Portfolio Review 2019 - Performance Review

Quantitative Measures
Beta = 0.76, VaR = 8.92%,
Expected Shortfall = 17.43%
Overall - Time = 19.99%

Performance Review for 2019

Beating the STI ETF benchmark is not difficult this year. As a market capitalized ETF, STI ETF was a late buyer in the REIT rally, which highlighted the downside of this methodology. Moreover, a lot of retail investors with larger proportion to REITS performed way better than me. My returns were also punished as I averaged down on Silverlake Axis on the recent price correction. I also sold off a percentage of STI ETF to increase my war chest instead of reallocating to US Stocks, resulting in the missing out of the Christmas rally and the year end momentum play.

The S and P 500 trounced the returns of most market participants. I am not certain whether the blind money / DCA via index investors resulted into this phenomenon. There is significantly high PE stocks in the index constituents. Stocks could be simply getting more expensive instead of being supported by real earnings due the blind allocation of capital to the same few stocks for the various US /Global ETFs. As a value /FA investor, this makes me uncomfortable and I will not allocate aggressively into US stocks for the time being. 

Nonetheless, I shall not make excuses for myself to be complacent and should seek to improve my methodology to improve my results. I am generating a watch-list of stocks I will seek to accumulate if a correction hit. The priority now is to increase my Warchest and possibly allocate a portion to short-term FixedD if required. 

Holdings Review

Technology and Intellectual property
1) I have averaged down on Silverlake Axis after it had hit new lows of SGD0.41 at the month of September and Dec. This fundamentals-based averaging down and skewing my portfolio allocation is a controversial threshold to cross. As I do not utilise stop losses and is willing to average down as a company becomes cheaper with better fundamentals, this led to an oversized allocation towards SLA. My portfolio allocation rule is to NEVER exceed 20% on a single stock unless it is driven by upward revaluations. I need to be disciplined and stick to that. 

The meeting I arranged with SLA investor relations clarified on my doubts I had regarding the fundamentals of the company. The company is conducting share buybacks. It is not just a tool to manage external appearances, as there is insider buying from assorted managers which is reassuring. The balance sheet is strong and the core banking moat of the business is not disrupt-able by current Fintech in my opinion. In fact, the legacy core banking systems are ripe for replacement as banks seek digital banking strategies to structure new products and services as well as to incorporate automation to reduce overheads. There is reasonable certainty of cash flows from the contract book it has undertaken. There are certain industry specific questions that I posed to them, which reassured me that the Client-vendor relationships are strong, and the company is working to improve sales and profitability instead of expanding blindly to capture market share at all cost. There is significant revenue growth areas from boring areas like insurance processing (Merimen), where many lessons can be gleaned from the banking sector like adoption of machine learning based algorithms and STP processing. I am bullish towards their fintech acquisitions (Camera on-boarding, digital banking apps, bio-metric and fingerprint on-boarding) tools to improve their existing platforms, which are definitely in demand. I will be keeping the notes from that meeting and monitor if there is changes to the thesis.

2) Tencent is a conviction play based on the moat of Wechat and the stickiness of premium games in China and eventually worldwide. Google follows a similar thought process. I do not have granular understanding on the individual lines of business which limited my potential sizing into this company. I am wary of averaging up/down due to the acquisition heavy structure and accounting quirks in the industry, but the SAAS growth story, innovation focused culture and products, and moat of the existing business looks impressive. From a replacement cost perspective, their platforms are so entrenched in their specific areas that it generate significant network externalities. It will take tremendous capital and effort to displace them from their current standpoint.

3) Blizzard games are easy for me to understand.  Despite the exciting top down growth story of the video / mobile gaming industry, the bottom up analysis revealed a plethora of stiff competition making it a incredibly difficult business to operate. Significant resources need to be put into designing unprecedented playstyle / concepts, which can be easily imitated by competitors. Marketing, distribution and capital is also important for gaming studios and it is very difficult to find a decently price company until
Blizzard’s August  share price correction. Noticing the tendency of heightened year-end sales and continual expansions releases / game reworks from Blizzard, I look forward to seeing its financials and see if the rebound story remains intact. 

4) I am bullish on the moat of HKEX. As a gateway for Northbound and southbound Stock connect, Bond connect, China based ETF as well as London-China Connect, HKEX displays ERP qualities as it acts as a tolltaker for securities moving in and out of this gateway. The balance sheet, profit margins and cash balances are impressive. Despite some disappointments in the failure to acquire London Exchange due to government concerns, the unexpected Alibaba Secondary listing brought the battered HKEX to the first place in capital raising rankings.

Despite the fear of Macau dislocating Hong Kong as a financial center, the amount of infrastructure and talent to duplicate HKEX, as well as rewriting of commercial and legal contracts to trade in restricted CNY is staggering and not likely to occur in the near future. Nonetheless, considering the sizable percentages in my portfolio, I should not average down unless there is price correction / significant margin of safety for me to snap it up. 

5) SGX is an unusual situation. The deterioration of the Singapore equity markets as a capital raising center, closing of revenue lines, and delisting of companies is counteracted by the booming Derivatives business in SGX. The balance sheet and Dividend policy suggests that it is a stable dividend stock to hold, but the growth story of the derivative business (if any) remains a murky one to me. 

6) OCBC remains as one of the most well capitalized and safest banks to hold. The share buyback policy is misleading as OCBC conducts share buyback for its employee share compensation scheme instead of insider analysis that the stock is undervalued. Short term earnings may be punished due to the tightening of the interest rate margins as well as the increase in loan loss allowances, so it should not come as a shock when the earnings report come out. 

7) Ascendas India Trust and Ascendas REIT are the biggest gainers in my entire portfolio. My entry position is 3 years ago when Janet Yellen first increased interest rates resulting in discounted REITS. AIT was the larger position which I continually accumulated while Ascendas REIT was neglected. Both returns were not spectacular until the massive REIT Revaluation / Rally this year. I did not expect to see >50% gains from a dividend focused holding that pays 90% of its profits with supposedly limited room for capital appreciation. 

A lot of retail investors with much higher skew in REITS performed way better than me. A perceived change in market sentiment can push prices to incredible highs despite the diluting rights issues by various REITS. There is much lessons to be learnt about the unpredictable nature of markets, and I am just fortunate to be taken for the ride.  

8) Hong Kong Land is a property play in the Land Scarce Island in HK, whereby the long term valuation of prime estate in HK should not be adversely affected. The earnings may have a significant hit as the nature of HKL is to generate most of its profits in Hong Kong to channel to property development in China and prime estates around Asia. In a worst case scenario, the short earnings of HKL will take a hit. Nonetheless, the prime property in diversified regions should present a significant price floor on the intrinsic value.

9) Stanford Land is an asset play on a company which is cash rich and owning Prime property in Australia. Australia was suffering from a tourism downturn, and the hostile action by managers on minority shareholders along the stingy dividend policy battered the stock to attractive levels. I am wary of over committing to the stock due to its illiquid nature, until I have a strong thesis that the fundamentals are improving. 

10) Raffles Medical growth story is stunted as the management are very conservative about growing aggressively in Shanghai and Chongqing. Management warned there will be significant startup costs before the hospitals will deliver revenue. The China growth story will take some time to actualize and I will monitor periodically for updates.

Despite proclaiming myself as a long term buy and hold investor, there were some holdings which I bought and divested after a relatively short period. It is very hard to be consistent in your strategy versus your actual behavior in the market. Mistakes are inevitable and below is my List.

1) I let go of Apple too early after taking a small profit as I am not confident in the stiff competition posed from the China smartphones. I could be holding on to 30% gains if I held it up till now.

2) Singtel morphed from my largest position (strong balance sheet in a price war thesis) to one lot which was kept mainly for gaining access to its AGM. I underestimated the eroding power of market forces, and how entry of competitors could lead to the pricing moat of existing incumbent eroding rapidly. Price wars can last as long as there are investors with deep pockets. Companies can diversify / diwosify and burn cash in many areas to the point whereby the original thesis of the company can change within a few years.

3) STI ETF was considered undervalued until it bought stodgy REITS which are quite likely to be fair valued / overvalued by the time it entered the index. The weakness of the market cap methodology was evident to me, but it took very clear global headwinds affecting the business of the larger constituents to make me reduce my stock position to increase my warchest.

I might be doing a separate post to examine the weakness of my investment methodology. It is much harder to be consistent in execution if you don't have a idea of the dos and dont's in your framework. I might also be looking into foreign ETFs to increase my exposure to foreign growth areas as a replacement of the STI ETF. I will strive to remain patient until exciting opportunities emerge!


  1. I am also holding raffles medical. The cash flow has dropped quite a bit this year but their cash reserves shld be able to maintain the dividend. We will have to see how they do next year though.

    1. Hi Clement,

      Thank you for visiting and providing your feedback on RM.

      From RM Q3 results, its cash position of S$116.9million as at 30 September 2019 should be a sufficient buffer for to maintain its relatively low dividend payout. The nature of operating cash flow is stable and it should be able to tide through the gestation period of the CN hospitals barring unexpected events.

      It will be good to observe its growth trajectory in China through the earnings reports and AR. The managers elaborated in the last AGM about their strategy to pursue conservative phase by phase expansion to manage expenses and conservative marketing via roadshows / sporting events / health checkups.

      The gestation losses are significant and it is a bet on management to execute well. It will be prudent to monitor before any averaging up / down. China is a large albeit challenging market and interesting developments await!


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