A good year so far for our local stock market with the STI YTD returns slightly below 20%.
My personal value-investing portfolio has done extremely well for the year too, standing at about 38% currently, with all time high at close to 42% last week. A highly concentrated portfolio with emphasis on value stocks with low liquidity, will see drastic fluctuation quite often.
Sunright and Multi-chem continue to be the leading key winners, each occupying at least 20% of the portfolio, with Sunright delivering 300% returns since purchased at Feb 2016. I personally feel that Sunright and Multi-chem are in the fair value territory currently, which is good for holding on to, until i can find a better value stock with more upside to allocate the portfolio to.
Screening for good value local stocks are harder in these few months, which means that the market might be at an expensive phase. As the portfolio’s value increases over the years, the local market coupled with its low liquidity might force me to look overseas for a more diversified portfolio. With 2 to 3 stocks occupying at least 50% of the portfolio, there is a serious risk of the portfolio suffering heavily in the event of severe unforeseen circumstances, which is also one of the biggest reason that i avoid S-chips as much as possible, despite several shining gems among them, Eratat was a good learning experience for me, and i am glad i experienced it at the very beginning, when the quantum was much lower. My screening criteria mostly start with: P/B <0.6, P/E <15, PSR < 0.75, minus S-chips. All the companies that i purchased must show a healthy accumulated profits over the years too. If you can find stocks that are trading below NCAV, with its current year profits most likely higher* than last year, you might have a winning formula.
*Remember to see if it is due to one off event and make your own judgement.
Ultimately, profits will always lead the way, and most of the time, it is the biggest factor whether the stock is a value trap or not.
Recommend a good read above for stock selection criteria, just the most important criteria listed inside will benefit you tremendously.
As the portfolio value increases, custodian holding has become less attractive for me, and with SCB introducing minimum commission, i find myself looking out for other brokerage, and i have started using DBS Cash upfront account.
As a value investor, the brokerage also has to be the most value for money too, with the lowest commission for cash upfront account with a S$5 rebate per trade, and all stocks purchased go into CDP account, it is the most value for money brokerage for me at the moment. However Singapore Brokerage market still has a long way to go, there were several frustation for me along the way as i used DBS account to buy and sell stocks.
Some of my summarised thoughts for value investing in Singapore
- A concentrated portfolio is expected from time to time, which is probably not a wise decision to make.
- Most of my trades are not fully filled, resulting in multiple minimal commission paid just to get the quanity i want. This reflects the low liquidity of Singapore value stocks. (Every extra buy/sell trade will result in S$10-25 commission incurred)
- For investors who are more interested in cashflow(dividends), value investing might not be an option, mine stands at 2% for the year.
- Most of the companies that i have purchased, are normally very low profile companies, and their market cap are very small, at best micro-cap, with a few venturing to the lower tier of small cap, this might not be comfortable for some investors who are looking at big names, companies that they have heard of etc.
Till next time then.
Wishing all a great year ahead, and stay invested always.