This month has been the most depressing month since May 2010. Shocks from all over the globe send stock markets tumbling down non-stop. First was the higher than expected inflation numbers from emerging markets, especially from China, which made investors worry about the effects of the series of tightening measures by the Chinese goverment. This caused many investors to doubt the possibility of a successful soft landing. In addition, the unrest in the Middle East spread from Egypt to other countries like Libya. Unrest and protests turned violent and this has a huge impact on the export of crude oil. As Middle East is the largest exporter of crude oil, this hinderance caused the oil prices to soar to USD 100 per barrel. This has a huge impact on the economy as many business will be affected and worried investors flee the market.
All these events caused my portfolio to plunged southwards, almost erasing all the unrealized profits for the year of 2010 as my unrealised profits dropped a massive 28%. However, as I believe that all these events are just short term selling pressures, in the long run, the fundamentals still hold. Hence I decided to hold on to my counters and ride out this period of volatility, and when opportunities present themselves, I will try to grab the opportunity to average down the buy price of some of my counters.
Early this month, I added Wingtai into my portfolio. Wingtai is property developer of the mid and high-end properties. It's retail business also includes popular brands like Topshop, Fox, Uniqlo, Warehouse and G2000. Property and retail businesses are the 2 booming sectors in Singapore. Although the property sector is currently under pressure due to the various cooling measures implemented by the Singapore government, I believe that in the long run, property will still be a profitable business in Singapore due to the scarcity of land. Moreover, its retail brands are affordable and well-like by the general public, therefore Wingtai is a good company to invest in. However, with the selling pressure building up, its share price has plummeted to a new low at the end of the month. This caused me to suffer a rather substantial loss at this point of time. I hope with time it could recover as its fundamentals are still strong.
Amidst the depressing environment, there are still some good news to cheer about. Soup Restaurant has posted a great profit for the year and has announced a final dividend of $0.005 per share. This brings the full year dividend to $0.015 per share, which translates to 15% yield based on my purchase price. Soup Restaurant has been a great counter for the year, with its capital appreciation and dividend payout. However, the year ahead is a challenge for the management due to the introduction of the levy hike for employing foreigners. Most of the employees of Soup Restaurant are foreigners, and this hike will pose a pressure on its profits. However, I believe the management will be prudent with regards to this matter and minimise the policy's impact on the profits of the company.
Rotary has also reported a great year with a 900 million order book for 2011 and it is paying a final dividend of $0.038 per share. The full dividend for the year is $0.048 per share, which amounts to a 4.6% yield based on my purchase price. However, the year ahead is going to be difficult year for Rotary, as more than 80% of its business is concentrated in the Middle East, Saudi Arabia. Although Saudi Arabia is currently safe from the riots in Libya, however, the risk level still remains high as we are unsure how the situation in the Middle East will pan out. I can only hope for the best and wish that peace prevails soon.
Last but not least, UOB Kayhian has had a good year with decent increase in yearly profits. This year they are announcing a dividend payout of $0.09 per share, bringing the full year dividend payout to $0.095 per share. This equates to an approximate yield of 6.1% for the full year based on my average buying price. Last month, I had sold a portion of my holdings during the nice price surge. In the recent correction, I bought back more shares after its price dropped approximately 10% from the peak. I believe in the business of UOB Kayhian, especially after the takeover bid of Kim Eng by Maybank, UOB Kayhian becomes the sole listed brokerage on SGX. I believe it remains as the first choice for retail investors whom do not have large amount of cash but still hope to diversify into the financial sector.
The plunge this month has been very significant and I hope next month will be a better month and the situation in the Middle East will cease. As for now, I will continue to hold on to my investments and look out for opportunities to average down my cost. Consequently I will try to build up my cash reserves for the opportunities ahead.
My Current Portfolio:
Lessons learnt: Try to keep a portion of cash as opportunity fund as we can never time the market. Opportunity funds will prove to be very useful in the event of a correction period where share prices of fundamentally strong companies are pushed down temporarily due to the macroeconomic environment.
