4Q 2022 Investment Strategy Update

It is the time of the year again where we take stock of what we have done and how we have performed. COVID-19 issues have taken a back seat now that countries around the world have started opening their borders since Jun 2022. China has dropped their long standing COVID Zero policy and remove their tight control on virus management starting Dec 2022. Residents within China cheered this move but globally, analyst still remains skeptical due to the usage of only vaccines developed in China, which is less effective than the ones developed by Pfizer or Modena. Now that China begins to open up, they are highly likely going to face a surge in infection rate, overwhelming their medical system and a high death rate among the elderly (which is what many countries faced during the early stage of COVID-19 pandemic 2 years ago). Russia Ukraine war is still on-going. US Federal interest rate has hiked by 4.25% in 2022, with forecast to raise another 0.75% in 2023. 2022 sure does not end on a good note, at least not something investors will cheer about.

For myself, business trip has re-started in the second half of the year, potentially exposing myself to other variants of COVID-19 in other countries. Thank God for keeping me safe, I still have not contracted the virus yet so far.

DJI ended at 33147, an increase of 4872 points (+17.23%) compared to 3Q 2022. For Singapore, STI ended at 3251, an increase of 121 points (+3.86%) compared to last quarter. Singapore market has the 3 big banks (DBS, UOB, OCBC accounting for 43.5% of STI weightage) to thank for, keeping the index stable and not fall like dominos in other countries. Overall, USA market welcome investors return to companies that largely outperform expectation but for the tech companies, they are still out in the wild (As seen DJI +17% vs Q3, compared to NASDAQ -1% vs Q3). Singapore market this quarter are relatively stagnant as the banking counters did not gain much, and the REITs are taking a beating due to the increase interest rate. For Q4, the investor community remains jittery over the potential of a world recession in 2023, with USA a 70% chance in entering a recession, up from 65% last forecasted in November.

With 2022 drawing to a close, it is time for the annual review against my 3 year plan (Next 3 years (2020 - 2022) Investment Plan) set back in Nov 2019. Below are my result:

Original 2020-2022 plan:

1. 50% Equity, 50% Reits/Trusts
2. Portfolio Dividend Yield to be 3.50% in 2020, 4.20% in 2021, 4.80% in 2022.

End 2022 result:

1. 55.55% Equity, 44.45% Reits/Trusts
2. 79.85% SG Equity, 20.15% USA Equity
3. Portfolio Yield at 3.58% in 2022 (+0.51% from 2021, but miss 2022 4.80% target)

Verdict: Miss Target

Below is my end 2022 portfolio snapshot:

Total dividend received in 2022: $5,655.22 (~$471.26/month)

With market retreating, if you look closely, opportunities awaits. I am closely looking at some of the USA REITS listed on SGX. Investors has been selling them due to the high interest rate the REITS are paying in US dollars and the potential of USA entering recession, affecting future yield distribution. Prices has dropped to an unprecedented low levels that most counter are on a 0.5 Price to Book ratio, with dividend as high as 15% yield! I believe most companies are sound and if you can wait for 3 years for this down cycle to recover, you will likely stand to reap the benefits. Now, enough talking, below are my transaction for this quarter:

Transaction 1: Sold 1 batch Man Utd shares in December.

Partly cashing out since Glazer announced commencing strategic alternatives with a possibility of a total sale. Their appointed advisor has placed a target of 6-7 billion pounds. Personally, I think the final price will be between 3-4 billion pounds (3.6 - 4.8 billion USD) which translates to $22 - $29.20. We shall see in time what is the outcome.

Transaction 2: Bought 1 batch Visa shares in December.

Long term investment with the recent drop in share price. Visa has been buying back their shares every quarter and with such a cash cow generating machine, if you have holding power, share price are bound to increase in the long term with a smaller pool of shares in the market as time goes on.

Transaction 3: Bought 1 batch Prime US REIT shares in December.

USA REITS listed on SGX has been given a hammering in the last 4 months, with the Feds aggressively increasing interest rates, leading to a declining pool of cash available for distribution. In addition, USA is now forecasted at 70% potential in entering a recession in 2023, further diluting investor appetite for such REITS. However, I find Prime US REIT to be sound, not highly geared (38.7%) and their portfolio have a decent occupancy rate. At current price, this will equate to a 15% dividend yield. Buying in to ride the once in a lifetime opportunity. Plus, they have just launched the Distribution Reinvestment Plan. Time to grab more free shares.

Transaction 4: Bought 1 batch Mapletree Industrial Trust shares in December.

Long term investment as the manager has the history of growing distribution and Net Asset Value. If you have holding power, the share price will rise with time.

That is all for now. See you all in Q1 2023 update and thank you for reading thus far.