Blueprint to build your own STI index - Avg 10yr Annualised Return 12.6%

SGX website provides some good information for retail investors, and one of the few articles published in the website was the report on the 10 year annualised return of the local stocks. The 10yr annualised returns of any stock is a good indicator of how the stock had performed over the last 10 years. If you coupled this with the rule 72, this is a very powerful concept.

The S&P500 10 year annualised returns is around 13.6%. What does this mean? This mean that the amount invested in the S&P500 will double every 5.3 years.

I am writing this article so that my kids, in time to come when they are interested in investing, has something to guide them. 

Below is the table that shows the 10yrs annualised returns for each of the local stock,

Do note that the Capital mall is now CICT.

The last column (index composition) is the weightage of your total fund that you will be investing, the ones with the higher annualised returns will have bigger weightage. You can also choose not to have any weightage at all.

Should you be buying all these now. Of course NOT. You need to value each of the stocks, and buy only when their price drop into the discounted value zone. One of the quick test is using the 5 years avg dividend. At the current price, there are few stocks in the discounted territory.

The avg return from this DIY index is 12.6%. What does this mean?

This means that every 6 years, your invested amount becomes double. Apart from buy S&P500 ETF, here is another alternative to your investing journey.

Alibaba - Is it time to buy ??

 Happy National Day Singapore.

It is a long weekend here and I just want to share my thoughts on this counter BABA listed in NYSE and as well as HKSE (9988). There have been many sharing of is it time to buy in the social media when Alibaba crashed more than 40% due to the hard handed by the Chinese Government. I am not interested in any country's politics thus I shall not comment on this aspect. I am more interested in if there are coffee money to be made from this crash.

In stock investment, all of us know that there are risks involved as the equities returns are high. This principle applies to all market, including the chinese. Having understood this, then let's look from FA and TA perspective at how we can take advantage of this crash using our spare cash. By spare cash, I mean you dont lose sleep if you lose the entire stake.

Fundamental Analysis

Over the last 5 years, on average the EPS is about 5.5. This is about 30% discount to the last reported earnings. This is to ensure there is some margin of safety.  Using this; the estimated stock price at

PE 22 = USD 122

PE 34 = USD 188

PE 45 = USD 247

So at the current price, would you go in??

Technical Analysis

Looking at the TA, there are no indications that the correction has slowed or stopping. Do a comparison with Jan 2019 when the correction happened and it reversed up when MA and TA indicators moved up.

The above is to record my thought process for me to reference in future, not a recommendation of any sort. 

Q1 2021 Portfolio Updates

 Market continued its uptrend from 2020, and with the Covid-19 situation stabilising, the old economy counters have started to recover as well. Overall, the local market had moved up along with the rest of the global indexes. As such, some of the sectors are not as cheap as they were during the massive correction last year.

Transactions

With the recent run up, I took profit on the following counters.

• Kimly
• DBS
• OCBC (Partial)
• Exxon
• STI ETF (Partial)

Some of the counters were mentioned in this post. For DBS, using 5 years average dividend of $1.09, at $25 it is fairly valued. Of course it can go higher but I am happy with my profit.

The reason that I took profit is they have given me decent returns, most up to 5 years worth of dividend that I would have collected. With the sale, I can use it to invest in counters unloved (below) at the moment. The lesson learnt from the March 2020 correction is that one must have enough bullets to capitalise.

Unloved Counters

Using the profits from the sale, I invested into these counters.

• Keppel Reits
• CDL HTrust
• Jardine C&C
• Manulife US Reits
• Starhill Global Reits
• Yanlord

Reits sector performed badly last year and investors avoided them. The leading ones like the Industrial Reits managed to hold well and most are already fully valued. However, the Hospitality, Office and Retail Reits are still in bad shape. This gives opportunity for us to invest, collect dividend while waiting for market to notice them again.

Jardine C&C is a counter in the STI index, using the 5 years average dividend of SGD$1.07, at 4% yield, it is still undervalue. 

The irony is when market is heavily corrected, everyone is worried. And when the market is moving up every other day, everyone is talking about investing for dividend. It is only during tough times that the yield is attractive as the price is low.

Trading

I have started trading for few months now, with small amount, this is to capitalise on recovery play and when market is moving up. These are counters that I have bought;

• Raffles Medical
• SPH
• China Sunsine
• Genting

Thanks for reading.

Above information does not constitute investment advice or recommendations.

These Blue Chips gave STI a strong start in 2021

 If you still remember, STI was the worst performing stock in this region last year. And how things have changed, it has started 2021 on a strong foot hold. As the banks constitute the highest weight, they have helped STI to propel forward given their recent very strong rally.

Below are the 2 bank counters that I owned and a laggard which has started to catch up. Given the flush in liquidity and returned confidence with the vaccine, they may rally higher. Let's see if the uptrend can still continue.

DBS

This counter has rallied the most, and as such, it is no longer cheap as compared to few months ago.

 

OCBC

Like DBS, this counter has rallied in the last few months. Last week, it gapped up for 2 days, which means that investors are scrambling to want a stake in this counter. However, at 11x earnings, it is neither cheap nor expensive.

Jardine C&C

Though this counter is also in the STI index, it is the poorer cousin of these 3 counters. The counter has not moved much, but last week it breakout of the key resistance strongly. At about 10x earnings, it has not been fully valued.

Happy and prosperous investing all, open eyes BIG BIG. 养 套 杀 。