From My previous Blog

This is extracted from my previous blog. I forgot the password.hahah. Posted on 22 January 2008.

Hello to myself and maybe meiyin - the only loyal readers of my blog! Anyway i reckon it is good to publish something here on a more regular basis for these few months for a simple reason - chaos.

Now, the above chart looks at how the STI behaves for the past 6 months. Definitely not a very happy sight for most investors. Yeah, i am in the red now, but not really enough to make me have sleepless nights. At the first dip, I knew it was all a correction and thus did not take much action, the only thing i did was to assess more options to purchase. Knowing that the rallies probably will not last, I decide to go for dividend stocks and i chose Macquarie International Infrastructure Fund. Potential dividend yields of 8%, interesting infrastructure play, relatively cheap at that point of time. So I bought it at 1.15.

Market fell slightly further and I actually bought at 1.08 with the intention to buy it cheap. We were in the middle of the credit crisis, with little idea when all the mess gonna end up at. On hindsight, it was really a brave but uneducated move to enter the market at that point of time. MIIF never really receovered and I sold it on 15 Jan 2008.

All my stocks were doing fine at that point of time, BestWorld had a bonus issue, Singpost was holding well with a dividend of 0.125 cents per share. Then the whole downturn began. That was the time I got to know about courage marine, the marine sector that i am so attracted to due to it being backed by assets, strong cashflows and a strong O&M sector in the region due to high oil prices. I found CMG to be highly correlated to the Baltic Dry Index and BDI had been on record highs for half a year implying that record revenues were earned by CMG without it being recognised yet. PE was already cheap at 0.46 so I bought 4 lots. Prices crashed to 0.395 and I bought 4 lots again. Prices had a minor rebound till 0.435 and I was breaking even on the weighted average cost of 8 lots but I held on... as my fair value of the company is at least 0.60 implying a potential 33% gain.

Well the rest of the story is very much plain and obvious, the market never really recovered and I just experienced the biggest slides i ever can remember since i started looking at markets. STI slided at least 15% in the short course of 5 days and here am I, in a bit of a loss with Singpost at $1.03, Bestworld at $0.845, Courage at $0.3 , ASL at $1.16. Anyway, I traded MIIF for ASL as my favourite well diversified shipping company just got damn cheap and PE is below 10.
Lessons learn? Well, it remains to be seen whether the story that most speedy bear markets have a speedy recovery will unfold over the next few weeks. My bet is that with the various measures by the US and the strong economic fundamentals in east asia, the story remains beautiful. However, I remembered the various times in which i saw the value of my portfolio and I was just so tempted to cash out. I didnt and in fact did a bit of switching. MIIF reached the limit of my patience and I sold it for ASL. I realise that such trusts are really too boring for me.

As for other stocks, i learnt that it is important to always go back to the company and see how it is doing. Is it still the same story as the one that persuaded you to buy into them. Are they doing well? Are they giving out dividends? I think if the answers are all Yes, stay in. My only worry is Courage Marine. I am confident of my valuation method, only to be proven wrong by the market as of now but the current market is sentiment driven to a large extent. So the next 6 months will tell me some story about fundamental analysis and whether it is really relevant to stock picking.

The biggest lesson is, in times of crisis and bulls, nothing beats holding stable dividend plays like SMRT, Singpost. I think Ben Graham's lessons are well told again. In times like these, strong dividend yields will be the only consolation. In good times, strong dividend yields plus relatively attractive capital gains will give you double bonus. So isnt it obvious that high dividend stocks are the perfect choice for retail investors like me?

Yes and no. I think the biggest lesson is that always allocate a comfortable amount to play and to invest. We are back to asset allocation again. I am confident about my bets in more speculative plays like ASL, Courage and Bestworld. However, after these turbulent months, I am sure that once I reach the PE limits of these stocks, I will cash out and await to buy into dividend yields. My heart truly got weaker after these 6 months.

One more thing about PE before I end my long post. Anything below PE 15 is attractive, one mistake is I bought Singpost at PE 18 thinking that it is worth it since they are practically a monopoly. Well, its still worth it but not as worth it if i bought it below PE 15. For Singapore stocks, anything 18 can be considered for cashing out and anything below PE 12 should be considered for buying. If PE 12 is not reached, just wait, the right time will come. See.