Upswing at the start of 2023, and what I am avoiding

Stock markets started 2023 on a strong footing with gains across global equities. China’s re-opening after dropping the zero-Covid policy in late December helped propel the advance. Signs that inflation is easing from its autumn highs in several major regions also supported sentiment, amid hopes central banks may be close to the peak of their rate hiking cycle. Emerging markets outperformed their developed counterparts. In fixed income markets, bond yields fell (meaning prices rose). Commodities saw a negative return for the month.  

It is fair to say that 2022 will go down in history as the year where investors’ portfolios were turned on their head. Many things that worked in the previous decade have become a drag on performance, most notably the large declines seen across mega-cap US stocks including a 60% decline in Tesla and a 48% drop in Amazon.

Rather than being a long-overdue market correction, some experts believe the investment landscape has just experienced a large structural change. This could require an overhaul of your investment portfolio.

Howard Marks from Oaktree suggests we are experiencing the third major sea change for investment markets of the last 50 years. He says: ‘We’ve gone from the low-return world of 2009-21 to a full-return world, and it may become more so in the near term. Investors can now potentially get solid returns from credit instruments, meaning they no longer have to rely as heavily on riskier investments to achieve their overall return targets.’

Marks highlighted: ‘If you grant that the environment is and may continue to be very different from what it was over the last 13 years – and most of the last 40 years – it should follow that the investment strategies that worked best over those periods may not be the ones that outperform in the years ahead. That’s the sea change I’m talking about.’

Between 2009 and 2021, interest rates were very low which made it easy for companies to borrow money to grow. Now it’s more expensive to borrow and lenders – be it through loans or bonds – or investors through share placings are less willing to back loss-making businesses or ones with minimal prospects for decent profits near-term.

While I am glad that we had a good run in Jan 2023, there is a reason why I am a bit sceptical of the stock upswing in Jan 2023.

We are starting to see a return in investors’ appetite for risky speculative stocks with poor underlying fundamentals, often with little or no earnings at all.

Here are a few examples.

1) Carvana Co. (CVNA)

In its recent earning report, the company announced worse-than-expected financial results for the third quarter. The revenues came in at $3.39 billion, much lower than the $3.71 billion analysts were expecting. The quarter’s net losses increased from $32 million to $283 million year-over-year.

1) Carvana reported revenue of $3.386 billion, down 2.7% year-over-year and about $300 million lower than analyst estimates.

2) The company had a loss of $2.67 per share compared to a loss of $0.38 from the same period a year ago.

3) Retail units sold were 102,570, down 8.4% year-over-year.

4) The total gross profit per unit was $3,500.

5) Total gross profit was $359 million, down 31.4% from one year ago.

6) SG&A expenses were $656 million, up 20.1%.

In short, the recent earnings are terrible. In addition, it has a dismal balance sheet which shows a debt of US$ 8.07B, vs a total cash position of US$666 mil.

However, in spite of these dismal fundamentals, the stock is up approximately 217% for the past month, jumping sharply in volatile trading sessions. The moves are at complete odds with the broader gloomier outlook for the used-car industry, where prices for vehicles have been tumbling in recent months amid rising financing costs and consumer anxiety about an economic slowdown.    

The rapid gains in Carvana shares follow 2022’s relentless selloff that wiped out nearly 98% of the company’s market capitalization, sparking fears about a possible bankruptcy and leading Wall Street analysts to warn about “the path forward.” The rally also brings to mind the meme-stock mania of early 2021, when heavily shorted companies saw massive gains as they were bid up on social-media platforms. 

2) Bed Bath & Beyond Inc. (BBBY)

In a meme stocks frenzy nearly two years ago, retail punters bid up Bed Bath & Beyond’s shares by banding together on online forums.

However, the Union, N.J.-based chain is on a precipice, as a slow, years-long decline metastasizes within a haze of strategic missteps, bad investments, patchy inventory and indifferent shoppers. Executives warn that bankruptcy might be unavoidable, although many experts wonder whether the 52-year-old retailer will survive at all.

On 2 Feb 2023, Bed Bath & Beyond failed to make interest payments on its bonds just weeks after the company warned it was considering filing for bankruptcy, yet the stock is surging higher.

The company was due to pay more than $28 million on three tranches of notes on Feb. 1, totalling about $1.2 billion, a company spokesperson confirmed over email. The company has now entered a 30-day grace period to make good on the payments. But paying back its debt may be challenging for the cash-strapped retailer.

In spite of all these, the stock is up almost 80% in the past month.

By the way, the stock price fell from its high by more than 90% in end 2022.

Bed Bath & Beyond: The Market Has Lost Its Mind (read here)

3) ARK Innovation ETF (ARKK)

Cathie Wood’s ARK Innovation Scores a Record Month, Thanks to Tesla and Roku (read here)

Coinbase Bull Cathie Wood’s Ark Innovation ETF Has Best Month Ever (read here)

The Fed is ‘changing their tone,’ Cathie Wood says (watch here)

How can we leave out Cathy Wood and the ARK Innovation ETF?

At the end of 2022, the ETF’s price is down almost 80% from its peak.

Cathie Wood’s ARK Innovation ETF (ARKK) came roaring back in January, notching a partial bounceback from its tumultuous time in 2022.

Shares of the exchange traded fund closed out the month at $39.93, a near 28% increase from the end of December, marking its best monthly performance since launching in 2014. It is up approximately 38% for the past one month.

While it holds a significant amount of stock in companies like Tesla and Zoom, the basket of tech firms also holds millions of shares of cryptocurrency exchange Coinbase. The San Francisco-based crypto company accounts for a 4.5% slice of the fund, a position worth $347 million.

“The stock market is filled with individuals who know the price of everything, but the value of nothing.” — Phillip Fisher

“Past patterns tend to recur. If you ignore that fact, you’re likely to fall prey to those patterns rather than benefit from them. But when markets get cooking, the lessons of the past are readily dismissed.” Howard Marks

Many people are excited by the bullish sentiments in the markets. I marvel at how fast yesterday’s Weeds are today’s Flowers.

Personally for me, in the short term, prices tend to be a distraction (more than anything else). While I am cautiously optimistic about the re-opening of China and the easing of the Federal Reserve rate hike with inflation coming down, I am wary of these huge price surges in stocks with seemingly poor fundamentals.

While the price upswings look tempting, I reckon this is probably FOMO. Many people (would rather) forget about past crashes in favour of short-term quick easy gains. My intention, however, is to invest for the long term.

As was mentioned earlier by Howard Marks, we are entering into a period of a sea change. What works in the past, may not work now.

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Promotion Period:  16:00 06/12/2022 – 15:00 28/02/2023(SGT)

Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

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2023: A new Dawn for Chinese / Hong Kong Stocks? A case study of Tencent

I really have to hand it to the Chinese authorities for making such a 180-degree turn in changing the market sentiments towards Chinese/Hong Kong-listed stocks.

While many are excited by the recent surge in share prices (starting from late October 2022), many long-time (bag) holders of Chinese/Hong Kong-listed stocks, with many stocks still in the red, are naturally skeptical of these large upswings.


KraneShares CSI China Internet ETF has risen approximately 95% from its low in Oct 2022.

I personally am vested in Tencent (0700.HK) stocks. In late May 2022, I divested my Alibaba (9988.HK) stocks and used the free-up capital to purchase these Tencent stocks. Technically for the amount I have invested, the investment is still in the red.

Tencent is currently the largest Chinese company by market capitalization at US$500.28 billion. Naturally many would look to Tencent as the barometer for Chinese/Hong Kong-listed stocks.

Sino-US tensions a key risk for Tencent 

Tencent Holdings’ stock has experienced wild swings in recent years, marked by record highs and multi-year lows. In comparison, its earnings exhibited more stability, despite having its own challenges.

Domestic regulatory developments and Sino-US relationship concerns have emerged as key risks for Tencent shareholders. If one is to consider price volatility as a main concern, then these would indeed be key risks. True blue value investors would have dismissed such factors; but in the world of Chinese stocks, such risks have many worried.

In January 2018, Tencent rose to a then-record high of HKD476.6 following a run of 13 consecutive months of gains.

In the months that followed, Tencent only saw one month of gains in nine as Sino-US tensions worsened following former US President Donald Trump’s commencement of a tit-for-tat trade war with Asia’s largest economy.

Tencent stock slumped nearly 50% from its January high to HKD251.4 by October 2018.

At the start of 2020, Tencent stock rebounded to HKD375. The Chinese tech giant extended its recovery as its portfolio of gaming, video streaming, and social media businesses helped the company’s earnings weather the economic downturn brought on by Covid-19-induced lockdowns. Indeed, earnings-wise, Tencent has been churning along nicely (save for the quarterly bumps which typically see the 4th quarter having lesser earnings compared to the other quarters).

While global peers underperformed in the difficult economic conditions of the Covid-19 era, Tencent stock surged to an all-time high of HKD775.6.

Beijing regulatory blitz hurts Tencent in 2021

Tencent stock went on to experience its worst periods of losses in succeeding months as China embarked on a regulatory drive in 2021.

Chinese tech stocks were hit the hardest as authorities in Beijing scrutinised a wide range of concerns including data security, gaming addiction, education expenses and antitrust issues.

Gaming stocks saw intense selloffs as state-affiliated news agencies in China described video games as “spiritual opium” and “electronic drugs”. By August 2021, Beijing authorities had placed restrictions that limited minors from playing video games to only one hour a day on weekends and holidays.

Regulators also took notice of Tencent’s dominance in the music streaming industry. The company’s music streaming unit Tencent Music was forced to give up its exclusive music rights in July 2021 as the State Administration for Market Regulation (SAMR) took matters into its hands to restore market competition.

Furthermore, the advertising industry in China saw a slowdown after tutoring firms were forced to go non-profit and were barred from listing on the stock market.

Tencent closed 2021 at about HKD456, giving a year-to-date (YTD) loss of over 18%. 

Tencent slumps to over five-year low in 2022 and the Capitulation of Chinese stocks

2022 proved to be a similar story for Tencent stock. The gaming-to-social media firm extended its losses into the year due to weakness at its core gaming and advertising businesses.

Frequent lockdowns in China due to the ongoing zero-Covid policy continued to hurt Chinese businesses throughout the year. In November, Tencent reported a back-to-back drop in quarterly revenue.

Rumors of technology investment firm, Prosus and Naspers plan to offload their stake in Tencent also caused a negative overhang on the stock.

By 28 October, Tencent slumped to HKD190.78, its lowest since January 2017. 

On 24 Oct 2022, CNBC has a post titled, “U.S.-listed Chinese stocks drop 15% after Beijing’s power reshuffle makes the market ‘uninvestable’“, read here. Reiterating what JP Morgan Chase has stated as early as March 2022. At that time JPMorgan Chase shocked investors and attracted controversy in the financial media for labeling Chinese internet companies as “uninvestable.”

China May Be ‘Uninvestable’ After All (read here)

However, on 1 November, Dutch investment group Prosus clarified the speculation and said that it had only sold “small numbers of ordinary shares in Tencent” to fund its share repurchase programme.

Prosus also reiterated its “continued confidence in Tencent’s long-term prospects”.

Tencent stock surged nearly 40% in November, following the clarification from its major shareholder. An announcement of Tencent distributing shares of food delivery company Meituan to its shareholders also propped the price.

As of 7 December’s close, Tencent stock traded at about HKD300, following YTD losses of over 33%.

The 0700 stock price was down over 61% from its all-time high of HKD775.6 hit in February 2021. The little upside from Oct 2022 to Dec 2022 provided little consolation for many long-term investors.

What is interesting in the social media world (blogosphere and Youtube etc) during this period, is that we start to see many articles/videos about the sell down in Chinese stocks or for lack of a better word – capitulation. Although the selldown itself has been ongoing for some time, and in the case of Tencent, since early 2021, the sudden and multi-year low as demonstrated in late Oct 2022, is something that has caused many investors much anguish.

Brian from 3foreverfinancialfreedom.com did a post titled “The Day of China’s Capitulation – 24 Oct 2022” on 25 Oct 2022 (read here).

Perhaps Brian has felt it is necessary to address this because there were so many who messaged him on 24 Oct 2022 about “potentially one of the most turbulent capitulation investors investing in China and HK stocks”. And in his words ” I wouldn’t have expected so many readers to follow me and suffered a capitulation when they have to sell their position yesterday to surrender but if it is, then maybe I will relook at the way how I share my positions in the future in this blog.”

Alvin from Dr Wealth wrote a post titled “Should you quit China stocks?” on 26 Oct 2022. (read here)

To quote: “Bottomline, study and invest in what you believe in otherwise you would always be in a dilemma whether to hold or sell.”

Over at the Youtube side, the Bagholder Pod was created sometime in late Nov 2022. Given the time it was created when many stocks are at their multi-years lows, the channel is perhaps aptly named (Bag Holder).

In its 2nd Episode titled “Alibaba, Tencent, SEA Ltd Earnings. Warren Buffett BUY TSMC? Double-down on Crypto Now?!”, they discussed the sell-down in Alibaba, Tencent, SEA Ltd stocks and their earnings. (watch here)

2023 A New Dawn?

Perhaps in hindsight, that period might have marked the turning point for Chinese / Hong Kong-listed stocks. If Oct 2022 marked the period of capitulation, perhaps now we might be in the stage of hope and relief?

Only time will tell.

Start of 2023 and thoughts on my portfolio (read here)

I last thought about my own stock portfolio something in early Jan 2023 whereby I was mulling whether to DCA more into growth stocks. Perhaps I have been mulling too long and given the sudden price surge (from late Oct 2022 until now – late Jan 2023), many would have felt the sense of FOMO (Fear of Missing Out).

Foreign investors rush back to Chinese stocks despite worries (read here)

The recent rally in Chinese / Hong Kong-listed stocks is not without reasons. The Hong Kong market has recently experienced one of its worst sell-down in 2022, where the Hang Seng Index slumped to less than 15,000.

As mentioned earlier, the sell-down was due to the regulatory risks on the tech giants coupled with the diplomatic tensions between the US and China. Consequently, there were spillover effects from China’s property crisis in the 3rd quarter of 2022 which further soured the sentiments in the Hong Kong markets.

However, as we end the year 2022 and start the year 2023, the narratives from China have improved.

China ended its zero Covid policy, and the Chinese banks have pledged US$162 billion in new credit to property developers. Ant Group moved key steps forward in restructuring, as its consumer finance unit won approval to expand its capital base.

Brian from 3foreverfinancialfreedom.com in his post titled, ” Jan 2023 – Portfolio Transactions & Update” dated 19 Jan 2023 (read here) has listed out his Jan 2023 portfolio. Comparing it to his Oct 2022 portfolio then, he has injected a lot of funds into Alibaba (almost double the position) and added to IShare HSTech (9000 shares). He has also added a new counter Alphabet (from 0 to 2000 shares). The value of his portfolio jumped from around S$352+k late last year (Oct 2022) during the ‘capitulation’ of Chinese stocks to around S$1.25mil on 19 Jan 23, in a duration of fewer than 3 months.

In fact, if you dig a little deeper, his bold moves started in Nov 2022, whereby the portfolio value has crossed $973K.

In short, a sense of bullishness from Brian for the start of 2023 as compared to late 2022.

With regards to the Bagholder Pod. I have not been tracking their portfolios, but I reckon Chi Keng has a fairly large proportion of his portfolio in Chinese Tech Stocks and he has witnessed large volatilities (in his portfolio values) in 2022. In their recent video titled “EP12: China Stock RALLY, 8% GST, Portfolio in 2023” and in the segment “Why People blame influencers”, there is a sense of apprehension (from them) about the harmful remarks by investors (who probably lost money in US/Chinese growth stocks in the recent down years or have blindly followed their trades). I recalled Chi Keng’s reply when asked about the recent Chinese stock rallies that his focus will probably still be on the numbers and not the price volatility (probably spoken from experience after the past years of drastic price swings).

Perhaps it is with this baggage from past volatilities, that current investors now look with hope to 2023 for Chinese/ Hong Kong-listed stocks. Likewise, I am cautiously optimistic.

If I am to describe my feeling as a retail investor currently vested in HK-listed stocks for the past few years, it would be akin to the feeling of someone who has just got off from multiple rounds of a roller coaster ride. Kind of numb (to the rhetorical headlines), and if I were to go through the rapid crashes again – would feel like puking.

I am keenly aware that the sparks can as quickly dim/disappear with any negative statements from the Chinese regulatory bodies.

No doubt the ride-up will be bumpy. Currently, according to Simply Wall Street, Tencent (0700.HK) is fully valued (if we assume the price of HKD 415); although prices seldom stay at the mean (to quote Howard Marks). Most of the time they would be in the range of overvalued or undervalued and stay there for prolonged periods.

 “Markets can stay irrational longer than you can stay solvent.” John Maynard Keynes

For me, I have stayed vested and have been doing some DCAing into Tencent stocks (little drips). Not much war chest left anyway.

Technically I have not left the ‘party’ (for some, the term ‘nightmare’ might be more appropriate). Which in a way has twisted way beyond my imagination. From the public protests in Hong Kong, culminating in the fire in Festival Walk and the slashing of policemen, students holding out from police in their university campus, implementation of the extradition law amendment bill, to the Covid lock-downs, multi-year recessions, and risk of Hong Kong dollar de-pegging from the USD, lost counts of numbers of Chinese regulatory interventions to Chinese businesses, end of zero-Covid policy, re-opening, etc…

Beyond my HK listed Tech stocks (Tencent and Pinduoduo), I have significant exposure to HK-listed dividend stocks (first bought back in late 2019) and these have rallied as well (though to a lesser extent). It has been a good start for me in 2023.

Although second-level thinking is important in investing, sometimes it is good to not overthink too much, to focus on the numbers, and think long-term.

Tencent shares extended a four-month rally after Chinese regulators granted new licenses for its games. Suggesting that Beijing may be relaxing its restrictions on the gaming industry, which included capping playing time for minors and other curbs to address gaming ‘addiction’.

Despite the rally, the numbers are still there.

Past quarters have been weak. However, Tencent has started to benefit from the adjustments that they have made to reposition itself for a new industry paradigm. They activated infeed advertisements in Video Accounts, achieved breakthroughs in international games publishing, and executed cost efficiency initiatives that re-focused them on core activities and controlled their cost growth.

In Nov 2022, during the 3Q 2022 earnings, Tencent stemmed the bleeding from the past quarters, marking its first year-on-year growth in its non-IFRS earnings after about 12 months.

Tencent’s Q3 2022 operating profit was at US$5.8 billion, up slightly from the US$5.75 billion it recorded a year earlier. This is on a non-IFRS basis, which reflects core earnings by excluding certain one-time and non-cash items.

On the same basis, profit attributable to the company’s equity holders saw a slight increase of 2% year on year to US$4.5 billion.

I shall leave you with this paragraph in the book titled, “The Most Important Thing – Uncommon Sense for the Thoughtful Investor” by Howards Mark.

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Promotion Period:  16:00 06/12/2022 – 15:00 28/02/2023(SGT)

Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Posted in Hong Kong Shares | Leave a comment

Prime US REIT – current yield is at 18.11%. Value trap or value buy? 4 things you need to know now.

Investing can be rewarding but can also cause a lot of pain. It was not too long ago that Manulife US Reit’s shareholders were informed on 2 Nov 2022 via the 3Q 2022 Operational Update and Briefing that as per GRESB 2022, the Reit is 5 Star with a score of 92, and ranked ‘A’, 1st out of 10 U.S. listed offices. See below.

Note: GRESB is an independent organization providing validated ESG performance data and peer benchmarks for investors and managers to improve business intelligence, industry engagement and decision-making.

The gearing though not fantastic (at 42.5%) was not near the 50% limit. In the 1H 2022 Corporate presentation on 10 Aug 2022, the gearing was at 42.4%. Comparing the 2 Nov 2022 announced gearing to the gearing announced on 10 Aug 2022, it was only a marginal 0.1% increase.

The next earnings report date for Manulife US Reit’s fourth quarter 2022 financial results will be in early Feb 2023, and shortly around the end of March 2023, Manulife US Reit shareholders will receive the dividend payout.

Frankly, the weakening of occupational performance in the office real estate submarkets in the U.S. is known to many and according to the management, occurring where MUST’s properties are located. Physical occupancy percentage has weakened considerably as many companies pivot to the remote working or hybrid working model in lieu of the in-person working model.

Personally it seems to be a structural decline that appears permanent.

However, on 30 Dec 2022, many of the shareholders were probably shocked when the manager of Manulife US REIT (MUST) announced that the real estate valuation of its portfolio has declined by 10.9% to US$1.95 billion ($2.62 billion) based on the year-end valuations for 2022. This is compared to the US$2.18 billion valuation as of Dec 31, 2021.

And its aggregate leverage will be approximately 49% (though still within the regulatory limit of 50%). This is taking into account additional borrowings, fair value changes in investment properties and certain projections in the value of other total assets from 30 June 2022 to 31 Dec 2022.

The announcement was released via their website in the Newsroom section (read here).

In short, gearing has suddenly shot up in less than 2 months (announcement dates). Flash back to 3Q 2022 update on 2 Nov 2022, the gearing only increased marginally by 0.1%.

At 49%, it is just a whisker shy of the Regulatory 50% limit. Too close for comfort.

Investing for yield

Personally, I think there are 2 kinds of dividend investing.

The first kind is often known as dividend growth investing. Typically we are willing to settle for average or below-average yields of 3% to 5% (maybe even 6%), however on the assumption that dividend payout will increase over time, often based on the past increasing dividend payouts through the years.

The other version is to invest in high-yield dividend stocks (eg. min 9% to 10%). In the book titled “The Income Factory – An Investor’s Guide to Consistent Lifetime Returns”, by Steven Bavaria. Steven termed this as the Income Factory.

To quote the book:

These are companies with little or no growth, however, the high yield would more than compensate for the investor’s required returns (percentage) per year. Assuming a 9% yield, by reinvesting the dividend, the income stream will double every 8 years. However, the caveat here is that there should not be an abrupt dividend cut and that the underlying company must survive.

Typically for me personally, I would view exceptionally high dividend yields as a warning sign (value trap) and stay away from it. However, some people may treat it as a turnaround play or net-net play (in theory it is not the same) and invest in it. Having said that, this is not distressed debt investing, which Howards Mark specialized in. Oaktree (co-founded by Howards Mark) is known for its strategy of investing in “good companies with bad balance sheets”. Shareholders being the lowest rung of the capital structure, bear losses first.

Prime US Reit

This brings me to Prime US Reit. Its current yield (on 7 Jan 2023) is at 18.11%! If it qualifies as an Income Factory stock, you can potentially double the income stream in less than 4 years!

See the below screenshot from StocksCafe.

Kore, Prime US Reit unlikely to hit gearing limit even as US office assets face waning valuations (read here)

To quote the above article (see below):

The current gearing ratio (on 7 Jan 2023) is 37.9%.

Prime US Reit made a tepid debut on the Singapore Exchange (SGX) on Friday 19 July 2019, closing at its initial public offering (IPO) price of US$0.88.

In recent years, the share price has been trending down. In fact, the price has gone below the low as seen on 3 April 2020.

For people interested in this high-yield play, there is a few critical pieces of information that I think they need to be aware of first.

1) Falling Occupancy

The portfolio occupancy as a whole has been steadily dropping since the onset of the pandemic. The actual physical occupancy rate of each building would be lower.

Some of the occupancies of Prime US Reit’s buildings are startlingly low. As at Sept 30, the occupancy of Reston Square in DC (Virginia) was 47.1%, Village Centre Station I (Denver) was 69.9% and Tower 1 at Emeryville near San Francisco was 77.1%; all three are below their sub-market average.

Although the WALE (Weighted Average Lease Expiry) is a healthy 4.1 years as reported on 29 Nov 2022 (see below). An anchor tenant that occupies large sections of a building can skew the WALE for the property either upwards or downwards, depending on how long a lease the tenant has agreed to.

In fact, if we look in detail, quite a number of the properties’ WALE is within 1 to 3 years, but these properties have less percentage contribution by Asset Carrying Value. Nevertheless, the clock is ticking fast.

WALE is measured across all tenants’ remaining leases in years and is weighted with either the tenant’s occupied area or the tenant’s income against the total combined area or income of the other tenants.

To quote this article: “Work From Home and the Office Real Estate Apocalypse” (read here), emphasis mine:

The Covid-19 pandemic led to drastic changes in where people work. Physical office occupancy in the major office markets of the U.S. fell from 95% at the end of February 2020 to 10% at the end of March 2020, and has remained depressed ever since, only gradually creeping back to 47% by November 2022. In the intervening period, work-from-home (WFH) practices have become more established, with many firms announcing permanent remote or hybrid work arrangements associated with shrinking physical footprints.

Nevertheless, Prime’s occupancy rate is still higher than the overall US office occupancy rate of 86%. And most of Prime’s tenants are legal and financial services, which tend to be more defensive at this point of the economic cycle.

2) Rising Gearing Ratio

Likewise, since the onset of the pandemic, the gearing ratio is been steadily climbing.

As reported in Nov 2022, the weighted average debt maturity was at 3.1 years.

To again quote this article when they modeled the Physical Occupancy, Contractual Occupancy, and Lease Expiration, emphasis mine:

These large drops in physical occupancy did not translate into large immediate drops in commercial office cash flows, as shown above. The reason for the delayed and gradual reaction is the staggered nature of commercial leases. Because most commercial leases are long-term, and not up for immediate renewal, only a fraction of office tenants has had to make active choices about their future office demand so far. Among all in-force leases as of the end of December 2019, only 38.23% came up for renewal in 2020 and 2021 combined. Nearly all of the tenants not up for renewal have continued to make rent payments, despite their lack of physical occupancy. When more leases come up for renewal in the future, the office demand of tenants who have made limited use of office space during the pandemic remains highly uncertain and is a crucial determinant of office valuation.

So in other words, we have yet to see the full financial impact of this structural shift due to WFH practices, from the Reits’ financials.

It is like watching a giant oil tanker crash, you can anticipate the inevitable crash miles away yet subsequent actions will be futile.

3) Crunch time for DPU

Talking about tankers crashing.

While Prime’s debt is mostly “fixed”, and it has enough credit lines to refinance its debt, the issue is most of its debt is due in 2023 and 2024 which are the critical years when Fed rates could hit 4.5% or higher.

As reported in Nov 2022, Prime’s borrowing costs are only ~3% (the weighted average interest rate at 3.34%), the average cost that US property investors borrow to buy office properties. If rates remain elevated or go up much higher, Prime’s interest payments will spike and DPU will drop.

Yes, the dividend yield will likely remain high, probably due to the falling share price.

4) Properties in the hot zones

Ultimately a Reit is only as good as its properties. Ask any serious property investors and the three main important points are location, location, and location.

Let’s think back to what Manulife US Reit management stated in their announcement back on 30 Dec 2022 (when it was announced that gearing has risen to 49%) – see below:

Personally for me, as a foreign retail investor observing from far at the US Office real estate, I would be worried if some of these properties are in the ‘troubled’ areas. Especially when I see articles like the below mentioned:

Office Vacancies Keep Climbing as Recession Threat Looms (read here)

One-Third of San Francisco Offices Now Available for Lease (read here)

As per this article dated May 2022, due to various reasons, Houston, Dallas, San Francisco, Atlanta, Northern New Jersey, and Los Angeles are some of the cities with the highest office vacancy rates. See below.

According to its website, Prime US REIT owns a high-quality portfolio of 14 Class A freehold office properties which are strategically located in 13 key U.S. office markets. The buildings are found in the business district of key urban centers such as Washington DC, Atlanta, and Dallas. 

By Asset valuation and percentage contribution by Asset carrying value, the top five properties are (see below):

1) 222 Main (13.7%)

2) 171 17th Street (12.4%)

3) Park Tower (9.5%)

4) Village Center Station II (9.3%)

5) Sorrento Towers (9.0%)

Many of its top 10 tenants are located in 222 Main, Sorrento Towers, and 171 17th Street, Park Tower. See below.

Now, where are these properties located?

1) 222 Main: 222 South Main Street, Salt Lake City, Utah 84101

2) 171 17th Street: 171 17th Street NW, Atlanta, Georgia 30363

3) Park Tower: 980 9th Street, Sacramento, California 95814

4) Village Center Station II: 6360 S. Fiddler’s Green Circle, Greenwood Village, Colorado 80111

5) Sorrento Towers; 5355 & 5375 Mira Sorrento Place, San Diego, California 92121

FYI, Sacramento and San Francisco are only 87 miles (140km) apart. San Diego Office market vacancy rates are also high.

Downtown San Diego’s Office Vacancy Expected To Remain Elevated (read here)

In gist, some of Prime’s top five properties are in the ‘hot’ zones where office market vacancy rates are elevated. The outlook is negative.

Nevertheless, for Park Tower, the top tenant is the State of California (Government), while 171 17th Street top tenants are in the legal services and financial services, which might provide some form of stability as compared to Tech firms (which are currently in the news for cutting headcounts in view of a slowing US economy and also holding back their expansion plans). However, whether there will be positive rental reversion rates moving forward, is another story.

Whether or not shareholders of Prime US Reit will be surprised (shocked) by unpleasant news (as in the case of Manulife US Reit), I do not know and can only guess.

However, from a dividend investing point of view, it is neither dividend growth investing nor high dividend / ‘Income factory’ type of investing, since dividend cuts seem inevitable. It may be a turn-around play, but things will probably get worse before turning around… not an easy counter to hold on to. To be frank, turnarounds (as optimistic as we are as stock investors) seldom happen.

Well, I may be wrong. Nevertheless, it pays to understand more about what we are investing in before investing or staying vested.

Prime US Reit’s Full Year Announcement Analysts, media, and investor briefings should be in Feb 2023. We shall know more then.

So what do you think? Will Prime US Reit be the Optimus Prime or Sentinel Prime?

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Promotion Period:  16:00 06/12/2022 – 15:00 28/02/2023(SGT)

Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Posted in REITS | 1 Comment

Start of 2023 and thoughts on my portfolio

It is common for many to do a review of their portfolio at the end or start of the year, and I am no exception. It is good to be retrospective and take stock of what happened in the past year.

The good thing about having a blog (or a journal) is that I can always go back and check what I was thinking about in the past. When I read back my previous posts during the period from the end of 2021 to the start of 2022, I realized that I was generally rather pessimistic about the coming year 2022.

Thoughts on my Portfolio (Nov 21) (read here) – Written on 8 Nov 2021

To quote the post above:

“In a way, I am using the income-generating portion as a ‘base’ from which to slowly grow the other portions. Although, almost every month I do reinvest part of the dividends/interests received into dividend stocks as well.

Generally, I feel that valuations in the US Growth stocks are rich, and values can be found in Chinese tech stocks at the moment. Many renowned investors (Charlie Munger, Monish Prabai, Ray Dalio, etc) have waded into this sector in 2021.”

Short post for the start of 2022 (read here) – Written on 2 Jan 2022

To quote the post above:

“With the rich valuation of the US markets, I do not foresee much investing in the coming weeks or months…

Plan for 2022 (Investment)

To be frank, I do not have a very clear plan at the moment. I reckon I am still waiting for the markets to direct my actions….
However call me superstitious, as per my horoscope (fire dragon) reading for 2022, it is not advisable to bet big on risky assets in 2022.”

The most underrated key to investing and time for me to revisit it in 2022 (read here) – Written on 18 Jan 2022

To quote the post above:

2) Valuation: It could also be the fact that from many valuation indicators, the US markets do appear overvalued (from a P/E valuation perspective). Singapore market (from a P/B valuation perspective) appear slightly below or full valued, while the Hong Kong market is undervalued (from a P/B valuation perspective) if we can accept the regulatory risks.

I still believe that if the US markets sneeze, the other bourses will also catch a cold. Well, these days, when the China markets sneeze, many markets elsewhere also appear to be affected.

So with the 3 or 4 impending rate hikes in the US; and high valuation and potential pull-backs… I would say the odds are good that we can find better opportunities moving forward in 2022 and even 2023.

While it is normal for me to look at the overall net worth, I think there are other better ways to evaluate.

Overall my net worth increased only slightly in 2022. In fact, gains from my active income and passive income are mostly negated by the (unrealized) losses in my portfolio. That being said, there are many things that I reckoned I have done well or as intended.


Low negative XIRR

XIRR: To calculate returns on investments where there are multiple transactions taking place in different times. Full form of XIRR is Extended Internal Rate of Return.

I don’t consider myself good at market timing, and I still believe in DCA. However, given the relatively high valuation and generally negative outlook, and impending rate hikes in the US, back at the end of 2021/start of 2022, I decided to delay and space out my investments longer.

For instance, for the first half of the year (2022), there were lesser investments with smaller amounts as compared to the later part of the year. It could be argued that 2023 might provide better opportunities, but who knows. However, on a yearly basis, for 2022 I am glad that I delayed most of the DCAs. See below.

Digicore Reit’s stock price tanked in 2022. Many of the tech stocks in my portfolio also did not fare well in 2022, stock price wise (eg. Alibaba, and subsequently Tencent).

It is not that I did not invest in them (tech/growth stocks), yes, overall the amount invested relatively speaking is smaller than the amount invested in dividend stocks. However, I guess the smaller allocation in growth stock as compared to my dividend stocks could also be due to the bigger stock price drop for growth stocks (even Digicore Reit which is not technically a growth stock behaved like one, price-wise).

Of course, I might be better off overall by just selling everything and staying out of the market for the whole of 2022. However, that is a tad too extreme and I likely would not do it if I were to go back in time.

For the year 2022, the overall XIRR though negative is not that bad.

I generally still think the Hong Kong (dividend and growth) stocks offered better value and invested more there in 2022. Ultimately 2022 was a better year in terms of price appreciation for the Singapore market.

Hope with China and Hong Kong re-openings things will get better in the later part of 2023. Earnings for these companies will finally see substantial improvement.

2022 may turn out to be a good year

If we believe that markets move in cycles due to the various external factors (interest rates, war, Covid) and internal factors (earnings & innovations of companies, etc)… then perhaps from a long-term perspective, the year 2022 would lay the foundation for subsequent good years for equities (eg. if not 2023 then 2024 and beyond).

While many would focus on the stock prices and their eventual net worth and fear more future rate hikes by the US Federal Reserve and ongoing world issues like Covid-19 (cases mounting in China), the ongoing war in Ukraine, and worldwide recession; not that many mention valuations.

For the S&P 500, the current Shiller PE Ratio (on 30 Dec 2022) is 28.09. See above. With the median PE at 15.90, it is still technically not cheap. However, when viewed in context, the value has not been cheap for a very long time, only reaching near or below that level during the GFC in 2008/2009 and during the early 1990s.

In recent years, during the lows of the March 2020 market crash, the Shiller PE ratio was 24.82. Currently, we are close to the levels seen in May 2020 (27.33) and June 2020 (28.84).

I reckon the US Federal Reserve has been getting better at using the interest rate tool, qualitative easing (QE) or qualitative tightening (QT). Would we ever see the lows in S&P500 during the 2008/2009 GFC? Would the US Federal Reserve not do anything (keeping in mind that the money printer is still very much there, with the lure of cheap money)?

Over in Hong Kong, Hang Seng’s PE hit a low of 6.1 in 1984 and a high of 29.7 in 2000. Its historical average is 12.5 times earnings. The Hang Seng P/E ratio on 31 Dec 2022 is 7.16. The current PE ratio is lower than the historical average.
Perhaps a better gauge of the Hang Seng Index valuation will be via its Price to Book ratio, which is currently at 0.92 (on 4 Jan 2023). In 30 years, it was below 1 only in 1998, 2016, and of course in March 2020 (till probably now).

Hang Seng index hits 2008 lows: Chinese equity ETFs to watch (read here)

Hong Kong: HANG SENG INDEX (.HSI) now trading below its net asset value for only the third time in almost 30 years (read here)

Here in Singapore, the SPDR Straits Times Index ETF (ES3.SI) has a current Price/Book value of 1.11. Since 1980, the P/B ratio of Singapore’s stock market has averaged 1.44. Right now, it’s hovering just slightly above 1. The current level is below the historical average. This also means that investors think that, as a whole, companies traded on the Singapore stock market are only worth as much as their net assets.

I watched this Youtube video episode with Adam Khoo as the guest (watch here), and I tend to agree with that part of what he said about the year 2022, which might turn out to be a good year if you are a long-term buy-and-hold investor, and have invested money you do not need urgently in the short term.

Going into the new year with more stock holdings and increasing dividend income

While my net worth did not look (ahem) good, my stock holdings have actually increased and my passive dividend/interest income has reached a new high.

Price is just one aspect of the equation. Unless I am nearing retirement and need to liquidate my positions, otherwise I should not be too concerned about price volatility.

And if we really think about the concept of money – it is after all a concept (fiction) based on trust, not backed by gold, silver or any other commodity. Money only works because we all agree to believe in it.

I would recommend reading the book titled “Money: The True Story of a Made-Up Thing” by Jacob Goldstein.

“Money feels cold and mathematical and outside the realm of fuzzy human relationships. It isn’t. Money is a made-up thing, a shared fiction. Money is fundamentally, unalterably social. The social part of money—the “shared” in “shared fiction”—is exactly what makes it money. Otherwise, it’s just a chunk of metal, or a piece of paper, or, in the case of most money today, just a number stored on a bank’s computers.”
― Jacob Goldstein, Money: The True Story of a Made-Up Thing

“Remember the first seven words of that last sentence: “Everyone believes that it will hold up.” They are the essence of banking (and, for that matter, of money). If everyone believes a bank will hold up, it will almost certainly hold up. If, on the other hand, people think a bank is going to fail, it will fail—even if its finances are in great shape.”
― Jacob Goldstein, Money: The True Story of a Made-Up Thing

Unlike the feeling at the end of 2021 / start of 2022, I do believe in continuing to DCA at a normal rate this year and investing more during the dips (or when trends reverse). I have always been telling myself to go more into growth stocks, but I tend to favor dividend stocks especially now given their increasing yield and more so for Hong Kong-listed dividend stocks.

If at the start of 2022, I see more value in HK growth stocks (cough cough Alibaba cough…), then perhaps I can be persuaded to be more aggressive in 2023 in my purchases. BTW I liquidated my Alibaba position (9988.HK) in 2022 and switched to Tencent (0700.HK). I have recently added a bit more (0700.HK).

Currently, US0listed and HK-listed growth stocks (eg. Alphabet and Tencent) have PE ratios below 20, and even Pinduoduo is at a low 20 to 30 PE. If one is to not consider the R&D expenses (necessary for capturing market shares as growth companies), these are indeed good valuations, brought about by the negativity of the high-interest rate environment.

Having experienced the Financial crisis of 2008, the European debt crisis of 2009-2010, Coronavirus crash of 2020, US-China tension, QE, QT, etc…it is probably more important to keep on buying on a regular basis, keeping to my barbell investment principle and slowly build up my growth and dividend portfolios, while keeping an eye on the fundamentals of the companies invested. After all, to quote Adam Khoo again, even God couldn’t beat dollar-cost averaging (read here). 

If we are to extend the idea of pendulum and cycles by Howard Marks, I do believe we are sensing much pessimism and negativity now. Trees don’t grow to the sky and things seldom go to zero… Many stocks are at good valuation with moods generally negative.

It might be hard to see better days now, but we should not wait for the sky to be all clear to invest.

Hold on.

“[On the consistent swinging of the pendulum between fear and greed] The significance of all this is the opportunity it offers to those who recognize what is happening and see the implications. At one extreme of the pendulum – the darkest of times – it takes analytical ability, objectivity, resolve, even imagination, to think things will ever get better. The few people who possess those qualities can make unusual profits with low risk. But at the other extreme, when everyone assumes and prices in the impossible – improvement forever – the stage is set for painful losses. It all goes together. None of these is an isolated event or a chance occurrence. Rather, they’re all elements in a recurring pattern that can be understood and profited from.” Howard Marks

Thank you for reading. Happy New Year everyone.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Promotion Period:  16:00 06/12/2022 – 15:00 28/02/2023(SGT)

Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Posted in Portfolio | 1 Comment

Children in personal finance: The worst financial decision we have made but the best money decision we have made (Go figure)

When I read Kyith’s post titled ” Why Financial Independence with Children is Challenging“, I just thought that it is an interesting post with many truths in it. I would like to add another dimension to it.

I always felt that a single guy’s life is so much more straightforward. I am not saying it is a walk in the park. It is just different. Perhaps I can share a bit of my own personal experience, in a light-hearted way.

I am married with two kids.

Actually, finance is one huge variable in life. Everyone’s personal life is another variable. Add kids and family into the mix, and you have one big messy variable!

During this December break, I was lucky to have some free time to read. And among the books that I have read, I would recommend that if you have the time, to read this book titled “How I Invest My Money” by Brian Portnoy and Joshua Brown. The book is a collection of stories from many financial experts and these articles tell us how they invest their own money. They share stories about their childhood, their families, the struggles they face, and the aspirations they hold. Sometimes raw, always revealing, these stories detail the indelible relationship between our money and our values. Taken as a whole, these essays powerfully demonstrate that there is no single ‘right’ way to save, spend, and invest. We see a kaleidoscope of perspectives on stocks, bonds, real assets, funds, charity, and other means of achieving the life one desires.

The fact is all of us are different. When you put the word ‘personal’ in front of finance (personal finance), there is really no one-size-fits-all standard. What works for me may not necessarily work for you. However, it would make complete sense to me, and outsiders would really need to peel through my history, my upbringing, and the unique situational circumstances to really understand why.

In the book, the article by Joshua Brown is interesting.

His key phrase throughout his article is that “Life isn’t always consistent”, but there is an underlying reason for each financial decision he (and his wife) made.



The article by Morgan Housel is also a good read.

There is this portion whereby he mentioned that he and his wife own their house outright without a mortgage (I reckon it is probably during the period when the bank loan interest rates were relatively low and other financial assets like stocks had better rates).

To him, it was “the worst financial decision they made but the best money decision they have made”.

Colours

When I was in university, one of my tutors made a remark to a bunch of us (guys) that kind of struck a chord with me to this day. He mentioned that the world would be a much more boring place without women. A woman adds colours to a guy’s life.

Before I was married or even dating, my life was much simpler. It was like shades of grey. With guys, our conversations are pretty much centered on studies, computer games, soccer matches, competing in sports, etc.

Then my girlfriend came along and kind of messed it up. Life became complicated and emotional.

Till today, I still couldn’t ‘solve’ it.

For instance, my wife’s favorite weekend torture question for me is “Where to go for dinner?”. I used to think that it was a simple cost and reward equation type of question. Eg. Find the best value for money place, which is easy to travel to and a place that is not that crowded. Or maybe it is the type of food. For instance, we had Western food last week, so this week we can try Fast Food, Hawker food/Food court, Chinese, Japanese, Korean, Thai, or Vietnamese food, etc…

However, it turns out that there are many layers to that question and the answer has very little to do with the food or the price. For instance, it must be a place where we can buy the things that the kids (or she) need, a place with food that is suitable for the kids to eat; and where there are activities for the family, there must be a purpose other than just eating… Like seriously how am I to solve that, unless I am Professor X from X-men who can literally read her mind. Actually, she already knew the answer before she asked me.

Well, till today, I have yet to crack the code. However, I have gotten better at it… I think :p.

Or I can trace back to the time when we were deciding to get our first BTO flat. Being the simple linear guy I am, I would whip up my handy calculator, check online for the best value for money flat and make a case for why we should opt for the ‘not that expensive’ BTO flat in the extreme West or East region in a non-mature estate; so that it would not subsequently be a financial strain on us. I would quote from the book ‘Rich dad poor dad’ on how the apartment we stay in is not an asset and how we would be better off financially by getting a cheaper flat and paying off the mortgage as fast as possible.

However, in the end, we bought a ‘not that cheap’ BTO flat next to a MRT station, two bus stops away from her parents’ place. Which in a way made much sense later when we have kids as being near to her parents does have its benefits (as they help in taking care of our kids, etc..esp vital when the child is sick) – not to mention that after the MOP (Minimum Occupation Period), the value of the flat multiplied (but it is still not an asset in my opinion).

Not that black and white.

Mantra: A happy wife = A happy family = A happy life

There is some truth in this mantra.

There is something about making someone else happy that beats making only myself happy. There is also something fulfilling about bringing up another life.

I can’t really quantify it, but it pays to remember my wife’s birthday, my kids’ birthday, and our wedding anniversary. Events in our family sure run smoother when I remember and do something about it.

Let’s just say that I have forgotten the dates many times, and things could have been better- I feel. For a forgetful person like me (‘borderline dementia’), Google calendar or my Samsung smartphone calendar works wonder (c/w pre-set reminders… yes it is reminderS over different days not one reminder). In case, I mistake the buzz for another meeting reminder. Heck, I can’t even remember what I had for lunch yesterday at times.

If this is a PSLE maths question, I reckon the only way to find the solution is via many rounds of trial and error.

You can delegate everything, except (being present with) your kids

Most C-suite executives in the corporate world could easily find ways to delegate work to their juniors.

However, personally, I find that there is really something in life that you can’t delegate. Eg. Taking care of kids.

Sure we can employ domestic helpers or nannies, we can send them to child care centres or student care centres, we can seek the help of our parents (the kids’ grandparents)… but at the end of the day, the bond between a parent and a child cannot be replicated by having someone else in our place.

I know of some parents who actually install CCTV cameras in every room and would routinely check on their kids (remotely and virtually) to ensure that they are doing (studying) what they are scheduled to do. If not, they will call up to question why. A parent literally showed me on the spot the live feed video from his handphone (with pride).

My guess: Probably for super on-the-ball parents, they will probably set up online meetings with their kids for quick progress updates. Yes I am watching you… :p.

There is this guilt that all parents will feel when they spend too much time away from their kids (due to work). Guilt that cannot be washed away by extravagant toys or expensive holidays.

Frankly, there is nothing in life that can really prepare me to be a parent. There are certificates, degrees, and courses for almost anything under the sun. However, I wonder if there is a degree for fatherhood. The day my son was born, I was officially a parent. No course, no training…I am just his dad (for Life!). It is a lifetime 24/7 full-time ‘job’ that I can never delegate away.

To borrow the phrase from Morgan Housel, the amount of time, energy, and money we spent on kids is the worst financial decision we have made but the best money decision we have made.

The bowl of fishball noodles: Humans can reciprocate

Actually, a pet does that as well but your own child can bring it to a whole new level.

Ask any dog lover and they will say that the best time of the day is when they get back home from work, and their dog greets them at the doorway.

My A-Ha moment was actually when my son was around 6 years old.
I was with him alone at a food court. Both of us was having fish ball noodle for lunch. While I was eating, my son looked at my bowl and said “Dad, do you have enough, do you want my fish ball?”

That was like the first time that my son actually said something that showed that he cared for me. And it meant a lot to me.

Actually, from birth to toddler… it is always the parents caring for the child. However, humans (unlike our other tangible items like properties, cars, clothes, toys, etc)… do have the capacity to love and care (when they grow up). If brought up the right way.

Well in a simple linear financial equation, we would probably be better off financially by spending our money on an investment property or retirement annuity… but then again life isn’t always that linear and quantifiable, and of course, life isn’t always consistent.

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Promotion Period:  16:00 06/12/2022 – 15:00 28/02/2023(SGT)

Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Posted in Investing methodology | 6 Comments

Why I think this Hong Kong-listed Funeral Services stock could be a good dividend play for my portfolio

Before I continue, my personal thought is that if you are looking for quick capital gains through stock price appreciation of China funeral service-related stocks, you might have probably missed the boat.

The hype around these stocks was already evident in Nov 2022 after China authorities did a U-turn on their zero Covid policy, and subsequently, there was news of the unreported high number of Covid-19-related cases and deaths. Chinese pharmaceutical-related stocks, medical stocks, and insurance stocks have all recently seen a sudden uptick in stock prices.

China estimates 250mn people have caught Covid in 20 days (read here)

I am just writing here about my personal thought process and how it relates to my own personal stock portfolio. To be frank, some of these thoughts would not stand up on paper and make a lot of financial sense, but they made sense to me due to the current composition of my portfolio.

The Singapore Case

On 6 August 2021, it was announced that due to Singapore having successfully vaccinated 66% of its population, restrictions would be eased in two phases. Subsequently, Singapore has removed restrictions relating to the Variant of Concern (SARS-CoV-2) from 29 March 2022.

We can see from the chart below that from Aug 2021, there was an uptrend in the number of Covid cases, reaching a high sometime in March 2022, and since then there are waves of highs with each new variant.

The new COVID-19 hospital and ICU admissions have nevertheless been trending down.

The total number of recorded deaths so far is 1710, with 89.7% of the population fully vaccinated.

Among the deaths, we can see that the majority of the cases are from the elderly (60 to 80+ yrs of age).

The number of deaths daily has been trending down although there are waves of high due to the waves of new variants. Recently the death rate is 0.14 for 7 days on average. It is a long drawn but clear downward trend, but by no means over.

From the population pyramid of Singapore, we can see that there is a high percentage of the population in the above 45 years old age group.

Now what has it got to do with China, you might ask?

The case with China

Data from China is very opaque, but if we are to assume Singapore as a micro example of what is to come in China, it is not hard to guess what will happen. In fact, it might be argued that the battle with Covid in China will be long-drawn and at a much more massive scale.

Unlike Singapore, in China, only 69% of those aged 60 and above and just 40% of over 80-year-olds have had booster shots. In the US, over 70% of those over 65 have received a first booster, while 44% have already received a second.

In Singapore, more than 90% of those above 60 years old have minimum protection (eg. they have completed three mRNA or Novavax/Nuvaxovid doses, or four Sinovac CoronaVac doses). See below.

And there is the question about the effectiveness of the vaccines used in China. So far, eight COVID vaccines have been approved by its government. The two that are most commonly used are CoronaVac and Sinopharm. And they don’t stack up to the mRNA vaccines used in the U.S. (and Singapore).

From the population pyramid of China, we can see that China has a lower percentage of the population in the above 45 years old age group (but it is slowly morphing into Singapore’s version). Nevertheless, there is still a relatively high proportion of the population which are above 45 years old.

As crematoriums fill up, China shifts how it counts Covid deaths (read here)

For a tiny nation with a high vaccination rate among the elderly, with more effective vaccines, and with a well-drawn-up re-opening plan as compared to China, Singapore is till today still battling with Covid-19. Death rates have stabilized somewhat, but after many months after the reopening, the battle is still ongoing. The mammoth-scale battle in China has only just started.

With the rather opaque data we have been receiving from China, perhaps a better gauge would be via the earning reports from the Chinese pharmaceutical-related stocks, medical stocks, insurance stocks, and even funeral services-related stocks.

Hong Kong-listed funeral services-related stocks

There are 4 stocks listed on the Hong Kong exchange (see below), and among the four, two of these stocks issue dividends. eg. Fu Shou Yuan International Group Limited (1448.HK) and Anxian Yuan China Holdings Limited (0922.HK).

Fu Shou Yuan International Group Limited, together with its subsidiaries, primarily provides burial and funeral services in the People’s Republic of China. It operates through Burial Services, Funeral Services, and Other Services segments. The Burial Services segment sells burial plots; and offers cemetery maintenance services.

Anxian Yuan China Holdings Limited, an investment holding company, engages in the cemetery business in the People’s Republic of China. It provides funeral and burial services; sells tombs and niches; and operates the Bai Nian Ju building covering an area of approximately 30,000 square meters. The company was formerly known as China Boon Holdings Limited and changed its name to Anxian Yuan China Holdings Limited in July 2013.

The below article though dated helps to explain Anxian Yuan’s business and key revenue drivers.

Anxian Yuan Announces 2014/2015 Interim Results (read here)

From a purely fundamental stand view, Fu Shou Yuan (as compared to Anxian Yuan) is a much bigger company with stronger fundamentals.

Fu Shou Yuan has a higher ROE, ROA, lower Debt/Equity but lower current ratio.

From a historical financial standpoint, Fu Shou Yuan’s EPS and net income have been rising consistently. See below.

Anxian Yuan’s EPS has been flat in recent years and net income has been slightly up trending in recent years. Not as stellar compared to Fu Shou Yuan’s. See below.

In fact, among the four, the stock that has been receiving the most attention from analysts is Fu Shou Yuan.

Individual investors among Fu Shou Yuan International Group Limited’s (HKG:1448) largest shareholders, saw gain in holdings value after stock jumped 11% last week (read here)

China stocks: party and funeral shares make a dissonant rally (read here)

Nevertheless, Anxian Yuan’s balance sheet is respectable with a high current ratio of 3.72, with a low debt/equity of only 5.12%.

Anxian Yuan China Holdings (HKG:922) Could Easily Take On More Debt (read here)

These data are readily available from StocksCafe. If you do not have an account, you can sign up using my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Dividend play

“In this world nothing can be said to be certain, except death and taxes.” Benjamin Franklin

There is a certain business moat when it comes to deathcare/funeral services-related stocks, and I have previously written a few posts on these stocks (see below). After all, death to every one of us, is certain. Their business is relatively immune to recessions.

I have also previously invested in Nirvana Asia Ltd which has been bought out and delisted, netting me a small profit.

Grim Reaper Stocks (read here)

Fu Shou Yuan International Group Limited (read here)

From a dividend growth perspective, Fu Shou Yuan is a clear winner. Compared to Anxian Yuan, it has a lower payout ratio. In 2021, the payout ratio is 28.82%. The management is committed to paying out no less than 25% of their net distributable profit as dividends to shareholders. See below.

Anxian Yuan does not consistently pay out dividends and only in recent years started a more regular dividend payout scheme. In 2021, the payout ratio is 47.74%. The company intends to pay dividends of not more than 75% of its distributable reserves available for distribution. See below.

Personally, from a fundamental point of view, I would reckon that Fu Shou Yuan is the clear dividend growth winner, given its consistently increasing dividend payout over multiple years.

As mentioned earlier, Fu Shou Yuan has been getting more analyst coverage and from the Simply Wall Street site, we can see that Fu Shou Yuan’s stocks appear to be 27% overvalued. See below.

While Anxian Yuan’s stock is 46% undervalued. We can clearly see which stock is getting the hype.

In addition, for my case, at the moment, I would like to add some higher dividend yield plays into my dividend portfolio and I have initiated a tiny position in Anxuan Yuan stocks.

Anxian Yuan is a riskier play and only time will tell if it can keep up with its dividend policy and even have an increasing dividend payout. The reopening of China and the increase in mortality rate should provide a short to medium-term tailwind.

Anxian Yuan’s current dividend yield is 9.89% and the projected dividend yield is 7.69% which is relatively high among my dividend counters (even among the HK-listed dividend counters in my portfolio).

On the other hand, Fu Shou Yuan’s current yield is only 1.6% and the projected dividend yield is 1.6% (rather low in today’s high-interest rate environment, even the latest Singapore Treasury Bill’s rate is higher). However, I must add that to just focus on the current Fu Shou Yuan’s dividend yield is rather short-sighted, after all, it has a strong history of consistently increasing its dividend payout.

The ‘messy’ battle with Covid-19 with the reopening of China is only beginning. Stock prices for these funeral services-related stocks remain volatile. However, if one is to believe that revenue and income for these companies will increase in the short to medium term given the scale and long drawn-out battle, it is worth having exposure to these stocks over time. There is really no hurry to invest, and perhaps a better strategy is to slowly DCA into these stocks.

As Cases Explode, China’s Low Covid Death Toll Convinces No One (read here)

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Promotion Period:  16:00 06/12/2022 – 15:00 28/02/2023(SGT)

Sign up and open an account with Tiger Brokers (Singapore) during the promotional period to receive a free GoPro Share (NASDAQ: GPRO), 365 Days of unlimited commission-free trades for HK, SG, and China A stocks, 180 Days of unlimited commission-free trades for U.S stocks, 5 commission-free trades for options within 30 Days and 1 month Ryde+ subscription.

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Posted in Dividend & Yield, Fu Shou Yuan, Hong Kong Shares, Nirvana Asia Ltd | Leave a comment

Top 3 Stocks Superinvestors Bought in Q3 2022

The third quarter of 2022 hadn’t been kind to investors, with the S&P 500 declining over 6% throughout the period. But as Warren Buffett famously said, “Be fearful when others are greedy and be greedy when others are fearful”.

Consumer confidence is at a low, inflation is high and market sentiment is teetering on the edge with the prospect of recessions being tossed around in the news. But while it seems like a terrible time for investors, it’s actually an incredibly useful time to be making new investments.

Recent declines in US tech valuations have had some super investors salivating at the prospect of picking up shares in companies where they see long-term value at huge discounts compared to 12 months ago. While their investment doesn’t necessarily signal the end of the difficulties for shareholders, there’s something to be said for their confidence in businesses with solid fundamentals.

Number 3 – Meta Platform

In both Q1 and Q2, Meta appeared among the list of most purchased stocks, and with the stock falling a further 15% across Q3

Meta is a company with a wide moat. It has a large network effect, but of course Meta’s business has changed quite a bit recently. 

With the macroeconomic environment as it is, big advertisers are pulling back on budgets. This is evitable in their earnings.

By the third quarter of this year, Meta had realized an 18% reduction year-on-year in the price per advertisement due to declining demand.

Recent pushes from Apple to reinforce user privacy has also negatively impacted Meta, with Apple’s App Tracking Transparency (ATT) rules preventing Meta from using user data in the same way they were previously to optimize the advertisements that would be served up to a user. ATT reportedly reduced the company’s revenues by about US$10B per year.

While Meta’s shift to focus a large amount of resources to their metaverse presence is illustrative of a long-term bet on the future of social interaction, they’re detracting from their bottom-line, making the earnings reports look a little less rosy. In Q3 their R&D ballooned year-on-year to US$9.1B but their revenue actually shrunk, leaving just US$4.4B in net income, a 51.6% reduction compared to the $9.1B in earnings from the same quarter last year.

Number 2 – Microsoft

Microsoft was another poor performer in Q3 with the stock ending the quarter down 10%.

They have three revenue segments:

1) Productivity and business processes

2) Intelligent Cloud

3) Personal Computing

What we’ve seen over the past few quarters is their cloud segment take off and their personal computing segment slow. This is very much a result of the macro environment and the trend of tightening consumer spending amidst record inflation levels.

However, overall Microsoft is generally very well protected thanks to their economic moats in software and cloud and thus, despite the stock falling around 28% year to date, it continues to attract long-term-minded super investors.

Number 1 – GOOGL

Google got 12% cheaper across Q3 but it remains a popular bet among hedge funds and other smart money. The likely explanation lies in its incredibly strong balance sheet with minimal debt – literally $22B in plain old cash and just $14.6B in long-term debt. They have a massive moat in online search and digital advertising, continuing their firm grasp of the market with over 83% of the total search volume in 2022.

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

Posted in US Stocks | Leave a comment

Increasing returns and yield with my portfolio in a down market

So yeah, 2022 looks likely to be not a good year for my portfolio. Well, it did not pan as well as I wanted it to, or hoped for.

However, that is what it is like for stock investments (some years are good, and some years are not so good). The good times, will kind of take care of themselves.

I reckon when life gives you lemons, make lemonade.

While during the bad times (well for my portfolio), with rising interest rates and rates seeming to stay high for some time, and growth stocks (and dividend stocks included) moving sideways (or down), I have made some minor adjustments to take advantage of the (bad) situation.

Please note these are just my own personal thoughts and might not be suitable for you. Ultimately, the key is to hold on to a diversified portfolio of fundamentally sound stocks. Many would argue that holding on to an ETF that tracks the S&P500 or World index would be better… I do see the merit in that.

Portfolio

Long story short. Basically, I have an unbalanced barbell portfolio. The majority of my holdings are in dividend stocks (Hong Kong and Singapore listed).

Keeping a long-term focus on dividend stocks

It really depends on your priorities and risk appetite. I typically favor dividend stocks (over growth stocks) due to their more moderate price volatility and the predictability of dividends. However, the fundamentals of any stocks (be it growth or dividend stocks) can deteriorate, and ultimately it is worth monitoring and reading up on their earning reports and news pertaining to the underlying companies.

Despite the increasing interest rates, I still believe that long term wise it would be more beneficial and rewarding to stay invested in good dividend stocks, and have taken advantage of any dire news and sharp price drops to purchase more dividend stocks – and will continue doing so from now to 2023.


As mentioned earlier, I should be achieving around $30,000 passive dividend/interest income for 2022.

Getting yields from Growth Stocks

2022 was not a good year for the growth stocks in my portfolio. I do not have many growth stock counters in my portfolio, namely, Alphabet, Mastercard, The Trade Desk, Tencent, and Pinduoduo.

Nevertheless, I still believe in the long-term outlook of these companies.

In the later part of the year, I have regularly sold covered call options for these growth stocks. The 3 counters on which I have sufficient stocks to sell covered call options are Alphabet, Tencent, and Pinduoduo. Among the trio, Pinduoduo’s stock price is the most volatile, which also means a higher premium for the same duration.


My strategy is simple… target is to get a min duration of 1 to 1.5 months or more (till the expiry of the option), and aim for far out strike price (typically it is located at the bottom of the price list or very near the bottom…). In short, not a short duration, and strike prices which have not been within the trading range for the past few months.

This will greatly reduce the probability of the options being assigned. However, it will not eliminate the possibility. There are a few times when I was assigned or was quite close to being assigned. As much as I want to totally mind off from this endeavor, new (and sudden) events or news will cause some anxiety at some point in time. It is not totally passive… and I do not consider them as passive income (more like bets).

However, with a relatively long duration and far-out strike price, the odds technically should be in my favor. Over time it should help out in little ways.

On the flip side, because the strike prices are far out, the premium allocated is not high.. and since the duration is relatively long (more than a month), I cannot do this frequently. In other words, if you are looking for high and fast gains, this strategy is not for you. In fact, it is rather boring and normally it tests my patience (does not help when I see videos or articles touting the high returns from selling options within a short span of time).

On some days, I just put in my sell trade at the limit price and check if my order is filled at the end of the day. If it is not filled, I will just try again the next day (when there is a temporary hyped-up positive sentiment/news causing a spike in stock prices making selling call Options easier and with a better price).

I also need to ensure that the earning report dates of the stocks do not fall within the duration of the call options, as any surprise upside earnings will suddenly supercharge the stock prices. This further limits the frequency of my selling of covered call options.

Also, I can only use this method for highly liquid growth stock options and not dividend stock options. There is little trading liquidity for most dividend stock options… so there are technically no (or very few) buyers willing to purchase far-out strike prices. In fact, in comparison to HK growth stock options, US growth stock options are generally more liquid (or have more price options).

To give you an idea. I sold Alphabet Inc Class A call options on 22 Sept 2022. The stock was trading at around US $100.14 on that day. The call option has a strike price of US $125 (almost a US $ 25 price difference), with the expiry of the option on 21 Oct 2022, almost a month out.

If we look through the 1- year price chart of Alphabet Inc Class A, the highest the price went was around US $148 in Feb 2022. And given the volatility of the stocks and the general downtrend movement of the stock price (and stock market), to have a US $25 upside over a period of a month is low. It is not impossible but improbable. The premium I received from selling 2 lots after the deduction of the fees is only US $14.57 (S$19.65).

Since I am selling covered call options and not naked call options, I have to be totally honest with myself that I do have the underlying stocks to sell the covered call options. Sure I can get by, by selling naked options, but during sudden events or price upswings, I would be unduly stressed as I would be caught without the underlying stocks to sell… why go through that anxiety for that small amount of premium at the beginning? Consequently, this further limits how many call options I can sell. FYI, there are of course other options such as rolling over the options (eg. Close current options at a loss and purchase another one with a later expiry date), but I just don’t really want to have to go through that, given the choice.

From late Aug 2022, the “grand” total premium which I received from the closed/expired Options positions is around S$473 (for around 3 months). It is nothing to shout about, and I am just taking a slow and boring way of earning some spare income while holding on to my growth stocks. In fact, every time I sell these options, I am wondering why would anyone want to buy them. :p…..

The mentality behind this is very different from a trader’s mentality. Increase odds in your favor for small gains, rather than a tiny money outlay, and have a small chance at massive gains. Guess that is what most options traders preach, eg. with just a small cash outlay, one can have a leveraged (control) position in stocks. A small price to pay to limit losses and potentially achieve high rewards.

Imagine you are the casino, and you are selling a dream to the gambler… He will get 10 million dollars, if Micheal Jackson (when he is alive) walks into that casino on that day at noon, go on stage, sing a solo of the Billie Jean song, does his moonwalk, plays roulette, and win the game, and pay the tab for everyone in the bar; while the gambler just needs to pay $100 for such a chance to win that 10 million dollars, more than he can ever earn in his entire lifetime…. (an extreme example) possible but improbable. You get my drift.

Ultimately, over time (long period), with my increased holdings in growth stocks, the premiums received should increase. The same process but just an increase in lot numbers.

I do intend to hold on to my holdings of the growth stocks in my portfolio as I believe they are fundamentally good companies. As mentioned earlier, the fundamentals of any stocks (be it growth or dividend stocks) can deteriorate… so despite this strategy, if the fundamentals of the underlying stock deteriorate it might be more worthwhile to liquidate and look for better growth stocks.

On a side note, I personally tried selling cash-secured put options but found that it kind of tied my liquid cash down. This is because, for the duration of the put options, I need to ensure I have the underlying cash on hand in case the options get assigned (cash which I can’t deploy to purchase other investments should good opportunities arise). Similar to selling naked call options, I do not recommend selling naked put options.

FYI I find StocksCafe useful for tracking my Options positions. If you do not have an account, you can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Recycling my Singapore Saving Bonds in my War Chest

I always have this portion of my net worth which I consider my war chest. Instead of leaving it as cash in the bank, I want it to earn some interest while at the same time be fairly liquid.

I find the Singapore Saving Bonds an ideal instrument to do so.

With the rising interest rates, the recent issues of the SSBs have an average (10-year) yield of more than 3%. I have been slowly selling the SSBs bought from 2018 to 2020 and using the refunded money (either cash or SRS) to purchase the more recent issues of the SSBs. I intend to keep doing that to create a bond ladder so that I have interest payments almost monthly.

Overall, this will further increase the yield of my war chest. Having said that, SSBs are not meant for long-term holdings, ultimately the SSBs’ yields cannot surpass the overall inflation rates. They act as short-term war chest funds which can be liquidated and ready to be deployed early next month to take advantage of any good opportunity… while earning some (safe) interest at the same time.

Using my CPF-OA to purchase Singapore Treasury Bills (T-Bills)

Why Every Singaporean Should Apply To Invest Their OA Funds In T-Bill (read here)

Treasury Bills (T-Bills) Singapore Dec 2022 Guide: Latest T-Bills Interest Rate & How To Buy T-Bills in Singapore (read here)

One way to maximize the returns on our Ordinary Account (OA) savings is by investing in higher-yielding Treasury Bills. Like the Singapore Saving Bonds, T-bills are completely backed by the Singapore Government, which has a “AAA” credit rating. This reduces the risks of investing in T-bills to the bare minimum. Singapore is one of only 11 countries in the world that enjoy the “AAA” credit rating! Some other countries include Switzerland, Australia, and Finland.

The floor interest rate for the Ordinary Account is currently 2.5 per cent, and 4 per cent for the Special, MediSave and Retirement (SMRA) accounts.

CPF members get an additional 1 per cent on the first S$60,000 of their combined CPF balances, and those aged 55 and above get another 1 per cent more on their first S$30,000.

Given that the Ordinary Account interest rate is pegged to the three-month average fixed deposit and savings rates of three major local banks – DBS, UOB, and OCBC, it is unlikely that the floor interest rate for the Ordinary Account will rise any time soon.

With the latest T-bills auctioned in November 2022 yielding 3.9%, it presents a unique opportunity to earn higher returns on our CPF OA savings.

Personally, I do not intend to take on much risk with my CPF funds. There are options to use CPF-OA to purchase ETFs (STI or S&P 500), however my preference is for my CPF-OA funds to remain as a risk free (bottom) layer of my overall net worth. Nevertheless, I do not mind swapping CPF-OA funds with another risk free instrument such as T-bills temporarily.

I have recently made a trip down to the bank to bid for the Dec 2022 (6-months) T-bills. Issue code: BS22124H. (Benchmark yield as of 30 Nov 2022: 3.91% p.a.) The auction date is 1 Dec 2022, and the issue date is on 13 Dec 2022.

However, we have to consider that investing in T-bills is an arbitrage opportunity rather than a long-term strategy. In addition:

You will not get any CPF interest in the month that you apply for the T-Bills

– You will not get any CPF interest in the month that you get the money back from the T-Bills

So effectively, you lose 1 month CPF-OA interest if you buy T-Bills with CPF-OA. This means the T-Bills interest must be high enough to compensate you for the loss of the 1 month CPF-OA interest.

I personally feel that any amount below $50,000 is not worth the effort. Just doing some rough estimation, if I am to invest $100,000 (from my CPF-OA) to a 6 months T-bill (around 3.9% interest rate) I probably can get around $500+ additional interest… eh again not much (nothing to shout about).

By the way, you can also track T-bills using Stockscafe (read here).

In gist

I reckon there are other ways to maximize returns on our spare cash in this rising interest rate environment. Shall not go into them here.

Ok the above-mentioned are just some of my actions (or little steps) to take advantage of the situation. These are by no means fast and quick ways for gains… but rather just some slow and small steps. I probably won’t be able to have enticing post titles like “How to make $XXXX in Y days”; and I don’t intend to. I also don’t believe that I am some star investor, but rather am aiming to avoid huge losses and to stay in the investing game for the long term – hoping to slowly snowball my gains.

“Even though most investors see their work as active, assertive, and on the offensive, the reality is and should be that stock and bond investing alike are primarily a defensive process. The great secret for success in long-term investing is to avoid serious losses.”
― Charles D. Ellis, Winning the Loser’s Game: Timeless Strategies for Successful Investing

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!


Posted in Dividend & Yield, Personal Finance | Leave a comment

Tiny goals for my Dec 2022 break

So yeah, this is technically the start of my Dec 2022 break. I will be spending time with my family (wife + 2 kids) through these 2 weeks.

I guess this is a little post to ponder how I should go about this break.

There are a few tiny goals that I hope to achieve.

“Being Present”

On most days when I go to work, I will take the MRT train. During the morning, some people on the train will be staring at their phones, and some will be plugged in with earphones. Most will be mindlessly scrolling through social media or using that few minutes on the train to catch up on some drama. There are lesser people doing that in the morning (during the train ride to work), as compared to the ride home in the evening. This is probably because many are still drowsy / half awake.

On my ride back home, most people on the train will be glued to their smartphones. Me included. I guess this is the only time after the long hours at the office, that we can finally be free to watch what we want.

However, once with my kids (for dinner), my mind may be still preoccupied with work, or I just want to mindlessly scroll through the social media platforms online. Too tired for anything else.


Often I failed to engage with the kids.

So now, I really have no reason and can finally be around for the entire day (at least during this break) to focus and be mentally present with my family. No mundane work to drain my energy and take up my time.

Today we just put up our little Christmas tree together with my little girl and went shopping for a water bottle for her.

My goal is to spend less time on my devices (laptop or handphones) and just be present and enjoy the moment. Hope I don’t get any urgent calls or messages from my boss or colleagues hahahahaha..

Season for giving

They say Christmas is the season for giving. And with Christmas around the corner, it is probably time to give.

Ok, for this year, despite the lackluster stock markets and the less-than-stellar performance of my portfolio, I did accomplish my main goal of saving and investing for the year. In fact, I can give myself a pat on the back and says that I have indeed exceeded my target. I have allocated the intended amount of my savings (from my active income) plus the passive income from dividends and bond interest into my basket of stocks (both growth and dividend counters).

Net worth-wise, 2022 has not been a good year. My portfolio did not do well. However, that is how it is with the stock markets, there are good and bad years.

I have also managed to set aside a lump sum for my aging parents (going to contribute to their CPF accounts by year-end).

I still have a small amount set aside, to slowly create a bond ladder with Singapore Saving bonds next year.

With that being taken care of, I can now use a portion of what’s left for the vacation and have nice meals plus treats for the family.

Ultimately money is an enabler, and holidays are a time to have fun!


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

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Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

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Happy shopping!

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Winding down for the year 2022

In a few days’ time, it would be Dec 2022, coming to the end of the year.

I have not been blogging much as I wanted to take a breather from social media and investing, and just focus on other aspects of life.

Nevertheless, looking at my own portfolio, in terms of value, I could safely say 2022 is technically ‘a lost year’. The value of my portfolio did not go up or down for the whole of 2022. In fact, I could say that I have basically lost a year’s worth of active income in addition to some more unrealized loss. Or put it another way, if I have liquidated all my positions at the start of 2022, and stayed out of the market for much of 2022, I would have been better off financially (at least my net worth would have increased based purely on my active job income).

Some of my counters which were green at the start of 2022 (unrealized gains) have turned red (unrealized loss). Well, many counters are still technically green.

However, all these are in retrospect. I do not have a crystal ball.

Still, I have stayed invested throughout 2022 and during the month of Oct 2022 (China’s stock capitulation), I have added more to my Hong Kong dividend counters (and only a tiny bit to my Pinduoduo holdings). I read with interest the post by Brian titled “The Day of China’s Capitulation – 24 Oct 2022” read here. And I made a mental note to invest more should Brian write a similar post again.

Today’s Sunday Times (27 Nov 2022) is interesting because many articles do relate to financial matters in one way or another. These articles are not just in the Invest section. There are articles about the rising cost of living, about investing in Tech stocks, and articles questioning if China has indeed reached the breaking point over zero Covid-19 (which would have implications for people interested or vested in China-related stocks).

Even the Life Section has the headline titled “Work from anywhere? How about a beach in Bali or a farm Down Under”, with stories of Singaporeans having overseas “workations”.

The couple who are planning to stay and work from Bali reminded me of the Youtuber Jean Vorokova (Year in Bali: Pros & Cons, the Realities of Life in Bali as a Foreigner (watch here))

Has China reached breaking point over zero-Covid-19? (read here)

Work from anywhere? How about a beach in Bali or a farm Down Under (read here)

The risks of investing in tech stocks (read here)

IT workers turning to unions as tech layoff tsunami reaches India (read here)

With the rising cost of living in Singapore and the impending stepped GST hikes in 2023 and 2024, many middle-class Singaporeans are already feeling the pinch. For those with the option to work ‘anywhere’ due to the flexibility brought on by technological advances and the general acceptance of remote working after the pandemic, staying and working in another country with a lower cost of living suddenly seems possible and alluring.

Indeed, the idea of ‘geo-arbitrage’ given the strong Singapore dollar and the remote working trend is gaining traction. My wife and I were having a chat with my teenage son this morning at Starbucks, and he mentioned that he wants to work in Croatia when he grows up. He saw some videos about the nice natural sceneries and food there, people there communicate in Italian and English, etc… Personally, my mental map of Croatia is pretty blank if you ask me.

The article that probably struck a chord with many people is the article about the rising price of the humble “cai png” or economy rice.

Typical economical rice in Singapore (Photo: Desiree Koh)

The caifan story: When ordering it is stressful – because prices have gone up (read here)

Personally, I was also caught by surprise by the price hike. Just a few weeks back, I ordered an economy rice meal consisting of 1 meat and 1 vegetable (the meat was a big chicken thigh (steamed) and the vegetable side was a dash of lady fingers) from the Koufu coffee shop near where I stayed. I was rushing for a meeting and had only a few minutes for lunch. Prior to that, I looked at the sign behind the stall, and it mentioned $3.80 (or $4 plus) for 1 meat (side) and 1 vegetable (side). When it was time to pay, I was told that it costs $8! That was like almost a 100% increase.

Think they have forgotten to update the price list at the stall (or was it left not updated on purpose :p).

My Portfolio

Recently I have sold off most of my Singapore Saving Bonds (SSB) which were yielding 2+% to the low 3+%. I intend to recycle the funds to purchase the fore-coming SSBs. I have invested a small sum for the upcoming Dec 2022 SSB, and will be slowly adding more SSBs next year. In gist, I am recycling my funds to purchase the latest rounds of SSBs.

For the longest time (perhaps never in my personal investing journey) have I witnessed bonds / T-bills / bank deposits becoming such hot investment yield plays, and ultimately giving dividend stocks and REITs a run for their money. I am still much more inclined toward dividend stocks and REITs currently despite the past (and ongoing) carnage and have accepted that policies and short-term interest rates are beyond anyone’s guess.

Nevertheless, I have retained the amount allocated for SSBs. And at times, I am undecided whether to DCA more into dividend stocks or REITs (or even Chine Tech stocks) or should I just turn to SSBs or T-bills.

In mid-Oct 2022, I liquidated my position in SATS, and together with some of my war-chest holdings, added to SGX and Pinduduo in late Oct, and added to Alphabet, Trade Desk, BOC HK, Hong Leong Finance, CapLand Ascott in Nov. While at the same time liquidating my SSBs to purchase more SSBs later.

I seldom liquidate my positions in stocks totally. However, I am disappointed with the SATS CEO/President’s decision to purchase WFS at such a ridiculous price (after the run-up in revenue and income of WFS due to the tailwinds of the pandemic). Not forgetting the resulting deteriorating balance sheet amidst the rising/high-interest rate environment. I don’t see how such a move is beneficial for investors long term; and accept that no matter how sound or solid a company is, it could one day be mismanaged. On another note, I read that this CEO was only recently appointed; and probably was under immense pressure then to turn the business around.

Although the overall net value of my portfolio has dropped…it was not devastating. Perhaps as most of my funds are in dividend counters (and not growth stocks), the decline (percentage-wise) is not huge. Perhaps like what Christopher Ng would have said (Living a Dividend Life – How much do you need? watch here), they are probably more ‘forgiving’, in the sense that I can still look forward to the dividend payouts while hoping for sentiments to turn around. I reckon I should be able to hit $30,000 in dividend/interest payout for 2022.

From another angle, the overall yield for my portfolio has been slowly creeping up. Which is good from a long-term perspective.

I may have probably missed the China Tech stocks capitulation in Oct 2022 given the past month or past weeks’ price increase. For instance, Tencent HK was just HKD 200 in late October 2022 and has quickly risen by 36% in less than a month.

Likewise, the price increase for Pinduoduo is impressive. I managed to snagged some shares at USD 40 in late Oct 2022. Now it is trading at USD 65.75. Up almost 48%.

Nevertheless, these are short-term price volatilities. Your guess is as good as mine.

However, I am reading with interest, into the recent developments in China. China has been trying to keep the restriction controls under radar (and avoiding a full-blown country-wide lockdown) but given their public stand, it might be difficult for the top officials to change tack.

The same risks which have caused many to say China Stocks are ‘uninvestable’ only recently are still very much (and even more) in place. With the record high Covid-19 cases in China and the pent-up frustration of the public, and the recent committee leadership round-up from the National Congress, there might be a case for good investment opportunities sometime in the future for those who are well-prepared (eg. war-chest).

Or China might finally stop its zero covid position, and may eventually fully open up in early 2023 (which would be good news for all who are currently vested in China-related stocks).

Well, I am never good with market timing, but then again, I always feel that opportunities will come to me – in the form of dire headline news. There is no need to go around trying too hard to look for opportunities. Either way, I am staying invested.

Time out

Will be taking a long break from work in Dec 2022. Going for a staycation in Sentosa with the family and a nearby trip. Been quite tired from work, and hope to recharge. The construction sector is still plagued by supply chain issues and the project that I am involved in is having many issues.

Coming out of the pandemic, there appears to be some shift in the work culture. As it is still early days (to tell), I hope I can find a better balance in the future.

I was coming back home from work one day and saw this ad on the bus (by a job recruitment company), with these words in bold: “The best escape is a better job”….. hmm… what say you guys, who are aiming for FIRE?

Source: https://twitter.com/jobstreetsg?lang=nl

Thank you for reading.


StocksCafe

FYI I find StocksCafe useful for the tracking of my own portfolio, and especially like to use it to track my portfolio stock dividend/bond interest payouts (projected and due). You can use my referral code: apenquotes. Just click here. Upon signing up using the referral code, you will get to enjoy being a Trial Global Friend of StocksCafe and test out all features for free for one month!

Please follow me at StocksCafe, via my StocksCafe profile page.

Tiger Brokers

For the Singapore market, Tiger Brokers currently waive the minimum fee and only charge a 0.08% trading fee. This drastically reduces your cost as the minimum fee from other brokers (ranging from SGD 8 such as FSMOne and SCB, to SGD 25 for local brokerages) does add up and can eat into your returns.

Tiger Broker Referral Code:: GPE59H

Sign up here.

FSMOne.com

Typically I use FSMOne.com to invest in funds & ETFs (including money market funds).

If you do not have an account, you can sign up here. Please use my FSMOne referral code: P0031127, when you sign up.

Gemini

As stated by MoneySmart on Jan 22, if you’re looking to optimise trading your crypto with relatively low fees, simple-to-grasp expert UI and ease of purchase with Singapore dollars. then the best crypto exchange in Singapore is Gemini,

If you do not have an account, you can sign up here using my referral link. After you have signed up, once you buy or sell US$100 or more (or 100 USD equivalent of your domestic currency) within 30 days of creating your account, your account will be credited US$10 (or 10 USD equivalent of your domestic currency) worth of bitcoin.

Shopee

I have been using Shopee for a while and think you will like it as much as I do.

Get $10.00 off your first purchase using my code DARREB52.
Download Shopee now and enjoy hot deals at the best prices! Click here.

Happy shopping!

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