March 2020 Portfolio Review

Overview
S&P 500 Index Fund -22.65%

Straits Times Index Fund -25.21%

Tracker Fund of Hong Kong -18.39%

My Portfolio -16.37%

Transactions

With some luck, I managed to convince my mum to invest a modest sum of money with me, after the markets has plunged to probably 5 years low. As of March, I have purchase up to about 50% of the capital, namely on:

-Straits Times Index Fund

-Perfect Shape Medical. It was suppose to be for my portfolio, but as there is already a modest appreciation in capital, I decided to gift it to my mum instead.

-Genting Singapore

-Southwest Airlines 

For my own portfolio, there were a lot of buying and very little selling. Let's start with the sells.

-Sold down a huge chunk of LHT, with the intention to raise cash for Perfect Shape Medical.

-While I have mentioned it earlier, I have redeem all my Singapore Saving Bonds. This raise a small amount of capital for purchase in equities. I do not believe in buying bonds if you have a realistic chance of living another 20 years.

-bought a significant amount of TTJ Holdings.

The year to date fall of TTJ is a staggering 38.3%. Note the increase volume in the last three days of trading. This suggest to me that someone is dumping a huge amount of shares.

TTJ is starting to look very cheap, although it is not a dream business of any sort. It has about 0.099 cash per share deducting non-interest bearing liabilities. The boss owns a huge amount of shares... and we are now at its all time lows.

-bought a small amount of ChangShouHua

It is just another net-nets stock. Unfortunately, the latest result announcement indicate that in view of the virus and business expansion, there will be no dividend paid. A real bummer.

ChangShouHua, dropped 9% today but iliquidity brought it to a 1% decline.

-bought a respectable amount of Xinghua Port Holdings

Results are actually better compared to last year-- the port business should be pretty resilient to the disease. Pulp and paper cargo handling did increase a little. Debt is pared down slightly and management is still shareholder friendly...

Dividend yield is now a decent 6+%. I think I can trust the folks running the show. Unfortunately, I am still holding on to a significant paper loss to this stock.

It couldn't be helped since the stock has fallen 29% YTD. It is not the most comfortable stock to hold but I am pretty sure my money is in the right hands.

Overall, I am currently holding 14 stocks. 4 of them are down more than 30% even after taking into account of dividends-- that is how bad this year is for me... and we are only 3 months into this year.

The 4 -30s club are:

• SUTL (-39.22%)
• TTJ (-35.06%
• Mapletree NAC (-30)
• Colex (-32)

I am not too concern with Mapletree NAC and Colex as they are relatively small holdings, but SUTL & TTJ is about 25% of my total portfolio... not a nice feeling.

Enduring is part of value investing. Michael Burry used to say that he will always cut at 15% loss. Looking at it now, good move Dr Burry.

There are stocks that did okay in my portfolio, and they are all stocks that have relatively high dividends and respectable valuation to their earning power. Some out there might call them "good companies." Cheap-by-assets stocks get no mercy from the market these days, and I agree.

The Tide Wash Over

At the end of what is likely the most horrible week in recent history, most portfolios, especially those who have no exposure to US equities, had bled. Mine was no exception.

A list of index returns, as retrieved from https://countryeconomy.com/stock-exchange,
reveals that:
1)
S&P lost a mere 8.7% this week.
Dax lost 20%,
CAC (Paris) 19.86%,
ASE 19.39%,
FTSE 16.97
Nikkei, 16%

2) STI lost "only" 11.04% this week, culminating to a YTD loss of 18.27%

3) Year to Date, ASE lost an astonishing 39%.
------------

My little portfolio has a YTD loss of -11.84%.

Stocks in the portfolio with >20% losses, inclusive of dividends:
1) TTJ (-32.3%)
2) Colex (-25.57%)
3) Xinghua Port Holdings (-25.51%)
4) OKP (-23.68%)
5) SUTL (-19.99%)

Included in the list should be LHT, which the owner decided to purchase some stock, lifting the price by an insane 24.73% intraday. Without it, LHT should stand at close to -20% as well.

So I have only 10 stocks, and 6 of them are down 20%. I don't think nothing can test one's behavior better than the current climate.

There are no more bonds to buffer the decline as they are fully redeemed. I am pretty sure there are some deals to be had.

Feb 2020 Portfolio Review

I think it is much easier to start this blog off differently...

If you were to have a screener that will email you the list of 52 weeks low stocks, and this list appears:

And if 2 out of the 16 stocks are in your portfolio, you can't be doing so well against the broad market.

So I am a little surprised that I have done one percent better than STI Index. Of course, when compared to the Hong Kong and American indices, I am trash.

Year To Date, for major indices:
STI: -9.34%
HSI: -7.18%
S&P: -7.58%

My portfolio: -6.8%.

It is not a good year and many of my stocks are standing at double digit unrealised losses. Everyone is probably suffering now. The temptation for many is to cut loss, "sell and buy back cheaper later," etc. Some around me are even buying inverse ETF (which doesn't really correlate accurately with the market movement, i.e. goes up or barely moves when the markets is also going up sometimes).

Market Transaction during Feb and part of March:
-Redemption of all Singapore Saving Bonds, which is approximately 20% of the entire portfolio.
-Added OKP Holdings as prices fall.
-TTJ, and SUTL, twice in a month.
-Complete divestment in small holdings Stamford Land and Qingling Motors.

There was a joke made by the author call "Concentrated Investing, ..." (https://www.amazon.com/Concentrated-Investing-Strategies-Greatest-Investors/dp/1119012023) and within it, there was a insurance manager who was asked why his returns were much better than the norm... and the reply was:

"Tennis Shoes!"

The author finally figured that he meant "10 issues" instead. Coincidentally, that is the same number of holdings in my portfolio.

***
Incidentally, writing this post makes me feel a little better, although it felt like my portfolio was actually underperforming daily. I felt this way because I have lost track of the number of times I see a 6-9% plunge day on a least a stock every other day. With the port barely threading above water for the time being, my expectations for this year would be that I would underperform the market.

This is largely because none of the earnings reports in the companies I hold have anything optimistic to report about.

When I started getting serious into value investing, my primary motivation is that I would remain unshaken in market movements as bad as 2008. Value investing seems to suggest that value portfolio does OK during bear markets (now), poorly during bulls (last year), and remarkably well during recoveries (when will this come? I know not...). Interesting times.

Wuhan Virus and Stock Picking

Let's get the usual portfolio returns report out of the way, particularly because it wasn't the best start I hoped for.

Year to Date for the major indices:
STI, 0.3%
HSI, -1%
S&P, +2.1%

I am currently at 0.17%.

My first and only purchase of Jan 2020 is Xinghua Port Holdings, which dropped as much as 8.7% at one point in a single day this week. It didn't hit me so hard then because I have already sold bulk of my holdings last year. Between today and then, the chair and CEO had been buying shares relentlessly, so I think it makes sense to bet along.

===
I suspect the Wuhan virus case would be discussed at most CNY eve dinner today.

I am partly pique by the issue myself and draw parallels between stock picking and the statistics that is derived from news reports.

It is human behavior to extrapolate recent events, numbers, and used it to predict future numbers. Charting is the oldest, and most common attempt by the human species to prediction the direction of a stock.

Right up till a few hours ago, all but 1 of the 17 victims are male, and all of them are pretty well-aged citizens. It lead me to think that this virus is fatal, probabilistic-ally, to males that are old. I am afraid that I am wrong, because a 36 year old man has just passed on. There were no pre-existing medical conditions reported with this victim.

I would not be surprised that this would become an epidemic, after all, medical professionals who would take utmost precautions in dealing with dangers, are still getting the virus. It either means that this virus is extremely infectious, or that it is infecting us in a manner that is beyond the usual ways of what we know.

My dad, who is a pro-China guy, said that there is a possibility that it is transmitted to victim via their eyes.

So let's go back to how this relates to stock picking. Obviously some medical stocks are receiving a lot of favorable price movements. Healthway Medical, which isn't anything impressive in both earnings and assets, had a huge surge of over 40% in a single day, followed by a high, single-digit rise the next. It corrected slightly on the last two days of this week.

Too much good things have to happen for Healthway in order to justify this kind of valuation.

Riverstone, another popular medical glove manufacturer, enjoyed a 10% revaluation in a matter of a week.

The stock market is largely about guessing. So it is anyone's guess on how things will work out. But who wins? I don't think any amateurs like myself could outgun a professional at this kind of game, so it is foolhardy imo. The only guys that won are the lucky and the brokerages.

Certain retail stocks suffered. Xiabuxiabu, a hot-pot restaurant chain in China, was particularly volatile. It started the year at 8.92, and was bought up two weeks later to 11.50 (28.9%, mind you). I have no explanation for this movement. The same store sales weren't impressive.

And the Wuhan issue brought everything down in a hurry.  Today, 24-Jan, the value of this stock... is 8.90... The price-earnings ratio of this stock is now 20... still optimistic I feel.

If John Burr Williams' idea that a company's value is the sum of its current and future cashflows, how can a event which is (hopefully) short term, bring about such valuation revisions? If one has done enough Discounted Cash Flows, one would understand that bulk of a company's valuation comes from its future cashflows (5th-20 years).

So realistically, I am not a fan of DCF, or earnings valuation. But I believe in buying companies with short term problems, particularly those who had some form of positive track record. After buying, it is a matter of patience, and some times, we have to stomach a lot of worries. This is why I think value investing is not for everyone.

2019 Year End Review

 Portfolio returns vs Hong Kong Tracker Fund (HKEX: 2800). Yes, that spike was due to Xinghua Port Holdings, which saved my ass this  year.

Since my last post in https://laymaninvesting.blogspot.com/2019/10/rough-week-colex-lost-jurong-bid.html about Colex losing its bid for Jurong, the stock recover briefly but slumber back to pre-rally prices.

As the stock market rises as a whole, my value-oriented portfolio did not receive any mercy; it lost another good 4 percent since 3 months ago. It was depressing.

3 major stocks are responsible for the loss.
TTJ- down 26%
Colex- down 17%
SUTL- down 10.5%

OKP, LHT, Cosco Shipping International, Qingling, and Mapletree NAC Trust lost 5 percent or less. Some of these were very long term holdings, and dividends were paid. That was how bad a year it was.

As I wrote,

STI ES3 funds returned 8.48%.
Hong Kong Tracker Fund (2800), returned 11.35%.
SPDR SPY delivered a crushing 29.63%

My little portfolio, as a whole, garnered a measly 13.21% (Update: 16.23% as of 31-Dec, Thanks to a surge in a single stock due to a generous dividend policy. This stock, is itself, a dividend play)

While I do not own any stocks listed in America, it is still a humbling result as I think I have failed very badly this year. Who would have thought that REITS, who are priced at book value at the start of this year, will deliver 20-30% capital gains by the end of the year? Tech stocks also rallied in the latter half.

(As usual, I am not part of this blissful ride. I have initiated only 2.42% in Mapletree NAC Trust recently)

Which is shocking since most people invest in REITs for income and not for capital gains. A suitable cycling analogy would be for a road cyclist to be overtaken by a medium-aged man riding a single-speed bike. It doesn't matter if the road cyclist has been pedaling for 8 hours, and the latter, minutes. It is still a sad sight.

Portfolio Composition
23.47% is in Singapore Saving Bonds (here by referred to as bonds)
47.68% is in Singapore-listed equities, and
28.86% is in Hong Kong-listed equities.

There were no brilliant ideas this year, and worse, no profits that were rightly gained from value-investing ideas.
Stock.cafe summary reveals that I have made 26 buys, 12 sells. This is the lowest amount of transactions I ever made since 2016.

What is Next?
The American market is at an all time high. If market movement were to trend higher, I will be looking towards purchasing more bonds and going-private deals. I will not deviate from my investing principles, even though it was lackluster this year. I will not invest in things I cannot understand, or simply popular issues. I certainly ain't a fan of fleecing other people ideas and presenting them like my own.

Rough week + Colex lost Jurong bid

It has been quite a rough week, as my portfolio lost about 4.5% in a matter of 7 trading days.

Colex lost 13% or so yesterday. As I am writing, Colex fell another 9%. TTJ fell another 8% yesterday too. It feels like shit when the index goes up 1+% and my portfolio suffers.

I won't say this is the worst day of my life but every time shit happens, I wonder why I didn't restrain myself and only buy when there is a significant problem. Peace time is the worst time to buy. Saved for the spike from Xinghua Port holdings earlier this year, the portfolio has been underperforming badly, especially against portfolio concentrated on REITs.

If this makes no sense, then it must be horrible to be a value guy during the 2000-3 boom years.

----

Let me dig out my purchase reasons for Colex.

In July, I wrote:
6) Initial position in Colex
Colex has a contract that might end next year, but the value in it is obvious.

Another 2% dividend-er like Stamford Land, it has a very strong free cash flow history-- no red ink for the last 10 years. Market cap is now 33.1m, cash is 19.4m, and it is debtless for a decade.

Free cash flow for the first half of this year is 10% lesser but no cause for alarm. If they were to win the Jurong tender this coming quarter, prices should adjust upwards. Capex requirements aren't too alarming, and there is a sizable amount of book value to protect the downside.

Looks like majority of the investors out there do not believe that there is any form of downside protection from its book value. After re-doing my sums, the conservative side of me will say there is still a bit of downside in the stock.

TR is 11m
Cash is about 19m
Total current assets is about 30m

All liabilities is 12m. So the net current assets is about 18m.


With another half a year of cash flow to come, perhaps 1-2m can be squeezed from the company.
That means the value of company is about 19-20m by the end of this contract.

The market is selling now at 27m.

That means about 7-8m of "shortfall" in value has to come the non-current assets, which is valued at 18.5m thereabouts.

Composition of the non-current assets as follows:
Leasehold buildings: 4.9m
Equipment: 5.6m
Motor Vehicles: 8.6m

Most of these can be sold off at discounted prices, especially equipment and motor vehicle. I suspect there is a 2-3m shortfall in my valuation. Clearly, my purchase was too dependent on Colex winning the Jurong bid. So the market is not selling Colex at a depressed price, unless it is below 17 cents a share.

I am quite disappointed at myself. Perhaps I was in a rush to deploy capital during peace time.... I need to work on the discipline to hold cash during peace...

Sep 2019 Portfolio Review

STI (ES3) returns: 3.087-> 3.126 + 0.12 (dividends) =5.15%
HSI (2800) returns: 25.25->  26.7 + 0.15 (dividends) = 6.34%
S&P (SPY) returns: 254.38 ->  291.12 + 1.43164 (dividends) = 15%
Current Portfolio return: 17.35% (bond, stock and funds invested for mum), 24.12% (my stocks only)

Transactions (September)
Purchase of LHT as prices fell as much as 10% intra-day.
Purchase of TTJ as prices fell to 0.21 a share
Purchase of Cosco Shipping Int, twice (2.25, 2.00), due to it being cheaper
Sale of Chuan Hup, due to LHT and Cosco being cheaper by book value.
Sale of Hotel Grand, due to cheaper stocks

The purchase of LHT took place just hours ago, as the price without news.
This is the problem with obscure little stocks that trade thinly. There could be no news, no earnings report, no hints, and stocks that trade thinly like this will have dramatic price movements. Hanwell moved tremendously since Monday. PC Partners, moved from 1.6x to 2 as I write. Hop Fung, which saw strong insider buying since 0.36, corrected from 0.4 to 0.36 in a single day.

This is what I mean when a certain style of investing becomes a kind of religion, a mental pillar or support which protect you from getting influenced too much by the market.

Aug 2019 Portfolio Review

STI (ES3) returns: 3.087-> 3.126 + 0.12 (dividends) =5.15%
HSI (2800) returns: 25.25->  27.45 + 0.15 (dividends) = 9.3%
S&P (SPY) returns: 254.38 ->  291.12 + 1.43164 (dividends) = 15%
Current Portfolio return: 1% (bond, stock and funds invested for mum), 23.14% (my stocks only)

****

Transactions (August)

1) Increase of LHT due to lowered prices.

2) Increase of TTJ due to lowered prices.

Both companies, being cyclical, did not fare well on the earnings front.

Price movement in the stock market is highly correlated to earnings, and as such, it might be foolhardy on my part to insist on buying based on book value. Yet, balance sheet investing is the easiest, and most reassuring way of all.

LHT

Current Market Cap of LHT (Price: $0.50 a share), 26.62m

Half Yearly results on 8-August-2019 (https://links.sgx.com/1.0.0/corporate-announcements/5S6NEQ21JX7VTPIQ/LHT-Holdings-Ltd-Half-Year-30-June-2019-Results-Announcement.pdf)

Cash: 16.596

Fixed Deposit: 11.21

Total Cash: 27.806

Total Liabilities: 8.792

Net Cash: 19.0m

Supposed I am the majority shareholder of LHT, and given that interest rate is going down, liquidity is bothersome, and I am virtually paying 7.62m (26.62m market cap - 19.0m cash) for the entire company, and the fact that dividends has been on the high side... would listing on the market makes sense? I have no need for easy access to capital...

Hong Kong markets has seen some recovery but my stocks did not rise in sympathy. As such, the portfolio as a whole has underperformed against the HSI recently. I am not expecting to beat the US market, which is a disappointment but largely deserving result.

 

A layman's approach to Yangzijiang (YZJ)

Some weeks ago, after YZJ lost 30% in market capitalization in a single day, more than a few courageous investors figure that it could be an opportunity.

As you can see, it is also the lowest it has been for almost its entire life listed in SGX, saved for the Great Financial Crisis.

Personally, I am not a sophisticated investor, and uses simpler means to determine value.

Market Capitalization of Yangzijiang (as of now, based on 0.915 a share): 3.63B
Share price of YZJ at its lowest during the debacle: 0.755 a share: 2.98B

The easiest way to determine value is to look at its balance sheet. Safe to say, YZJ is a shipbuilding company, so it is not too wrong to use simple balance sheet investing, as opposed to services or software companies.

All figures above in RMB.

The following "discounted" values are used:
Cash: 4108.414
Restricted cash: 17.815
derivative fin. instruments: 2
Fin asset at fair value: 500

Receivables: 2000
Inventories: 1000
Contract Assets: 3000

Total: 10628M RMB

The biggest asset of all, "Debt investment at amortised cost," is 14520.602M. I have no idea how reliable this asset is... only the management will know. I note that there is a similar entry in the non-current assets section that is worth some 4266.881M RMB, but I shall leave it as it is now.

This approach is too conservative but I have always lean towards the cautious side.

All liabilities will not be discounted. As such, the value of 14570M is dervived.

Remember we left this debt instrument asset in the current asset alone. This is where we try to fit assumptions to value:

If Debt Asset is worth…	100%	75%	50%	25%
Debt Asset Value is…	14520.602	10890.4515	7260.301	3630.1505
Adding to adjusted, discounted, current assets of 10628M:	25148.602	21518.4515	17888.301	14258.1505
Liabilities	14570	14570	14570	14570
Net Adjusted Current Asset Value:	10578.602	6948.4515	3138.301	-311.8495
Adjust from RMB to SGD	2071.08	1360.37	614.42	-61.05
If Non-current asset is worth 14.7B RMB (approx. 2B SGD)*	4071.08	3360.37	2614.42	1938.95
…if YZJ is selling at 0.915, market cap is 3.63B	11% discount	7.5% premium#	28% premium	47% premium
…if YZJ is selling at 0.755, market cap is 2.98B	36% discount	12.7% discount	12.3% premium	35% premium

*We are making a huge, huge assumption here. We ascribing a value of 1 dollar for every 1 dollar of non-current asset, which is very generous. Let's not forget that there is about 4B of debt instrument valued in the books, which is about 820M SGD. How reliable is the assets?!

#premium means that we are overpaying, i.e. the value of the company is estimated to be 7.5% lower than the market price.

If YZJ were to be selling at 0.915 a share, and we feel that the debt asset is worth 1-for-1 dollar, then we are ONLY getting a 11% discount from the assumed value of YZJ.

Realistically, it the debt assets is only worth 75% of its stated value, and we were lucky enough to bottom pick at 0.755 a share, we are only getting a 12.7% discount of price to value.

I doubt that is enough margin of safety for the prudent investor. Some of these "investors" were already claiming to be geniuses, and others are fools!

***

Another observation should be noted: Within a space of six months, the debt instruments in the book increased by 29.4% in the current asset section, and 18.7% in the non-current. Should one be concern, given that the management has been less than forth-coming in disclosure (that its founder-director is under investigation), and that the company's main business is after all, shipbuilding?

Or should we all nod our heads in unison, and agree with the market, as it recovered from 0.755$ a share to 0.915$ a share?

The simpler the approach, the better.