Wednesday, August 31, 2022

Portfolio Summary for August 2022

As of 31 August 2022

CDP

Security# sharesPrice S$%
DBS30032.602.90
UOB30027.332.43
OCBC Bank70012.092.51
SGX1,2009.493.37
iFast5,7004.487.56
SATS3,9004.044.67
ST Engineering4,1003.734.53
Micro-Mechanics8,4003.147.81
Powermatic Data8,5002.766.95
Nanofilm10,4002.377.30
TheHourGlass5,0002.323.44
Vicom11,8002.037.09
Sheng Siong13,0001.626.24
ComfortDelGro11,2001.414.68
Credit Bureau Asia14,3000.994.19
Genting Singapore11,7000.7752.69
HRnetGroup21,9000.7654.96
HC Surgical35,5000.4354.57
China Sunsine41,8000.485.94
TalkMed Group14,5000.391.67
Kimly27,0000.3652.92
Silverlake Axis15,0000.361.60
Portfolio Market Value = $337,700

Trade Actions
- None

SRS

Security# sharesPrice S$%
OCBC Bank90012.097.85
SGX1,3009.498.90
iFast2,1004.486.79
SATS2,2004.046.41
ST Engineering3,0003.738.07
Micro-Mechanics3,1003.147.02
Powermatic Data3,4002.766.77
Nanofilm4,1002.377.01
Vicom4,7002.036.88
Sheng Siong8,7001.6210.17
ComfortDelGro6,9001.417.02
Credit Bureau Asia5,7000.994.07
HC Surgical19,5000.4356.12
China Sunsine10,8000.483.74
TalkMed Group5,8000.391.63
Silverlake Axis6,0000.361.56
Portfolio Market Value = $138,635

Trade Actions
- None

Commentary:
For the month of August, I did not execute a single trade. While work has been hectic, the other reason is because none of the stocks on my watchlist hit my target entry price. So I will just roll my cash stash over to next month. Equity markets are trading sideways. Investors are alternating between optimism that the economy is growing strongly, and pessimism that the hawkish stance by central bank governors in combating inflation will push the world into a recession.

I did spurge a bit in August however, as my family celebrated three birthdays within the same month. I also arranged an annual health screening at Raffles Hospital. Age is catching up and I want to ensure no negative surprise.

In August, I received dividends for iFast, TalkMed, UOB, The Hour Glass, OCBC Bank, Vicom, Powermatic Data, DBS, ComfortDelGro and Sheng Siong. It is always nice to receive the fruit of my investment strategy.

Looking forward to September, I think the seesaw-ing of stock prices is likely to persist. I do not see any clear reason that will send the markets into a buying frenzy or a freefall. Nonetheless, I will keep a lookout for buying opportunities as they appear.

Stay safe!

Sunday, July 31, 2022

Portfolio Summary for July 2022

As of 31 July 2022

CDP

Security# sharesPrice S$%
DBS30031.472.84
UOB30027.552.49
OCBC Bank70011.672.46
SGX1,2009.903.57
iFast5,7004.217.22
SATS3,9003.974.66
ST Engineering4,1004.024.96
Micro-Mechanics8,4002.987.53
Powermatic Data8,5002.757.03
Nanofilm10,4002.016.29
TheHourGlass5,0002.223.34
Vicom11,8002.067.31
Sheng Siong13,0001.606.26
ComfortDelGro11,2001.424.79
Credit Bureau Asia14,3000.994.26
Genting Singapore11,7000.8052.83
HRnetGroup21,9000.785.14
HC Surgical35,5000.4755.07
China Sunsine41,8000.4355.47
TalkMed Group14,5000.391.70
Kimly27,0000.3652.97
Silverlake Axis15,0000.401.81
Portfolio Market Value = $332,353

Trade Actions
- Bought 10,400 shares of Nanofilm Technologies.
- Bought 14,300 shares of Credit Bureau Asia.

SRS

Security# sharesPrice S$%
OCBC Bank90011.677.64
SGX1,3009.909.36
iFast2,1004.216.43
SATS2,2003.976.35
ST Engineering3,0004.028.77
Micro-Mechanics3,1002.986.72
Powermatic Data3,4002.756.80
Nanofilm4,1002.015.99
Vicom4,7002.067.04
Sheng Siong8,7001.6010.12
ComfortDelGro6,9001.427.13
Credit Bureau Asia5,7000.994.10
HC Surgical19,5000.4756.74
China Sunsine10,8000.4353.42
TalkMed Group5,8000.391.65
Silverlake Axis6,0000.401.75
Portfolio Market Value = $137,503

Trade Actions
- Bought 4,100 shares of Nanofilm Technologies.
- Bought 5,700 shares of Credit Bureau Asia.

Commentary:
July has been a hectic month at work, so I hadn't paid much attention to the market. July also heralded the start of Q2 earnings reporting season, with UOB reporting 11% YoY increase in Q2 net income yesterday, but its share price dropped due to downbeat sentiment.

The U.S. Fed hiked interest rate by 75 basis points this month, which was largely within investors' expectations. In Singapore, the MAS reported Core Inflation rose to 4.4% YoY in June from 3.6% in May [report]. It is going to be a while more before we will see any tapering.

I added another watchlist target to my portfolios - Nanofilm Technologies. This company, together with iFast and Credit Bureau Asia are my strategic bets. Even when these companies hardly pay a decent dividend now, I like their ROE, profit margins and growth potential in their respective areas. I must confess though - I don't fully understand Nanofilm's proprietary technology, and I cannot ascertain whether a newer discovery may render the technology obsolete. This contravenes Buffett's advice of staying within one's circle of competence. Caveat emptor. 

Heading into August, my cash hoard stands around 23% of total portfolio value. I have set market alerts around preferred price levels for the stocks on my watchlist, so that I do not miss out while burying myself in tons of work.

Take care!

Thursday, June 30, 2022

Portfolio Summary for June 2022

As of 30 June 2022

CDP

Security# sharesPrice S$%
DBS30029.683.04
UOB30026.252.69
OCBC Bank70011.392.72
SGX1,2009.463.88
iFast5,7004.148.06
SATS3,9003.905.19
ST Engineering4,1004.085.71
Micro-Mechanics8,4002.908.32
Powermatic Data8,5002.687.78
TheHourGlass5,0002.323.96
Vicom11,8002.028.14
Sheng Siong13,0001.526.75
ComfortDelGro11,2001.405.36
Genting Singapore11,7000.722.88
HRnetGroup21,9000.7755.80
HC Surgical35,5000.4956.00
China Sunsine41,8000.446.28
TalkMed Group14,5000.3851.91
Kimly27,0000.383.50
Silverlake Axis15,0000.3952.02
Portfolio Market Value = $292,785

Trade Actions
- Bought 300 shares of UOB.
- Bought 500 shares of iFast Corp.
- Bought 500 shares of Micro-Mechanics Holdings.
- Bought 11,800 shares of Vicom.
- Bought 3,500 shares of Powermatic Data Systems.
- Bought 14,500 shares of TalkMed Group.
- Sold 10,600 shares of Silverlake Axis.

SRS

Security# sharesPrice S$%
OCBC Bank90011.398.43
SGX1,3009.4610.12
iFast2,1004.147.15
SATS2,2003.907.06
ST Engineering3,0004.0810.07
Micro-Mechanics3,1002.907.40
Powermatic Data3,4002.687.50
Vicom4,7002.027.81
Sheng Siong8,7001.5210.88
ComfortDelGro6,9001.407.95
HC Surgical19,5000.4957.94
China Sunsine10,8000.443.91
TalkMed Group5,8000.3851.84
Silverlake Axis6,0000.3951.95
Portfolio Market Value = $121,551

Trade Actions
- Bought 3,400 shares of Powermatic Data Systems.
- Bought 4,700 shares of Vicom.
- Bought 2,100 shares of TalkMed Group.
- Sold 9,100 shares of Silverlake Axis.

Commentary:
The Straits Times Index (STI) has completely eliminated its year-to-date gain. Although the local market is still far from bear territory, stock prices have started to slide, similar to other markets.

Worry of inflation has finally crept into Singaporeans' mind, according to separate surveys by DBS [here] and YouGov [here]. The government has taken preemptive action by announcing a surprise S$1.5b budget to help families and businesses tide through this challenging period [news].

I went on a spending spree in June. Fine-tuned my positions in iFast Corp, Micro-Mechanics Holdings and Powermatic Data Systems as their prices retreated.

I also built a stake in two new counters - UOB and Vicom. Banks are big beneficiaries of interest rate hikes, although there is the concern that a recession may bump up nonperforming loans. UOB's acquisition of Citibank's consumer assets in Malaysia, Thailand, Indonesia and Vietnam provides hope that the bank now has a meaningful avenue to expand its business in ASEAN [news]. Vicom is a relatively well-known vehicle inspection company in Singapore. I like the consistency in Vicom's double-digit ROE and margins.

I have managed to add TalkMed Group to my CDP portfolio too. I further reduced my position in Silverlake Axis as its price rallied near month end.

I am gradually tilting my portfolios towards more liquid holdings. Current cash stands at 30% of total portfolio value. I hope to scoop up more shares as they approach my preferred entry level.

July marks the beginning of Q3, which also heralds the start of the earnings reporting season. As investors buy and sell based on actual results versus estimates, volatility is going to be high. A U.S. Fed interest rate hike of 75 bps in July is almost a given. Any economic data that paints a better picture is likely to spark a relief rally. Overall, a wild ride is expected.

Friday, June 17, 2022

Mortgage takes a bigger bite of my income

CNA published an explainer last evening about how the U.S. Fed interest rate hike impacts mortgage rates in Singapore [here].

This brings to mind a letter I received from DBS a few days ago. The bank wrote that in view of the increase in their FHR6 (6 months Singapore Dollar fixed deposit interest rate), they will be raising my mortgage rate from 1.00% to 1.55% p.a. accordingly.

My first reaction was, "Yikes."

I know the Fed had hiked Fed Funds Rate (FFR) by 50 basis points in May, but DBS is raising their FHR6 by 55 basis points???

I can imagine getting more letters from DBS in the remainder of the year, as the Fed had just hiked FFR by 75 basis points in June, and is committed to do the same in their July meeting if required.

This spurred me to reach deep into my email inbox and retrieve the details of the repriced mortgage package which my wife and I signed with DBS in September 2021. Back then, our mortgage lock-up period was expiring, and DBS strategically sent us an email with an attractive repricing offer.

The offer was a fixed rate package tied to FHR6 in stepwise increment for first three years. FHR6 + 0.80% p.a. for first year, FHR6 + 0.85% p.a. for second year, FHR6 + 0.90% p.a. for third year and FHR6 + 1.00% thereafter.

But what got me to sign on the dotted line was a feature that DBS offered:

The bank promised to cap the maximum interest rate at 1.60% p.a. throughout the first three years.

Looking at the inflationary enviroment today and the central banks' aggressive posturing, I am glad I have gotten the deal.

Mortgage servicing is due to take a bigger bite out of Singaporean households' expenditure. A 1.00% increase on a $500,000 mortgage means an extra $417 per month to the bank.

That is $417 which could have been spent on a nice staycation, a new kitchen appliance or an investment course.

Or if you are a glutton like me, that is $417 which could have been spent on restaurant meals.

$417. Each. Month.

My wife and I are dead set to repay the full mortgage at the end of the three-year lock-up period. That will be one heck of a milestone for us.

In the interim, time to 'take revenge' by investing in bank stocks. DBS itself is starting to look attractive. Yummy.

Cosmetic Giant Revlon Files for Bankruptcy

I am sad to read that U.S. cosmetic giant Revlon has filed for Chapter 11 bankruptcy protection [news]. The company had buckled under a combined debt of US$3.7 billion, with an asset total of only US$2.3 billion.

I remember Revlon because I had often seen their commercials on the television during my younger days.



This is another sombre lesson why investors need to watch the right side of companies' balance sheet carefully. It is even more critical now as central banks around the world are starting to hike interest rates, meaning the financing expense for companies will only grow larger.

Personally, I have been burnt by my investment in Hyflux's perpetual bonds because I did not pay attention to the company's financial health when I first subscribed for the security. Had I bothered to scrutinise the numbers, I should have caught a few red flags. Oh well.

This also drove my preference now for companies with little or no debt. At the least, the company should have sufficient cash and marketable securities to cover their total liabilities.

Do pay attention to the fundamentals of the companies you are investing. A bit of homework can potentially save you money, and some heartache.

Wednesday, June 15, 2022

Jerome Powell got to wear the black suit and dark tie

I was tickled as I read an article on Bloomberg titled, "Fed Mulls ‘Game Changer’ to Jolt Inflation: Decision Day Guide" [news].

The quote in the title came from Chief Economist Vincent Reinhart at Dreyfus and Mellon. He was describing how the U.S. Fed Chairman Jerome Powell will have to present himself at his upcoming June 22 and 23 semi-annual testimony before the U.S. Congress.

Spiking inflation in the U.S. has bristled many U.S. lawmakers. Since the mandate for the U.S. Fed is to control inflation, it is fair to say Powell has perhaps the most stressful job in the world right now.

For sure, the U.S. Fed is going to hike the Federal Fund Target Rate in tonight's FOMC meeting. The question is by how much?

Some professionals think an increase of 50 basis points is still on the table; CME Fed Fund future traders believe a 75-basis point increase is more likely [data]; yet, there are a few extremists who believe a 100-point hike cannot be ruled out either. [news]

None of the above three choices will satisfy investors completely. So a massive reaction in the equity market is not unexpected.

Hang on tight for a long roller coaster ride.

Tuesday, June 14, 2022

CME FedWatch Tool

I was watching the Asia First programme on CNA this morning when the presenter talked about CME's FedWatch Tool [here].

As explained on the website, the FedWatch Tool calculates unconditional probabilities of Federal Open Market Committee (FOMC) meeting outcomes to generate a binary probability tree.

The probabilities of possible Fed Funds target rates are based on Fed Fund futures contract prices assuming that the rate hike is 0.25% (25 basis points) and that the Fed Funds Effective Rate (FFER) will react by a like amount. (For more information on the methodology, click here.)

CME FedWatch Tool.

What interested me was that based on the data at time of writing, the market is pricing in a 96.8% probability that the U.S. Fed will hike 75 bps - yes, 75 basis points, not 50 anymore - during tomorrow's FOMC meeting.

Figuratively, it is no longer about the U.S. Fed slamming the brakes on the economy. It is about the U.S. Fed throwing everything, including the kitchen sink in an attempt to tame the runaway inflation.

I'm not sure if the prophesied recession will materialize or not, but the simple fact that the U.S. Fed is hiking interest rate faster than previously expected means that perception will change within the population.

When a person thinks the near-term future is going to be financially challenging, that person will likely adopt a series of actions to mitigate the effect. For business owners, this means manpower hiring freeze or holding back on business expansion. For consumers, this means cutback on unnecessary expenses or simply saving more.

All of these actions will have a follow-on impact on the economy and companies' top line. When profits are squeezed, further mitigative actions are taken and the tightening cycle goes on.

Hopefully, the fear does not spread maniacally, and we can avert a recession, even by a slim margin.