Tuesday, September 8, 2020

If I Had To Choose - STI ETF or One of its Components?

It has been a while since I wrote so often.

While I talked about the Risk of Investing in ETF in the last post, I particularly mention about STI ETF. So I thought I should clarify my position and also address a particular question that I believe members of my Fundamental Scorecard Telegram Group will be interested (And maybe you who are reading this post).

While everyone is busy looking at the US market tonight, I am writing about STI ETF. While everyone is raving about S&P 500 rising from the dead, here I am writing about STI ETF which is trying to go lower everyday.

To start off, I don’t disagree in investing in US markets now. In fact, I encourage it. But one must make the purchase with the mindset that “this could be a permanent loss of capital” (Atas sentence cause I watched too many Guru Youtube lately). So you should only press the buy button IF you know the company well enough. This has also been what I have been preaching to everyone in the Fundamental Scorecard Telegram Group.

On a side note, I already place my GTC purchases last Friday. So everyone can rave about the US market tonight, I shall stay away from the noises.

So back to the main topic – why mention STI ETF?

Let me go back to Warren Buffett's most famous phase – Be fearful when others are greedy. Be greedy when others are fearful.

Now that everyone is ignoring STI and even SG market, maybe it is time to look at them again. That’s all. I am not saying you have to make purchases, but I am telling you to consider them now.

Obviously, it is not only what Warren Buffett mentioned. It is also due to 3 particular reasons.

1. SG Blue Chips ranges between low and high – Yes this is what I am saying. SG Blue Chips tend to ranges between high and low. There are many reasons behind why it ranges. But if you pick any SG Blue Chips, you will probably see the pattern. Then again, we have some like DBS that just rise and rise – that is an outlier.

2. Buy low and sell high. - Do I really need to explain this?

3. We will Bounced Back - If you don’t believe that Singapore will rise back, then are you saying, you will lose your job soon and the Singapore economy will collapse. Nevertheless, the Food court at PLQ still has a lot of people today. Bubble tea is still striving. Orchard Road is still packed. – So yes, we will bounce back.

So, this goes on to the next S$1000 question that I have been thinking - whether to add more of the SG Blue Chip (that is already existing in my portfolio) or STI ETF?

Do note the pre-requisite of the question above is that you must have an existing position of a component of the STI ETF in your portfolio.

The answer lies in my last post and my belief stated above.

In my last post, I said there are systematic risk in investing in ETF. If you chose the ETF route, you have to accept the risk. 

As mention above, I said my belief is that you should know your company well before buying.

Thus, if you don’t know the 30 companies well in the STI, why purchase the STI ETF? To diversify, you can DIY? 

The only reason I see someone who should invest in an ETF is because he/she already have their hands full and like to take the easy way out or just want to take the easy way out. Hey, there is nothing wrong with that. You can watch my youtube video here where I use 6 questions to explain how one should invest.

Furthermore, if you look at the components of STI ETF, DBS contribute 16%. Right now, in my portfolio (Yes I index my portfolio), OCBC also contribute roughly 13%. In my experience it is VERY HARD for an index to rise if the significant contributor do not move UP.

So with DBS being the outlier of the STI (even the SG market), do you think it can shoulder the burden of lifting the other 29 SG Blue Chips, especially companies such as Singtel, Sembcorp Industries, SIA, Hongkong Land, Genting Singapore and Dairy Farm?

Ok – You may counter this argument that there are other rising stars like Mapletree (whatever) Trust and SGX. But I generally believe there are more weak companies (especially during this Covid-19 Pandemic) than strong companies.

With that I hope I made my point across. If there is a need to choose, I prefer to average down in an existing SG blue chip now rather than buying into the ETF. 

However, if you hold on to the STI ETF instead and have a DCA strategy, you may want to Double Down during this period WITH GOOD BUDGETING. Please do not eat Maggie Mee in order to double down.

If you like to join my Fundamental Scorecard Telegram Group, please find the link in my previous post.

Saturday, September 5, 2020

The Risk Of Passive Investing In ETF

I suppose I will get a lot of backlash for writing on this topic. But I felt really important that I must address this - The risk of investing in ETF.

So if you have been in my Fundamental Scorecard Telegram Group or my Facebook Page, you may have seem what I wrote.

The first conversation was someone asking if I will sell my OCBC shares. As I quote and edited some of my words from the Telegram Group:

"No. This is a bit different when I sold all my starhill reits.

REITs business, in my opinion, is only 1 way. Thru Rental. So at that time when lockdown happens, I think for very long, then I decided to sell.

For a bank, bad times and good times, there are ways to earn. Is only how much. Plus provision is expected.

Maybe another point is core competencies. I work in Financial institution all my life. So I do know how they work.

Another point is at that time, I was wondering if the opportunity cost for holding starhill is high. You see in the lockdown if I deploy funds to US, I will make more gains. So that was a thought.

But now for opportunity cost, I don't see that there is much opportunity cost in putting my funds elsewhere. In fact, if I see OCBC, I may just buy STI ETF. Because I don't see much value now in the market.

When I say value, it mean in terms of new position other than adding to those I held.

So overall, I thought about it yesterday and I am intending on adding OCBC into the future."

Before I continue, I like to address the following:

1) Yes I sold all my Starhill Reits (The only REIT I had at that time) in March at the lowest price it had and I deployed to the US.

2) I do have 1 REIT holding in my portfolio. Its the one that is undergoing a potential merger.

3) Yes - I did bought more OCBC and it contributes about 15% (I estimated) of my portfolio.

Moving on...

So someone commented that I should choose STI ETF over OCBC. This was when I let loses a bit due to some of the conversation I had with him (If you are reading this, I apologize if I sounded harsh). 

It was also basically due to a conversation we had on the group chat prior to the first OCBC question where the same member asked why is the Telegram Group so chill despite the US market drop on Thursday.

My combined edited comments are as follows:

 "If you know the company well, you can ignore daily drop. And it gives you opportunity to add.

If you invest in ETF, you will be like WTF.. Because you are in no control. Do note that systematic risk apply to all no matter how clever u r. You don't know what happen because u don't know how the ETF will allocate the figure.

But I don't disagree to investing in ETF. U just have to suck it in and take the risk.

Do you know what comprises in the STI ETF? They are Banks, REITs, Keppel, Jardine BIG Group, and Singtel and also SIA... and somemore.

If I want REITs, I might as well go for REITs.

At the end of the day, I am not in control of the ETF allocation and risk management. Furthermore I may not like some companies in the ETF. So that is why I seldom go for ETF. If i want to diversify, I DIY. 😊"

Sooooo.... the purpose of this conversation made me realize the pointers below in Passive Investing:

1. If you buy ETF because everyone is talking about just buying ETF, WITHOUT KNOWING WHAT IT COMPROMISES OR AT LEAST REPRESENT - It is as good as buying into a company that the Uncle in the Kopitiam tells you.

2. Even if you know what it does, like STI ETF tracks the performance of the top 30 companies listed on the Singapore Exchange. It is not good enough. You have to know which are the companies.

3. Even if you know the companies, you have to know the allocation!

At the end of the day, buying into a ETF is similar to buying into a company. You have to dig into the ETF to understand what it represent, who it represent and which companies have the most allocation.

If not, the risk will be, if a market correction happens (Yes - Market Correction will happen to a ETF), you will not know what happened and may just sell everything irrationally.

With that, I like to say that all investment requires one to do homework. There is no free lunch in the world. If you are really really interested in Investing, please feel free to join our Fundamental Scorecard Telegram Group.

We talk about US, SG and sometimes HK companies and market. I will also answer all questions in the chatgroup if no one answered them. Oh... and there are many Gurus in this chatgroup, so don't worry if you think we are just another Telegram Group.

Tuesday, August 25, 2020

Dissonance and Consonance

Many moons ago, when Covid-19 had not hit our shores, I believe that there is definitely some value that Technical Analysis can brings to Fundamental Investor like me. It may be possible to allow me to find better entry and exit points.

After all, I have seem numerous of my exits going on to higher level after I exited. One example is Trendlines.

On the other hand, I also believe that if a Trader trades a fundamentally strong company, it can provide them some leeway if they miss out on certain actions - Like stop loss. This is because you will be holding on to a fundamentally strong company. 

In addition, even if the trader misses an entry price, he can always plan the next entry price for the same company - just because the company is fundamentally strong and has a chance of bouncing back.

Nevertheless, the truth is I was never able to get myself to learn about Technical analysis. It was not my forte.

As we fast forward a few moons later, Covid-19 landed on our shores.

Market went crazy. It was free falling until it wasn't.

Then came the point where I realized the economy and the market is moving in totally different direction. As the divergence gets bigger, Fundamental Investors ask ourselves why is this happening? But the Trader continued with their life as usual and made lots of money.

At this point, I am almost certain knowing TA will only value-add to an Investor like me who only knows FA. 

Its like in music, where Dissonance and Consonance both exists.

Even in my Fundamental Scorecard Telegram Group, I also do know a few investors whom also uses TA to time and plan entry or exits. They seem to be doing well too.

I even found someone whom did achieve success in combining the 2 methods. His name was Colin Nicholson (You can read up on him here).

So with that I will probably have something planned for readers whom are interested as well.

Oh...and obviously the TA will not be done by me. It will be by Lyn.

Stay Tuned!

Friday, August 21, 2020

QAF Ltd's Sum of Parts Valuation in Apr 2020 and Aug 2020

 Vested. Probably of Biased Opinion.

I made 2 videos on QAF Ltd in April 2020 and August 2020. 

In the first video (my first ever Youtube Video), I discussed the business model in detail and provided a valuation at that point in time.  

In the 2nd video, I reviewed its financials and provided an update on the valuation.

1st YouTube video was made during the Lockdown Period in April 2020.

Then I made the 2nd YouTube video as of today.

In both videos, I discussed about the valuation based on the Sums of Parts method.

Generally, in April 2020, I believed QAF is worth S$1.12 per share.

As of Aug 2020, I calculated QAF being worth S$1.27 per share.

If you want to know how did I achieve these figures, do click into the links to view the explanation in the YouTube Videos!

Please also subscribe to my channel, like, share and comment on the videos.

Thursday, August 6, 2020

When You Know You Are In Love...

When do you realise you were in love with a company: 
  • when the analysis you did was full of risks and you said its seem fine, 
  • when the competitor share price beats 52 week high and your company is flat maintaining 52 weeks low, and you said fine,
  • when you said their new business has some sort of potential and you are willingly to wait for it,
  • when you realise you may want to sell and you feel you felt so heartbroken,
  • when you know this is the US market and you keep saying their quantitative numbers are significant undervalued.

Yes. I will do it tonight. Bye bye my beloved.

Nevertheless, it really makes me feel LIKE SHIT yesterday and last night I went on a spending spree.

Sounds like someone who is trying to walk out of a heartbreak. 

Everything started yesterday as I wrote out my thoughts which I shared with my Fundamental Telegram Group Members and on my TUBInvesting Facebook.

"Good morning everyone, just some thoughts...

I dont know why the US market is still so resilient. Suddenly companies reports are beating estimates instead of missing them although you know revenue is kinda of missing.
For example, I expect DIS results to be bad and share price to fall. But results is so-so, after hours, it went up. 

Some reasons came to my mind...
1. Wall street reduce estimates - end up companies started beating them instead?
2. A lot of companies has EPS improved DUE to OPERATION cost as they reduce workforce, furlough employees. Thus, although rev went down, net profit went up.
3. Fed US really screw up the economy by printing money. They fill the hole and overload with in. Maybe not even US, but countries around the world. Is it required?
4. Too much "happiness" in the market right now because every company is just beating.

Probably I may have too negative expectations of things. Maybe Mr Market just hates me."

I will probably do a video on this company and the competitor, and what I DID. Something drastic that I probably will not do in real life.