Should have sold in May and gone away?

In The Straits Times and The Business Times today, there are at least three articles which mentioned "sell in May and go away" and whether it holds any water. Has anyone sold a large part or all of their investments in the last few trading sessions?

Well, today, global stock markets retreated as the Greeks and the French elected new leaders into government. They are sick of austerity measures and they spoke with their votes! European debt story is still very much the key sentiment driver for global stock markets, it would seem.

Asian markets and the euro slumped on Monday after voters in France and Greece voted out their ruling parties in a backlash against austerity measures aimed at battling the eurozone crisis. Read article here: CNA.

I am not an economist. I am not a political scientist. Some issues are definitely beyond me. So, what do I do?

Someone just told me that timing is everything and that now seems like the right time. Right time? For what? I replied that things are increasingly more volatile and I find it harder to time anything.

I am chanting the same mantra to myself and that is to stay invested for income while keeping a war chest ready. This is the only strategy I know which would work either way.

I know that the majority of my portfolio which is in S-REITs is actually doing better now than a few months ago. My more recent investments are not doing as well, notably China Minzhong, SoundGlobal and Wilmar. These investments were made as the counters' share prices retreated from recent highs. Do I press the panic button? I like their businesses and I believe they would probably be around for a long time to come. I like the investment themes of agriculture and water. So, I am staying vested. I would probably add to my long positions too if TA shows me clearer signals to do so.

Don't panic. Stay clear headed. Revisit reasons for being invested in the first place. Are the reasons still valid? Are the investments still fundamentally good? If you want to buy more, what does TA tell you? Think with our heads and not our hearts. Good luck.

Related posts:
1. Sleep well at night with a plan.
2. Why do I not panic?

STI declines 2.2% to 2,924.95 at closing
Monday, 07 May 2012

© 2012 - The Edge Singapore

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Check out "Marvel's The Avengers" Official Facebook page and play
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LMIR: 1Q 2012 DPU 0.69c.

I remember saying that LMIR was too cheap to sell in December last year. It was trading at 36.5c a unit then.

I also remember saying that unitholders should be more patient after the rights issue because the REIT's DPU would bump up in time. The rather low DPU of 0.53c for 4Q 2011 would not be the norm. I estimated the norm to be a DPU of 0.815c per quarter or 3.26c per year. In fact, quarterly DPU could surprise on the upside in time.

LMIR announced a higher DPU for 1Q 2012 as expected but the quantum of 0.69c is lower than the 0.815c I estimated. Is the management taking too long to deliver the goods, post rights issue?

I have, of course, questioned the quality of the management a few times before and readers who have been following my blog from its inception would remember some scathing remarks I had made in the past.

Whatever the negativities, LMIR, with its very low gearing level of 9.2% and interest cover ratio of 13.3x, would take a fool of epic proportion to sink. Therefore, it remains, in my opinion a bullet proof REIT with plenty of room to grow.

What is worth highlighting is that any further growth is likely to be funded 100% by debt and, thus, DPU would grow, everything else remaining equal.

For anyone investing for income with a good dose of patience, investing in LMIR could be a very rewarding decision. So, is it a good time to buy into LMIR now?

Well, at last Friday's close of 42.5c, the annualised distribution yield, using 1Q 2012's DPU of 0.69c, is 6.49%. This is not attractive enough for me to add to my long position.

Assuming that the REIT would, over the course of 2012, deliver a DPU of 3.26c as per my estimates, the distribution yield would be 7.67% at the same unit price of 42.5c. This is definitely more attractive but it would mean investors must be more optimistic and place more confidence in the management to deliver. This is a judgement call.

Investors could consider adding if price should weaken to offer distribution yields upwards of 8% for a bigger margin of safety. Is this to be based on annualising 1Q 2012's DPU or the DPU I estimated, post rights? That's your call.

Related posts:
1. LMIR: Too cheap to sell.
2. LMIR: 4Q 2011 results.

See press release: here.