SS is in his mid forties, and works for a global MNC providing technological services to financial institutions.
SS is a Chartered Financial Analyst (CFA) and a Chartered Alternative Investment Analyst (CAIA). But SS will be quick to say you don't need paper qualifications to invest wisely. All you need is money and a willingness to do homework.
SS's interest in stocks began in his university days, when his classmate extolled about the legendary Oracle of Omaha, Warren Buffett. SS made his first stock purchase in massage chair maker, OSIM (now delisted). When the price rose two days later, he excitedly sold the stock, pocketing a virgin profit of four hundred dollars. He thought he had a knack for such stuff!
Sadly, his first investing mistake came not long after, when he shorted Singapore Airlines stock after the September 11 incident. The broker rejected his cover order due to breaching trading limit.
SS learnt a painful lesson about risk management. And he never use that broker thereafter.
Over the years, SS developed an interest towards real estate investment trusts. In 2014, he came up with a scorecard system for comparing locally listed REITs ("S-Reits"). He would write short reports on S-Reits and share with his friends. (You can still find one [here].)
However, through his research, SS discovered some inconvenient truths. Firstly, S-Reits are perpetually in debt, and are at the mercy of debt capital markets. (When credit freezes up, guess whose door they will knock to beg for money?) Secondly, the management fee is typically paid in units, which means unless an investor participates in EVERY equity offering, his or her ownership gets diluted each time. It is all good when the tide is in and there is plenty of fish; but when there is a downturn, there will be less crumbs for everyone.
Moreover, it is challenging for S-Reits to grow the revenue pie without taking on leveraged risk. The only way to reduce gearing is to sell off assets at a profit and then use the excess proceeds to pare down the debt. Or - you guess it - find more equity investors to join in the pool.
S-Reits have benefited from the ultra-low interest rate environment since the GFC, but this era is over. With interest rates averaging 4-5%, interest expense will take a bigger bite of the revenue.
SS eventually settled on an investment style close to his roots - fundamental analysis. However, SS is skeptical of discounted cash flow (DCF) valuation. Given the many assumptions going into the formula, one can almost arrive at ANY price desired. (So please read broker target prices with a pinch of salt.)
The Singapore stock market also has a penchant for ignoring where you think the value should be. Undervalued stocks can stay under water for a long time...like, forever?
Being a lazy investor, SS decided to take a simpler approach - He searches for companies with double digit ROE (return on equity), decent and sustainable profit margins, more cash than debt where possible, and a distinct advantage ("a moat" as Buffett calls it). The company should be a market leader, geographically diversified or operate in an industry with few competitors. Since SS is looking to his portfolio to complement his income, he prefers companies with a regular, sensible dividend payout. SS is flexible in his stock selection - as long as the company fulfils most of the criteria, he will add it to his watchlist.
Numbers aside, the qualitative aspect of a company is important too. SS looks for capable management and a committed board of directors with shareholders' interest clearly in mind. Corporate governance is the buzzword these days, but it means little if the executives are not watching out for the little guy.
At the moment, SS does not have an appetite for foreign stocks. The volatile fx rates, wild price swings and complicated tax systems give him pause.
SS's best investment is, ironically his current job. His salary has risen fivefold since he first joined the company. SS's worst investment is losing $40,000 in two collective investment schemes organized by private real estate developers. They have since defaulted and gone bankrupt.
During his free time, SS likes to read and blog down his thoughts.
SS is happily married for more than a decade, and is the proud father of two active boys. He currently stays in a five-room HDB flat at Serangoon North.
SS is a Chartered Financial Analyst (CFA) and a Chartered Alternative Investment Analyst (CAIA). But SS will be quick to say you don't need paper qualifications to invest wisely. All you need is money and a willingness to do homework.
SS's interest in stocks began in his university days, when his classmate extolled about the legendary Oracle of Omaha, Warren Buffett. SS made his first stock purchase in massage chair maker, OSIM (now delisted). When the price rose two days later, he excitedly sold the stock, pocketing a virgin profit of four hundred dollars. He thought he had a knack for such stuff!
Sadly, his first investing mistake came not long after, when he shorted Singapore Airlines stock after the September 11 incident. The broker rejected his cover order due to breaching trading limit.
SS learnt a painful lesson about risk management. And he never use that broker thereafter.
Over the years, SS developed an interest towards real estate investment trusts. In 2014, he came up with a scorecard system for comparing locally listed REITs ("S-Reits"). He would write short reports on S-Reits and share with his friends. (You can still find one [here].)
However, through his research, SS discovered some inconvenient truths. Firstly, S-Reits are perpetually in debt, and are at the mercy of debt capital markets. (When credit freezes up, guess whose door they will knock to beg for money?) Secondly, the management fee is typically paid in units, which means unless an investor participates in EVERY equity offering, his or her ownership gets diluted each time. It is all good when the tide is in and there is plenty of fish; but when there is a downturn, there will be less crumbs for everyone.
Moreover, it is challenging for S-Reits to grow the revenue pie without taking on leveraged risk. The only way to reduce gearing is to sell off assets at a profit and then use the excess proceeds to pare down the debt. Or - you guess it - find more equity investors to join in the pool.
S-Reits have benefited from the ultra-low interest rate environment since the GFC, but this era is over. With interest rates averaging 4-5%, interest expense will take a bigger bite of the revenue.
************************************ DISCLAIMER ************************************
I'm not saying that S-Reits should be avoided at all costs. Just be aware of the risks involved (leverage, valuation, dilution etc).*****************************************************************************************
SS eventually settled on an investment style close to his roots - fundamental analysis. However, SS is skeptical of discounted cash flow (DCF) valuation. Given the many assumptions going into the formula, one can almost arrive at ANY price desired. (So please read broker target prices with a pinch of salt.)
The Singapore stock market also has a penchant for ignoring where you think the value should be. Undervalued stocks can stay under water for a long time...like, forever?
Being a lazy investor, SS decided to take a simpler approach - He searches for companies with double digit ROE (return on equity), decent and sustainable profit margins, more cash than debt where possible, and a distinct advantage ("a moat" as Buffett calls it). The company should be a market leader, geographically diversified or operate in an industry with few competitors. Since SS is looking to his portfolio to complement his income, he prefers companies with a regular, sensible dividend payout. SS is flexible in his stock selection - as long as the company fulfils most of the criteria, he will add it to his watchlist.
Numbers aside, the qualitative aspect of a company is important too. SS looks for capable management and a committed board of directors with shareholders' interest clearly in mind. Corporate governance is the buzzword these days, but it means little if the executives are not watching out for the little guy.
At the moment, SS does not have an appetite for foreign stocks. The volatile fx rates, wild price swings and complicated tax systems give him pause.
SS's best investment is, ironically his current job. His salary has risen fivefold since he first joined the company. SS's worst investment is losing $40,000 in two collective investment schemes organized by private real estate developers. They have since defaulted and gone bankrupt.
During his free time, SS likes to read and blog down his thoughts.
SS is happily married for more than a decade, and is the proud father of two active boys. He currently stays in a five-room HDB flat at Serangoon North.
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Hello, what's your email? Would like to contact you for an investment related event.
ReplyDeleteJust dropping by to say hello. I like the way you think, and your portfolio is good.
ReplyDeleteHello apenquotes,
DeleteThanks for dropping by. I visit your blog regularly too.
Happy holidays!