Monthly Review- November 2012

This is a month filled with volatility and action for me.  As previously posted, I had sold all my holdings in Rotary with a huge realized loss.  Instead of being depressed, I actually felt more relieved, as it seems to me that Rotary, like First Ship Lease Trust, had been a long term burden in my portfolio, and finally I have plucked up the courage to bite the bullet and realize all losses to admit that I have made the wrong decisions.

With the freed up remaining capital from the sale of Rotary, I am ready to look for better opportunity out there.  At that time, my focus laid on Noble.  Noble has recovered from its loss a year ago to churn a profit for the third quarter.  However, as it was below analysts expectations, it led to a slide in share price.  In my opinion, I saw this as an opportunity as Noble was not making a loss this time, thus its fundamentals have already improved from he previous year.  It was just beaten down as it missed expectations.  Hence I bought into this strong commodity trader, awaiting for it to reverse its course.

Unfortunately, at this point of time, a substantial shareholder of Noble decided to sell a huge chuck of his shares at a discount.  This caused the share price to plunge the following day, and it weigh down my portfolio.  Just as a ray of hope shines through the gloomy skies as the Chairman of Noble stepped into the market soon after to purchase shares, all was in vain as the outbreak of the "war of words" between competitor Olam and Muddy Waters created more doubts in commodity firms, which translates to further selling pressure.  At this point of time I can only hold on to the shares to await the release of next quarter's results, which could boost the shares once again, provided if its fundamentals remain intact.

In addition, I added my holdings in Far East HTrust and FJ Benjamin, both with the intention of averaging down the buying price after the recent drop in share price.  The drop in share price for FJ Benjamin was rather significant, due to the counter going Ex-Dividend.  However, since fundamentals did not change, the drop will not deter me from adding on to my holdings.  Both counters are involved in the hospitality and retail sector, which is one of the stronghold of Singapore's economy.  Although downward pressures in profitability remains, especially due to rising labour costs and miscellaneous expenses, I believe they will still have the capability to outperform.

Next month is the last month of 2012.  I hope to see the window dressing and the exuberance in the stock market that may help to propel my portfolio to new highs. 

My Current Portfolio:

Lessons learnt: Do not look back on loss-making investments.  Once sold with realized losses as decisions has been made, you should move on.

Rotary (26th Jan 10 to 6th Nov 12)

Rotary was once a growing Engineering, Procurement and Construction company in the oil and gas sector.  As a leader among the contractors, Rotary had a good reputation in the industry.  This is reflected in its ability to clinch the massive USD 745 Million worth of contracts in the SATORP project in the Middle East for the construction of refinery tank farms.  It is because of all these reasons, that I decided to invest in this company, hoping to see the realization of its potential in time to come.  

All was well, and Rotary continue to announce more contracts clinched through the months and its share price remained relatively stable till 2011 when its CFO resigns and things start to take a turn.  Share price starts to dip and falls to a new 1 year low.  However, being naive and greedy, I held on to the counter, waiting for a rebound to happen.  

Indeed a rebound occurred in early 2012, pushing Rotary's share price to to the high $0.70 per share levels.  But greed continues to blind me, in hope that I may be able to break-even, I continue to hold on to it, but in my dismay, all that comes is just the continuous tumbling down of the share price, which never turnaround again.  

Things worsen in September when Rotary released its first profit warning in recent years, stating that cost overrun in the SATORP project due to design flaw and the unforeseen increased in man-hours caused Rotary to suffer a huge 3rd quarter loss, and a projected full year net loss as well.  This sparked the panic sale of its shares, and trying to be as calm as I could, I told myself not to panic sell at this time, as it will mean I am selling low.

After some thoughts, it seems that Rotary's share price is drifting lower and lower.  The alert button in me was activated when its share price drifted below $0.40 per share.  With this, I decided that it is time for me to cut loss to prevent further damage to my portfolio and hence I sold all my holdings at $0.395 per share, which was a massive 58% capital loss.  If there is indeed a rebound after the sale, I can only accept the losses, as fundamentals have changed.  The current Rotary, in my opinion, is not as strong and reputable as it was prior the SATORP incident, mainly because financially, it has took a big hit as we see its cash flow plunged in the released 3rd quarter results.  

My thoughts at that time: I am quite hesitant to sell my holdings in this counter as it would mean a realization of a huge loss, right after the massive loss I realized in January this year from First Ship Lease Trust.  However, it is also the lessons learnt in First Ship Lease Trust that I should follow, and understand that "hoping" for a rebound usually just make things much worse, as these hopes are not supported by any fundamentals.  In the final quarter of 2012, Rotary is going to announce a full year net loss.  In addition to that, if the 4th quarter results also suffered a net loss, I believe there will be more downward pressure, and that is too much risk involved.  Hence I decided to cut.

Lessons learnt: The moment a company stops giving dividend, it is a clear signal to sell the shares of the company, regardless of the loss, as this move by the company signals a lot of pessimism in the near term future of the business.  If I sold my holdings during the release of the 2nd quarter results, my capital loss will definitely be below 50%.