What did AK buy in the stock market in the last 12 months?

A reply to a fellow blogger inspired this blog post as I looked back at my "nibbles" in the stock market in the last 12 months (since May 2014). They are:

1. Ascendas Hospitality Trust
2. Wilmar
3. Soilbuild Biz Space REIT
4. SembCorp Industries
5. SembCorp Marine
6. OUE Limited
7. ST Engineering
8. SATS
9. Accordia Golf Trust
10. WingTai
11. Marco Polo Marine
12. Singapura Finance
13. Hong Leong Finance
14. NeraTel
15. PREH
16. Yongnam


Quite a mixed bag.

I am sure all of us have our reasons for our investments. To be doubly sure, it is always good to see if we are able to articulate the reasons through writing, even briefly, and see if they make good sense.

Ariake Sunroute.

From the list, it is clear that there is a slant towards investing for income but with less reliance on REITs and business trusts. Although I turned cautious some time ago on REITs and business trusts as their valuations became less compelling, bearing in mind also that they distribute most of their income to unit holders, leaving little to fund growth or to pare down debt, I still believe that they remain relevant instruments for the income investor. The REITs and business trusts in the above list are #1, 3 and 9.

I continue to like NeraTel (#14) for income and potential growth. I added to my position as its stock price declined not too long ago. I believe that a DPS of 4c is undemanding and could be maintained as there are indications that future growth will be funded through debt. A judicious amount of leverage is good for the company if they are able to improve ROE.

I also increased my investments in selected blue chip companies as their stock prices declined. I believe that their businesses are going through temporary bouts of weakness. These are companies which are likely to do well in future, current rough patches notwithstanding, and are unlikely to go kaput in the meantime. They also pay dividends and I like to be paid while I wait. These are #2, 4, 5, 7 and 8.

SembCorp Industries.

As interest rates are rising, financial institutions are likely to do better. I increased my investment in Singapura Finance (#12) and also initiated a position in Hong Leong Finance (#13) on weakness in their stock prices. Interest income accounts for about 80% of their total income as compared to 60% for banks. I believe that earnings will likely improve as interest rates normalise (i.e. rise) in future. Trading at a fair bit of discount to their NAVs, they are also known to pay meaningful dividends. I am quite happy to be paid while I wait (again).

There are a handful of investments which I made in property companies in the last 12 months. These are #6, 10 and 15. Although things are likely to remain challenging for them in the near term, I chose to invest in these three companies because of rather specific reasons apart from the fact that they are pretty undervalued relative to their NAVs. In short, I believe that there could be specific catalysts for each of them to do better in time to come. Built on expectations with margins of safety, these positions are smallish in size.

Marco Polo Marine (#11)  and Yongnam (#16) are probably not going to pay dividends for a while. They were both relatively big investments for me at one time or another but they were pared down under different circumstances. As their stock prices suffered, I feel, excessively from Mr. Market's pessimism, I added to my much reduced long positions recently. Both companies are trading at huge discounts to valuations and have potential catalysts which could excite Mr. Market again in future.

Marco Polo Marine.

CONCLUSION

I will continue to receive meaningful income from my investments in the stock market this year even if stock prices should decline. As long as the businesses I am invested in are able to do well in future, I should stay invested, have a war chest ready and buy more on weakness. If valuations do not become more compelling, I will simply channel dividend income to my war chest. There is nothing wrong with sitting on money and doing nothing if nothing is worth doing.

I have a handful of positions which I feel are more speculative in nature and, although they could turn out to be hugely rewarding in time to come, I have been careful to size them appropriately. In total, they do not cost more than what I could recover easily within a year from my other investments in the stock market.

It doesn't matter how big or small our portfolio is. If we are clear minded as to why we are invested, if we have a war chest ready and if we have sized our positions appropriately, we should be able to sleep well at night. Having peace of mind is most important.

Some related posts:
1. Ascendas Hospitality Trust: A nibble.
2. Soilbuild REIT: A nibble.
3. Accordia Golf Trust: A yield of 12.16%?
4. AK went shopping in the stock market.
5. OUE Limited: A nibble.
6. Incomplete analysis of Wing Tai Holdings.
7. PREH: A nibble?