"This stock is a WINNER! ALL IN!" The 3 Aces up my sleeves!

For readers who who are not subscribed to my YouTube channel or who simply prefer reading blogs to watching videos, this is the transcript of another recent video I produced.
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During "Evening with AK and friends 2023", I used the example of Master Leong, an investor who liquidated everything else in his investment portfolio and went 100% into Alibaba's stock.

For good measure, he even used leverage.

So, he didn't just throw in his kitchen sink, he borrowed to throw in another kitchen sink or two which he did not have.

100% of a portfolio in a single stock is not something I would have done, no matter how promising I think that business might be.

It just isn't a good investing strategy to me.

To be sure, it is more like gambling than investing.

It reminds me of the movie "King of Gamblers" with the arch enemies at the poker table.

I know Master Leong had to liquidate some of his Alibaba holdings when the stock price hit an all-time low, taking a huge loss.

He had to because he was using borrowed money.



I said this before.

Most of us do not have money gushing in.

So, for most of us, we have to remember the importance of position sizing.

Bite off more than we can chew, we might choke.

We definitely do not want to use borrowed money to invest with.

All of us are happy during good times.

However, how to stay happy as investors during bad times?

Always have three Aces up our sleeves.

1. Appropriate psychology.

2. Appropriate money management skills.

3. Appropriate investment allocation framework.

I have been blogging since 2009 and I have thousands of blog posts.

Sometimes, some blogs could have had unintended consequences.

Some people might have bought stuff I talked to myself about and some even went all in.



I have always been careful to say that I was just talking to myself and that all of us should have a plan, our own plan.

This started as early as in February 2010.

I said this in a blog on investing strategy.

That "it is, quite simply, a question of proportion."

Later on, "eating bread with ink slowly" became popularized by one of my blogs.

I will leave a link to the blog below.

Why do I invest the way I do?

I invest primarily for income.

Investing for income has provided me with a passive income stream during good times and bad times.

It is very comforting and definitely helps to keep me sane.



I have invested in some stocks which have not done as well in terms of their stock prices, but if their businesses are humming nicely and if they continue to pay me, I am happy enough.

I have invested in some businesses which are facing tough times but because I have sized my investments in these businesses according to my own circumstances, even if it would mean a total loss, if it should happen, it would not be a financially crippling experience.

This is especially when I am not using borrowed money to invest with.

So, I am quite comfortable even if their stock prices go down and, in some cases, I am even looking to buy more.

With lower prices, some stocks will look more attractive.

I should be happy.

Why would I go into a depression?

Again, this is especially when I am not using borrowed money to invest with.



Of course, prices could go lower.

However, prices could also go higher.

Our job as investors is not to anticipate what the Market is going to do, although I try to engage in a conversation with my schizophrenic bowling ball from time to time.

Our job is to have a plan on what to do if Market should do something.

So, if something were to happen, we act.

We can prepare but not predict.

So simple, right?

Simple but not easy, I know.

In closing, I would say that for those of us who get heart attacks from seeing prices plunging, we are probably more into prices than values.

It could also be that we have used up all our war chests too early.

It could also be that we have sized our positions badly and we are stuck with having too much of one bloody stock.

Bloody from bleeding and not profanity, of course.

Whatever it is, look at a bad situation as a learning experience and try to do better henceforth.

If AK can do it, so can you!

Reference: 
How to have peace of mind as an investor?

DBS, OCBC & UOB: Even higher dividends probable?

For readers who who are not subscribed to my YouTube channel or who simply prefer reading blogs to watching videos, this is the transcript of another recent video I produced.

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One of the things I keep reminding myself about is to invest in businesses with strong balance sheets.

This is especially important in an environment where cash is no longer trash.

Debt has a real cost and is much costlier today.

As an investor for income, investing in businesses which have excess capital, we could also get a pleasant surprise from time to time.

This is because we could see higher dividends from these businesses in the form of special dividends.

I made this point in my recent videos and blogs on ComfortDelGro, for example.

Now, could we expect the same from DBS, OCBC and UOB?

I hinted at the possibility in recent videos and blogs.

Today, I will share some pertinent numbers from an analysis by Philips Securities to explore this possibility.



We know that rapidly rising interest rates within the last year provided a strong tailwind to Singapore's banks.

Net interest margins rose significantly and with that, net interest income jumped.

On the back of such strong performance, all three Singapore banks increased their dividend payouts to their shareholders.

So, from that, we can establish the fact that the banks are able and willing to reward shareholders.

However, with the Fed likely to pause its rate hikes, all three banks are providing guidance for lower net interest margins for the rest of the year.

In several blogs and videos which I produced, I said that Net Interest Margins for DBS, OCBC and UOB likely peaked in Q1 2023.

DBS thinks its net interest margin could be at 2.05% to 2.1%.

Both OCBC and UOB think their net interest margins could be at 2.1% to 2.2%.



Overall loans to Singapore residents fell by almost 4% year on year while business loans fell almost 6% year on year.

Total deposits grew by almost 6% to almost $1.8 billion.

Of this, the current account and savings account proportion declined almost 19%.

This is as customers continued to shift money into higher interest-bearing fixed deposits.

With loan growth declining while funding costs have caught up, it is hard to see any significant growth in net interest income.

With the numbers provided, it should be very clear that net interest income could come under pressure.

Still, if we should stay in a holding pattern, the current level of dividend payouts by the banks should remain undemanding.

This is because the banks will still benefit from the expanded net interest margin on a full-year basis.



A bright spot could be in fee income for the rest of the year.

DBS saw 29% quarter on quarter growth in fee income.

OCBC saw 14% quarter on quarter growth, its first in 6 quarters.

UOB also saw 14% quarter on quarter growth, its first in 4 quarters.

If fee income continues to grow, it could make up for some of the loss of growth in net interest income.

However, unless this segment should see some stunning growth, it is unlikely to result in much higher earnings to justify an increase in dividends.

Still, even if the banks should maintain their current dividend payouts, they would still make for very attractive investments for income.

With dividend yields of 5% to 6% at a payout ratio of around 50%, Singapore banks provide investors with peace of mind.

Then, what about the possibility of a higher dividend I suggested before?

Where is that coming from?



Well, all three banks have excess capital ratios or the Common Equity Tier 1 capital ratio.

As they only pay out half of their earnings to shareholders, their retained earnings would grow.

They could choose to pay out special dividends if they are not able to put the funds to work.

I made use of some numbers provided by Philips Securities, but the analysis is my own.

So, take this analysis with a pinch of salt since AK is no expert.

If AK can talk to himself, so can you!

Reference: 
More reasons to invest in SG banks.