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Starhub: A nibble at $3.85 a share.

Monday, June 29, 2015

Friends would remember that I looked at possibly investing in Starhub a couple of years ago but its high level of borrowings frightened me.

Of course, Starhub has chugged along quite nicely since then and it was only later that I discovered how its very predictable and strong cashflow was able to accommodate its high level of borrowings.

So, I have been waiting for a chance to get some since...

Starhub's stock price plunged today, hitting a price (of $3.70 a share) not seen since late 2012. The big movement downwards was unexpected, of course, although the charts show the 150% Fibo line to be at $3.70, a golden ratio and supposedly a strong support.




I was more expecting a slow drift downwards in price and thought I could, perhaps, buy if the share price hits the 200 week moving average (200W MA) which is currently at $3.87. This is a long term support and should be quite strong.

So, looking at the chart when its share price had already recovered from $3.70 to $3.85, I wondered what to do because breaking the 200W MA is a bearish signal.

The widening of the Bollinger Bands indicates increased volatility. The OBV shows selling pressure. The MACD is declining and shows no sign of a positive divergence. These are all on the weekly chart which suggests that continuing weakness in the longer term should not surprise us.

In the near term, however, share price could rebound as they sometimes do. In fact, the higher low on the MACD in the daily chart suggests that this is a distinct possibility. Such a big one day movement in price should have attracted short sellers and shorts have to be covered eventually.




In terms of fundamentals, it won't be wrong to say that Starhub has challenges. Like SingTel and M1, the other two local Telcos, Starhub must deal with loss of revenue from the more and more popular use of apps such as Whatsapp (please pardon me if I did not get the name right as I don't use this) instead of voice calls and SMS.

Fortunately, Starhub has Cable TV but that business has not been growing much recently. Anecdotal evidence shows that more people are watching free online streaming content. I do that too on my iPad. Japanese anime, remember?

Of course, now, the new threat is the introduction of a fourth Telco in Singapore and this is probably "da bomb". How badly would Starhub's business be affected? I don't know. Would Starhub's ability to pay 20c in dividend per share (DPS) annually be affected? I don't know.

I do know that paying 20c per share annually in dividend means distributing almost all of its earnings to shareholders. So, if its business should suffer a decline in earnings per share (EPS) and this is a real possibility, we could see a reduction in DPS.




I could get a 5% dividend yield if I were to invest in SPH now. Of course, Starhub is not SPH. They are different animals but paying out almost all their earnings as dividends to shareholders make them similar in that respect. They could see earnings come under pressure for different reasons but that makes them similar too as the challenges are very real.

I would like to have some buffer in terms of dividend yield buying into SPH and Starhub because I am investing in them primarily for income and not growth. A more or less predictable 5% dividend yield might be attractive to me but to have a buffer means getting in with a higher yield which means a lower entry price.

Anyway, I decided to nibble at Starhub at $3.85 a share. That gives me a prospective dividend yield of 5.19% which provides a very thin cushion. This is really nothing to shout about and, definitely, I am not expecting to make a lot money with this entry price. From here on, I could, however, buy more if its stock should see more price weakness.

Related post:
How much to invest? Nibbles and gobbles.

Is it bad to receive regular dividends and to sit on cash?

Sunday, June 28, 2015

Many times, I have been asked what is the yield on my total portfolio. I have never bothered to answer the question for various reasons and because I don't ever answer such questions, I don't bother to find out what the answer might be.

I know more or less what are the dividend yields and distribution yields of my various investments in my portfolio but I have never really calculated what is the average yield.

A friend recently told me that the average yield of my total portfolio including cash must be much lower and he wondered if I was beating some kind of benchmark. I could see where the conversation was going and I gave a loud sigh.

I know there are some people who are like my friend, who are obsessed with measuring their performance and worried that, if they hold too much cash, they might under-perform the benchmark which in many instances is the STI. 

So, consequently, they are constantly on the lookout for assets to put money into in order to prevent their portfolio's performance from declining. It sounds stressful and I am stressed out just imagining this.




I am pretty simple minded when it comes to investments. I use some common sense and ask some questions which I think matter in that investment. If I am satisfied that I am not overpaying and the stock is likely to do pretty well in future, I buy some. Regular readers would know what I have been nibbling on in recent months.

Yes, some of the nibbles have been poorly timed but we can rarely buy at the lowest prices or sell at the highest prices. We can use some technical analysis to provide insights but if we did buy at the lowest or sell at the highest, we were lucky. I believe in holding on to investments that have good bones. Anyway, I sleep well at night because I "eat bread with ink slowly". Remember?

"When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 and went to $2, but then they later went to $30." Peter Lynch.


"I buy on the assumption that they could close the market the next day and not reopen it for five years." Warren Buffett

Frankly, if prices did not come down, I would not have nibbled at anything. I would most probably just be growing my war chest.

Why should there be an urgency to buy something just because cash is going to be a drag on the overall performance of our portfolio? 

Is the overall performance of our portfolio so crucial? 

It could be to some, I guess.




I told my friend I am probably about 70% to 80% invested. So, I have 20% to 30% in cash. I don't know the exact percentage because I don't measure but it is about there. My investments are generating income in excess of $100,000 a year for me. Again, how much is it exactly, I don't know. I will know at the end of the year.

Even if I were to retire from active employment and not have an earned income, I guess I would be quite comfortable living off just a portion of my passive income. The rest, I could invest with when opportunities present themselves. If there should be nothing I fancy, I would just continue to build my cash position. Even if my cash position should be 50% or more of my portfolio, it wouldn't bother me.

AK is the proverbial frog in a well. There are many things in this world AK doesn't understand but AK knows that he feels good when he has more cash in his bank accounts. 

I am not a professional fund manager who has to answer to unit holders who might ask, "Why are we paying you just to sit on so much cash?"




Well, I understand that it could be that my friend and others like him imagine themselves to be pseudo professional fund managers. I understand that but it doesn't mean that I have to be like that. I am just a regular retail investor.

I would like to end this blog post with something Charlie Munger said before but it is probably a bit overused in my blog by now. Hint: It has something to do with some character sitting on something. So, I will end with a couple of quotations from Peter Lynch instead:

"In this business, if you're good, you're right six times out of ten. You're never going to be right nine times out of ten."
"If you can't find any companies that you think are attractive, put your money in the bank until you discover some."


I am not a professional fund manager and thank goodness I am not or I might be kept busy answering calls from irate unit holders. 

"Whose money is it anyway?" 


(Oops, I think that sounded like a question from a member of the opposition in local politics. Getting a bit mixed up in my old age. Cham.)


Related posts:
1. How did AK create a 6 digits passive income?
2. How did STE married with kids retire at age 44?
3. 5 revelations from a regular retail investor.


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