Wednesday, February 22, 2017

Why I still keep my portfolio

I noticed that there are quite a lot of views on the portfolio that I keep and I thought that I owe some of the people what I do think of it - where after a long while I have not been talking about it.

Right now, the stocks that I hold through the Felice's Fund is as below:


Alternatively, you can also view them here.

One would have noticed, I seldom buy and sell as compared to some other bloggers - some of them I have been critical of. Why? Firstly, if I am to share my portfolio or how I deal with my investment, I always believe that I have to be responsible. If I trade them often, then it is unfair towards the readers. I am not stupid to see that some people do take notice and tend to have a followers mentality (although the decision to invest is ultimately the readers themselves) and just emulate.

You would notice that over the last 2 -3 years some of those stocks that I have bought, would have moved lower than my purchase price during certain times. These happened to stocks like EcoWorld, Ekovest-WB, WCE, Insas. In fact, some of these stocks are still trading below my purchase price - e.g. Tropicana and TA.

(Hence, the moral of the above paragraph is not to follow me as the stock I pick does not tend to have immediate upside. You can in fact wait.)

Those whom have read my articles, would know that in the stocks I picked, I tend to be more careful and have deep thoughts and research over them. In fact, the stocks I picked here in my blog, I am even more careful as opposed to my other personal investment account - where I tend to be more aggressive. In times where stock market is on the uptrend, generally being aggressive would bring more upside. But over the last 50 days where market have been more active, I have not even shown a single trade in my portfolio.

Why?

First of all, I am still very happy with the portfolio that I have. There could be some readjustment...for example, I could have bought more Ekovest and TA - but generally these are just as good.

You would also know that my investment horizon is over many many years to an extent that I have penned down it is a 2027 target. Basically, this means very long term investment. For those whom do not have that kind of horizon, please do not try to emulate.

Why again WCE

As an example again, WCE - one will not see good positive numbers until few years down the road. The only number I tend to follow is how much its development expenditure has gone up to. Through that, it gave me an indication that the project is progressing - although not the best indicator. Besides that, I also see its borrowings level. These numbers will not tell me whether the company is able to keep the construction within budget - but to me as long as it is within certain range, it is good enough for me.


WCE definitely is not a "sure thing" stock, but I have certain confidence that I think it has a good probability to succeed well. My margin of safety is the upside is huge while the downside is lower. Just to give an example (which sometimes I have mentioned before but did not elaborate).

WCE is a holding company. It holds 2 main companies - WCE, the highway which it owns 80% and Rimbayu which it owns 40%. We know that Rimbayu is quite safe as it has land and these projects are now selling albeit slower due to the slowdown in property sector - but it will get there. Whether the project is 15 years or 20 years, there are limited downside in my opinion. But the upside is not that much - perhaps slightly more than RM1 billion in total?

As for WCE, the highway subsidiary, currently the company is raising hundreds of millions to pump into the project. People who invest mostly would know that the holding company is ring-fenced against its subsidiary's bad performance. Assuming (which I do not think so), WCE the highway is so bad that it does not perform at all - something like the Seremban - PD highway. Then WCE Holding's return from WCE highway is zero. It will not be negative as they are different entities and one should note that some of the bonds are guaranteed by Danajamin. Even if WCE Expressway needs more funds injections, there are ways to get around it without affecting WCE Holdings that negatively.

On the other hand, its performance on the upside is tremendous even with say 8% IRR. I will not show you the cashflow but people in finance will be able to figure it out. Or else, just think of it this way after the completion (with an IRR of 8%), the compounding would be just crazy over 50 years. This is why I take note of the progress of the project.

What about others?

Again, most of the stocks I hold are for long term. These applies to Ekovest - which has similar trait to WCE but with more immediate return. The structure is quite different. With WCE, it is more direct, which is why I hold WCE more as well.

I do not have to put much mention on Airasia. The more I say, there are certain groups which would say I try to move the stock - but if you look at its daily volume, you would know that no 1 single individual can do anything to Airasia's stock performance. At this moment, I can say is that I admit the structure is not simple (and that is admitted by Tony Fernandes). The devil is in the detail, and once it gets simpler, many things would be clearer. Another thing is that the group does do things. They talk a lot and they do a lot as well. Some companies do a lot of talking but do not do. Airasia REALLY sells tickets.

As for DKSH, well to me it is one of the cheapest consumer stock which can have large upside. To me, DKSH has yet to perform to its ability - which is why it is my longest holding stock i.e. since I started this portfolio.

What about Ecoworld? Just purely a fantastic property company. Anyone who is in the premium property business would have wished that PNB did not do a big controlling purchase of SP Setia - because it created a bigger monster. And ironically, it competes BIG against SP Setia as well.

Insas? Inari is real and through that alone Insas is certainly cheap, just that one would wish that the controlling shareholders provide a fair deal towards its shareholders. There is a tendency for the controlling guys to do an ICap which is not fair. The only thing I can say is if one gets older - there is a higher chance they get more sensible. Insas controlling shareholders are not getting younger.

TA? Quite similar to Insas but (don't know why) I am more confident towards the attitude of the TA's shareholders. For one thing, in the past (many many years ago), TA was a darling, hot stock. Today TA is no longer that and the controlling shareholders I hope does not have that mentality. It is just that - it is true, TA did not perform well financially in the past few years and many people just does not understand its financials which can be more complex. In this case, I hope time is my friend.

Tropicana? Wow, like I have said before Tropicana has changed in its business strategy and not many people understand that. It no longer holds single individual properties all over the place but holds huge development land in attractive places. It is not Ecoworld for sure, but do go over to have a look at Tropicana's projects and you would realise that it is not a RM1.4 billion property company.

5 comments:

Wammo said...

Looks like DKSH had a strong result today - EPS up 33% vs. last year... Thoughts on this one?

felicity said...

Hi Wammo,

I have high confidence on DKSH. If one is to look at them, they are now more focused on doing businesses that have better margins. DKSH has strengths against many of its competitors through their channels and systems. Let's see how far they can go.

Anonymous said...

It may fit into your investment style. Can consider Paramount Corp Bhd.

Incorporated a new SPV last week for restructuring. Proforma, including their coming acquisition, for Education Segment (excluding tertiary which is loss making) works out to RM65m PAT. Give and take 20 - 30x PE. Paramount market cap <RM720m.

Rumour of disposal of their school properties to a REIT which may yield short term one off gain. Dividend yield of 5.1%.

Only if you have the holding power to last till the IPO of their education assets.

felicity said...

Thanks for that. I will check out.

Indiabulls Housing Finance Pvt Ltd said...
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