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1. AIMS AMP Capital Industrial REIT @ 19.5c/unit
2. Sabana REIT @ 83c/unit
3. First REIT @ 71.5c/unit
So, did I buy anything today? Nope.
Some people have advised me, with good intentions I am sure, to wait longer and I could perhaps get these at even lower prices. Indeed, what they think could happen just might. Really.
In the last bear market, many who were expecting the market to bottom at 1200 points were sorely disappointed and quite a few missed the ride up. Those who bought at 1400 points or higher anyway were amply rewarded over the next one year and more.
This time round, I see many people are once again predicting where the bottom might be over the next few months. I won't go there.
So, what is my plan in a nutshell?
I might still indulge in some counter trend trading if the technicals look promising and I will continue to invest for income, adding at critical supports. I will continue to be invested in the stock market but keep a warchest for future acquisitions at bargain prices if they should present themselves.
My plan is good for me but it might not be good for you. In fact, I am very sure that it is not good for everybody. Take stock of your own situation and decide what is best for you.
What is best for anyone, however, I believe, is usually a strategy that will allow the person to sleep well at night. That is priceless.
At this very moment, stock markets in Europe and the U.S.A. are down between 3+% to 6+%! Will Asian markets be drenched in another bloodbath tomorrow? Buckle up because it seems like it would be a rough ride.
What am I going to do? Stick to my plan. What else?
If some of the counters I am eyeing should fall to my target prices, I will collect more. I am pacing myself as there is no way of knowing how much worse this will get.
Being invested for income, having regular dividends and income distributions will provide me with reliable cashflow during leaner times as I wait for the recovery which is bound to take place one day.
Stay invested in Asia. This is where all the growth is and will continue to be.
Read: DJIA falls below 11,000.
Read online articles on the upcoming Presidential Election during my lunch break.
The candidates and what they say:
Tan Jee Say (symbol: heart):
1. The primary role of the Elected President is to act as a check on a possible rogue government.
2. Under the Constitution, the president has blocking powers in only five specific areas which include the reserves and key appointment holders.
3. On all other matters, the president has to act on the advice of the prime minister and Cabinet.
4. "I’m not anti—establishment. I’m for Singapore and my views are for the good of the country."
5. He added he estimates his campaign budget would run up to about S$200,000, and he would appeal for donations via his website from Wednesday night.
Dr. Tony Tan (symbol: spectacles):
1. Can help strengthen Singapore’s ability to weather the current financial uncertainties and protect its financial reserves.
2. Will raise issues dear to his heart, such as education, through formal and informal channels.
3. Will also champion the Singapore brand overseas, help raise the profile of local charities and encourage greater participation in sporting, cultural and artistic activities.
Tan Kin Lian (symbol: hand):
1. Intends to influence the government within the Constitution.
2. Views himself as being the only neutral and non—partisan candidate.
3. Wants to follow in the footsteps of the late former president Ong Teng Cheong.
4. Mr Tan said he has a shoestring budget of about S$50,000 for his campaign.
1. Suggested that policies behind community—based groups like Mendaki, Sinda and CDAC be merged.
2. Dr Tan made clear he didn’t want to interfere in politics.
3. More than 1,000 posters and 200 banners have been printed, and volunteers are keen on securing the most visible spots.
I do not like the idea that Tan Jee Say is asking for $200,000 donation from the public to fund his campaign. The amount seems too large and why can't he fund his campaign himself? I remember reading that he is a multi-millionaire private investor.
I like Dr. Tony Tan's credentials and I know GIC did much better compared to Temasek Holdings in the last recession too. He has the brains but he has always kept a rather low profile. However, his links with the PAP might work against him as the party is not at the height of its popularity now.
I also like Tan Kin Lian as, being familiar with his blog on finance and insurance, he seems to give good advice and cares for the common people. I like how he is campaigning on a shoestring budget of $50,000 and made no mention of asking for donations.
I like Dr. Tan Cheng Bock's honesty and integrity. I remember watching Parliamentary debates on TV in my schooldays and I was always impressed with how he would just speak his mind against policies if he felt it was necessary to do so. I also like his down to earth approach in campaigning. I think this is a good person who seems to be a good balance between Dr. Tony Tan and Tan Kin Lian.
The choice is a tough one. Who will you be voting for?
I was working late today. Trying to figure out some computer related stuff and trying to get used to a new software. This is likely to remain a challenge for me at least over the next few days. I am definitely one of the least IT savvy people around but this is life, I guess.
Although I would like to crash into bed right now, I thought I should blog about my sell order for First REIT at 79c which was partially filled today. Sold some First REIT at 79c? Why?
Given the volatility in the stock market, I guess it should be a prudent decision to lock in some gains if we could. After all, the REIT is not going to distribute income for at least another three months down the road and there is a chance of further downside with sentiments so weak.
The black candle today was formed on the back of relatively low volume, however. Selling lacks conviction although it does not mean that price cannot drift lower.
77c, the low of the day, is where we find the 100dMA. 77.5c, the closing price, is where we find the 200dMA. These prices are immediate supports. If these were to go, I would expect price to go lower.
79c is a natural candlestick support turned resistance. If it should break on the back of higher volume, we could see gap covering at 81c. Before that, 80c should provide some formidable resistance for various reasons, technical and fundamental.
Good luck to fellow unitholders.
So, the technical reason I had for buying more shares in CapitaMalls Asia is no longer valid and I will not add to my long position anymore until the picture changes. Will I cut loss? I will only do so in a rebound. I will not do so as price goes lower. That has been my practice.
Prices rarely go up or down in a straight line. They climb a wall of worries and go down a river of hope. With CapitaMalls Asia, a rebound in share price could see gap filling at $1.325 per share. Whether this will happen or not, nobody knows for sure. If it happens, I will reduce my exposure.
Fundamentally, I still like the company's exposure to the growing middle class in China. These people have greater discretionary spending power and shopping malls in China will see strengthening demand over time. This will translate to higher asking rents and higher valuations for malls.
I also like how the RMB is likely to strengthen in time and this would mean that the NAV of the company will only go higher in S$ terms. How long will this take? Your guess is as good as mine.
Only one person knows for sure and he is Mr. Market. He will decide when the share price of the company will trade higher. Having failed to pre-empt Mr. Market's movements successfully, it is now back to basics while I wait for clearer signs.
An elaboration on my methods.
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We also know that the ultra low interest rate environment is pushing up prices of almost everything. Inflation? You bet. Is this going to persist? It certainly could. If it does, then, my decision to sell my properties in recent months might not be that brilliant after all.
However, if we remember basic economics, we will recall that prices are a function of supply and demand. With many more new homes to be completed from 2012 to 2015, we could very well face a supply glut in future. This is probably quite well documented by now but I will run through the numbers once more:
Year 2012: 15,457 new homes to be completed.
Year 2013: 17,111 new homes to be completed.
Year 2014: 21,680 new homes to be completed.
Year 2015: 22,520 new homes to be completed.
We should also bear in mind that, currently, there are still more than 30,000 completed homes unsold.
(Sources: URA, DTZ and Nomura.)
As long as demand remains strong, the supply could be well-absorbed. This would depend on the state of the economy and the level of confidence amongst buyers, of course.
To add to the supply glut concern, the very well publicised recent decision by the government to build more HDB flats and to build them faster is likely to weigh in on the matter. Read HDB has promised 25,000 more new flats next year, based on what it said the construction industry can handle.
What about me? I get the sense that many readers are wondering what I am going to do with the cash that will be coming in from the divestment of my properties. To be quite honest, I am not going to keep too much cash in my savings account for too long as inflation would rapidly erode its value. To that, some might say that because they are in cash, their cash is now able to purchase many more shares than it could a month ago. This is certainly a valid point as well.
While I was holidaying this weekend, I noticed that I have a lot more white hair. Family and close friends know that I think a lot. I think I think too much. ;)
The REIT has proposed the acquisition of 39 Ubi Road 1. The property has a remaining tenure of about 40.4 years and is valued at $32m. The vendor, Ascend Group Pte. Ltd., will take a master lease of the entire premises for a term of 5 years. Extension works is ongoing and will add approximately 41% to the building's existing gross area. The acquisition will be funded by debt and will increase gearing level from 25.1% to 27.7% upon completion. My thoughts? With what information is available at this point in time, I like it as it would probably bump up DPU marginally for unitholders without asking us for more funds while gearing level remains very comfortable. See announcement here.
Al Salam Bank Bahrain BSC increased its investment in the REIT by 1,909 lots at a price of 94c per unit on 2 August 2011. It now holds a 5.14% stake in the REIT. See announcement here.
The REIT received a 'BBB-' long term corporate credit rating from Standard & Poor's Rating Services. This reflects "Sabana REIT’s moderate leverage with good access to diversified funding channels and stable cash flows. The ratings also take into account the quality of Sabana REIT’s industrial property assets in Singapore and minimal capital expenditure needs. The stable outlook was based on the REIT’s balanced business risk profile as well as its adequate cash flow protection measures" and "is a significant first step that will allow Sabana REIT to access investment grade Shari’ah compliant debt and capital markets." See announcement here.
Aaron shared 4 time honoured rules:
1. If you can't take the heat, get out! This is something I did not talk about but I have said time and again that investors should just do what they feel comfortable with. Anything we are not comfortable with, avoid. Aaron is quite specific in who are the people who should get out.
2. Don't panic! This one sounds very familiar. Aaron says that many investors simply cannot take the pain and are cutting and running. Historically speaking, many investors sell out of stocks at important market bottoms. This is a reason why I refuse to sell when prices are forming new lows and would only sell if they rebound to test resistance. Aaron is quite specific in who are the people who should not panic and should stay the course.
|The 8 immortals each had his or her own way of crossing the sea.|
3. Have a plan! Sounds familiar again. Aaron says it differently from me but the essence of the message is the same. We must understand our motivations for investing in the stocks we are invested in. The tools we employ and the attitude we have must be appropriate to our motivations. That way, we will stand a good chance of doing better with a consistent strategy and this is so both financially and emotionally!
4. Learn from your mistakes! Do we need to say more about this? Life is about learning and more learning. Regular readers would know that I am still learning and would have read my story. New readers might be interested in reading this: Excuse me, are you an investor?
Aaron ends his article by asking us to ask ourselves three questions, go read his article and see how you would answer these three questions. Could be revealing. Enjoy "4 rules for the see-saw market".
In my last blog post and probably a couple more before that, I mentioned that we should stay calm and rational, have a plan and act upon it. This is my personal mantra and it has not changed.
Some wonder how I could act so confidently and decisively. Here are some reasons:
1. I am not investing using borrowed funds or funds which I need in the near future for other purposes.
2. Of my total investible cash, only 50% or so has been deployed in the stock market. In the last few sessions, it could have bumped up by a few % points.
3. I am informed by FA on a counter's value and by TA on a counter's price. I buy when I see value and when prices are at supports.
4. 80% or more of my investments in equities are for passive income and I sleep well with the knowledge that I will have regular cashflow from my investments.
5. I know I will divest partially if prices should rebound to test resistance levels. Yes, I am not one to fall in love with my investments.
This list is probably not exhaustive but they are five reasons off the top of my head.
Today, the only counter that hit my target buy prices is Sabana REIT at 88c and 87c. At these unit prices, we are looking at distribution yields of slightly more than 10% per annum. My overnight buy orders at these prices were filled.
Some ask me if I will be buying more units of Sabana REIT if its unit price were to weaken. Looking at the chart and using three sets of Fibo lines, I have identified stronger supports at 83c and 80.5c. If the immediate support at 86.5c should break, those are the prices where I will be adding to my long position.
Seven steps to creating passive income from the stock market.
Another day of heavy selling. Lots of panic! Pandemonium even! What should we do? Stay calm and be rational. Have a plan and execute it. I took my own advice and did exactly that.
I am currently about 50% invested in the stock market. Of this 50%, about 80% is invested for income and much of this is from S-REITs. Currently, my five largest investments in S-REITs are:
1. AIMS AMP Capital Industrial REIT
2. Sabana REIT
3. First REIT
5. Cache Logistics Trust
Today, my buy order at 20.5c was filled while the buy order at 20c was almost half filled. However, as my buy order at 20c was some 10 times bigger than the buy order at 20.5c (which was more of a hedge), I am quite happy that almost half of it was filled.
Regular readers would remember that I partially divested AIMS AMP Capital REIT at 21.5c/unit to get more Sabana REIT at 92c/unit some time back. So, buying at 20c today was a sweet moment for me. Having only bought back some 25% of what was sold at 21.5c/unit, I am fully prepared to buy more if price were to retest the REIT's historical low of 19c/unit.
Last Friday, I loaded up on Sabana REIT at 92c. Today, I loaded up again at 91c and 90c which were the two support levels identified in my last blog post on the REIT. 90c is the historical low and more than half of the total units that changed hands today happened at 90c.
There is some support, no doubt, but if support at 90c were to be compromised, we could see unit price hitting 88c or 87c if the Fibo lines are anything to go by. At 88c and 87c, we would be looking at a distribution yield in excess of 10% per annum and I would not be able to resist buying more.
Finally, I loaded more units of First REIT. If you refer to my last blog post on the REIT, you would see that I drew 3 horizontal lines at 77c, 76c and 74.5c. These were the supports I identified. The buy orders I put in at all three levels were filled today.
A these prices, we are looking at a distribution yield of about 8.5% on average. With more acquisitions in the pipeline, distribution yield could increase and the very low gearing the REIT currently has means a lower chance of equity fund raising.
Could we see price going lower to test 72.5c or 71.5c? We could. Then, I would buy again.
So, did I panic and sell? No, I only sell when prices test resistance, not when they are going lower. Downtrends are rivers of hope.
The MACD still looks like it could form a positive divergence although it would look less probable with each successive down day. Trading volume is lower today as price moved lower, suggesting that there is some fatigue on the part of sellers.
Indeed, a cross between a white hammer and a white spinning top was formed at the end of the session. Another reversal signal. We could see a rebound in the next session and a gap close at $1.325 could happen. If that were to happen, I would reduce exposure to this counter.
I suppose Mr. Market recognises the REIT's stronger numbers and astute management. However, Mr. Market is also known to be whimsical. If there should be a sell down, I am ready to buy more. Buy? At what price?
Since April, price moved higher as the MACD formed lower highs. A negative divergence. So, buying recently at 22c or 22.5c would have been unrewarding. In fact, selling some would have been a good idea. A correction is to be expected.
Where is a strong support? I see 20c as a very strong support. Apart from being a nice round number, it is also where we find the 138.2% and 150% Fibo lines approximating, both golden ratios.
Fundamentally, 20c would be a very nice price to add to my long position as well. That would give a distribution yield in excess of 10% per annum and it would be purchasing at a 30% discount to NAV.
Regular readers would remember that I divested some of my investment in the REIT recently as I balanced its weighting in my portfolio with that of Sabana REIT. With its stronger numbers which includes a higher DPU and plans to redevelop 20 Gul Way, accumulating on weakness is what I will be doing.
However, many are also queueing to buy at 20c. So, one bid higher? 20.5c? Why not?
As for First REIT, its very low gearing and defensive quality of its assets are very attractive. The management also has a very good track record to boot. Closing at 79c, it is now offering a distribution yield of more than 8% per annum once more.
The uptrend on the MACD has been broken in the last session. Could price go lower? It could and if it does, I expect strong support at 77c next. That is a natural support level as it was the top of an interim basing process. It is also where the rising 100dMA will be approximating soon. Buy more at 77c? Probably.
AIMS AMP Capital Industrial REIT: Higher DPU and 20 Gul Way.
First REIT: 2Q 2011 results.
Today, almost all of the counters in my watchlist registered a loss. Almost? Yes, although none of the counters registered an increase in share price, one counter closed unchanged. That honour goes to AIMS AMP Capital Industrial REIT. This demonstrates the relative resilience of the REIT's unit price. Given the bloodbath seen in the stock market today, this is impressive.
The action in the stock market was so exciting that I actually wrote two blog posts in the late morning today. There was a lot of fear to the point of being petrifying. However, if we have already planned for a scenario like this, just execute the plan and there is really nothing to fear. What? Nothing to fear? Yes, why fear opportunities to collect on the cheap?
In my opinion, the only people who would fear a sharp decline in the stock market are people who are fully invested in the stock market and who
1. Borrow money to invest.
2. Use money which they need for other purposes in the near future to invest.
If we are 50% invested or less and if we are not using borrowed funds or funds we need in the near future, I do not see why we should panic. Stay calm and rational.
As revealed in my two earlier blog posts today, I bought more units of Sabana REIT at 92c and more shares of CapitaMalls Asia at $1.265. Could prices go lower next week? They could, of course. Who can be sure?
In case you are whooping for joy, remember that signals could fail. If we see price opening higher than $1.28 in the next session, the signal is most probably confirmed and we could see price closing the gap at $1.325. Otherwise, be prepared for possibly more downside.
Sabana REIT's unit price also gapped down in the morning but by the end of the session, it closed at 92c, the same price it started the day at, forming a dragonfly doji in the process.
Volume was relatively high and yet volatility was very low as we saw units changing hands at 92c and 91.5c only. This says something about support for the REIT. If its unit price should retest the 90c low, I will probably buy many more units.
Stay calm and get your warchests ready. There could be many more buying opportunities if the selling persists. Good luck.
A sea of red! Have a plan and execute it!
CapitaMalls Asia: Bought more at 161.8% Fibo line.