Tea with Solace: A review of Saturday with Victor Chng.

This is a guest blog by Solace who spent last Saturday morning attending a talk by Victor Chng and friends.

Review on "Level Up Your Investment Profits"

I first knew about Victor Chng and Rusmin Ang when I came across the book "Value Investing in Growth Companies". I was impressed with their results in many of the local stocks and how they used scuttlebutt effectively.

They are in similar age group as me and when I know that they are hosting a talk at SPH on a Saturday morning which is near my house, I did not want to miss the opportunity to hear them speak. Solace is always curious to know how some people in his age group can be so good in investing. We must always case study successful investors, see what they have in common and model their techniques to suit our own style.

One recurrent advice that Victor gave was to invest within our "circle of competence". This is something that all investors have heard of but very seldom practiced. Their approach is primarily based on fundamental analysis. It involves lots of research and hard work. It does not involve looking at numbers in the annual reports alone but also encompasses looking at business model, industry macro factors, quality of management and finally valuation. It formed a nice little frame work.

 

Number	Business
Valuation	Management

My Personal Opinion:
If a person does not have sufficient knowledge in the four factors, one cannot say he is investing within his "circle of competence".

The speakers went on to spend some time explaining about common valuation methods, identifying good management, picking up important numbers in annual reports etc. I shall not go into details and bore everybody. I presume most readers of AK’s blog already have some kind of knowledge of investing.

For people who want to know more, just pick up any Pat Dorsey, Peter Lynch or Warren Buffett books to read. Ask AK for recommendations. (AK says: Food for thought found in the right sidebar.)

Victor also spoke about the differences between a good company and a fair company. Even if it is a fair company, we can still profit from it if we buy undervalued. He then went on to explain about distressed industry, where we can actually profit by buying into fundamentally strong company when the price has hit rock bottom. "Fallen Angels" was also mentioned; we need to able to deduce if it is a temporary setback or a permanent decline.

My Personal opinion:
There is a fine line between fallen angels that are value stocks and those that are headed straight towards bankruptcy. Needs experience and good judgment.

Several case studies were shared. Many are stocks that the speakers have invested in before. One of them is LMA international and why it has a unique economic moat. Cerebos, the company behind Brands and how it was so profitable. The comparison between Hanwell Holding (Product: Beautex Tissue) and NTPM (Product: Premier Tissue). A look at the financial numbers would tell us a lot why one is superior to the other.

There was a question from an audience which I thought was excellent. Cerebos, the company behind Brands can potentially be hard hit by a massive outbreak of birds’ flu or a change in consumer preferences, leading to a worse case scenario where no one wants to drink chicken essence any more.

My Personal opinion:
This is a very valid concern and highlights the importance of safety margins in investing, even for stocks which seems invincible. Anyway, Cerebos has already delisted from the Singapore Stock Exchange.

Finally, Victor touched on one sector of the industry which is in distress. The Baltic Dry Index (BDI) has fallen to records low in recent times and value can potentially be found in the Dry Bulk Shipping Sector. Weaker players are out of the game and the search is on for companies with competitive advantages can lead the recovery which may be taking place.

As strong iron ore demand from China drives up price of ship charters, the worst could be over for the shipping sector. Using the framework that Victor has explained, he has identified 2 companies in the region that appeal to him,

This is a cyclical industry which has gone through multiple boom and bust cycles before and this time is no different. Some of the big names and billionaire are believed to have already invested in this sector. Based on the information provided, retail investors can potentially ride on recovery in this sector by carefully investing in fundamentally good stocks in the sector.

My personal Opinion:
I generally agree with the findings of the speaker on this sector. I am monitoring it myself. But as a prudent investor, we should still do our homework to verify the facts and macro industry situation before leaping in. As mentioned before, always invest in your "circle of competence" and with a margin of safety.

Victor will be organizing a roundtable discussion forum where he will be sharing his findings of the sectors in details. He will also show how the methods could be replicated to find opportunities elsewhere. If you are interested to learn more, you can contact Victor and friends for more details on the discussion forum.  Email: Contact@fifthperson.com

Conclusion
I agree with the investing methods that the speakers have touched on. Many successful investors succeed based on hard work, fact finding and many hours of learning and research. I always believe that is no short cut to riches in investing. I believe the investment methods shared by Victor and Rusmin are very relevant and should be studied carefully.

Finally, I just want to add, if one comes across marketing gimmicks that promise instant riches and instant success by attending courses which charge ridiculous prices in the thousands of dollars, one should open one's eyes to see clearly and think carefully. At that kind of prices, one might actually get better value for money by investing in an ETF or reading some good investment books.

Related posts:
1. Saturday morning with Victor Chng: Level up!
2. Saturday with Victor Chng: Becoming a better investor.

Invest and get back the money spent!

There are so many signs that my body is ageing and here is another one.

I was reading while waiting for a friend one evening to meet up for dinner. I think I must have been reading for at least 30 minutes and when I looked up, everything was a blur.

I blinked a few times and it was still a blur. I removed my glasses and rubbed my eyes. I put on my glasses again and it was still a blur. I think my vision only cleared up after another minute or so. What's the reason?

When I went for an eye check recently, I was told that I need reading glasses. Yes, it was one of those moments in between denial and acceptance.

What did I do? I made a trip to a discount store!

I tried those $2.00 reading glasses, congratulating myself for being such a smart fellow! However, they didn't work for me! Everything was still a blur.

Apparently, because I have astigmatism, I could not use those $2.00 reading glasses. So, sadly, I had to get a pair made. Price: $68.00.

My reading glasses.

I consoled myself by saying that Singapore's population is ageing rapidly. I am not alone. I should try to get back the $68.00 I spent by investing in businesses that cater to the ageing population. LOL.

Related posts:
1. AK gets recognition from government.
2. Tea with AK71: Eldershield.

Helping our parents invest their money.

This blog post is inspired by what I read at Bully the Bear. The blog master is now helping his parents manage some of their savings to secure higher returns. The money would have gone into fixed deposits, otherwise. Read: Why my parents are so eager to invest.

My parents also leave money in fixed deposits which they say give them a peace of mind. Whether it is a good idea or not is, of course, open to debate. However, peace of mind is priceless. If they do not wish to put their savings in "risky" investments, I won't go against them. This also gives me a peace of mind because if the "risky" investments turned out badly and I was the one who asked them to invest, then, it would be a nightmare of epic proportions.

Photo taken when I went on a cruise with my parents.

In recent years, however, my mom saw how my investments delivered regular income and instead of being purely a market speculator, she decided to have me help her invest some of her money. She now gets more than $1,000 in passive income from stocks per month which is a nice bit of extra money for a person in her 60s.

More recently, my dad asked me if I could help him invest some of his savings as well. Of course, I have to do it. Why? He is my father. No other reason needed.

I told him that I could possibly get an 8% yield for him but the principal sum will have to be locked up for at least 5 years. That was my only condition. So, he has to be sure that it is money he will not need. At the end of the 5 year period, he will get 100% of his capital back if that is what he wants or he could stay invested.

How am I going to achieve this over the next 5 years? Honestly, all things remaining equal, with great difficulty, I suspect.

I could consider investing in the following:

1. Sabana REIT
2. Croesus Retail Trust
3. SPH
4. NeraTel
5. Hock Lian Seng

There are many things we can say about Sabana REIT but the distribution yield is rather attractive with unit price just 1c shy of $1.00 and there is a chance it could go a bit higher with an occupancy level of under 92% now. This allows ample room for improvement.

Croesus Retail Trust has retreated in price since going XD. It is now close to my entry price. This Trust is going to deliver a higher distribution yield than Sabana REIT and if things go the way I expect them to, it could do even better in future.

SPH has always been a favourite of mine as a blue chip investment for income. With the listing of SPH REIT, I like SPH more now and increased my long position in the stock last year. SPH will increasingly morph into an asset light property play even as it tries to reverse the decline in its traditional print business.

Regular readers will remember how I increased my long position in NeraTel by 10x last year in an effort to divert resources into stocks which will not be affected badly by any increase in interest rates. NeraTel is still a net cash company with strong earnings which should see meaningful improvements over time as the company sets up offices in new markets.

Hock Lian Seng is an investment I have held for a few years now. I initiated a long position in the stock shortly after its IPO. It has a strong balance sheet and rather stable earnings. It pays out about 40% of its earnings as dividends. It is one of those stocks that I almost forget I have until it is time for it to pay a dividend again.

If I were to divide my dad's money into 5 equal portions and invest in the above, I estimate that I could possibly get a yield of about 7%.

So, how am I going to deliver the estimated 8% yield?

I am going to cheat.

OMG! AK is going to cheat!

Bad AK! Bad AK!

OK, I am so ashamed of myself. You can stop reading now.

Pause.

Pause.

Pause.

Er... Still reading? You really want to know?

Let there be light!

OK, then, my plan is to keep the money that my dad is entrusting to me in my war chest. Then, I will deliver the 8% yield from my existing investments while I wait for prices to go lower before accumulating with bigger margins of safety.

There is no hurry for me to buy anything from Mr. Market. Well, maybe I could increase my investment in Croesus Retail Trust which I believe is rather attractive if 87c should be retested.

What if prices did not retrace lower but stay at current levels or go higher?

Well, anyway, I have always planned on using a good part of the income that is generated by my portfolio to support my parents when they are no longer working. So, this proposed arrangement is just a matter of utilising my passive income earlier than planned.

It will make my dad happy and that gives me a peace of mind.

Note: If anyone is wondering whether to start an investment portfolio based on the 5 securities I have highlighted in this blog post, please read the disclaimer found at the end of the page first.

Related posts:
1. A strategy to grow wealth and augment income.
2. Hock Lian Seng: DPS of 1.8c.
3. Croesus Retail Trust: Luz Omori and Niz Wave I.
4. SPH: Results are within expectations.
5. Sabana REIT: Am I buying or selling?

First REIT buys hospital at 17% discount to valuation.

I like buying properties at a discount to valuation but, in reality, such offers are hard to come by. In the world of S-REITs, however, it has happened before and it has happened again as First REIT is going to buy Siloam Hospital Purwakarta at a 17.3% discount to valuation. The price tag? S$31 m.

The hospital has two parts, a 3 storey building which was completed in 2005 and a 5 storey building which was completed in 2008. Major refurbishment is now underway and is expected to be completed by late 2014. The good news is that all refurbishment work will be paid by the seller. So, First REIT will get a newish property. No additional cost.

First REIT will pay S$26.5 million using debt and issue new units to the seller equal to a value of S$4.5 million. This is rather innovative. It makes the purchase financially less demanding. Gearing level will then rise by a more modest percentage from 32.3% to 33.9%, post acquisition.

This purchase will increase future income for First REIT and the 15 years Master Lease agreement will provide stability. A 6 months rental deposit will also be collected.

Now, as investors for income, we are probably more interested in how DPU will be affected. First REIT will have more units in issue after this and also a higher debt burden. So, both NAV per unit and DPU will only see very marginal increases, post acquisition. So, don't go spending any money on a lion dance troupe.

Everything else remaining equal, I would say that First REIT is a fairly good investment for income but, like the management of the REIT, I would like to buy stuff at a discount to NAV and the REIT's NAV is currently about 97c per unit.

See announcement: here.

Related posts:
1. A simple way to a double digit yield.
2. Distribution reinvestment plan: First REIT.

Graduating soon? Take steps towards financial security.

Received an email from a reader who is about to graduate and join the workforce:

Hi AK,

I am C and this is actually my first time writing to a blogger.

I've recently found your blog and you've been such an inspiration to me and my "future financial life".
 
Would like to sincerely thank you for setting up this blog to benefit us youngsters in Singapore. :)

I am about to graduate soon in a couple of months and I'm just wondering if you can provide some advice to me...
 
Upon graduation and receiving my first pay check, would you recommend me to first set up my emergency fund or invest in FDs or buy insurance or voluntarily top up my CPF or invest in a SRS account or a combination of some? 

There just seem to be many things I should do but I'm not sure which one I should focus on to get my priority right.

Thank you for your kind advice, AK.

Warmest regards
C

My reply:

Hi C,

I am not allowed to give advice but I am happy to share with you what I would do if I were in your shoes. :)

1. Buy a term life policy. 

Very important if we have parents or other dependents to care for. 

How much should the coverage be? 

It is up to you but I feel that $500K is probably more than adequate for most.

2. Buy a good H&S policy. 

Personally, I have NTUC Incomeshield with Assist Rider. 

We don't want to be sunk by hospital bills. 

How much you would spend here depends on whether you are comfortable with Class C, B or A wards or if you want to stay in private hospitals.

3. Buy a Critical Illness policy. 

We need this money to help pay for long term treatments if we should be diagnosed with one of these illnesses and not die. 

I am covered for $300K but, for a start, I think $100K should be comfortable.

4. Set up an emergency fund. 

Slowly build this up so that it is enough to cover at least 12 months of regular expenses (including insurance expenses). 

My preference is for 24 months. 

In case we lose our jobs or are unable to work for some reason, this is the fund we would draw upon.






Once we have done all these, we can start thinking about investing for a second stream of income.

Of course, if we can pay less taxes, we should. In planning for retirement, you want to consider topping up your CPF-SA to a maximum of $7K a year. Of course, you could also start an SRS account.

The tools are out there to help us achieve financial security. You will do quite well if you make good use of them. :)

Best wishes,
AK

If anyone has any ideas to share, please leave comments here and I am sure C will read them. Thank you.

Related posts:
1. Why a meaningful emergency fund is important?
2. How much for hospital and surgical insurance?
3. Tea with Solace: Getting ready for investment.
4. Build a bigger retirement fund with CPF-SA.
5. SRS: A brief analysis.

Invest in real estate for high returns!

A reader, Gary, asked me for my opinion about something he saw in Bukit Merah Central.

"... Saw a roadshow in Bukit Merah Central which displayed "24% per annum"! Company is Islandia and I'm not so sure if really can get 24% per annum! Sounds like scam but the strange thing is that there are people manning the booths!"






So, with some help from my friends, Victor Chng and Matthew Seah, I discovered that Islandia is actually a proposed integrated resort to be developed on an Indonesian island called Pulau Abang Besar. 

Apparently, construction work started in the middle of last year.

See PDF file:
http://www.cuffzholdings.com/News/The%20Islandia%20AsiaOne%20Feature.pdf

This project is a joint venture by Cuffz Holdings and Huafa Assets.

Digging around a bit more, we found that Cuffz Holdings is actually partnered with IOC Group Limited.

IOC Group Limited is listed on the MAS Investor Alert list: http://www.mas.gov.sg/IAL.aspx?sc_p=I

Scroll down the list and you will see it.

What is the MAS Investor Alert list about?






"The Investor Alert List provides a listing of unregulated persons who, based on information received by MAS, may have been wrongly perceived as being licensed or authorised by MAS."


If I were approached by anyone promising me a return of 24% per annum by investing in a piece of real estate, I would be very wary.

If I were approached by anyone promising me a return of 24% per annum by investing in a piece of real estate that is under construction, what should I do?

Related post:
Invest $10,000 and get 24% yield in 24 months.

An annuity plan for retirement needs.

Sharing an email exchange with a reader and I hope to hear what readers have to say:

Hi AK,

I am P, one of your loyal followers in your blog. I have a silly
question that I ponder the past 2 days that I could not decide. So, I
thought you are very financially wise, maybe you can help me.

It is like this: I am 45 years old. I am thinking of buying an annuity
that will gave me $300 per month for life from age 65.I need to pay 10
years of premium totaling $45562. If I die at age 66, my dependents
will get $50, 798. This is the same for my dependents even if I die at
age 86. If I die at age 86, I will get $300 per month for 20 years.

Another alternative, I could invest for income and maybe buy OCBC
shares, I will get a rate of 3.5 per annum. It seems higher.

I am at a loss at what to do, what will you do if you will me?
Assuming that you do not invest in high yield income and only at OCBC
shares. What will be your considerations? For me, I am more worried
about my dependents and hope that they will be happy and not to always
worried about money. That is why I hope to give them an income for
life. It is the only thing that a mother can best give to her children
and also to teach them to be financially literate.

Hope you can help me.

Thank you, AK for your kindness.

Regards
P

My reply:

Hi P,

I am not a financial advisor. So, I am not going to give you any advice on this but I will share with you what I think.

You did not say when must you start contributing to this annuity which will accumulate over a 10 year period. So, I will assume that you must start contributing now at 45 years old since you are thinking to buy one now.

I will also assume that you are contributing the same amount every year over a 10 year period. Total: S$45,562 means S$4,556.20 a year.

The guaranteed payout is S$50,798 in the event of your death at any time from age 66 to 86. Otherwise, you would get S$300 a month over a 20 years period or a total of S$72,000.

The attraction of an annuity plan to me is really the predictability it provides which is important in our old age. Of course, we hope that the insurance company doesn't go bust.

Now, predictability is good but is it that difficult to do better than what an annuity promises to do for us?

Assuming inflation is 3% per annum, the initial sum of S$45,562 which you have progressively contributed from age 45 to 54 should become at least S$54,798 at age 55 just to keep pace with inflation. By age 66 when you start drawing $300 a month, this sum should then become S$73,644.

A 5% draw down per year from age 66 would give you about $307 a month which approximates the $300 a month you have been offered. Assuming that nothing is done to the money to grow it over the 20 years draw down period (e.g. keep the money in a biscuit tin), the money would be depleted over the same time period. Don't ask me what happened to the excess $7 a month.

The annuity will deliver maximum monetary benefit to you and your estate if you were to live up to age 85 years and 11 months. Total benefits: S$ 71,700 + S$50,798. To me, it is almost like a game of chance and it probably is.

Now, assuming that you did your own investments and you managed to only keep pace with inflation at 3% per annum, that S$73,644 you would have accumulated by age 66, if invested, would probably still grow at 3% per annum and even with that 5% draw down a year, you would not end up with nothing at age 86.

After 10 years, at age 76, by my calculations, you would still have S$53,907 for your estate. After 15 years, at age 81, S$43,380. At age 86, $28,512.

Hypothetically, if you could consistently receive a 3.5% yield by investing in OCBC alone, the difference is even more stark and would beat this annuity plan flat.

Of course, share prices will most likely fluctuate but if the business is strong and grows over time, that 3.5% yield on cost is likely to grow as well and with it, the share price of the company.

Best wishes,
AK

Related posts:
1. Will I retire happy?
2. Retiring a millionaire is not a dream.

Will I retire happy?

I received this email from a reader recently:

Hi Mr. Tan,

I stumbled upon your blog and read about your analysis on the inflation-adjusted retirement plan. currently, I have a term plan and am currently considering on a retirement plan, which I have recently signed.... 

And it is the above-captioned one.




I am 35 and based on this plan, I expect to retire at 55 and this plans covers me up to 70.

I will be paying total premiums of $70,875 for 15 years,


In which there will be a 5-year accumulation period.

Thereafter, my total guaranteed retirement income is $115,875 from age 65 to 70.

If I assume the inflation rate from now is 3% p.a., I should expect my guaranteed payout to be $115,171.88 for 15 years. 

Which seems like the plan is marginally palatable. 




But now that you got me thinking about the returns on my capital, it looks like I am losing the returns during the 5-year accumulation period. 

Am I right? Should I be worried?

I have already signed the plan and realized that there are more demerits to my proposal than I thought it had because I was focused on reserving retirement income while having a longer coverage on death & terminal illness. 

Like I cannot surrender it before retirement age, or else I lose everything.

Also, it would be great if you could post an article advising on securing more $ for retirement for worried young Singaporeans.

I hope I can get your advice on this.

Thank you very much!

SI

My reply:

Hi SI,

Er... I am not a Mr. Tan. 

I think you might have mistaken me for one of the 4 presidential candidates in the last presidential election. ;p

If you have already signed up for the plan, there is little else you can do about it, I suppose, short of terminating it and suffering losses.

I think that if you follow my reasoning and calculations in the blog post you mentioned, you will see why I don't think the product will do the job it says it will do.

Anyway, I don't wish to cause you further anxiety. 




There is a non-guaranteed portion in the product. 

It could work out nicely for you in the end if they deliver on that, much delayed though it might be. :)

As for how to secure more money for retirement for 'worried young Singaporeans', I blog about it on and off:

1. Earn more
2. Spend less
3. Invest for a second stream of income

This is my peasant mentality to financial freedom. :)

Best wishes,
AK

Related posts:
1. Inflation adjusted retirement income plan.
2. To be a happy peasant.
3. Very first step to becoming richer.
4. Wealthy nation cannot afford to retire?

Saturday with Victor Chng: Becoming a better investor.

In case you missed the blog post on what is happening this Saturday morning, a friend of mine, Victor Chng, is going to share his views on an unloved sector of the economy and how we could potentially make quite a bit of money by capitalising on this.

So, if you are interested in Victor's analysis and if you are free this Saturday, get your tickets at:

Level Up Life Series.

Price: S$9.00 per ticket.
Bring a friend and pay S$15.00 for a pair.
If you are a student, show your matriculation card at the door and you go in for free.

If you want to bring it a step further at the end of the half day event, ask Victor about the discussion forum he is organising. That will be another value for money learning experience.

I try to be a better investor by listening to better investors. I believe that Victor is a better investor than I am.

The book Victor wrote with Rusmin Ang.

Related post:
Saturday morning with Victor Chng: Level up..

AIMS AMP Capital Industrial REIT: Good price?

A reader, Mark Wong, asked this in the comments section:

"Hi AK71

"The REIT is trading at $1.315 now. Will you consider this as a good price to enter? I have not yet holding any of the REIT at this moment."

As I feel that many do not read the comments section of my blog and I really think that my reply to Mark could be of interest to others, I am publishing my reply as a blog post instead:

"Hi Mark,

"I feel that the more important question is to ask whether you are getting the value you want. What do I mean?

"Referring to the blog post above, a realistically optimistic distribution yield at $1.08 a unit (the price of the rights units) is estimated at 9.26% , post rights issue.

"So, at $1.315 a unit, we are looking at a prospective yield of 7.6% with the added benefit of a stronger balance sheet which could allow the REIT to do more AEIs which could increase DPU in future. So, everything else remaining equal, we could see distribution yield inching up from 7.6%.

"By my estimate, the REIT is currently not trading at any discount to NAV whereas, previously, at a higher unit price, it was. $1.315 per unit is probably close to valuation.

"So, if you were to ask me, I would say that the REIT's units are fairly priced although $1.315 (post rights issue) looks "cheaper" than $1.415 (pre rights issue), that is just an illusion created by prices.

"There is nothing wrong with buying at a fair price, of course. So, I won't tell you if now is a good time to buy into the REIT. You have to answer that yourself."

Related post:
AIMS AMP Capital Industrial REIT: The rights' value.

Singapore Short Stories: Man collects rent from his boss.

Everyday, Mr. Tan went to work in a local SME in an industrial estate on a sunny little island called Singapore.

Mr. Tan was a model employee and was always on time.

Mr. Tan was also rather frugal. 




He would prepare his own food to bring to work and saved a big portion of his earned income. 

Mr. Tan's biggest fear was to be destitute in his old age.

Mr. Tan always remembered what a famous man called Warren Buffett said:

"We never want to count on the kindness of strangers in order to meet tomorrow's obligations."




Mr. Tan was a regular guy and didn't have any dreams of greatness.

Sometimes, after a trying day at work, Mr. Tan would wonder if he could stop going to work and still receive an income? 

Being rather practical, he dismissed it as wishful thinking.

Then, one day, he had a conversation with the accountant in the company he worked for.

In the conversation, the accountant said that the company had to pay rent and salaries every month but the difference was that the landlord didn't have to work for the money while they had to.




Hey!

Get paid every month?

Didn't have to work for the money?

Idea!

A few years later, Mr. Tan still worked in the same local SME in the same industrial estate on the same sunny little island called Singapore. 

A big difference was that some of the rent paid by the company every month to the landlord ended up in Mr. Tan's bank account regularly, enough for Mr. Tan to stop working for a living if he had wanted to.




Now, how did that happen?

Let me ask my bowling ball.



Is this an easier way to be a landlord?

Related posts:
1. Building and preserving our wealth.
2. 2015 full year income from S-REITs.

Tea with Matthew Seah: Same stock, different results!

Recently I met up with a friend. Naturally being me, as we conversed, we veered more toward talking about investing. As we talk, I found out that this friend of mine had invested in the same US company as I did back in August 2011.

Back then, he had asked me what company I was investing in. At that time Gap Inc (GPS) was falling some 32% from its high of US$23, to below US16. Of course after doing much due diligence, I deemed that GPS was undervalued (I shall spare the fundamental analysis portion), and I told him I just bought GPS and told him the reasons why I think this is a good company to invest in. And without doing due diligence, he bought…

Coincidentally he had bought at the same price as me – US$16.16, although the exchange rate and broker fees might be slightly different. After 2 and a half years, how does each of us fare?

Friend: loss of S$65
Me: sitting with a 100% return of investment, with some 54% of my original shareholdings earning residual dividends + capital gains!

Apparently, right after he invested, the price of GPS went up and down several times. So much so that he could not take the emotional strain and he sold his entire stake in early October, 2013. He didn’t even manage to receive a single dividend during the time he was invested and made a small loss. The chart below shows what happened.

As for me, I have been holding since I bought it till June 2012, when I sold 46% of my shares for a total return of my original investment capital, plus a bit more. My remaining stake has gained some 163% In value and I have also received some dividends every now and then from the company. The chart below gives a pictorial view of what I have described.

Why such a big discrepancy?

I’m sure readers of financial blogs would know that emotions affect one’s decision in investing and trading. Emotions and personality can often get in the way of successful investing. As a result, many people have tendencies to:

1. Buy on tips from other people

2. Buy on a whim

3. Buy the hype

4. Ride a winner till it goes bust

5. Fail to exit a loser

As an investor, we should recognize our own emotional strengths and weakness, and approach investing in a way that is more suitable to our investing style. It is paramount that you know what type of investor you are and not follow other investors blindly. Their investing style might be very different from yours!

Read other guest blogs by Matthew Seah: here.

The world is full of nice people.

I shared this on Facebook earlier:

As I was also filling out a donation form for Singapore Children's Society, I asked readers who are following me on Facebook to make a donation as well, if they can afford to.

See what $10, $25 or $50 can do for needy children:

Yes, just $10 can make a difference to a child's life.

Donate online at:
Singapore Children's Society.

Thank you for your kindness. :)

Related post:
An appeal by AK for funds.

Saturday morning with Victor Chng: Level Up!

My blog about how AK feels like Bilbo Baggins might still be quite fresh on your mind. In case you are wondering, I am still meditating on the issue and wondering what kind of disguise would work.

While I am still meditating, the boat has to leave without me. Well, it can't be helped, I guess. There is always another boat and, maybe, by then, I would have made up my mind.

However, quite honestly, I didn't know about this particular boat until 2 nights ago.

Well, at least, I can help spread the word about this event which is happening very soon:

Venue:	SPH News Centre, Auditorium 1000 Toa Payoh North Singapore 318994
Date:	15 March 2014, Saturday
Time:	9:00am - 1:00pm (Registration starts 8:30am.)

It is just slightly more than a week away. Rather short notice.

Hear from one of the brilliant analytical minds I mentioned somewhere in my blog's comments section before. I spoke with him at length again recently and I was really impressed. His name is Victor Chng and he will share with you his insights on what is currently unloved by Mr. Market.

Click to enlarge.

Someone else whom you might learn something from is Chris Chan. I learned quite a few things from him about insurance in his presentations before. Get the right kind of insurance at the right prices. Although I have taken his advice to heart, I have yet to defrag my insurance policies. Maybe, one day, I will have a chat with Chris.

I was told that there are only about 200 tickets available for sale. So, if you want to attend the event, you have to be fast.

Oh, I haven't told you the ticket prices:

$9.00 for one ticket.

Bring a friend and you pay only $15.00 for two tickets.

Here is the link: Level Up Life Series.

If you are a student, just show up at the venue and flash your matriculation card. Why? You get to go in for free! This is the promise my friends made. So, go early and get your free seat!

Remember, go with an open mind and I think there will be plenty of useful knowledge to take away.

If you do not think you need more guidance or the services offered, don't sign up for anything. This is the same thing I said about attending Value Investing Summit in 2013 and 2014.

However, if you feel that you need more guidance or if you feel that you do not have time to do due diligence, then, consider signing up with Victor for his discussion forum!

The forum will not cost you thousands of dollars. It will not cost you one thousand dollars. It will not even cost you half a thousand dollars.

Victor has put a lot of thought into the design of the discussion forum and I believe that it will be truly value for money.

My friends are taking baby steps to fulfil their vision of promoting financial literacy without charging high prices and to channel a percentage of their earnings towards charitable causes at the same time.

If you have the time and a few dollars to spare, spend a Saturday morning with Victor Chng and see for yourself this young man in action (and you will know if AK had postage stamps over his eyes).

Related post:
AK feels like Bilbo Baggins.

Invest $10,000 and get a 24% yield in 24 months.

I received an email from a reader regarding an investment opportunity and he asked me for my opinion:

Hi !

I heard about your blog from my father and I am very impressed! I would like to ask you if you know about the German Real Estate Investments through XXXXXXX Wealth Holdings. The minimum cash in is $10k and the yield is 24% over 24 months. Is it too good to be true? Is it a scam? Could you help me look into it please and give me advice on whether to cash in or not. Thanks!!

IL

My reply:

Hi IL,

Ask them how is that 24% return on investment over a 24 months period achieved. If they cannot explain it to your satisfaction, don't touch it with a 5 feet pole.

If an explanation is given, see if they are paying you from cash flow generated by the properties or are you simply taking back some of your own money.







I visited their website.

Their "dedicated and talented management team" has over 25 years of combined industry experience. I wonder how many people are on their team?

At the bottom of the page, it says that they are not regulated by the Monetary Authority of Singapore. That doesn't sit well with me.

I don't know if it is a scam but when in doubt, I stay out. :)

Best wishes,
AK







Apology: Due to an administrative oversight regarding an advertorial earlier, I had to take down this blog post and re-publish it today. Very sorry for causing any discomfort to some readers. :( - AK, 4.52pm, 6 March 2014.

AK will always be AK.

Apology: Due to an administrative oversight regarding an advertorial earlier, I had to take down this blog post and re-publish it today. Very sorry for causing any discomfort to some readers. :( - AK, 4.50pm, 6 March 2014.

My reply to a reader's email:

Thank you for taking the time to write to me. I appreciate it. :)

Do you trust me when I say that I will not do anything which I think is against the interests of my readers? Please tell me you do. -.-"

I will stay true to the spirit of being AK (which always has an element of fun and laughter)! AK is a just a regular guy who shares what little he knows and loves value for money. AK believes that luck is important in everything he does. AK believes in being charitable. None of these will change. :)

I am more comfortable being anonymous and will probably stay so for some time to come. One day, when I am brave enough and ready to deal with the consequences, I might let it go. However, there is no saying whether that one day will ever come. ;)

AK is but a frog in a well.

Win a car in the Phillip-Macquarie Warrant Challenge!

Regular readers know that I won a car many years ago. Quite lucky, that. I always say that luck plays a part in the grand scheme of things. This is true in our efforts as investors too.

Now, there is a chance that you could win a car and unlike lucky draws at NTUC Fairprice, Harvey Norman or Courts, for examples, I suspect that there will be less participants in this lucky draw and your chances of winning are higher! Why?

This car is the grand prize in the Phillip-Macquarie Warrant Challenge and I don't think this is something that will have a big following of "shoppers". So, chances of winning are higher, I surmised.

You know what is the best thing about this Challenge? You don't have to use any real money!

If you have some experience trading warrants before, you possibly have an advantage over the rest. However, if you have no experience at all, you won't lose any real money anyway.

Like they say:

"It’s the perfect way to get started if you’ve never traded warrants before but always wanted to, and you stand to win your share of the $30,000 in cash prizes. Overall prize winners will also be entered into Phillip Capital’s Grand Lucky Draw to win a Mazda 6 worth S$90,000*"
*Terms and conditions apply.

To learn more or to take part now, go to:
Phillip-Macquarie Warrant Challenge!

Have fun and good luck! Hope one of my readers win! Huat ah!

Saizen REIT and Croesus Retail Trust: Much ado about Yen.

A reader sent me an email and expressed worry that the JPY might weaken further against the S$. With exposure to Saizen REIT and Croesus Retail Trust, he is worried.

For sure, the JPY has weakened dramatically in the last 2 years (and a few months) against the S$. By now, it has weakened some 25% or so. It might weaken further or it might not. I am sure there are arguments made in favour of both cases.

I think, as investors, we have to know clearly what is our motivation for investing in Saizen REIT and Croesus Retail Trust. If we are investing for income and if we have not overpaid in either case, I feel that we have little to worry about.

Luz Shinsaibashi, Osaka.

Both Saizen REIT and Croesus Retail Trust hedge exchange rate risk. So, even if the JPY were to weaken another 10% in the next six months, their next income distribution in S$ will barely be affected. Similarly, if the JPY were to appreciate significantly in the next six months, don't expect any big gain in DPU, everything else remaining equal.

Of course, the income distribution after the next could be hedged at an even lower exchange rate if the JPY is weaker by then. Yikes! Yes, this is one of the risks that comes with investing in anything that receives income in a foreign currency.

With Saizen REIT trading at 88c a unit and giving a DPU of about 6.5c, we are looking at a yield of 7.38%. Croesus Retail Trust is trading at about 89c and will offer an annualised DPU of about 9.3c, by my estimate, or a distribution yield of 10.44%, after its recent acquisitions. Double digit yield, anybody?

Of course, we have to remember that Saizen REIT has a much stronger balance sheet compared to Croesus Retail Trust and that they own different types of properties.

In the event that the JPY weakens another 5 or 10%, what would the impact be on the distributable income in S$ terms? Yield falls to 6.64% for Saizen REIT and to 9.45% for Croesus Retail Trust? Is that so unpalatable? Is that a catastrophe?

Photo of the Great Buddha in Kamakura I took on a trip in December 2011 when JPY was at its highest against the S$.

Investing for income is supposed to give us some measure of equanimity even if the equity market sails through a storm. If the slightest hint of choppy waters scares us to bits, we might want to look at our motivation for being invested again and also check to make sure that we have not invested with money we might need in the next few years.

There must be a reason for our fear. Find it.

Related posts:
1. Saizen REIT: Is the DPU sustainable?
2. Croesus Retail Trust: Recent acquisitions.
3. Motivations and methods in investing.
4. Be comfortable with being invested.

AK feels like Bilbo Baggins.

The good thing about being an anonymous blogger is that I feel more comfortable to share more openly many things about myself, including what is my annual passive income from investments, for example. Anonymity gives me some protection and that gives me courage.

Over the years, I have been invited to speak at various public events or to be interviewed. Predictably, I have declined all such invitations with only one exception.

Bilbo Baggins. Source: Wikipedia.

Recently, I met a group of big hearted people who feel that many people will benefit from me sharing in person my little ideas about financial well-being and investing. Of course, my immediate response was to decline the offer. No surprises there.

However, I was so won over by what they are setting themselves up to do that I offered to them my blog which represents more than 4 years of dedication. To me, if my blog is able help fulfil the noble vision which they have, it would give me great satisfaction. Well, of course, I would still be blogging. I still enjoy it enough not to give it up yet.

They are very decent people and they think that it is not right for them to take my blog. They reasoned that it is not right to take it without fair compensation. They do not like the idea they will benefit from the arrangement but not me. This is the kind of people they are. Despite telling them that it doesn't matter to me, they refused.

Instead, they asked me to seriously consider doing greater good by inspiring people in person. I understand the argument that many people do not read blogs. I understand that many prefer people to people contact. However, there are already so many speakers and trainers who are doing a good job of inspiring people. Why me?

I am just a regular guy who works as a manager in a family controlled SME. I make a mid 4 figure salary and have 14 days of annual leave a year. I make use of common sense and try to be prudent with money. I also try to make my money work for me by investing for a second stream of income. There are many people who are like me in Singapore, I reckon.

Fear of the loss of privacy is the biggest thing that is holding me back from making a public appearance. It would also be terrible if, by making a public appearance, I cause my family to be subjected to scrutiny as well.

I told one of these friends that I feel like Bilbo Baggins and that, to me, he is Gandalf who has come knocking on my door. Should I pack up my stuff and go with him?

I am a worrier by nature and, already, I can imagine how things could go wrong in more ways than one. I wonder is this going to be worth it?

Related post:
Common but admirable people.

Hock Lian Seng: DPS of 1.8c.

Hock Lian Seng's strong balance sheet, cash flow as well as high gross profit margin attracted me. Even if it is not a good investment for growth, I believe that it is a good investment for income with its record of paying out meaningful dividends.

Hock Lian Seng reported a gross profit margin of 40% on the back of lower revenue but higher gross profit. NAV per share improved from 24.9c to 27.8c. EPS reduced slightly from 4.9c to 4.7c, year on year.

A DPS of 1.8c has been declared. This means a payout ratio of 38.3% and a dividend yield of 6.67% based on the price of 27c a share.

Realistically, Hock Lian Seng will face headwinds in future and the management has said that:

The Group will continue to participate selectively in the some of the upcoming infrastructure projects tenders called by the Singapore Government. However, the Group is expected to face stiff competition from large foreign contractors, higher construction costs and a shortage of foreign workers.

So, although there is reason to believe that Hock Lian Seng will do reasonably well based on past track record, the landscape has definitely become more challenging.

Its exposure to property development could also be ill timed:

On the property development front, the Singapore Government has implemented property cooling measures to both the residential and industrial property market. The Group believes that the measures would create a stable and sustainable property market in Singapore.

The construction of the two industrial property developments are expected to be completed by early 2015. The joint venture residential project at Dairy Farm Road was launched in September 2013.

Having said this, now, with a PE ratio of 5.75x and trading at a slight discount to NAV, the stock does not seem expensive.

See: Full year results.

Related posts:
1. Hock Lian Seng: Buying on weakness.
2. Hock Lian Seng: Dividend 1.8c per share.