Friday, May 31, 2019

Portfolio Summary for May 2019

As of 31 May 2019

Cash Equity

Security# Shares
DBS Group400
LHT Holdings15,500
Old Chang Kee100
Portfolio Market Value = $31,185

SRS Equity

Security# Shares
Sheng Siong Group8,700
Frasers Centrepoint Trust3,000
CapitaCommercial Trust3,000
Frasers Commercial Trust2,408
Portfolio Market Value = $51,652

It is no wonder the clique goes, "Sell in May and go away". The Straits Times Index suffered a 8.3% drop for the month. While the benchmark is still up 1.6% year-to-date, there is scant comfort in the global economy. The US and China have yet to iron out a trade deal, so tariffs will continue to eat into corporate profits. US President Donald Trump's latest tweet threatened to raise tariff on Mexico, if the country fails to stem illegal immigrants from crossing the border (news). Looks like "tariffs" has become the new weapon of mass (economic) destruction.

In my previous summary, I mentioned that I was keen to take on some new positions. A few micro caps on my watchlist had released favourable annual results. Unfortunately, those stocks were also monitored by others in the market. On the day after the result announcement, those stocks jumped in price significantly. Oh well, such is life. I'd be patient and wait for another buying opportunity.

I did load up on two bank stocks though, taking advantage of the selloff in the last week of May.

Trade Actions

DBS Group
Finally, I had succumbed to temptation and bought 400 shares of DBS Group at $24.25 apiece. The price is still high in my opinion. Would have preferred to load up at the 52-week low. Nonetheless, I believe the business is still intact. An annual dividend of $1.20 is a good aspirin for the volatility in its share price.

I added 900 shares of OCBC at $10.84 apiece. The Business Times recently quoted a Citibank report stating, "OCBC appeared interested to raise its 20 per cent stake in Bank of Ningbo over time as and when regulations allow." (news) This could potentially explain the rationale behind the lower-than-peers dividend payout. The article echoes the same sentiment shared in my earlier blog post (here), that something - positive or negative - may be brewing for OCBC that requires significant capital outlay. Taking a longer term perspective, I am confident the local banks will continue to be profitable, and the dividend will be increased or sustained.


Next month's Singapore Savings Bond (SSB) has an average yield of 2.13% p.a. which is on the low side compared to historical precedents. I have decided to stay out, in favour of the stock market.

Looking Ahead

June will be a 'dry' month for me, as I need to pay income tax and my insurance policies. Most probably I will only be a spectator in the stock market.

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Friday, May 10, 2019

To Diversify Or Not to Diversify?

I often ponder about portfolio diversification in my mind.  

On one end of the spectrum, there are investors like Warren Buffett and Charlie Munger who believe in concentrating their funds on their best ideas:

"Once you are in the business of evaluating businesses, and you decide you are going to bring the effort and intensity and time involved to get that job done, I think that diversification is a terrible mistake... If you can identify six wonderful businesses, that is all the diversification you need and you can make a lot of money and I can guarantee you that going into a seventh one is going to rather than putting more money in your first one, it's got to be a terrible mistake.  Very few people have gotten rich on their seventh best idea." 

- Warren Buffet's 1998 Florida University address

"The idea that very smart people with investment skills should have hugely diversified portfolios is madness. It’s a very conventional madness. And it’s taught in all the business schools. But they’re wrong."

- Charlie Munger

On the other end, there are investors like Peter Lynch, who held thousands of positions at certain times in his Fidelity Magellan mutual fund.

Personally, I limit my watchlist to no more than 15 companies at a time.  But I wonder if I should cut it down to 10.  Or even 6 (best ideas) for that matter.

When you run a concentrated portfolio, other issues start to creep in.  For example, I find it challenging to build up a position in micro caps.  On some days, the bid-ask spread is so wide, that simply lifting the offer will cause a run up in the stock price.  Perhaps that is the reason why most investors stick to the bigger companies.

Then there is the nagging concern whether you have done all of the homework required - the effort, intensity and time involved as Buffett said - to invest in the right company?

I figure it all boils down to faith.  Faith in my own stock picking skills.

To diversify or not to diversify?  What are your thoughts?   

Would you concentrate your funds on your few best ideas, or spread it across multiple positions?

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