Monthly Review- December 2012

2012 ended the year on a high note for most investors, as the STI rose by 19% for the whole year at around 3,200 points.  This year has been a great run for my portfolio as well, though it's filled with ups and downs along the way. 

The first couple of months has been great for equities, as despite uncertainties, the breakthrough of 13,000 points of the Dow Jones Industrial Average gave investors in the Singapore market a boost of confidence to bring the STI back to the 3,000 levels as well.  However, when May approaches, the "sell in May and go away" syndrome seems to act on everyone again, as the index fell to its lowest for the year, bringing my portfolio down together with it. 

As we continue through the year, the gradual recovery of the US economy, the soft landing and the reversal back to growth by China, the diminishing problems in the Eurozone and all the quantitative easing and the lax monetary policies by Japan, US and Europe gave much reasons for investors to cheer.  This is very much reflected in the markets, even in STI where it gradually moves up since May to end at 3,200 levels in December.

Boosted by all these good news, my portfolio also grew in size.  On a total weighted average, my portfolio was up by a mere 4%.  The seemingly poor performance was due to the huge loss I made at the start of the year when I decided to sell off First Ship Lease Trust.  Ignoring this initial loss, my portfolio would have grew by a weighted average of 14%. 

This year, I got rid of the two biggest "toxic assets" in my portfolio, namely First Ship Lease Trust and Rotary.  Although it takes a lot of courage and the ability to endure the pain from realizing the huge losses, the decisions made are definitely a relief for me.  Finally I do not have to stare at my portfolio with the huge unrealized losses, and continue to pin hopes on them for a possible turnaround.

This month, I sold off Wingtai and ST Engineering, as at that point in time, they had reached their recent all time highs.  Hence I thought that it was the best time to realize my profits.  Nothing much else happened as by this time, I think it may be the time for me to trim my portfolio and to reduce my holdings, so that I have the "ammunitions" to buy quality stocks when any possible corrections come, especially when STI has reached the 3,200 levels.

For the whole year, the star performers are Mapletree Logistic Trust, Parkwaylife Reit, CapitaMall Trust, Wingtai (all of whom I have sold earlier in the year, and now they have reached new highs in their share prices), ST Engineering, and amongst those that I am still holding on, Singpost and UOB Kayhian.  Of course, needless to say, the main draggers are First Ship Lease Trust and Rotary. 

For the year 2012, my annual dividend returns is 2.4%.  This is because for the year, I have sold off too many dividend counters, which is the main reason for the decline in dividends collected for the year.  In 2013, I will continue to find good dividend counters to add on to my portfolio to increase my dividend income.  At the same time, I hope that I remember and relearn all my "lessons learnt" penned down this year, so that I can improve in my investing journey for the new year!

 

My Current Portfolio:

 

Performance for the Year 2012:

 

 

Lessons learnt:  It is important to adjust the portfolio every year, to weed out the losers and add on the gainers.  This will help to boost the portfolio, to prevent the losers from sinking the portfolio further.  Do not rely on "hope".  If the fundamentals have changed, get rid of the losers as soon as possible to minimize losses.  Averaging down can only be done for quality stocks with good fundamentals.

ST Engineering (23rd Mar 11 to 18th Dec 12)

ST Engineering is the first major blue chip stock that I managed to venture into after building up some capital.  After its share price slide down by approximately 10% or so, I decided to grab this opportunity to purchase 2 lots of this strong conglomerate for possible capital appreciation and strong dividend returns.

However, it seems like there were more sellers than buyers for this conglomerate during that time, as even when fundamentals of the company remained intact, and its operating cashflow remained healthy, its share price continued to decline under pressure.  The decline was gradual, but consistent, making the share price down by another 15% thereabouts over the next 8 months.  This made me very disturbed, as despite the intact fundamentals, this is not reflected in the movement of its share price. 

Noting this, I decided to put aside my fears of possible further decline in share price and increase my holdings in ST Engineering, which was a great opportunity for me to average down my average purchase price, as well as increase my exposure to this strong conglomerate at a discounted price to its actual value. 

Indeed my beliefs paid off as soon after, a price reversal set in, allowing me to sell of the extra lots that I have at hand to further lower my average price of the 2 lots at hand which I intend to hold for long term.
Consistent and continual contract wins by ST Engineering continued to boost its share price, which did not look back thereafter.  As the share price crossed $3.60 with a reasonably high volume in November 2012, which was a historical high, I decided to add on my positions again to tap in the possible new high.  It did not take long for the share price to move higher to $3.88.  Initially I hope that it could move beyond $3.90.  However after 2 failed attempts to close above $3.88, I decided to sell and realise my 17% profits the third time it reaches $3.88. 
My thoughts at that time: The share price of ST Engineering has tried to break through $3.88 twice previously, but failed.  When it tested the same level the third time, I decided to just lock in and realise my profits, since my initial target has long been reached and surpassed.
Lessons learnt: Dips in share price of strong conglomerates are great opportunities of invesments, as when fundamentals remain intact for such big companies, it is just a matter of time when price reversal sets in to begin its upward trend.

Wingtai (1st Feb 11 to 6th Dec 12)

Wingtai was first purchased as it has a strong foothold in both the mid to high end residential segment, as well as the retail sector, including brands like G2000, Topman etc.  I see this as a good opportunity for me to invest in the residential sector, especially when Wingtai's share price has decreased substantially, with no substantial change in fundamentals.

However, things did not go too well after the purchase.  This is caused by the series of cooling measures implemented by the Singapore Government to prevent any possible bubbles from forming in the housing sector.  This creates a huge selling pressure on property counters as investors fear the possible negative effects these cooling measures will bring to property prices.

As observed, Wingtai's share price plunged by a massive 44% to $0.92 over the course of the year, before the reversal sets in.  It was a very depressing period for me, as holding on to this counter seems as if there was no light at the end of the tunnel at that time, as the price just keep on moving southwards.  But with a high NAV, I believe the company will not go bust, and even if it does, it has more than enough value to liquidate to compensate and hence protect my capital investments. 

Hence I took the plunge as an opportunity to purchase more shares to average down my holding.  However, as it declined further, my emotions set in and the fear that it will end up like First Ship Lease Trust deterred me from buying further when it went below $1.00 per share.  I am glad that during the course of this 2 year period, I made a couple of purchases and sales to average down my buying price, because soon, the reversal sets in. 

To help the recovery, Wingtai announced that Chairman is buying back 15% of the floating shares at $1.39 per share.  This announcement boosted the share price to above $1.30 levels and thus allowing me to erase all loses as I managed to breakeven at that price.  In addition, as I am holding 7 lots of Wingtai at that time, I decided to sell 15% of my shares back to the company to reduce my holdings, in case the price support fails and decline again.  After the sale, I ended up with odd lots of shares, which caused me to purchase back some shares to make it a complete lot.

After all the buying and selling comes to an end, I am rewarded with a consistent continual rise in Wingtai's share price as the market sees minimal impact in the cooling measures introduced by the Singapore Government, as up till this point, it only resulted in the stabilisation of property prices, instead of a price correction as feared previously.  This boosted market's confidence and at the second half of the year, the rally for property developer counters arrived with much anticipation. 

At a high of $1.77, it seems like the rally for Wingtai is coming to an end as it lacks the strength to push to higher prices.  The price booster soon came as SC Global, another high-end residential property developer announced the privatisation of the shares with an offer of $1.80, which is a 49% premium over the last closing price.  This news boosted the shares of Wingtai to breakup to $1.80 as well.  With this, I made the decision to sell all my holdings at $1.82.

My thoughts at that time: Looking at the rally, I was a little hesitant to sell as there may still be possible upside after the recent breakthrough.  However, with the issue of the US 'fiscal cliff' looming and remains unsolved, I concluded that the risk : reward ratio may have become too much to bear at this juncture.  Since the next announcement of any possible huge dividend payout (which could possibly act as another price catalyst) is at least 6 months away, I shall lock in my profits before the new year, and enjoy my December holidays.

Lessons learnt: For quality stocks, it is just a matter of time that the true value of the stock gets unlock.  Just as waiting for the right opportunity to buy requires patience, waiting for the true potential to be unlocked also requires much patience.