A Pretty Bad Day

Today is pretty dramatic and I would talk about a couple of things.

First off, my little portfolio suffered the heaviest single-day drop so far, a 3.1% drop.
This is attributed to a 9.8% decline in Xinghua Port Holdings, just over 10% in Samudera Shipping, a 6.8% in PC Partners, and a 3.8% decline in Thai Beverage.

I would be lying if I am not perturbed by it. But I guess if I aspire to hold less than 10 stocks, there will be more of this to come.

My reaction to that is to stay still. There are a few reasons for this:

1.  None of the companies are in the danger of going bankrupt.
2. All the companies are cheap based on simple valuation. PC Partner is largely a cyclical company and I might be wrong.
3. They pay a decent dividend, compared to risk-free rates.
4. There were no company announcements made prior or after today’s market close, and hence, as unpleasant and uncomfortable as it is, one has to treat it as market’s fluctuation. 
5. I want a 10-15% discount off my average price before I commit additional capital. The lower the price, the lower the risk.

Technical analysts would point out that charts tell the whole truth—believers of this trade does not suffer or endure any long term discomfort. Price movements tend to occur long before any formal announcements, and insider leakage is unavoidable. Even the most hard-core value guys will acknowledge this.

When I buy a stock, I tend to think about the probabilities of me making a decent return within 3-4 years. There are three advantages an investor can have. Intellect is one. Insider or industry knowledge is another. The last, is time. Having the patience (and stomach) to wait things out can be rewarding.

In view of the bond offerings by government-affiliated entities in recent months… I do think that if someone has an investment horizon of about 15-20 years ahead (before death become a statistically-high probability), bonds do not make sense, especially since they are not capital-guaranteed investments (like Singapore Saving Bonds). The financial statements of the entities selling the bonds are not disclosed, hence one needs to have faith (although I would say we are all in the same boat) that they are not in some kind of trouble.

I do believe there are studies made by the academia, measuring the performance of bonds vs stocks in 20 year period blocks, across various point in the last century. The probabilities of bond beating stocks is extremely low. If I am a 55-year-old man, or have some form of liabilities to pay for after 5 years, the bonds are a good idea.

I think if I work sufficiently hard for my ideas, 2.7% shouldn't be a tough target to overcome. Hence I am sticking with stocks.

Portfolio Commentary: October

SPDR STI Index Fund
Start of Year: 3.48
Today: 3.08 (excluding dividend of  0.113)
Returns: -8.25%

Tracker Fund of HK
Start of Year: 30.05
Today:  26.3 (excluding dividend of 0.16)
Returns: -11.95%

My Little Portfolio: 12.76%

Returns drastically plunged from 21.07%  at the start of October, together with the market.
Additional purchase made for the slow-grower which I intend to accumulate.
No divestment was executed during this period of volatility.

Top 3 positions are 18.73%, 18.43% and 15.46% for the top 3 positions. There are currently 11 stocks in my little portfolio and I intend to keep it to 8 and below in the future.

There were a couple of good companies that I am keen, though superficially informed, which price did not drop too drastically during this period of correction. As such, I have no spend a single cent in them. There isn't much to tell as nothing much was done, and shamefully, there were nothing much learnt during the last month. We can't stop growing but we cannot stop learning.