Friday, March 24, 2017

Market Musings: One Chart for Evaluating the High Yield Bond Market in Singapore


One area of controversy in the market is high yield bonds. 

A few investors I speak with are running for the exits, a lot of people waste no time in telling you that you are downright stupid for buying high yield bonds. Very few (around 2 or 3 people) are saying that while it is not the best buying opportunity (and cite July 2015 as the best) for high yield, high yield bond funds are worth a place in your portfolio.

I had written about high yield bond etfs before and here is a link to that post.

https://sgx-stocks-sti.blogspot.sg/2016/04/opportunity-or-value-trap-evaluation-of.html

What is the outlook for high yield and how should investors position portfolios amid such mixed sentiment? 

Every picture tells a story, so I am sharing a chart that may help investors evaluate the current high yield opportunity.

Full disclosure, this post was inspired by a blog post on State Street Global Advisors who had done something similar for the US market.





Stocks and High Yield Bond ETFs diverge, but actually delivered the same returns in the last five years. In summary, while stock ETF (ES3), the Straits Times Index ETF had higher highs and lower lows, over the last five years, both have delivered virtually the same returns.

If you factor in that the yield on the high yield bond etf (O9P) is actually 7.43%, while that for the STI ETF is actually 2.97%, you would probably have benefited from holding the high yield bond ETF.

To repeat what I had said almost a year back, 

From Morningstar report

Volatility Measurements

Volatility 5.11 %
3-Yr Mean Return 7.91 %

Sharpe Ratio 1.39

The Sharpe ratio in the past three years means one has obtained 1.39 return for every dollar risked.

I do understand that Sharpe ratio is ex post and cannot be used for ex ante calculations and there is no reason to expect similar behavior in the future.

Risk Measurement 1 Year 3 Years    5 years
Standard Deviation 6.17        5.11
Positive Months        6          24       35
Negative Months        6          12       15
Worst Month       -2.44        -3.11      -20.46


I will gladly accept a worst month of 2 to 3% down for a upward slope of positive risk adjusted returns.

I am not trying to "sell" the idea of buying this ETF, all I am saying is that it seems like a reasonable risk reward scenario,

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

Monday, January 23, 2017

Financials Favoured over REITS



I am sure, some of you may have seen this article in Straits Times last week.

http://www.straitstimes.com/business/invest/financials-favoured-over-reits

The accompanying graphic shows clearly that financials outperformed reits in the trailing two months.

Experts opined that in future, financials will out-perform REITS.

A classic case of performance-chasing!?

However, I thought, let us evaluate this call over a couple of years.

So, without further ado, i created a mock SPH REIT Index portfolio for 100K SGD.

Here is a link to that portfolio.
https://www.google.com/finance/portfolio?action=view&pid=12&ei=jrmFWLHsKo66ugS6k6PADg

My take is that chances are that this call will prove to be a case of performance chasing by "Experts".

The investment hypothesis is that financials will not outperform REITS.

The way I will evaluate is to examine the performance of this portfolio against the three banks at periodic intervals to evaluate whether this call was correct.

Full Disclosure : I have a small position in Keppel REIT and Cache Logistics Trust.

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.


I am not immune to that, so please understand that any past success of mine will probably be followed by failures 

Tuesday, January 10, 2017

The Long Wait continues (For Sing Holdings shareholders)

I had written about Sing Holdings back in 2014. 

The old post is here below.


I had done an update on this in 2016.


Now, we are here in 2017 January.

My assessment in 2014 was

"However, chances are Sing Holdings will stay at this level for a year till the mood for property stocks improves, it will improve over a long enough time, but that wait is likely to be quite long"

 After the 2016 post, if you ask me, what has changed in the last one year, 

The closing price as of Jan 9, 2017 was 0.32.

The closing price as of Jan 12, 2016 was 0.32.

In short, there has been no change in the prices.

Shareholders of comparable firms like Sim Lian, Chip Eng Seng and Oxley have gained anywhere between 6-40%.

Would anything change? And is this a good time to buy in to the share?


Short answer is it seems unlikely.


The past year saw bumper results with very high increases in terms of sales as well as earnings per share.


However, the reward in the form of dividends to share holders was low , i.e. the dividend has increased from 1 to 1.25 cents.


So, your only hope is that the market discounting goes from the current price to book of 0.5-0.6 to around 1.


Yes, this has happened in the past, but, chances are it seems less likely to happen in future.

Chances are that Sing Holdings will stay at a depressed level for a few years till the mood for property stocks improves, it will improve over a long enough time, but that wait is likely to be quite long, and we are talking in terms of probably a decade of holding it and probably in that decade there will be two windows in which it will appreciate to around book value.

From an opportunity cost point of view, it would be a waste to sink budgets in to this counter when there are better horses for one to ride.

Full Disclosure : I have no position in Sing Holdings and no plans to establish one.


Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.


I am not immune to that, so please understand that any past success of mine will probably be followed by failures




Thursday, November 17, 2016

Investing is not a Stock Market Game

Investing is not a game

I was searching on google for some small cap stocks on SGX and came across this article.

http://www.straitstimes.com/business/invest/invest-idols-picks-two-small-caps-with-big-potential

This article is a good illustration of the problem in investing.

The winner won Invest Idol on the basis of

a) A concentrated pick (2 stocks)
b) Focus on growth stocks
c) Margin of Safety approach
d) Great presentation
e) Discipline.

The two picks were Lum Chang and Falcon Energy.

Below is the performance till date



A 15% decline in portfolio value.

In short, it just proves that investing is not a game.

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

Wednesday, November 16, 2016

Nothing or Nobody to Piggyback On

Piggyback on Insiders

I had posted about CWT Limited a year back.

https://sgx-stocks-sti.blogspot.sg/2015/11/cwt-limited.html

The gist of the idea was that if CWT Limited dips to around 1.5-1.6, the chairman / insiders in the company will be buying into its shares and if one follows them, one can reap a 20% return.

http://www.valuebuddies.com/thread-1003-page-10.html


Here is a look at the performance of the shares in the last twelve months.


The share price never dipped below 1.8 in the last twelve months.

Unsurprisingly, there has been no insider transaction either.



One might think this is no use, but it is.

It just seems to validate the original hypothesis that CWT gets undervalued at around 1.5-1.6 and 1.9-2 is fair value for the company.

Full Disclosure : I will be keeping an eye out for any insider transaction in CWT Ltd and deploying some cash to piggy-back


Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures

Monday, November 14, 2016

Did you buy a Stinker? - A look at Yanlord Land Group

Image result for did you buy a stinker of a stock

Many investors cite Warren Buffet's saying of Be fearful when others are greedy and Be greedy when others are fearful.

I had posted about Yanlord last year.

https://sgx-stocks-sti.blogspot.sg/2015/09/yanlord-land-evaluation-after-year.html

The summary of the thesis was

"Chances are this will serve a position in the portfolio where are investing in a hated sector i.e. Property in China is being cooled, no point investing, so, you are taking a contrarian approach.

The bull thesis is that, all you need is for majority share shareholders to privatize this and pay out a small premium to traded price of say 20% and you have made your 20%.

One can take a patient approach and wait for the counter to hit 90 cents anytime from now till March 2016.

There is likely to be a run up in April or May 2016 at which time one has an exit price of say $1.2."

This was posted when Yanlord was at $1.



It dipped below $1 to the 0.98 level by January 2016.

I have highlighted the selling point above, anytime in April or May where one could have exited at 1.2.

All said, one would have reaped a cool 20% for a three - four month holding period.

Disclaimer :- 

I am not an investment professional.

I encourage you to do your own independent "due diligence" on any idea that I write about, because I could be and probably am wrong.

Nothing written here is an invitation to buy or sell any particular stock.

At most, I am handing out an educated guess as to what the markets may do.

The market will always find a new way to make a fool out of me (and maybe, even you!).

Even the best strategies of the past fail, sometimes spectacularly, when you least expect it.

I am not immune to that, so please understand that any past success of mine will probably be followed by failures