Monthly Review- January 2012

With the start of a new year, the outlook remains uncertain for the macroeconomy. However, for my portfolio, things seem to be in a better shape. This is not because the market has rallied to a large extend that all my losses turned into profits, but because I have wiped out the biggest toxic asset in my portfolio by selling it and realizing all my losses for it.
All along, due to my unwillingness to accept losses, I hold on to First Ship Lease Trust, hoping that one day the tide will turn, its share price will improve, and even if it didn't, the dividends collected from it will cover my losses. However, I have come to terms with myself that all along, I am just consoling myself that things will improve, while the fact remains that it was in a bad shape. All of these optimism ended when they declared a 90% decline in dividend payout, that made me realize it is time to let go and realize my losses. Hence, my portfolio took a big hit in terms of realized losses, and I started the year with a big dent in my portfolio.
However, not all was doom and gloom. Mapletree Logistic Trust has another great quarter, announcing a dividend of $0.01700 per share. In addition, Parkwaylife Reit, CapitaMall Trust and Singpost has also announced quarterly dividends of $0.02470 per share, $0.01280 per share and $0.01250 per share respectively. Furthermore, due to the good responses in a few property sales launched recently, property counters made a comeback, with Wingtai recovering almost 25% from the bottom. This gave a great boost to my portfolio.
It seems to me that only my dividend shares are doing well, churning in substantial dividends for me annually, while my growth stocks are mostly under water. I believe that with these, I need to reevaluate my investing methodologies, and be overweight in dividend counters and keep less of the growth counters.
With my decision to realize my losses for First Ship Lease Trust, my entire portfolio made a turnaround. For the new year, although my realized profits were totally wiped out and became a net realized loss, my total paper losses for my portfolio were greatly minimized. Including the total dividends collected, my portfolio has improved its total profits to date. I believe that in the near future, my losses will be recouped soon, provided that the market continue its drive forward. However, with the Eurozone crisis still a major concern at this point of time, I should continue to stay vigilant in my investments.

My Current Portfolio:

Lessons learnt: Do not be attracted and fall in love with stocks that gives high dividends (above 10% per annum), especially penny stocks. When they offer such high dividends, it is usually accompanied with high risks.

First Ship Lease Trust (30th Apr 10 to 20th Jan 12)

This counter has been plagued with bad news since the purchase of it in April 2010. Soon after the purchase, the share price plunged tremendously due to the default of two vessels. However, due to my unwillingness to stop loss and the thought that the high dividends will in time cover my losses, I decided to average down my buy price by buying more lots at the lower price.

Over time, I have seen major fluctuations in the share price of First Ship Lease Trust. Although I was presented with many opportunities to sell along the way during the temporary rebounds, I hesistated due to greed and keep on telling myself that it will rise back to my buy price, or even higher. Even if there are no rebounds on its share price, with its high dividend payout, with time, the losses can be broke even.
However, all these thoughts come to an end when First Ship Lease Trust announced that they will reduce their dividend payment by a hefty 90% from USD 0.0095 per share to USD 0.0010 per share! Although the management explained that they need to retain higher cash reserves to better position themselves in the uncertain economic conditions ahead, the drastic drop in dividend payment caused me to lose all faith in this counter. I believe now is the time to handle to massive losses and move on.
With the final average purchase price that I had, the sale of all my holdings translate to a loss of 60% of my capital invested in this counter. However, with the dividends collected so far, my losses on this counter is reduced to approximately 46%. Nonetheless, this is still a huge loss to my portfolio, and the losses in this single counter has erased all my previous realized gains from other holdings. No matter what, I can only blame myself for not cutting losses when prices were much higher.
My thoughts at that time: I was in a panicky mode when I see the drastic plunge in share price. I did hold back my decision to sell, but I too realized that for the past 1 year plus, I have been hoping for a rebound that never came. I believe its time to let it go and realize any losses, get back any capital that I could, and move on.
Lessons learnt: Being the first massive loss in the new year, it made me rethink my investing strategy. I suppose what I have been doing all these while does not serve me well, when I keep on trying to average down the losers instead of buying into the winners. It has been proven that if I keep on doing this, no matter how many winners I have, one loser is enough to wipe out my entire profits.