A few hours ago marks the end of trading for Dow Jones for the year 2017. So how did USA and Singapore fare for the year 2017? Marked by a strong USA economy recovery in 2H and low unemployment rate, corporate profits has continue to exceed analyst expectation, fueling a bull run in stocks. DJI ends the year at 24719, climbing 4957 (+25.1%) compared to a year ago. This has the potential of being derailed by the nationalist Trump, enacting policies (Tax breaks, employment) that seems to benefit more for the wealthy than for the common people. Reducing taxes will definitely boost the companies profit in the short term, but this policy hinges on the assumption that with more money on hand, economy will spend more, resulting in more profits and more taxes to be collected for the government. But, what if this doesn't happen? If forced to hike tax rate to stem the rise in government debt at a later date, it will have a disastrous effect on the economy. On the case of employment, to bring jobs back to America again, will it actually happen? From the news report, it seems unlikely. Companies are proceeding with upgrading and investing in Automation, reducing the number of workers needed. Through these upgrading investment, I agree it will spur the economy for 1-2 years, from the companies providing the upgrade service, but after this phase pass, what is left? With better economy, the housing market are on the rise again, leading to more construction, new homes, renovations, which will mean more debt as people borrow to carry out these projects (I doubt they will have cash to paid in full without borrowing). This all looks like a housing boom 2.0 all over again. This was what George W. Bush tried to do during his term and failed miserably. One thing that they seem to forget (or purposely overlook) is with stronger economy, US dollars will rise, which means the things produced in America will be much more expensive. Things will start to go wrong when people starts switching to cheaper alternatives overseas. Having said all these, will it happen? We will know in 1-2 years time. At least for the next 6 months, USA will continue on its growth path.
Back closer at home, STI has also benefited, with Singapore economy scoring bull eyes in 2H. STI ended the year at 3402, climbing 522 (+18.1%) compared to a year ago. Most of the stocks seems overprice for now, so I will just hold some cash and wait for the Bear to come. However, among all stocks, I can still see a few good ones that is positioned to grow in the next few years (I will talk more about it later). Having received the cash from Croesus privatization in 4Q, I am looking forward to 1Q 2018 cash from GLP privatization to continue re-shuffling my portfolio.
Now a time for reflection, compared to what I stated at the start of the year (New Investment Strategy 2017 - Growing Passive Income), how do I fare? This is a 3 year plan and having passed 1/3 of the journey, below are my result:
Original 2017-2019 plan:
- 50% Equity, 50% Reits/Trusts
- Portfolio Yield to be 1.50% in 2017, 2.50% in 2018, 3.75% in 2019.
End 2017 Snapshot:
- 90.96% Equity, 9.04% Reits/Trusts (Around the same as 2016)
- Portfolio Yield at 1.27% (+0.51% from 2016, but miss 2017 1.50% target)
Below is my end 2017 portfolio snapshot:
2017 has been quite a good year for me, ended with the complete divestment of Croesus Retail Trust, partial GLP sale and selling off Man United share with a good mid tens percentage gain. However, I am still on book losses for the commodity and O&G shares. Hopefully, with the boom in oil and commodity price in 4Q, I will be able to reduce my exposure to the sector in 2018. Below will be a summary of the transaction I have done in 4Q 2017:
Transaction 1: Bought in another batch of Man United shares in early October.
Seeing the good performances of Man United on pitch and ticking up of Man United shares on NYSE, I decided to enter the market again, hopefully exiting the counter when it reached my target price.
Transaction 2: Sold off most Man United shares a few weeks after transaction 1.
To put it simply, target price reached and I decided to exit the counter for a mid tens percentage gain.
Transaction 3: Bought in a batch of Mapletree Industrial Trust.
50% of cash from Croesus Retail Trust privatization was used to fund this purchase. They have a good pipeline of new properties coming on line in the next 2 years with good tenant commitment rate. In addition, they have now divested into data centers, with the recent joint venture to purchase a portfolio of data centers in USA with its parent company, Mapletree Investment.
Transaction 4: Bought in a batch of Fraser Centrepoint Trust.
Renovation at Northpoint City North Wing is drawing to a close and tenant occupancy rate should start ticking up. That will provide a base for this counter. For the new Northpoint City South Wing, it is still currently under Fraser Centerpoint. However, I got the feeling that once tenant base stabilize in the South Wing, Fraser Centrepoint might want to divest the whole South Wing property to Fraser Centrepoint Trust. This will be a good catalyst for growth. Fraser Centrepoint Trust currently already owned the Northpoint City North Wing and the adjacent building (Yishun GV) Level 1 shops.
Transaction 5: Bought in another batch of Noble Group.
Their debt restructuring efforts is coming to an end and it looks like banks will not forced them into Chapter 11. Just bought in a small batch to average down my overall price.
Transaction 6: Bought in another batch of Krisenergy.
Like what I shared in Q3, they have a potential of farming out their oil field to reduce the capital investment stress. Just bought in a small batch to average down my overall price.
Transaction 7: Sold off a small batch of GLP.
Cash in for the Noble Group purchase.
That is all for now. See you all in Q1 2018 update and thank you for reading this long long post. =)
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