Tuesday, October 01, 2019

3Q 2019 Investment Strategy Update

3 months drifted by pretty fast this quarter as we saw an unprecedented upheaval in the world news, starting with the on-going HK protest getting increasingly violent in nature, resulting in a plunge in the HK tourism and economy which of course, the HK stock market was not spared as well. This may work well for investor to scoop up shares which has dropped to an appealing level during this turmoil. For the USA, with the unpredictable Trump, the House Republican has formally started a Trump impeachment inquiry after a whistle blower complaint centered on Trump's phone call on Jul 25 with Zelensky to dig dirt on his rival, seemingly to aid his 2020 re-election campaign. With volatility, pockets of opportunities will arise. However, the problem is.... will you catch the correct opportunity, or will you catch a time bomb?

DJI ended at 26916, a rise of 317 points (+1.19%) compared to 2Q. For Singapore, STI ended at 3119, a decrease of 202 points (-6.08%) compared to last quarter. Stock market has generally been on a down trend for Q3, with news of China slowing economy, trade war between the world's 2 largest economy which does not seem to be ending soon and a growing negative view among the Federal Reserve. Defensive counter such as reits and high yield stocks, on the contrary, are recording all time high in Singapore, probably due to influx of fresh funds for less risky yields. With the outlook that the Federal Reserve are likely to drop interest rates further, reits are gearing up to pile on more debt for property purchase as seen from the recent acquisition deals from FCT, FLIT, MIT, MCT, Manulife US Reit, Keppel DC Reit, CapitaLand Commercial Trust and so on.....

For Q3 2019, I am focused on opportunistic stocks that have an attractive price to enter and hopefully sell them off when I deem their full value is matched. Concurrently, with the expectation that the Feds are going to drop their rates going forward, I am also into accumulating Reits / Business Trusts that have potential to further grow their DPU in future. Reason for doing so? Actually, it is pretty simple. Reits and Business Trust in Singapore generally have about 30% to 40% gearing. The lower the interest rate, the more money they can distribute back to shareholders, which will mean a higher yield, which will also mean a higher stock price. Some good counters I am looking at include Mapletree Industrial, Fraser Centerpoint, Manulife Reit, IReit. CDP lending continue to supplement some kopi money for me monthly as my China Everbright continues to be out on loan. Well, enough of my blabbering, below are a summary of my transactions for Q3:

Transaction 1: Bought in one batch of Amara in July.

Yup, you saw correctly. This is the brand behind the Amara hotels. Primary reason for the purchase was to make up my total holdings to at least 10,000 shares to join the CDP lending program. But on a hindsight, Amara is also transforming itself into a hotel hospitality and property landlord play. With the opening of its 100 AM Shanghai Mall in April 2019 and Office block in 2H 2019, they will have a steady stream of income, which will likely lead to an increase in declared dividend and hopefully stock price in the long term.

Transaction 2: Bought in one batch of HPH Trust in September.

HK protest did this counter no justice as it was hammered down with the on-going China-USA trade war as a back drop, plunging almost 25% over 2 weeks. Although its 5B HKD debt reduction initiative (2017 - 2021) still have 2.25 years to run, and there is a lumpy goodwill which I think they may write-off soon, I thought the drop in price is at a level which is attractive to consider entering. 

Transaction 3: Bought in one batch of Man Utd in September.

Poor form on pitch, forecast of a drop in revenue for next FY due to absence from the lucrative Champion League contributed to the drop in share price recently. However, as a brand, the Glazer has did well to increase its commercial value through Sponsorship, Retail, Merchandising, Apparel & Product Licensing. There has also been rumors now and then about Arabs royal family intention to buy over the club. Well, I see this as a buying opportunity. Man Utd cannot get any lower than now, and who knows, the Glazer might really sell if there is a tempting offer coming in.

That is all for now. See you all in Q4 2019 update and thank you for reading this long long post. =) Now, I need to think of the next 3 year plan (2020 - 2022) to grow my passive income.

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