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Date: 5 December 2020
A quick update on my portfolio
Where are we today?
For first time readers, here’s a quick rundown of my investment history: my investment portfolio used to be heavily concentrated in one or two stocks when I first started investing. I experienced a severe ~40%+ loss (or ~S$12,000) at one point before reallocating my portfolio, which set the stage for a great recovery this year. At its peak in June 2020, my portfolio was up about S$10,000, or 26% (excluding dividends) and up ~S$12,500, or ~30% (including dividends). (For first time readers, check out the key investment lessons learned from my experience here)
As of 5 December 2020, we have shed ~S$4,000 in realized and unrealized gain since we last checked in, largely owing to the rotation out of the tech and healthcare space. Currently, we are up by c.S$5,700, or ~14% (excluding dividends) and c.S$8,000, or ~20% (including dividends). This came sooner than expected as Moderna and Pfizer released their vaccine trial results about 2 weeks after I had done an in-depth review of AEM Holding (Article link: Intel troubles, AEM fumbles?). As predicted in that article, we saw a swift rotation out of the tech and healthcare (specifically medical glove) sectors which sent AEM tumbling to as low as S$3.24 and Riverstone falling to S$2.40 (pre-bonus issue).
Investment gains / losses (S$, May 2017 – Oct 2020)
What is in my portfolio?
My portfolio has remained unchanged over the past few months due to restrictive regulations arising out of my employment. Regardless, the current portfolio allocation has proven to be rather resilient thus far. With DBS, MCT, Singtel and Capitaland riding the early Covid recovery, Delfi is expected to join in Covid recovery at a later stage due to its geographical presence (Indonesia, Philippines primarily). I remain confident in AEM’s performance in the short to medium-term as noted in my previous post (The Hatch Fund Article: Intel troubles, AEM fumbles?) and I expect to see substantial upside from this position.
The inclusion of Riverstone in this portfolio is purely for hedging purpose — I expect blue chips like DBS, MCT and Capitaland to take a hit if Covid-19 cases see a resurgence domestically and continues to worsen abroad either due to (1) difficulty in the distributing and administering vaccines, or (2) mutation of the coronavirus. In which case, I expect Riverstone to benefit in this unlikely scenario. Furthermore, my brief valuation safely values Riverstone at at least $3.90 (>60% upside). Currently, Riverstone remains in a net loss position of c.S$1,200.
Updates on portfolio companies
AEM Holdings: Apple’s ARM-based M1 chipset Macbook and Mac hit the market a few weeks ago. Consensus view seems to like it for (1) power efficiency of the M1 chipset, (2) snappy response, (3) intel-based applications can still run (via a software that translates these programs, called “Rosetta”), and (4) iOS (iPhone/iPad) apps can now run on the new Mac/Macbook series. While Apple made sure its own macOS Big Sur apps were ready, more than a few open-source projects and commercial apps have yet to be rebuilt with ARM64-based code and thus will rely on the translation layer. (I might consider buying Apple to hedge against any adverse performance from Intel, which will trickle down to AEM).
Singtel: The MAS just announced that it will award full digital banking license to the Grab-Singtel consortium and also Sea Ltd. (Will consider looking deeper into what this means for Singtel)
DBS: I have not kept a close eye on the financial services sector in all honesty. I remain skeptical about the optimism shown by investors for the banking sector as loan repayment ability still remains an unknown to my mind. DBS saw a 0.1% increase in non-performing loan (NPL) ratio in the latest results, while that of OCBC and UOB remain unchanged. Furthermore, net interest margin (NIM) were lower across the board and profit before allowances have fallen significantly (DBS: -8%, OCBC: -5%, UOB – 14%). That said, the banks have all bumped up the CET1 ratio, which gives extra comfort on their ability to absorb any potential hit that may come.
Delfi: Management’s product portfolio optimization (phase out less profitable products and focus on premiumization) and margin-improvement (cutting out distributors in Java and going direct to retailers) strategies seems to have started benefiting the Company as revenue is up 3% in the most recent quarter with net profit rising 19%. (BusinessTimes Article – Delfi Q2 net profit up 19% on stronger product sales). As the only Retail company in my portfolio, I remain optimistic that this market leader in chocolate confectionery products is the right horse to bet on given an expected recovery (1) from Covid (which hit Indonesia hard having just seen a daily record of >8,300 daily Covid cases) and also (2) from its turnaround strategies (premiumization, cost-cutting/margin-expansion initiatives) deployed over the past few years.
Once I get more spare time, I am interested in exploring the following themes to keep a lookout for new companies to invest in / to diversify my portfolio:
- Data center due to current supply moratorium and the level of maturity of the Singapore DC market (maybe Keppel DC REIT, maybe something overseas)
- 5G rollout (M1/Starhub have rolled out mid-band 5G on the 2.1GHz frequency band. Singtel has rolled out mid-band 5G services on the 3.5Ghz and 2.1Ghz bands. On the other hand, TPG Telecom has lost out on its bids but has successfully applied for the mmWave spectrum needed for localised networks. It will operate the high-band 5G service and will likely enter into a commercial agreement with either of the two MNOs to offer mid-band 5G on the MNO’s network. Simply put, 5G can be split into 3 types: low-band, mid-band and high-band (millimetre-Wave). Low-band is about 20% faster than LTE, mid-band is about 6x faster than LTE but has less reach than low-band, and high-band is about 10x faster than LTE but only works if you’re in close proximity to the signal source.)
- Digital banking (Singtel)