Friday, December 30, 2011

How did the defensive portfolio fare?

Now let's look at how the elderly couple has fared for 2011 since their investment.

I have included here a sample portfolio for the elderly. This portfolio is a real-life example that I recommeded to an old couple. The shares were bought in mid-2010 and you can take a look at the percentage dividend yield and the returns on invested capital.

A defensive portfolio for the elderly
as at 30 Dec 2011
Stock (No. of shares)Buy at2011 dividendRealised profitUnrealised profit
Cerebos Pacific (2,000) $           4.48 $               640.00 $             640.00 $                 960.00
Popular (50,000) $           0.15 $               500.00 $             500.00 $                 650.00
OCC 5.1% NCPS (200) $       105.00 $           1,000.00 $         1,000.00 $                 460.00
 $ 37,460.00 $         2,140.00 $            2,070.00
% Yield5.7%
ROIC (%)11.2%

Please note that these shares were bought in mid-2010, when the STI index was at 2987.70. The index closed at 2646.35 yesterday. This portfolio gained 11.2% (including dividends) while STI index lost (11.4%). This portfolio beat the STI index by a margin of 22.6%. I would have considered this an achievement.

Remember these points that I have mentioned in my other post.
1.  Value investing is timeless. You can buy undervalued stocks anytime.
2.  A defensive portfolio is able to let you have a good night's sleep. Even during these uncertain times in the eurozone, this portfolio is still able to give the couple a dividend of more than $2,000. 
3.  Buying and holding stocks that are not actively traded can protect your portfolio from the effects of news.
4.  Buy businesses, not stocks. Cerebos Pacific is a company that produces Brand's Essence of Chicken, Popular is a company that is known to almost everyone in Singapore.
5.  Buy a high yield preference shares can almost guarantee every dividend payout at a fixed rate.
6.  Buy at the strike price and not any other price. 

The couple will still be holding on to this portfolio for the next couple of years to enjoy the high dividend yield. Anyway, they are going to receive an interim dividend from Popular in January 2012. Will update on this portfolio at the same time next year. So do keep a lookout.

Happy investing and cheers!

Happy New Year. Let's welcome more good years ahead.

How did Jac fare for his picks for 2011?

This is extracted from my post on 18 February 2011.
These are the companies that I have chosen to invest in.

The companies here are not listed in order of merit.
1. Popular Holdings. Singapore
2. Cerebos Pacific. Singapore
3. Walt Disney. US
4. Starbucks. US
5. McDonald's. US
6. Citigroup. US
7. OCBC. Singapore
8. UOL. Singapore
9. Duke Energy. US
10. Las Vegas Sands. US
Reasons for choosing these 10 companies:
1. Popular is strongest bookstore group in the heartland. Dividend yield can be 6% a year.
2. Cerebos Pacific. High dividend yield of about 7% to 8% per year.
3. Walt Disney. Acquire Marvel to be the company with the biggest number of cartoon characters. Growth stock.
4. Starbucks. Number 1 coffee in US. started to open stores in Japan and India. Opening into single serve area.
5. McDonald's. World number 1 fast food chain. Who does not know McDonald's in Singapore? My children eat their hotcakes or burgers once a week.
6. Citigroup. Growth stock. Balance sheet has improved under the leadership of Pandit.
7. OCBC. Growth stock with dividend yield of about 3.5%. It's growing presence in Indonesia.
8. UOL. Growth stock in residential, commercial and hotels sector. Great leadership Wee Cho Yaw.
9. Duke Energy. going to acquire progress energy to become biggest energy provider in US.
10. Las Vegas Sands. Growth Stock. Building one more casino in Spain.

So how do I fare for the whole year of 2011?
I shall use the share price on 03 January 2011 to gauge the winners and losers.
Let us look are the Singapore shares first.
1. Popular
    Price on 03 Jan - $0.165     Dividend for 2011 - $0.01
    Price on 30 Dec - $0.163     Loss - $0.01

2. Cerebos Pacific
    Price on 03 Jan - $5.25       Dividend for 2011 - $0.32
    Price on 30 Dec - $4.96       Gain - $0.03

3. OCBC Bank
    Price on 03 Jan - $9.41       Dividend for 2011 - $0.30
    Price on 30 Dec - $7.83       Lost - $1.28

4. UOL
    Price on 03 Jan - $4.52       Dividend for 2011 - $0.15
    Price on 30 Dec - $4.00       Lost - $0.37

Singapore blue chips lost 17% for the year 2011, while this Singapore portfolio makes a loss of 8.4%. This portfolio actually beat the STI index by 8.6%.

Now let us see the US stocks
5.   Walt Disney
      Price on 03 Jan - US$37.82       Dividend for 2011 - US$0.60
      Price on 30 Dec - US$37.36       Gain - US$0.14

6.   Starbucks
      Price on 03 Jan - US$33.25       Dividend for 2011 - US$0.56
      Price on 30 Dec - US$46.17       Gain - US$13.48

7.   McDonald's
      Price on 03 Jan - US$76.60       Dividend for 2011 - US$2.53
      Price on 30 Dec - US$100.74     Gain - US$$26.67

8.   Duke Energy
      Price on 03 Jan - US$17.86       Dividend for 2011 - US$1.00
      Price on 30 Dec - US$22.00       Gain - US$5.14

9.   Citigroup
      Price on 03 Jan - US$49.00       Dividend for 2011 - US$0.03
      Price on 30 Dec - US$26.39       Lost - US$22.58

10. Las Vegas Sands
      Price on 03 Jan - US$45.59       Dividend for 2011 - US$0.00
      Price on 30 Dec - US$42.79       Lost - US$2.80

The price for 30 Dec is correct as at 1am Singapore time. There will be some changes to be made the the trading ends in the US.
As for the US side, the blue chips were flat for the year 2011. This portfolio make a gain of 5.73%.

In total, the mixed portfolio has made a profit of 8.33% while the indexes made a lost of 17%. This means that this portfoliio has beaten the indexes by 25%. Consider a job well done for the novice investors.

Although I use closing price on 3 Jan 2011, it does not mean that I buy on that day. This date is chosen for calculation only. In real life, value investors have a personal valuation of the company. We only buy the shares when the stock has taken a beating, else we will just sit back and do not take any action. After the Japan earthquake and the downgrade of US credit, many share has been affected and prices nose dived. That was the time when the value investors took action. 

My personal US portfolio included some shares above, has increased 35.6% in value for the year 2011. I sold my Citigroup shares just before they did a reverse split and I reinvest the money into another stock and I am still holding on to Starbucks. That's the reason why I did not lose any value although Citigroup has lost 46.1%.

My personal Singapore portfolio included some share above, has increased 5.3% in value for the last quarter of 2011. I only started buying Singapore shares in September for the year 2011. That is why I am quite happy with the 5.3% growth in just one quarter.

I am looking forward to increase the value of my invested capital by at least another 15% in 2012. I hope you can do that too. 

In my next post, I will talk about the old couple's portfolio and how they have fared for the year 2011.

Happy investing and have a wonderful new year.


Tuesday, December 27, 2011

Investment is like our daily life

Dear readers,

It's been a month long since I last posted here. Merry Christmas and a Happy New Year to all of you. Hope that 2011 have brought you some good investments.

During the Christmas weekend, I read a post from a friend in her Facebook. 
"Damn crowded, whole world seem to be here — at 112 Katong."

We know that 112 Katong is a brand new shopping mall that was opened just before Christmas. It had attracted a lot of shoppers during the Christmas long weekend.
But how is this related to investment?

Thoughts just ran through my mind when I read the above post. Somehow I just linked the thoughts to investment. Here, I will explain their relationship.

It's in the humans. Nature create humans that like to follow the crowd or follow something new. 112 Katong was just opened and people just flocked there. They did not think of whether it will be crowded or not. They just like to be with the big crowd. Some people may even shop for things there, without comparing prices elsewhere. So, most of the time, shoppers bought things way above the value.

Imagine if you are an investor, waiting for a stock or a property to buy. You see that many people were buying ABC stock or DEF property, the price has been pushed up for almost 10%. You were afraid that price might go higher, so you decided to follow the  crowd and make your purchase, without doing any homework. This is the worst mistake that an investor can make.

112 Katong will still be there in the next 20 to 30 years. Why do so many people like to follow the crowd? Don't they feel uncomfortable with the crowd? Just like the shopping mall, the stocks will continue to exist as long as the company is still up and running. 

Personally, I prefer to shop in shopping malls on weekdays. Why? So that I can enjoy the shopping experience without squeezing with the others. So I applied the same concept into investing stocks. I look for stocks that do not trade on the top volume list. I look for stocks that people don't like. I look for stocks at my own sweet time and do research on them before I commit to buy. When I have committed to buy the stock, I will wait for it to fall to my strike price before I take action. That's what an amateur investor should do too. 

Also, we compare prices when we do our shopping. Recently, I bought two dozen golf balls that will cost $8 per piece in Singapore. A friend was coming back to Singapore for Christmas, hence I bought through the Internet. The golf balls cost less than $5 per piece. I actually bought at a discount of 37.5%. The same should go to property investment. I bought two, "not so popular", properties in 2010 and sold them for a good profit in 2011. Before buying the properties, I looked at the prices of nearby properties for comparison. Of course, I did not buy the cheapest one, but I bought one that is at a discount of my personal valuation of the property. Investment is just like buying normal shopping items, we tend to compare prices before purchasing them at a cheaper shop.

A good investor enjoys doing homework on the investments that he is interested in. Just like a student will like to do homework in the subjects that he is interested in. It's like purchasing a car. When a person likes a certain car model, he will look for all the reviews, or pictures of the car. This applies to investment as well. Be it stocks or properties, amateur investors should find out more before making the decision to buy.

There are many other examples that investment can link to our daily lives. Our daily habits will determine how successful we can be in our investments.

May the incoming 2012 bring us better investment opportunities.

Happy investing and cheers.