Wolf Money(portfolio update end April 2023)
Portfolio as at end of April
1.) Cash
2.) Bank of China(3988.HKG)
Bai(拜) Sifu(师父) seeking wisdom
In the age of internet, I haven’t pass a day without someone trying to sell me something. A course, insurance, collective investment scheme or a cause for donation and even ladies tummy tucking undergarments. Those “brothers” and “sisters” selling option, charting, crypto and many other investment courses on YouTube. Kindly excluded me from your youtube blast list, you are giving YouTube too much of your advertising dollars. I am most weary to those option trading expert turning drop shipping guru overnight. In the age of Internet if anyone can sell you anything, they can and they are most willing even an outlandish get rich quick scheme.
Most of those initial “free” seminar were mostly interested in selling you a dream and potentially to fish you in on that few thousands per session course or a silver bullet “get rich instant” software. The modus operandi works by gathering as many people to the free seminar and try to convert a small percentage of the attendees into paying customers for that “elite course”. Just imagining 500 people went for the free seminar with just only 2 percent conversion rate each paying 3k. The organisers stand to make 30k revenue just by having one class per week. It is very common for people to believe by paying a few thousands for a course, one should become a guru of that subject? Wrong. Let’s play devil’s advocate, How do you explained those people who had achieved success after attending the course? I have no doubt some people have a natural talent in achieving success in any field they pursue with or without attending any course but they are a minority, most failed to understand the core idea of the course. For example a professional pianist achieved greatness through long hours of self practice, not by attending a couple of hours of piano lesson under a well known master. Most people find the course worthy after paying a few thousands due to a type of psychology bias working behind our brain namely sunk cost bias. The bias worked similarly to doing your own cooking by investing time, effort and money to buy the ingredients and doing the laborious task cooking, most would judged their cooking skill highly than been judged independently. I agreed there are costs involved in organising seminars but one should pay only up to hundreds if the course is really worth pursuing . Every path to success is unique for each individual, “Bai Sifu” is not going to work for majority. The best way to increase your investment prowess/knowledge is do plenty of hard reading, talk to many business persons to understand their business and seek wisdom from friends which are expert in their professional field. I gained much knowledge from those conversations. I also want to say my thank you to all the people in team 4 and meta investment chat group. I gained enlightenment from all your wisdom. 🙏.
Most important if you are seeking higher intelligent through “Bai Sifu”, make sure the Sifu is the right one. A good Sifu can bring you to heaven and a mediocre one bring you to garden, no problem if you are going for Tai Chi lesson, for anything else your experience would be your greatest Sifu.
Commentary
Singapore government introduced another set of cooling measure to tame the runaway property market. The cooling measure seem to be targeting foreign buyers. ABSD was increased from 30% to a whopping 60% for foreign buyers. Property counters got hit due to the latest measure. Property developers are likely to delay new launches inline with a more subdue market. Maybe some foreigner wanting a safe heaven can consider our stock market instead of making a property purchase. In my view, the only market in the world which is not in a bubble state is our stock market. 15 years had passed since our STI index made an all time high of 3900. I hope people in SGX is reading my blog.
LWF had a mixed bag April with Boustead and HPC weaker couple with gain in BOC. YTD gain stands at 3.5%(non leveraged, dividend and cash yield excluded) down 1% as the sentiment turn negative towards end of month due to government introducing more property cooling measures affecting portfolio stocks. During the course of the month I didn’t find any stock that perk my interest. I am more interested in finding out more about the companies that I had invested. A lot of mental work done on research and attending AGM took up most of my time.
The US market had a positive month. The March banking sector anxiety seen to had dissipated . Another buzz words that was repeatedly mention in the media was the health of commercial real estate market in US. There are signs of pressure in the commercial real estate in the area of offices. You don’t have to look far, Just look at our local listed US office reit, most had a haircut of at least 50 percent since listing. Only half of the office workers had return to office for desk bound work post covid in US. The trend of remote working had continue even with the withdrawal of covid restrictions. Employers had identify the best way to improve profit was to turnover empty offices to landlords in process saving millions of dollars in rental. This mega trend had cause landlords to be saddle with half occupied offices, affecting cash flow and valuation. There is a tidal wave of refinancing happening in 2024 and 2025 for office landlords. It will be a litmus test for the sector. There are remedies which might involved introducing legislations on WFH. The US government might even proposed a law requiring companies to operate a physical office location for a minimum number working days just to save the skin of office landlords and banks. Traditionally banks are the biggest lender in commercial real estate loan to be worth trillions of dollars. Given 2024 is an election year, every possibilities would be consider to avoid a catastrophic crisis even if it involved shaving off more of that moral hazard if there is any left after the SVB debacle. May and June were historically weaker months for the market.
5 Japanese trading houses mainly Marubeni Corp, Mitsui & Co, Itochi Corp, Mitsubishi Corp and Sumitomo Corp found favour with Warren Buffett. Trading house is similar to conglomerate in our context. Keppel Corp, Sembcorp Corp and Intraco represent the earliest form of conglomerate in our country. In my last update, I mention about conglomerate coming back in fashion due to current business climate where trade wars, supply disruption and geopolitical risk are a common occurrence. Conglomerates may not be the best in the business they operate in but diversification give the company a more stable profit profile. In some ways, Boustead Singapore and Haw Par Corp could be consider as mini version of a conglomerate minus the trading business. Conglomerates might not be a bad proposition after all.
“ we call them conglomerate which had become an “unfashionable” word due to analyst giving a 10-20% discount on valuation due to “Jack of all trades”. In my view, conglomerate is not a bad idea going forward due to geopolitical risk, trade wars and supply chain disruption. Business cycle had shorten considerably in recent years, conglomerate might not be the best in their field but having good diversification into a few businesses does protect company from over reliance on certain market and sector. The concept works like a hot and cold drink stall. During cooler weather more people buy hot drinks and the opposite is true. Only when the tap stop running, hot and cold drinks can’t be sold (maybe plumbing business is a good diversification for the drinks stall). 🤔I am starting to see a few companies going into new businesses that are totally unrelated to their core. ” ——last month update.
Boustead Singapore(BSL)
I had written my updated piece last week. The link is as follow. There are news about BPL asking for 3 months extension to be in compliance with the listing rule on minimum float and delisting. They had probably 2 options to deal with the rebel shareholders of BPL which I wouldn’t comment here. I had a soft spot for BPL shareholder given I was a former shareholder of BPL. My wish is for Boustead Singapore to come out with an amicable solution soon so that both sets of shareholders can move on with greater certainty and purpose. I wish them all the best, may common sense prevails. The share is trading with a yield of just under 5%. Another bright spot for Boustead Singapore is Vietnam, their industrial projects with KTG has been gathering good sale. Watch out Singapore team , Boustead Vietnam team is catching up! Boustead Singapore will be reporting its full year result by end of May.
Bank of China(BOC 3988.HKG)
Bank of China share price was stronger due to optimism about China reporting better GDP numbers. Trade minister is optimistic about China hitting the 5% GDP mark this year. First q GDP was 4.5% far higher than the consensus estimate of 4%. BOC reported a steady set of year end result, profit attributed to shareholders increased by 5% over the course of last year. Dividend declared had increase by around 4.5% to RMB 0.2703 per share. The payout ratio is at a conservative 30%. Dividend will be paid in August.
Haw Par Corp(HPC)
I am glad to be able to attend my first physical AGM after more than 3 years of absent. I can feel the vibe of the local investment community. The meeting is well attended by Haw Par Corp shareholders. 2023 is likely to be a continuation of post covid recovery for the company. The management mention they are hopeful for earning to go back to pre covid, Fyi Pre covid Haw Par Corporation was making around 180m in FY 2018/2019. I have written my observations at the AGM just a few days ago. The link is as follow. As mention previously, I regard HPC as cash management with no big expectation. I am hopeful of a rise in normal dividend this year.
Cash
I continue to roll over my lower yielding SSBs to the recent higher yielding issue. Most of my SSBs are paying above 3%. I am looking forward to government sending me cheque for my free holiday over the course of next 10 years.
Summary
The current increase in interest is likely to be coming to an end as inflation had came down by half from last year peak. The recent crisis at some regional US banks had raise some concern with the Fed. A stop in rate hike might bring temporary relief to the market especially to the pricing of assets with valuers having clarity over interest rate path ahead. Our inflation had came down to 5.5% with core inflation coming in at 5%. The lowering of inflation will have a positive effect on bond prices. Interest on fixed deposit had drop from 4% to around 3.5% indicating a gradual decrease in interest rate going forward local wise. I expect no major movement in LWF in May or June. God bless.
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