Monday, December 10, 2018

2018 XIRR Performance & Networth Updates

Time really flies these days when we are in our mid 30s, pegged by a combination of busy work and heavy loads of watching our children grow as each year past by.

I wanted to wrap things up for the year given that I will be taking a holiday trip to Bali with my family for the next few days until Christmas, and wanted to do a reflection of my equity performance this year before I then wrap things up for 2018 on an overall scale. 

I received some good feedbacks last year on how I presented with my performance review, especially clearly positioning my winners and losers so I thought I’d continued with the same format for this year. 

Please bear with me as this will be a pretty long post.

Overall Market Thoughts

This was a tough and rough year for investors because this was supposed to be an expansion year where interest rates are going higher because the economy is improving and there wasn't a clear sign of global slowdown in the economy yet the market experienced some of the highest volatility we’ve seen in many years due to the trade wars and other stuff.

All major indexes including the DJI, S&P, Nasdaq, HKEX, Nikkei, DAX were all down for the year and STI was not spared either. 

What this means is that if you’d been just holding cash all along this year, you would have outperformed majority of the people. Of course, it is a very narrow angle of looking at it this way because equity as an asset has proven that they have and can perform better than cash in a much longer run. 

A couple of my fellow financial bloggers and close friends that I knew got caught in some of the situations this year unguarded.

There were the suspension of Hyflux incident, then the chronicle of APTT yield whore incident. We also have the Lippo cases of First Reit and some of the rights issue from OUE Comm and Keppel KBS. 

Even banks went down in the face of higher rising interest rate, and most Chinese and HK stocks are impacted by the tension in the trade war.

We don't even need to go to cryptocurrency to make our case.

In other words, investing in this year is tough because even if your portfolio has been sufficiently diversified across industries, you might still be caught this year by some of the incident which played out.

2018 XIRR Performance

Throughout the years, I’ve been implementing strategies that allow me to extract the maximum amount of return with the least amount of risk. I do this by either rebalancing my position or tweaking my strategies from time to time to meet the needs of my portfolio.

This year, I used a dual strategy of both going long on a high dividend companies demonstrated by my X+Y strategy (in case you're wondering what is this, you can read it here) and going short on some weak momentum fundamental companies.

I have yet to find a time to write on the latter strategy but I promise to do so once I have more time in 2019.

My portfolio remained a heavily concentrated portfolio consisting of only 8-9 positions, which remain suitable to my character to date. 

These are very high convictions position and this strategy entails that I take into account the risks and downside as much as possible because all it takes is one or two to blow up my portfolio so I put a lot of effort into watching that risk tails over there. 

This year, my lucky stars continued to provide me with great guidance in the face of many distresses in the market. 

While the Dow and S&P have returned slightly negative to date this year, our local STI index has also returned negatively at about -6.5%.

I was fortunate that my returns this year has outperform them at a decent 18.2% based on the last stockscafe report I checked. There will be some minor adjustment up and down in the next 2 weeks but I reckon it won’t dampen much of the return already locked in.

The long term 8 years return on average is about 18%, so I think I'm keeping up this year pretty close.

This is also the 8th consecutive years my portfolio has managed to do better than the index so I hope to continue this trend next year.

Let me break this down by my top 5 gains and losses details inclusive of dividends (last year I did top 10 but didn’t trade as much this year) 

Top 5 Profit Based on % Gains

The goal in my concentrated portfolio is pretty clear and that is to:

i.) Always on the lookout for an opportunity to make gains; and
ii.) Make sure my top few positions contributes positively to the returns. 

It was also around the same time that I started experimenting on my short strategy in the 2nd half of this year that I found out there was room to maneuver in this opportunity because the market was not pricing in certain downsides that I felt was adamant.

So I tested my thesis to this strategy.

APTT was amongst one of the opportunities that I managed to get in because we all knew earnings were going to be poor and that the company would be facing issues with their cashflow given certain of their debt covenants going to due sometime soon. So I went to take a short position two days before the earnings release with the intention to cover them back immediately after that. The dividend cuts whilst certainly not surprising to many, was a strong catalyst to the downside and I managed to cover back with a decent profits. Still, I have many close friends who were caught by this so I have mixed feelings on it.

The second company I managed to test with my strategy is with SIA Engineering which I blogged recently about it here on their fundamentals and although it was a pretty good gains in terms of % gains, it was immaterial in terms of the $ dollar amount.

The third company I currently have open with my short position is on UMS which I've blogged about it here on the fundamentals and the opportunity with it. I intend to have them closed after their full year earnings result next Feb. It is currently sitting near 10% gains at the moment. 

For my long position, I was fortunate to have 2 out of my top 3 holdings – Vicom and M1 made it to the list. 

Vicom has been one of my important general in this year’s volatile market and I am glad to have this around because it gives me both a decent capital gain and 6% dividend this year. This is probably a good exemplary of what I define by a 6% + 4% company when I gave the talk at Investors Exchange earlier this year.

M1 is probably the dark horse this year. 

When I accumulated M1 throughout 2017 and 2018, it was met with a lot of scepticism because the industry were in a doldrum (see my poor Singtel investment below later) and there are so many competitions out there that it was hard to “gain” from such an investment as an investor. 

I bought and accumulated them because I thought the valuation was cheap enough to give me that dark horse element and a nice 6% yield to wait for it to happen. Fortunately, the patience was well rewarded and after the announcement I sold off my shares at $2.10 to book a handsome profit from it.

Top 5 Profits Based on $ Value

The top 5 profits based on $ gains are pretty much similar to the one above so I won’t repeat again myself. 

The only exception changes is FLT moves up to the list while SIA Engineering moves out from the list because of the $ amount in value. 

I think FLT is another great example of the long term 7% + 3% strategy. 

Top 5 Losses Based on % Loss
Top 5 Losses Based on $

I've had my fair share of losses during the year and the most affecting me was the Keppel KBS due to the rights.

I clearly knew the downside scenario play of rights which I've written a lot in my past articles but was disappointed to have been caught by this when I went in too early in order to catch the mother share price.

Then, I exacerbated my mistakes further by applying for the excess rights too little given that I had limited funds to apply for the excess. When I looked at the rights results, I knew I blew my chances away. If I had played to my game, this could have been averted and I would be in the green.

Now, with all this and a potential tax case arising, this could be fatal if things doesn't go my way. I am still reviewing my position in this and Manulife for the next few weeks to see if I should divert away from that risk tail end.

It's a big lesson to learn and I had to pay for the mistake.

I was also rather disappointed with my Sasseur and Capitaretail China Reit investment because I think the entry price could have been better and the downside risk is pertinent given the trade war and devaluation of the RMB this year.

Again, I will continue to monitor on Sasseur and have them reviewed after coming back from my holiday.

Tuan Sing and Far East Hospitality were the more okay type of losses that I can accept because I think there were macro things that went against them during the year which was unprevented. I called this the "inevitable" type of investment losses I have to incur from time to time.

Networth Portfolio (2011 to 2018)

Overall, I think it's been a pretty decent year in terms of my networth portfolio growth.

The key in a rough market is really to contain your losses and make sure we don't get caught in certain situations that we don't want to.

Things like high risk equities, leverage are all tools that can be dangerous in markets where we put our guards down and am instilling a very heavy discipline when using these sort of tools.

I am fortunate that my losses (apart from Kep KBS which I'm still pissed off at myself urgh) were rather contained within and I found a couple of good opportunities during the year to nullify the impact.

Because of this, I am pleased that I managed to grow my networth this year by about $170k from the start of the year.

Out of that, the gains coming from equities and dividends during the year amounted to about $130k, while capital injection from savings took about $40k.

This is net after all the day to day expenses incurred and the savings portion are excluding CPF (because I always get this question).

Whilst we still have 2 more weeks to end the year, I will record down the networth of the portfolio to end 2018 at $833,750.

Do note that the Dec amount includes my wife's and children's portion of their shares as I have decided to consolidate them for easier reconciliation purpose with the CDP. This amounts to about $50k. Without this impact, the portfolio would end the year at about $783k.

I think 2019 will be another turbulent year because of the many elections that are happening across the Asia region. Still, what I wanted to highlight is in the midst of all the turbulence there are still opportunity that lies upon.

It is up to us to protect what matters when that happens.

Meantime, wishing everyone an early Xmas ahead :)

How has your 2018 performance been? Are there any good lessons to learn that you wanted to share with others?

Thanks for reading.

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  1. Hi, it's a pity that you seem to have stop updating your recent transactions and my portfolio pages. Anyway, thanks for sharing! And Merry X'mas to you too!

    1. Hi Anonymous

      I may restart my portfolio updates again sometime in 2019...though I doubt it will help much.

  2. Replies
    1. Hi Yaruzi

      Thank you but 1m still a miles stretch away.

  3. Impressive! Joining Millionaire Club at young age soon!

    1. Hi Uncle CW

      Thank you... I'll strive for that in the years ahead but still a long shot to go.

  4. Wow Congrats B!

    A gain in $170k in such a rough market this year is simply amazing. You are really getting much closer to your goal now!

    1. Hi TBWP

      The gains are actually around 130k, the rest of the 40k are from a capital injection. But thank you for your well wishes.

      Hope everything is well at your end too.


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  6. hi Brian,

    Can you share more about your short position on SIA Engineering and APTT? Are you still holding on to them now? Thanks.

    1. Hi Jalan Jalan

      No I no longer have them as I have closed them within a week.

      I'm still having my Ums positions open for now though.

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  9. Thanks for sharing, I have learnt a lot from your posts.
    Btw, for the top 5 losses, did you missed out Comfortdelgro?

    1. Hi Thomas

      Cdg wasn't a loss in 2018.

      I didn't compute this from an average price point of view but from their starting price at the start of the year.

      Cdg is a "gain" for me in 2018. The losses have been absorbed in 2017 xirr.

  10. How do you short the stock? Using cfd?

    1. Yes cfd City Index. Click the banner on my right wide if you'd like to register but please watch out the risks involved.

  11. Could I have your opinion on the Keppel and city development? Those company share badly are hit recently due to challenged biz environment, but it seems their prices are below the real value in the long term.

    1. Hi Thomas

      Keppel is a hard one because I think it is a close proxy to the price of oil which moves up and down these days. But it could be a good turnaround should oil prices remain above 70.

      City development is another good developer with solid track record over the years but unfortunately is in an industry with absolutely no catalyst at all. Long term shouldn't be a problem but return wise might not be a good

  12. are you not vested with CapitaLand Retail China Trust now?

    I noticed that you only "hold" it for 3 months and sold it at a loss? I am analyzing AU8U.SI at the moment, and their Q3 results seems quite promising. To me, the price seems attractive to go in at the moment, price to book value is < 1 too. However, there are still certain risks from the trade war, RMB depreciation and of course the ecommerce industry. I am quite bullish that ecommerce will not replace retail in near future though. CapitaLand Retail China Trust management team seems to know what they are doing as well.

    what are your thoughts on this.

    1. Hi Derek

      I sold crct at a loss.

      There's some great value in this company but the rmb might give them a bit of a dent. Still I expect it to be doing well. Just my funds not enough to turn it around.

  13. Thought ComfortDelGro would be your largest loss.

    1. Hi Anonymous

      See my comment above on cdg thanks.

  14. our local STI index has also returned negatively at about -6.5%.???
    i calculated is about 12% as of Dec 10th.

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