As of 12-May-2022:
S&P 500 Index Fund: -4.32% -> -14.49%
Hong Kong Tracker Fund: -5.53% -> -14.91%
Straits Times Index Fund: 8.26% -> 3.02%
My portfolio: -4.22% -> -11.64%
Results would have been more respectable if OKP, TTJ and Alibaba have not fall 6% today... Nevertheless, I am glad my portfolio is still a little ahead of Hong Kong and America indices.
Transactions:
There were four transactions of special situation nature, they are:
a) Oversubscribed to the rights of Lendlease REIT and was allocated full.
The use of perpetual securities, which pays a pretty high interest rate, as a source of capital to purchase JEM is not the best of news to share holders. I have just finished a zoom presentation and a Q&A by the CEO. He does sound down-to-earth and genuinely have unit-holders' interest in mind. Despite the share price going back down to 72 cents a share (rights-offering price), it might be worthwhile to hold on.
b) Initial arbitrage investment in Activision Blizzard
There is a good 21% or so gap between today's price, and the going private price of 95$. This is a copy of Berkshire's trade, and the unlikelihood that anti-trust will bring the stock down.
c) Slight increase in Embecta
Since my last post, the stock has given up the 10% or so of capital gain. With a small discount of about 8.8% from my initial buy price, I choose to inject another round of modest capital. I have also wrote a put contract, strike price 25$.
d) Initial investment in Yangzijiang Financial Holdings (CPF)
There are three main reasons why I have inject a small sum of capital into this company.
i) This is a spin-off play. It does look like the market prefers the less uncertain (but cyclical) shipping arm and sold off YZJ Financial without much discourse. I do believe that investors, who have YZJ shiparm invested via CPF, was unable to unload their shares. They could only look on helplessly in recent days until 11-May, and are also contributing to the sell-off
ii) The investment portfolio, consisting of mostly corporate bonds is not the most savoury, but I believe about 70+% of it is secured by assets of some form (real estate, land use rights, etc).
Quote: As at 31 December 2019, 2020 and 2021,approximately 60.9%, 78.4% and 70.5% of our Debt Investments were secured by collaterals, respectively. We mainly accept land use rights, building ownership rights or other securities as collateral for our loans and Debt Investments granted.
Assuming that all unsecured debt goes bad, that would be a proper write off of maybe 25% of the book value. This company has lost more than 50% of its book value, which means that there is a small amount of margin of safety between price and risk. Hence, current capital injected is small, but rationally sized.
iii) There is no indication (at least to me) that this spin off is the trash. The moratorium of 6 months will be revealing, but still feels like a distant future away. Any uptick in sentiments of the Chinese market would bring relief to this stock. The CEO seems abled and had sold his company, GEM Asset Management to YZJ (related transaction beware). Any insider purchase by the CEO would be taken seriously in the future.
The possibility of improved earnings, by the way of asset management contracts, is a hidden plus, but would take time.
Other transactions of this month involves:
d) Increase in purchase of Alibaba (9988.hk) at 88 HKD. As of writing, the market appraise Alibaba at 80 HKD per share. Losses are mounting in this stock but I am remaining patient. Return on capital has to be reassess there and then.
e) Increase in IGG due to falling prices
f) Increase in Centurion (in CPF), as fundamental data suggest that the business is improving, but the share prices seems to be beating a retreat.
g) Slight increase in Fu Shou Yuan due to falling prices. FSY remains a moderate growth company and falling prices means lower risk. Currently, the FCF yield is about 6%, so it does feel timely to make additional purchases.
***
In view of the amount of selldown experienced this week, I am re-posting my answer to a question posed by a fellow telegram group member. Basically, it is a standard list of "easy buys" during market selldowns.
When market crash, should add to current holdings or initiate new ones? I am already holding 7 business Liao.
Personally, I will run through my list of holdings to determine if I want to add on to those positions, since I have some basic understanding of it.
I do not subscribe to a belief that one must have a minimum amt of stocks to be diversified, and neither is the market that kind to provide you so many bargains.
At times, I do not add to my existing positions because my stocks are very iliquid, or the selldown in the stock is nowhere as bad as the market drop (as in, my stock drop 2% but market drop 5%).
If you have been diligent, you should have a list of stocks in a watchlist, but you have yet to acquire because the price is not attractive (or in my case, some stocks only have liquidity during market panics)
Obviously some stocks, during market corrections of 20% and beyond, are easy buys (in no order)
a) Singapore banks trading at way below book value; the CET scores of our banks are safe as it can be. Banks are easy business to grow at a slow/moderate pace.
b) Stocks that are undergoing privatisation— i.e. risk arbitrage stocks, e.g. Activision Blizzard
c) Blue chip stocks that were already reasonably priced (to cash flows or to books). Blue chip stocks are usually recover the soonest during recovery periods.
d) Stocks that are cheap to liquid assets (cash+investment, acct receivables net of payables). These stocks usually are pretty illiquid and market panics usually provide liquidity.
****
Looking Forward:
We are 5.5 months into this year and I have already way more capital than any single year in the last 5 years of investing. I have always inject capital pretty organically-- all my years, I am a net buyer except for 2017 (the Singapore market was pretty bullish then). I do not look at the market and decide that this is the amount of capital I am going to put in.... I merely look for opportunities.
Portfolio level, at cost, is at all time high.
The last two days saw crypto market in fearsome correction territory. Major coins lost 20% of the value intraday, after Terra USD, a coin allegedly used to support the price of BitCoin, collapsed after losing peg value to USDT. Understanding the whole ordeal is way beyond my intelligence and I am glad that I do not have a single cent.
The mood in the market has clearly soured. The darlings of yesteryears has been clearly forsaken. Sell down of 20% and more intra day is becoming commonplace. Perhaps the market is seeking repentance from all the freewheeling option traders, or casual growth stock buyers, I wouldn't know...Every single winner of 2020 is getting plummeted to the ground, but I would still put them on the "Too Difficult" tray.
But I know this is where the wheat gets separated by the chaff... either I relentlessly acquire stocks as the market goes on a freefall... or I pare down on my less convicted holdings to raise cash. This is suppose to be the time where I work under my desk lamp and look for ideas. Looking at the record amount of cash spent this year, I am worried that I could be deploying capital with too much pace.
-end
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