Dividend Knight Portfolio Update (Oct 2015)



 
Company
Shares (1000)
1.
M1
12
2.
AIMS AMP
30
3.
Starhub
10
4.
Singtel
8
5.
Frasers Centrepoint Trust
12
6.
CACHE Logistics Trust
16
7.
SATS
4
8.
Capitaland Mall Trust
7
9.
Raffles Medical Group
3
10.
Mapletree Logistics Group
10
11.
ST Engineering
3
12.
PLife REIT
5
13.
Suntec REIT
6
14.
First REIT
10
15.
MGCCT
7
16.
Keppel DC REIT
10
17.
Sheng Siong
7
18.
Mapletree Commercial Trust
2
19.
VICOM
0.5

Dividends received in October 2015: S$0

Total dividends received since Jan 2015: S$13, 265

Average dividends per month: S$1,105

Average dividends per day: S$36


Click to enlarge image

None of my holdings will be giving dividends in October. Fortunately, thanks to the volatility in the markets, I managed to accumulate 2000 shares of Sheng Siong at $0.815.

While most investors were focusing more on the STI ETF, banks, telcos and REITs in general, I decided to target Sheng Siong for a few reasons. Firstly, the growth for Sheng Siong lies in its e-commerce initiative, joint-venture in China and opening of new local stores. Since PAP enjoyed a landslide victory in the recent general election, Singapore should be marching towards a population of 6.9 million by the next decade. More people will probably lead to more consumption of daily necessities and groceries. So, Sheng Siong can ride on this long-term trend. The management is doing a decent job of maintaining reasonable profit margins and lowering operation costs by utilising a central distribution facility. As Sheng Siong imports a significant amount of goods from Malaysia, a weak ringgit will work in Sheng Siong's favour.

The main risk is stiff competition from NTUC Fair Price and Cold Storage/ Giant stores.



DK