Wolf Money(portfolio review end 2023)
Lone Wolf Fund(LWF)
Portfolio as at end of December
1.) Cash
2.) Valuetronics Holdings Limited
3.) SBS Transit
Commentary
Now and 2024
The market in 2023 had not been easy due to where I choose to “fish”. The high borrowing rate and high inflation had an impact on the profitability of local companies. The difficulty was compounded by poor sentiment in our market. I share the same frustration with many local investors, our market is sick. The patient needs to be treated. There will be no miracle cure if the exchange and policymakers leave the stock market on its own. Our market abysmal performance stands in stark contrast to Wall Street’s bullish rally. Driven by the rebound in tech, S&P and Nasdaq had a field day(year). Each index showed a high historical double digit gain in 2023 after the carnage in 2022. For your info S&P 500 was up more than 20% and Nasdaq more than 40% in 2024. STI Index was down just a hair below 0.5% for the year. It was down as much as 6 percent in Nov before a spirited fight back towards end of Dec bought some saving grace to our market. LWF put on 3.5% gain in Dec due to better showing by portfolio stocks. All three stocks ended positively for the month. The overall portfolio turned in a 14% return inclusive of dividends and cash yield, meeting the mid to high single digit target set for 2023. This year returns would have close to double if I had joined the dissenting minority to hold out for a higher offer for Boustead Projects. LWF’s return was enhanced by the higher cash yield and dividends which was negligible before 2023. Overall, LWF performance did better against the STI index’s 0.5% drop. For comparison, the dividend yield on STI ETF was around 4%. Total return for the Singapore market was up 3.5% if dividends were included.
Let me make a disclaimer first. I don’t know everything. There is no point predicting, since the financial market can’t make up its own mind. China’s economy continues to be weak next year. A friend of mine just came back from Beijing. The situation is bad, unemployment is high, consumer spending is weak and popular malls had seen less traffic. The weakness in China’s property market has spread to financial institution. Zhongzhi Group, a wealth management company, defaulted on payment of coupon interest and principal to their investors. A figure of USD 500b of wealth products is at risk of default was rumoured. Mum and pop investors are likely to be greatly affected.
Europe’s economy is likely to limp along due to geopolitics and high gas price. The European economy has become the sick man of the world, unless we get a ceasefire in Ukraine, business confidence will stay low for a while. As the Israel-Hamas war take centre stage, there seems to be growing consensus among politicians in US and some European countries, Ukraine is now a distant distraction as more Americans didn’t accept the need for America to get involved. Funding for Ukraine has dropped from billions to millions. The senseless war achieved nothing for the Ukrainian, American, European, and to a lesser extent, the Russian.
For US economy, the slowdown is likely to come as soon as early 2024. The high borrowing cost is starting to bite on corporate profit and employment, given the US market is an ageing bull, caution should be exercised.
I rode my luck and count my blessings over the past year. Some of my purchases in 2023 that did well included Bank of China, Boustead Projects and Valuetronics. BOC did well in the first few months of the year until it reversed course from May, impacted by the weak Chinese economy and the stock market. Boustead Projects had a takeover offer from Boustead Singapore, which contributed to a bigger portion of LWF’s return. Valuetronics was a recent purchase. The stock made a strong debut in my portfolio. There were small gains in Yangzijiang Financial, Lendlease, Starhill Global Reit and I managed to wipe my face on Sarine Tech trade. There was a realised loss in Haw Par Corp. For the longest time, stock continues to be undervalued.
LWF has broken new ground in 2023, in the area of REITs where I made my first 2 REITs purchases after a decade absent. However my purchases were short live due to Fed changing its narratives on interest rate, for higher and longer. That cause a big-sell off in REITs. I made a maiden purchase of a contract manufacturer, Valuetronics, which I wouldn’t have considered just a few months ago due to my perception of a tough business. I also took a rare position overseas, in HK-listed Bank of China.
I am interested in shares of technology companies if I can find one that fits my conservative mindset. One aspect of my portfolio to improve upon was to reduce the higher than expected turnover of stocks in my portfolio, most were driven by diminishing prospects of their industry beyond their control. High interest impacting the REITs sector and weak demand for diamonds, competition from lab-grown diamonds and ban on Russian diamond export affecting Sarine Tech were examples.
Boustead Singapore
The re-integration of Boustead Projects into Boustead Singapore will finally happens by mid of next month, baring any extension of exit offer. I look forward to BPL contributing to a big slice of Boustead Singapore profitability.
SBS Transit
By the time this blog is published, everyone will be paying more for their public transport ride. This year’s 7% increase in public transport fares was double of last year increased. SBS Transit also enjoyed the tailwind, coming from lower Brent crude prices which had dropped from USD $96 to USD $78m in just 3 months. I am expecting the margin to increase at least for the first 3 months of the year due to lower fuel price. The high cash balance in the company continues to enjoy high deposit interest.
Valuetronics
The company bought back more than 3m shares since it reported half-year earnings two months ago. More brokerage firms are covering the company with higher target price. I look forward to another satisfactory result come end of March 2024.
Cash
I continue to roll over the lower yielding SSBs to the current month.
Summary
For the past few years, Lone Wolf Fund had that one lucky pick each year that contributed to the bulk of my return. I have summarised the total return since 2020 and the company that contributed the most to portfolio gain. All estimated figures were back of envelope calculations, no spreadsheets or electronic records, only human computer. I round down my returns to the nearest 0.5%.
2020 +13% (ST Engineering)
2021 +15% (Boustead Singapore)
2022 +10% (Keppel Corporation)
2023 +14% (Boustead Projects)
What will 2024 bring? I don’t know is my answer. There are a lot of unknown unknowns in the market, it is not always easy to guess the outcome of one’s investment. Historically, an election year in US is likely to produce a favourable outcome for the stock market. However you never know, we are living in a different world now.
I will continue my “Cashare” strategy of acquiring companies with huge cash holding in their books if I can find one that makes sense. I am setting another mid to high single digit return target for 2024. The third time in as many years. A sign of what to come, 2023 might offer a good gauge for LWF. Dividends and cash yield will continue to contribute significantly to the overall return for LWF. In 2023, dividend and cash yield made up close to 40% of portfolio returns. There is a phrase I constantly remind myself, “I fear no corrective market, I fear my own greed”. Keeping my greed in check is key to surviving the unpredictability of the stock market. I will always be a humble student of the market.
My greatest concern for the market is the Japanese Yen losing control. BOJ, even without rising interest rate, a weak GDP growth and a weak CPI numbers out of country didn’t stop the Yen from rising substantially against the USD in Dec. The unwinding of the carry trade is going to cause major disruption to the world financial market given the carry trades had been on going for decades. On a personal level, I have started changing Yen for my future trip to Japan. I got my prediction on Yen wrong in 2023, Gold had a better showing in 2023.
Going forward portfolio updates will be published on the first trading day of each month to give an easier reference. I wish everyone a profitable year ahead. Thank you for taking an interest in my blog. I hope to see you around in 2024. May your resolutions come true in the new year. God Bless 🙏
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