Stock Market Archives - Page 10 of 28

Kiasu & Kiasi Crisis Stock Strategy (鱼与熊掌)

Posted on April 8, 2020 Written by Dr Tee (Ein55)

There are 2 distinct fearful personalities in each person (depending on condition): Kiasu (怕输) and Kiasi (怕死). Kiasu is “Fear of Missing Out” (FOMO), eg. commonly seen in Great Singapore Sales (long queue overnight for certain special offer), afraid of missing the opportunity. Kiasi means “Fear of Death”, safety first in most actions with low risk. Of course, it is possible to have Kiasu and Kiasi together, eg. long queue in supermarket, afraid the food supply may be limited during Coronavirus crisis.

It is not a shame to be Kiasu and/or Kiasi as it is human nature. A smart investor may align one’s unique fearful personality with opportunities in global stock market crisis. This way, the inner potential could be fully maximized to profit from giant stocks at low optimism. Let’s study in more details on both crisis stock strategies.

1) Kiasu Crisis Stock Strategy

This is suitable for contrarian investor with counter-trend investing strategy during bearish stock market, especially when stock prices are far below the intrinsic value, dropping below low optimism <25%. Warren Buffett could be the best example of this type of investor, usually show hands when market is crashed, “be greedy when others are fearful”.

Similar to Great Singapore Sales, when a shopper has only $100 budget, seeing a handbag with 50% discount at $50, may buy 1 first due to fear of missing out (Kiasu) as the opportunity may be on available on that day. It is crucial to reserve the capital as there be another better offer elsewhere or another day with 70% discount.

Contrarian investor is similar to smart shopper, would invest in giant stocks with strong business fundamental with multiple entries. For stock capital of $10k, one may split into several investments, eg (10 x 10%) or (5 x 20%) or (2 x 50%), etc, diversifying over different prices, each entry could be X% apart, eg 5-10% lower each time to justify further investment. This way of average down at low optimism prices would help to get as close to bottom price as possible, even no one would know what will be the lowest price.

Assuming the crisis (buy low get lower) may last for 1-2 years, investing with giant dividend stocks (including giant REITs) with overt 5% dividend yield would help to strengthen the holding power as during this period, one could enjoy 5% passive income (assuming worst crisis may even cut 50% of dividend, left only 2.5%, still higher than bank interest rate of 1+%). When crisis is over (no need to time the market), naturally the investor would enjoy the capital gains when stock prices start to soar, supporting by growing business of giant stocks. Then, contrarian investor may need to plan for when to sell or how long to hold (similar to last few years when global stock markets were in high optimism >75%).

Common failure of this strategy by beginner is to buy weak fundamental stocks at “historical low” price or last 10 years low, which may become lower in future, company may go bankrupt during crisis (eg. certain weak airlines or F&B stocks in Coronavirus crisis), may not have chance to wait for share price or business recovery.

For this strategy to work, contrarian investor requires to invest in a portfolio of giant stocks at low optimism (ideally <25%) with strong business fundamental (following Dr Tee criteria, there are over 1500 global giant stocks). If capital is limited, one may invest in major stock index ETF at low optimism (eg. Hong Kong Hang Seng Index ETF, Singapore STI ETF, China SSEC ETF, etc) which indirectly has diversification over a portfolio of blue chip stocks (although not all are giant stocks).

2) Kiasi Crisis Stock Strategy

This is suitable for trend-following investor or traders, waiting for reversal of share prices from bottom (paying premium of higher prices similar to insurance to ensure price is back to uptrend), still buying at low optimism <25% (but in uptrend price direction). This is integration of trading (trend-following) into investing (waiting for price below intrinsic value of giant stocks).

Safety is important for kiasi traders who could not let the capital stuck in the stock market as regular income (capital gains within weeks or months) is important for short term to mid term trading. Therefore, a stronger uptrend over weeks or months need to be established first (reg. higher highs and higher lows price pattern) before entry.

In case the uptrend or reversal could be a technical rebound, a trader needs to do further deeper market analysis to understand the competing forces of greed (eg. unlimited QE, less cases in Coronavirus, etc) and fear (eg. serious Coronavirus condition, weaker economy and business). For risk management, a trader may apply S.E.T. (Stop Loss, Entry, Target Prices) trading plan, following strictly. When direction is correct, a trader may add more position in the same direction (eg. uptrend prices).

For trend-following investors or traders, the risk of stuck in long winter (low optimism period such as global stock crisis, Global Financial Crisis or even Great Depression) is lower than counter-trend investors, therefore possible to consider growth stocks (little dividend) or some midfielder stocks (mix of growth and dividend stocks), focusing more on capital gains in a more bullish stock market.

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There are about 100 global giant dividend stocks (suitable for Kiasu contrarian investors) and 300+ global giant growth stocks (suitable for Kiasi trend-following investors or traders). It is possible for a smart investor to integrate both kiasu and kiasi strategies together, investing with multiple entries in both bearish and when reversal to bullish stock market with growth dividend giant stocks at low optimism, having the best of 2 investing worlds (鱼与熊掌、实可兼得).

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Filed Under: Market Cycle Investing, Market Optimism, Personal Analysis, Stock Market, Technical Analysis, Value Investing Tagged: crisis stock investing, global financial crisis, global stock crisis, investment strategies, kiasi, kiasu, stock strategies

Grandparents Blue Chip Stock SPH (远虑近忧)

Posted on April 7, 2020 Written by Dr Tee (Ein55)

Singapore Press Holdings (SGX: T39), SPH, is a well-known blue chip stock with 35 years of history of press business. It is popular especially among “grandparents” level of investors as a passive income generator through dividend payment.

In the past (over 20 years ago), there was little competition in this monopoly business, therefore SPH could gain income easily through advertisements with more circulations of hardcopy newspapers. However, in the internet era over the past 10+ years, disruptive technologies have changed the rules of the game, providing more channels of news (mostly free) through webpages, blogs, videos and social media (eg. Facebook).

As a result, number of SPH newspapers readers have been declining over the past decade (while Facebook and other internet users are booming), resulting in gradual falling of business fundamentals (revenue, earning, cashflow, even dividend) during the same period. The share price of SPH has fallen by half from the peak price of $5+/share, supressed further by recent global stock crisis, dropping to only 1/3 of peak price, $1.52/share, the lowest point at least for the past 26 years. Dividend yield is 7.1%, seems impressive (second highest in 30 STI component stocks, just behind Capital Mall Trust) but this could be a value trap.

A blue chip stock suitable for grandparents time may not be suitable for next generation now. SPH has lost the giant stock title (based on Dr Tee criteria) since 10+ years ago. Long term investing is not simply buy any stock and hold, especially for weaker fundamental stock in a sunset industry (monopoly is not a protection) of press business, buying low in prices would become lower in long term. SPH is a classic example as company never lost money, simply making less profits each year, long term stock investors may suffer huge capital losses if never review the business condition for decade, assuming a stock paying dividend yearly must be worth holding for lifetime.

The high dividend yield (DY = Dividend / Share Price) is mainly generated by share prices falling (1/3) more than falling of dividend payment (1/2) over the past decade. A common mistake of beginner in dividend stock investing is to pursue high dividend yield or simply check company is profitable (SPH has over 5% ROE for the past decade, not a junk stock, despite it is not a giant stock). The understanding of economic moat and business climate is crucial which is disadvantaged to SPH with popularity of internet, full with free news (including when you read this article, no need to pay even 1 cent to SPH).

This negative business cycle would continue, making harder for SPH to improve the financial condition with press business segment, despite promoting digital media over the past few years and reduce the workforce to save cost. 《人无远虑，必有近忧》is a Chinese idiom of wisdom, educating that one needs to have a long term plan, otherwise there might be risks in near future.

SPH new management may know there is a natural limitation in press business (despite considering 101 ways of improvement), therefore a solution way is to diversify into other business. Since SPH with P = Press, therefore it is hard to abandon press business overnight, especially this is an important mission empowered by government to ensure true news are shared with people (instead of internet, sometimes could have fake news).

So, an easy way out is to create second revenue Pillar of SPH with P = Property. Over the past decade, SPH has successfully establish a portfolio of properties (eg. Clementi Mall, Paragon, Seletar Mall, Rail Mall, etc) and even spin off another stock, SPH Reit (SGX: SK6U), to collect rental for some of the properties. SPH Reit is a young REIT with reasonably good business performance but share price is also corrected by 40% over the past 2 months of global stock crisis. In fact, SPH property business contributes to over 50% net profit of company, about 2 times of press business, one day may become Singapore “Property” Holdings.

Besides, SPH also diversifies the businesses to healthcare (eg. Orange Valley Nursing Home), education (eg. Mindchamps) and even Telco (M1 through partnership with Keppel Corp, another blue chip stock which also depends on property business to last through cold winter of oil & gas crisis). However, unlike property business which may be more passive in nature (investment decision), other businesses in different sectors could be out of circle of expertise for SPH, results of diversification have to be proven over time (so far property business is proven to be in right path).

For long term stock investors of SPH who have been making losses (more than 50% capital loss, even if collecting dividend yearly), may be in a dilemma of whether to cut loss (painful) or give SPH a chance to grow in property (proven) and other new businesses (still uncertain) beyond press business. One possible option is to apply “Change Horse” strategy as shared in earlier article, which is to sell a weaker fundamental stock, using the remaining capital to buy another giant stock with strong business fundamental (eg. existing competitors of SPH, internet related giant stocks which have growing businesses with more readers each month) on the same day, as if stock is never sold, just name is changed.

If not, at least SPH stock investor may consider to change P of SPH from Press to Property through SPH Reit (swapping between parent and subsidiary stocks) which focuses on property rental (may not be a giant REIT but performance is better than SPH as a whole). In this way, decade of downtrend in SPH business may be changed to potential decade of uptrend in SPH Reit business (with condition REIT manager is making the right decisions, eg. buying new property at lower price during crisis, etc).

The story of SPH has many hidden learning lessons. Firstly, there are few blue chip stocks which investors could buy and hold for lifetime as disruptive technologies (eg. another grandparents blue chip stock, Comfortdelgro with new challenger in taxi business but condition is more stable than SPH) may change the rule of game or there could be unexpected business crisis at certain point of time (eg. SARS and Coronavirus crisis to airlines sector but this is a short term risk). A smart investor has to regularly monitor the business at least with half-yearly annual reports. Buy a stock means one is in partnership with company doing business together, sharing the pains (if losses or less profits) and fortunes (if more profits which could justify more dividend payment).

Besides, SPH press business is a mirror of some individual who could not control own active job (eg. could be a worker in a declining semiconductor sector or a staff who does not have pay increment for years, etc) as they have been working for decades, not able to change the profession easily. So, if one could learn to convert the active income (salary from a job who may not have a bright future prospect) into 10-20 giant stocks, then literary one has 10-20 “jobs” which could generate money at the same time. The best is these additional incomes don’t need active “work”, therefore it is called passive income with dividend yearly or even quarterly, when holding long enough, potential capital gains due to growing business (with condition focusing in a portfolio of giant stocks, ideally buying low during global stock crisis). If these 10-20 giant stocks could pass the yearly certification process as a giant stock, then an investor may have option to hold for long term or even for lifetime or passing to the next generation as family wealth (this is common for those rich families with investment funds but individual may pass a few giant stocks to the next generation).

Dr Tee is still a long term supporter of SPH newspaper (not stock, but a reader), could not change the habit of reading daily newspaper for several decades. Personally, I hope SPH could continue to be strong in property and new business, so that the press business is sustainable.

So, until SPH becomes a giant stock again (to be proven, see if could pass Dr Tee criteria one day), an investor has the choice to invest in over 1500 global giant stocks, supported by growing business.

In Year 2020, SPH is officially removed from 30 STI index component stocks (investor has to focus only on giant stocks for investing, not just buying grandparents blue chips stocks):
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), Hongkong Land (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 member.

Filed Under: Market Outlook, Property Market, Stock Market, Value Investing Tagged: Blue Chip Stocks, monopoly, Property, reit, SGX, Singapore Press Holdings, SPH, SPHReit, T39

Compounding Monster of Investing (石破天惊)

Posted on April 5, 2020 Written by Dr Tee (Ein55)

The scale of global stock crisis is conditional: whether Coronavirus is short term, mid term or long term. So, we need to monitor the daily new cases of Coronavirus in the world (Singapore would follow the main trend):

World New Daily Cases:
https://www.worldometers.info/coronavirus/coronavirus-cases/

Singapore New Daily Cases:
https://www.worldometers.info/coronavirus/country/singapore/

The virus has a compounding formula of 2X every 7 days (some countries could be slightly faster or slower, 6-8 days), therefore in 1 month with about 30 days, it would have about 4 times of 2X, total 2^4 = 16 times monthly.

The tracking is from Day1 (23 Jan 2020) with about 1000 case in the world (mainly in China) and 1 case in Singapore. We can apply the formula from 23 Jan 2020 to 5 Apr 2020 with about 2.5 months or 10 times of 2X: 2^10 = 1024, approximately 1000 times. Therefore, world just crosses 1 Million cases (1000 cases on Day1 x 1000 times = 1M) and Singapore has just exceeded 1000 cases (1 case on Day1 x 1000 times = 1000 cases).

If this compounding continues, it would double itself every 1 week, eg 2 Millions cases in the world within 1 week, 8 Million cases within 1 month. The average fatality rate is 5% (country dependent, from 0.5% to 10+%, also depends on how comprehensive is the detection of infected cases, especially mid cases or no symptom cases). So, if the growth with 2X compounding is not ending soon, more people in the world would become victims in this health crisis.

The deadly compounding trend may be ended with 2 critical stages. Details of analysis of P1-P5 Coronavirus life cycle, may refer to Dr Tee past youtube video on global stock crisis:

P2) High to Slow Growth

The daily new cases fall from the peak of max daily cases. This would show the transition from high growth to slower growth (lower rate of compounding). Currently only China and Korea have observed this downtrend consistently. Good news is even “Top 5” of Italy, Spain, Germany and Iran are seeing downtrend over the past 1 week, a stronger light at the end of tunnel after 1-2 months of lockdown.

On 3 Apr 2020, there is a surge with over 20k new cases added in 1 day, this is due to 1 time correction added by France for not accounting to cases in nursing homes (previously only for those hospitalized are counted). So, we could not take 3 Apr as peak. Currently no clear ultimate peak is seen for the world, every day is a new peak for the world.

For Singapore, due to cross infections among different international travellers and community infections, the general trend is unfortunately aligned with the world (uptrend with new peak each day). At the point of writing this article, 120 new cases are reported (new daily high) which is not a surprise because the compounding “law” is governing with 2X every 7 days, implying 1000 cases recorded a few days ago could become 2000+ cases by coming weekend, therefore new potential weekly cases of 1000 over 7 days is reasonable to be over 100 daily cases. The worry is next 1 week as it would follow the next tier of “compounding monster” from 2000+ to 4000+ cases until the social distancing could slowdown the spreading of Coronavirus. So, it is right for Singapore government to advise (perhaps should be a “law” as in China and Italy, then it would be labelled as lockdown) to stay at home in Apr as this will be the highest growth rate of Coronavirus, similar to some stock crisis, don’t catch the falling knife by taking unnecessary risks.

US takes the lead as world no 1 in total cases, current uptrend is aligned with the world, each day is a new peak. We need to observe for the first dip, following by 7 days of more consistent downtrend to have a stronger confidence that growth rate is moved from high to slower growth. When cases in US are down, likely the world cases would fall unless new leader in country with high population (eg. India, Pakistan, Indonesia) may continue this world uptrend.

Hopefully, the world may reach a peak new daily case by mid of Apr (could be over 2 Million cases by then), could only confirmed with 7 days of downtrend (observed in most countries in Europe but not yet in US and Singapore and other Southeast Asian countries).

P3) Slow Growth to Zero Growth

After declining from the peak new daily cases (eg. completed in China and nearly for Korea), it would have minimal new daily cases (less than 1% of total cases), considered under control.

In terms of Coronavirus life cycle (P1 – P2 – P3 – P4 – P5 as given in earlier youtube video), here are the countries who take the lead to complete in advance:

1) China (2 months downtrend)

2) Korea (1 month downtrend)

3) Italy (2 weeks downtrend)

4) Spain, Germany, Iran, etc (1 week downtrend)

5) Most countries (less than a few days of downtrend or still uptrend each day)

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So, what is the significance of Coronavirus even one may not worry about health? Well, it would affect stock market and global economy. If Coronavirus may end by summer, then world may follow China economy with V-shape recover, then stock market may experience a rally with support by economic stimulus plans or even unlimited QE (Quantitative Easing or simply “Printing of Money”) by many global countries government.

It means, there is a chance for global stock “crisis” to recover from the flash crash over the past 1 month as the economic crisis is short term. High unemployment rate would gain back the jobs if crisis just comes and go. Consumers after months of lockdown may “revenge” with more shopping (retail sector recovers), more playing (entertainment sector recovers) or more travelling (airlines sector recovers). There is real experience after SARS 2003, world travelling increases due to suppression of demand and supply for 8 months after the outbreak.

However, if the Coronavirus continues beyond summer, the global recession with stock crisis may continue for mid term till 1-2 years later when vaccine is developed.

Of course, if the Coronavirus comes back every winter with a more deadly strain (new mutant), then it may become great depression similar to 1929 for at least 5 years until 2/3 world population are infected, only then the community immunity may stop this virus naturally (similar to Spanish Flu about 100 years ago) but this would be a disaster to mankind.

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We could experience the compounding effect of Coronavirus, similarly we may imagine if this is applied in a positive way on growth stock with 2X compounding in share price every few years, it would become 10x or 100x in a longer term.

There are over 1500 global giant stocks based on Dr Tee unique selection criteria. Some of them belong to this multibagger (3X to over 10X growth of share prices) or high growth stock which one could buy (ideally during a stock crisis) and hold long term or even for lifetime until the growth rate has slower down due to change in business (similar to change in rate on Coronavirus analysis), only then an investor would say farewell to this lifetime partner of growth stocks.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 member.

Filed Under: Market Outlook, Personal Analysis, Stock Market, Value Investing Tagged: compounding, coronavirus stock market, global financial crisis, global stock crisis, investing

World Cup of Global Stock Crisis （危机重组）

Posted on April 5, 2020 Written by Dr Tee (Ein55)

In a football game, we need a balanced team with 11 strong players (defenders, midfielders, strikers, goalkeeper), coach, opponent team, referee and audience. Each of them is playing a key role for a successful world cup, highest level of stock investing. Similar for stock investing, the highest level of investing is positioning during global stock crisis, let’s learn how to apply 3 main strategies of dream team.

Defender stocks usually are positioned for passive income (dividend) regardless rain or shine, suitable for all investing at all time but higher yield during crisis. Midfielder stocks usually aim for growth with capital gains and some bonus dividend. Striker stocks may have higher risks but potential return in shorter time is higher when one could take calculated risks.

Goalkeeper is the cash or capital available for stock investing, careful allocation is important. If a team is too defensive, all 11 players would shield around the goal pole (100% cash), then risk is zero but the potential return is also zero (this strategy is possible during high optimism market, take profits by selling stocks and stay risk free, eg over the last 2 years of high optimism market > 75%). In a low optimism market, goalkeeper could be more aggressive, even a goalkeeper may play the role as defender (0% cash, all invested) when opponent (stock market) is very weak (eg. 0% Optimism with global financial crisis).

Coach is in fact each of the investors who is like a fund manager, making the strategic moves for all 11 players, adjusting their roles (more aggressive, more defensive, balanced, 100% cash, etc) based on the condition of stock market (opponent team) which could be different at various timeframes (short term, mid term, long term).

Referee is the investing results, sometimes may declare win or lose, depending on the time of the game (eg. full game or extended investing game in day, week, month, year or never ending game of a lifetime). Some players who violate the rules of stock game (eg. insider trading or fake financial report) would get caught, may be given a yellow / red card or banned permanently from the investing game.

Audience are all the readers of investing article here, who may feel excited, worried, sad or no emotion when reading about stock market. After the exciting investing game is over, audience would be back to normal life, working for others to gain active income. If an audience (reader or learner) is motivated, also taking action (Buy, Hold, Sell, Wait, Shorting) in investing, then the effort of learning will be paid off. If an audience is still an audience (reading hundreds of posts or video daily) without action aligned with own personality, life still goes on, continue the same way. So, to have a positive change in life, one may need to start a positive action.

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So much about the football team, main goal is to motivate beginners to start investing, especially using time (compounding effect) with global stock crisis (buy low for global giant stocks) to change your current life.

There are 3 main strategies during global stock crisis (which falls about 30% over the last 1 month):

1) Dividend Giant Stocks (Defender)

This strategy is more suitable for contrarian investor (investing during bearish stock market, eg in current market). Main objective is to collect high dividend yield >5-10% (acceptable even if dividend is cut by 50%, eg for REITs, still much better than holding to cash with only 1% bank interest rate) through investing in strong fundamental businesses, supported by strong holding power of 1-3 years to face the uncertain crisis.

This method requires multiple entries (for every crisis, eg 10-20% lower prices each time, see my past articles for examples) to average down the price and diversify into 10-20 global giant stocks with at least 3 sectors from 3 countries. For 20 giant stocks (with min 5% dividend yield), assuming 1 giant stock may even go bankrupt (eg. DBS or OCBC, unlikely but assume it happens), this is max 5% permanent loss, which could be compensated easily by holding 1 year with 5% dividend yield.

For value investing, the “cost” of missing the opportunity boat may be higher than buying in falling price because of greedy to buy at the lowest price, eventually untrained investor may either need to pay higher price or totally miss again, buying at just fair price when marketing is recovering.

2) Growth Giant Stocks (Midfielder)

This strategy is more suitable for trend-following investor (possible for counter-trend investor but need to have min 2-3% dividend yield as mid-fielder). The high growth stocks are hard to get low optimism, this requires more patience, when opportunity comes, one may take action, despite the correction in global stock crisis may not be a lot (eg. 20-30%), unlike over 50% price correction in cyclic stocks, but these growth stocks are planned for buy low and hold long term for potential multi bagger (3X – 10X capital gains). Growth stocks investors have option not to sell during the next global financial crisis because the stocks are too good, will be the final 1% stocks to sell unless it is the end of the world (if so, stock market is no longer important to human, therefore no risk at all then).

3) Cyclic Giant stocks (Striker)

This strategy may be considered for shorter term trading or crisis investing (eg oil & gas stocks or crude oil itself, airlines stocks, F&B stocks, etc) with severe price correction during crisis, or for cyclical sectors such as bank, property and technology stocks which follows economic cycles (will fall badly during global economic crisis). Cyclic stocks do not need dividend, therefore risks are higher, more suitable for trend-following, wait for reversal in prices. For counter-trend investing, it is only possible if it is <10% of portfolio or 1 of multiple entries (easy new entry may wait for extra 20% dip before entering again). Crisis investing stocks would suffer real damage in business but should be at sector level, not only on individual stock.

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A smart investor who hopes to enter the bearish stock market right away with less risks through dividend stock, may also combine different Ein55 dividend stock investing strategies developed by Dr Tee, eg:

1) Growth Dividend Stocks

– collect dividend during low optimism, then enjoy capital gains when crisis is over.

2) Cyclic Dividend Stocks

– crisis giant stocks with great price correction and high dividend yield

3) Defensive Dividend stocks

– Dividend stocks with defensive business and stable stock prices

4) Undervalue Dividend Stocks

– dividend stocks with strong assets in property and cash but share price is less than 50% of value with regular dividend payment

5) Lifetime / Long Term Dividend Stocks

– Some may compromise dividend for higher and more stable growth, especially when planning for longer term investing or even lifetime investing (buy low and hold for life).

There are over 1500 global giant stocks, including 100 global dividend giant stocks based on Dr Tee criteria. An investor (coach) just needs to choose 10-20 of them to form a football team (own stock portfolio) to join the current world cup of stock crisis. Winner would gain the highest title of stock investing with potential high return. However, it requires practices and training to achieve this level, eg. playing in a state investing game first (minor stock correction) or country investing game (major stock correction).

Don’t continue to be an audience to cheer for your favourite team or do nothing throughout the game of investing. Instead, join the game as a coach now to form your own stock investing dream team, crisis is usually the best timing to recruit the best stock players who may be discounted by more than 50% in market prices.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 member.

Filed Under: Market Optimism, Personal Analysis, Stock Market, Value Investing Tagged: dbs, dbs bank, global financial crisis, global stock crisis, investing strategies, ocbc, world cup

Temasek Acquires Crisis Stock Keppel Corp (趁虚而入)

Posted on April 3, 2020 Written by Dr Tee (Ein55)

Temasek has offered partial acquisition to Keppel Corp (SGX: BN4) shareholders at the price of $7.35/share up to 51% ownership over 1 year period (with some conditions applied). Since this is not a full acquisition, some investors may be confused of what is fair price for Keppel Corp. Let’s study this acquisition offer in details.

Temasek owns 20.45% of Keppel Corp, intending to purchase shares owned by remaining shareholders (100 – 20.45% = 79.55%) to top up to 51% (still need 51% – 20.45% = 30.55%). So, it is partial acquisition of 30.55/79.55 = 38.4%. It means for every 1000 shares, 384 unit will be acquired.

The offer price of Temasek at $7.35 is about 20% premium over the average price before acquisition, aligned with several other acquisitions in Singapore. However, it only has 38.4% power, not the same as 100% power as other full acquisition (eg. Breadtalk current acquisition offer of $0.77, price would surge near to this price overnight after the announcement). Assuming the Keppel Corp share price is $5/share (on certain day), the theoretical share price after 38.4% partial acquisition = $5 + (7.35 – $5) x 0.384 = $5.90/share. Reader may replace this equation of $5 share price with any latest share price of Keppel Corp before acquisition.

Over the past 1 month of global stock crisis, Singapore stocks fall by about 30% in average but Keppel Corp only falls about 20%, aligning with 38.4% potential acquisition by Temasek which is about 1/3, therefore the stock corrections is also reduced by about 1/3 from 30% to 20%.

It means the global stock crisis still has about 60% impact on Keppel Corp prices. Therefore, an investor has to make decision mainly based on global stock crisis and current stock market condition with Keppel Corp value, not to assume price would recover to $7.35/share price eventually.

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Keppel Corp is a diversified corporation with 4 businesses: offshore &marine, property, infrastructure and investment. The 2 main pillars are Property (Keppel Land, contributing to about 50% company profits) and Oil & Gas (Keppel O&M, main source of losses over the past few years). Over the past 5 years after the oil price fell from $100 to $27/barrel, Keppel Corp suffers directly as main clients reduce the capital expenditure (eg. oil rigs), therefore Oil & Gas becomes a losing segment.

Since 2015 crude oil crisis, Keppel Corp has temporary lost the giant stock title, currently a marginal giant (likely will become giant stock again after oil & gas sector recovery). Luckily Keppel Corp still has 50% earnings from Property (eg. Keppel Land and Keppel Reit), even Oil & Gas is a loss for several years (recovering to small profits in last 1 year), the entire company as a whole could still make a profit. Compared with competitor or sibling, Sembcorp Marine (SGX: S51, also owned by Temasek through Sembcorp Industries) which has full risk exposure to oil & gas crisis, losing money for several years, resulting in share prices falling from $5 to $0.70 (last 17 years low).

Some may think it is “cheaper” to invest in Sembcorp Marine stock (85% correction) compared to Keppel Corp stock ($13 falling to $5/share during oil & gas crisis, about 60% correction). This comparison is only valid if both companies are giant stocks (which are not) because “crisis is not opportunity” if business fundamental is weak, eg for the case of Sembcorp Marine. For Keppel Corp, it is still a 50% giant stock due to strong property business. Therefore, investor of Keppel Corp is actually investing in value of Keppel Corp property (main value) while taking advantage of falling share price (due to Oil & Gas crisis). It was a good move in year 2015 (beginning of oil & gas crisis) for Keppel Corp to offer full acquisition of Keppel Land which 100% profits of property business goes to Keppel Corp, offset the losses in Oil & Gas segment in Keppel O&M.

Assuming Temasek could successfully own 51% of Keppel Corp by end of 2020, it is a full control of company. This may allow possibilities of strategic merging of Temasek subsidiaries companies (eg. Keppel O&M and Sembcorp Marine) or restructuring of Temasek companies, eg. Keppel Corp and Sembcorp Industries (Temasek nearly has 50% control), etc, to maximize the asset values.

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During crude oil crisis with Keppel Corp at low optimism prices, Temasek leverages on crisis to have majority control of Keppel Corp at reasonable low price of $7.35/share. This also provides an option for Keppel Corp investors to sell for 20% profit. However, the global stock crisis has disturbed the plans as prices of Keppel Corp are falling even lower than before acquisition news.

Analysis on Keppel Corp is beyond stock and Temasek, also requires understanding of property market and crude oil commodity market. So, it is a stock with complicated interactions of market signals, reflecting in final share prices.

Here is a special Ein55 style, 50% Discount Method for investing in Keppel Corp during crisis (with or without Temasek acquisition) with multiple entries to fight against unknown market crisis ahead. Assuming $10 is a common high level prices (occurred during when economy and crude oil market are bullish), an investor may apply 50% discount in prices each time before each multiple low due several unforeseen market crisis.

$10 = High Level Price (potential future selling price level)

$5 = Crude Oil & Stock Crisis (3 times in 2009, 2016, 2020) after 50% discount x $10

$2.50 = Global Financial Crisis (17 years low) after another 50% discount x $5

$1.25 = Great Depression (20 years low) after another 50% discount x $2.50

This is a non-linear version of multiple entries for very conservative investor who hopes to buy low but afraid of prices could get lower. Assuming all the crisis come (hopefully not), this is average price after 3 entries (like Keppel Corp with property pillar could still survive):

($5 + $2.50 + $1.25) / 3 = $2.92

This is lower than using linear average down method at low optimism (assuming 3 entries with $1 lower each time):

($5 + $4 + $3) / 3 = $4

Each method (linear or non-linear 50% discount) has its benefits. Linear method is more likely to achieve in practical market, for those who wish to reduce downside risk through averaging (eg. 3 times x 33% capital). Non-linear method is for very conservative investor, demanding 50% discount each time before willing to take out precious cash from the pocket for investment. During the long holding period (could be 1-3 years, depending on severity of crisis), Keppel Corp investor may be given an average of 4-5% dividend yield (past 10+ years record), assuming the dividend is also cut by 50% due to crisis, one could still get about 2% dividend yield which is higher than fixed deposit in banks with 1% interest rate. After the crisis is over, assuming the average entry price is only $5 (only 1 crisis experienced), an investor may not need to sell at $10 average high prices for 100%, could even sell near to Temasek fair acquisition price of $7.35 which is over 40% higher than $5 price.

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Charlie Munger (partner of Warren Buffett) said the big money is not in the buying and selling, but in the waiting. Global stock crisis may happen only every 5 to 10 years. Similar to a lion ambushed, waiting patiently for target, when opportunity comes near, only then strike for higher chance of winning. It is the same for current global stock crisis, for investors “ambushed” for many years, it could be the right time to plan for a strategy to take action in stocks.

Frankly speaking, there are over 100 global giant property stocks and 44 global oil & gas giant stocks (based on Dr Tee criteria), which are much stronger than Keppel Corp. Some of these giant stocks are also falling in prices 20% – 50% recently, “Crisis is Opportunity” investing in these growing business (value) with significant discount in prices.

There are at least 26 Temasek / GLC stocks in Singapore including Keppel Corp, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

Temasek stocks portfolio also affect about 15% of STI index stocks, which has strong impact on Singapore stock market. Here are 30 STI component stocks:
DBS Bank (SGX: D05), Singtel (SGX: Z74), OCBC Bank (SGX: O39), UOB Bank (SGX: U11), Wilmar International (SGX: F34), Jardine Matheson Holdings JMH (SGX: J36), Jardine Strategic Holdings JSH (SGX: J37), Thai Beverage (SGX: Y92), CapitaLand (SGX: C31), Ascendas Reit (SGX: A17U), Singapore Airlines (SGX: C6L), ST Engineering (SGX: S63), Keppel Corp (SGX: BN4), Singapore Exchange (SGX: S68), HongkongLand (SGX: H78), Genting Singapore (SGX: G13), Mapletree Logistics Trust (SGX: M44U), Jardine Cycle & Carriage (SGX: C07), Mapletree Industrial Trust (SGX: ME8U), City Development (SGX: C09), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Mapletree Commercial Trust (SGX: N2IU), Dairy Farm International (SGX: D01), UOL (SGX: U14), Venture Corporation (SGX: V03), YZJ Shipbldg SGD (SGX: BS6), Sembcorp Industries (SGX: U96), SATS (SGX: S58), ComfortDelGro (SGX: C52).

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Filed Under: Market Outlook, Property Market, Stock Market, Technical Analysis, Value Investing Tagged: acquisition, Blue Chip Stocks, crisis stock, keppel corp, oil & gas, Property, Property Stocks, reit, sembcorp industries, sembcorp marine, temasek, undervalue stock

Wait for Durian to Drop in Stock Crisis 榴莲忘返

Posted on April 2, 2020 Written by Dr Tee (Ein55)

Investing in global stock crisis is similar to wait for durian to fall (best if other people’s durian tree). It is fine to wait for durians to drop, eg. DBS Bank (SGX: D05) below $10/share or giant stocks below low optimism level, but if there is a small durian (eg. DBS below $15/share) comfortable to oneself along the way (so low that everyone could reach), may take one first, no need to wait for the biggest durian in the world as luck may not be there all the time (eg. buying at the lowest price).

This way, at least when the durian waiting game is over (Coronavirus fear), each investor has a gift from heaven for investment during crisis.

DBS Bank (SGX: D05) below $10/share or OCBC Bank (SGX: O39) below $5/share is as if durian drops down, some “abnormal” contrarian investors would start to enter. Every 10+ years, this DBS durian only has chance to drop, currently not ripe yet. Other giant stocks fruits (may not as tasty as durian) start to ripe already, hanging low, waiting for investors to pluck with a low price. But some worry the price of future durians may drop further, so still waiting for lower price. Question is durian may stop to drop one day, no one know when is the day, so need to take calculated risk at certain point, otherwise need to accept possibility of missing the opportunity boat one day.

Usually summer time around Jun-Aug is durian season here, perhaps implying more opportunities then. Coronavirus may end by summer for stock market to recover or pandemic may continue longer to cause global financial crisis. Stock investment is similar to wait for durian, must eventually take action (Buy, Hold, Sell, Wait, Shorting), otherwise one may be still empty handed after the season is over (榴莲忘返).

Cash is king when used at the right time. The key is to define the “right time” for everyone, aligned to own personality.

1) Counter-trend investors (buy low sell high) may start to take action in bearish stock market below low optimism < 25%.

2) Life-time investors (buy low & hold for life time) may want to wait for Level 3-4 (eg US) to fall to low optimism or even until global financial crisis happens (eg GDP declines over 10% in many countries).

3) Trend-follower traders or investors may wait until the durian feast is over, there will be still leftover due to over supply, not in a hurry to join the bearish stock market, wait for the trend to reverse first before long the market. Some traders who could not wait till summer, may want to collect “junk” durian by selling to others (shorting at junk stocks in bear market) to make profit.

Despite many global giant stocks are at low optimism (not yet for DBS), but Levels 3 (country, eg. US) and Level 4 (world) stock market are not yet at low optimism (but trending down again this week), so it is prudent to save silver bullets but need to have a plan to trigger it, so that will get something when stock hunting game is over.

Remember to ensure durian tree will not fall first (business fundamental is strong, won’t go bankrupt easily) during the thunder storm (economic crisis), otherwise no more durian in future, investor may also get injure as buy low for weak fundamental stock may get lower or get zero eventually.

So, which type of durian are you waiting to drop? D24 (DBS) or Mao Shan Wang or any global giant durian?

There are 30 Banking & Finance Stocks in Singapore including DBS Bank (investor has to focus only on giant stocks for investing):
AMTD IB OV (SGX: HKB), B&M Hldg (SGX: CJN), DBS Bank (SGX: D05), Edition (SGX: 5HG), G K Goh (SGX: G41), Global Investment (SGX: B73), Great Eastern (SGX: G07), Hong Leong Finance (SGX: S41), Hotung Investment (SGX: BLS), IFAST Corporation (SGX: AIY), IFS Capital (SGX: I49), Intraco (SGX: I06), Maxi-Cash Finance (SGX: 5UF), MoneyMax Finance (SGX: 5WJ), Net Pacific Finance (SGX: 5QY), OCBC Bank (SGX: O39), Pacific Century (SGX: P15), Prudential USD (SGX: K6S), Singapore Exchange (SGX: S68), SHS (SGX: 566), Sing Investments & Finance (SGX: S35), Singapore Reinsurance (SGX: S49), Singapura Finance (SGX: S23), TIH (SGX: T55), Uni-Asia Group (SGX: CHJ), UOB Bank (SGX: U11), UOB-KAY HIAN HOLDINGS (SGX: U10), UOI (SGX: U13), ValueMax (SGX: T6I), Vibrant Group (SGX: BIP).

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Filed Under: Macroeconomy, Market Optimism, Stock Market Tagged: bank stock, crisis stock investing, dbs, dbs bank, durian, global financial crisis, stock market crisis, stock strategies

Temasek Dividend Stock Singtel (掌上明珠)

Posted on April 1, 2020 Written by Dr Tee (Ein55)

Temasek invests in about 40 global stocks, the largest investment by market capitalization is in Singtel (52% shareholding), jewel in the crown. Singtel (SGX: Z74) is not just the fixed deposit of Temasek (through consistent dividend payment for decades), also cash generator for over 1 millions Singaporeans who are Singtel retail investors, the most popular stock in Singapore.

Over the past few years, due to competitive global and local Telco industry (eg. new player TPG in Singapore, uncertain regional markets), despite Singtel is more defensive than other peers, share prices has dropped by half from the peak of $4.40 to $2.28/share (about 30% price dip was over the past 2 months of global stock crisis). This is relatively stronger compare with local competitor Starhub (SGX: CC3) with share prices drop to about 1/3 of peak price. Even M1 was acquired and delisted during this period. TPG is listed in Australia (ASX: TPM), share price has also dropped by half over the past few years.

So, this is not Singtel stock crisis (Level 1 – individual stock), rather, it is Level 2 crisis (Telco sector) and even Level 3 crisis (country level – Singapore and most Asian stock markets).

Singtel is not just a Telco giant of Singapore, also a major regional Telco in Asia Pacific (Australia, India, philippines, Indonesia). It has diversification geographically, but also suffer uncertainty in each country (eg. legal cases in Thailand and India which affect its last few quarters of earnings).

Telco industry used to be a defensive sector as usually only a few licenses are given in each country for Telco operators, nearly a sure-win oligopoly business. Introduction of smart phones in 2000s, following by 3G, 4G, etc, has helped Telco industry to grow further over the past 2 decades. The yearly capex (difference of operating cashflow and free cashflow) is usually stable, therefore Singtel’s consistent earnings have contributed to stable free cashflow, eventually predictable dividend payment 2 times yearly to shareholders for decades, about 4-5% average dividend yield over the past 10 years, better than fixed deposit interest rates of 1-2% in banks.

With recent global stock crisis, Singtel share price has dropped to 11 years low, approaching the last low recorded in 2009 global financial crisis. Singtel will announce 2020 final year report (financial year ending 31 Mar 2020) in a few months time but results are predictable to be much weaker than last year due to losses in Bharti (India investment) and weaker earning over the past 2 quarters (especially with Coronavirus).

Singtel is defensive partly because it is a major Telco operator, price competition could affect its earning but few people may terminate the mobile phone lines in this internet era. During global financial crisis, perhaps some people may cut 3 meals into 1 meal to save cost but likely will still keep the phone line which is the meal of “soul’.

This implies despite Singtel has more downside in both business (especially for the coming 2020 annual report) and stock prices (especially if Coronavirus is beyond control, resulting in global financial crisis), it is unlikely the company would go bankrupt with share price dropping to $0. Singtel is a dividend giant stock, current dividend yield is nearly 7%. Assuming the earnings, cashflow and dividend available may drop by 50% (due to 1-time loss in Bharti), there is still 3.5% dividend yield.

An investor who is interested in Singtel may apply progressive entries at low optimism level, eg 5 times x 20%. Assuming $2.50/share is the first trigger at low optimism. and investor may consider (just a sample investing plan, not a personal financial advice, please make your own decision):

$2.50 or $X – First Entry (Level 1-3 crisis)

$1.50 or $Y – Second Entry (Level 4 crisis)

$0.50 or $Z – Third Entry (Great Depression, when people cut from 3 meals to 1 meal, still cannot survive, Telco is no longer important)

Assuming 3 levels of crisis happen, average price will be $1.50/share over 3 entries. Investor may also consider these prices after it drops to bottom and recover again (uptrend), no need to suffer with falling prices in bear market. The strategy is personality dependent, counter-trend (contrarian investor) and/or follow-trend (trader mindset).

Singtel may remain at low optimism (below $2.50/share) for several years, investors could collect >3% dividend yield (pessimistic assumption) during the winter period of crisis. This way of averaging method (investors may define own $X, $Y, $Z prices above, the sample prices given above are just for example purpose).

The strategies above may be applied for any dividend giant stock. There are about 100 global dividend giant stocks (you may learn the strategies from Dr Tee in 6 days comprehensive course or note down a few sample stocks in free 4hr workshop for the public), some are much stronger and more stable than Singtel. In fact, Singtel is slower in growth, more suitable for dividend investing (as if fixed deposit in stock market) at low optimism but may not suitable for growth to achieve higher capital gains.

There are many ways to make money in stocks, may not be investing, could be trading (higher probability is shorting for current stock market but risk is high due to high market volatility). It is possible for short term trader to short at bearish Telco stocks (may not be Singtel) to profit from the falling prices, especially when breaking below a critical price support, driven by fear of declining business and global events (Coronavirus, etc). So, it is possible for different persons to take different actions (Buy, Hold, Sell, Wait, Shorting) and all could make money in stocks if strategies aligned with personalities and market conditions.

There are at least 26 Temasek / GLC stocks in Singapore including Singtel, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

Temasek has 40 stocks in the global portfolio, about half are giant stocks (based on Dr Tee criteria). Singtel is Temasek’s largest investment but not Temasek’s best giant stock. An investor may invest in the Top 3 Temasek giant stocks, buying lower than Temasek (hopefully with help of global stock crisis), selling higher than Temasek (if timing is right). Even the stock with business may be in trouble (eg. Olam previously, SIA currently), Temasek is a strong sponsor, likely will help if having significant investment.

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Learn from Dr Tee 4hr Free investment course on global dividend giant stocks to collect passive income during low optimism in stock crisis, then enjoying capital gains with growing share prices when crisis is over.

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Filed Under: Stock Market, Value Investing Tagged: Blue Chip Stocks, dividend stock, SGX, singtel, telco stocks, temasek

Change Horse Strategy: SIA to SATS (塞翁失马)

Posted on March 28, 2020 Written by Dr Tee (Ein55)

Nightmare of a long term investor is to hold on to a weak fundamental stock with declining share prices over the decade, wasting both time and capital. It is painful to cut loss halfway, therefore many retail traders (especially those who follow tips to invest) may initially plan for short term trading but when encountering global stock crisis falling from high stock optimism, making losses, forced to be a long term investor since then.

Singapore Airlines (SGX: C6L), SIA, is not a giant stock nor junk stock, under-performing in business (see details of SIA stock in another earlier post), both long term investors (hold for 10 years) or short term traders (hold for 1 month) may make significant losses. So, some investors may be mentally conditioned (despite having option) to subscribe to new rights and bonds issues to avoid future share dilution, investing more new capitals in unknown future of SIA in competitive airlines industry.

Many people may think big names (especially blue chip stocks with decades of history) equals to strong companies. SIA is a big reputable company, therefore some may think it is also a good stock investment, especially backed by Temasek, 55% major shareholder.

There are at least 26 Temasek / GLC stocks in Singapore including Singapore Airlines and SATS, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

We may study Temasek portfolio (about 40 global stocks, about half are giant stocks, half are non-giant stocks, based on Ein55 giant criteria), focusing on top 10 Temasek giant stocks, buying them at low optimism prices (could be lower than Temasek’s entry price for some stocks now), selling them at high optimism prices in future, protected by Temasek (eg. even for non-giant stocks: Olam, SIA, etc).

Temasek has a giant stock, SATS (SGX: S58), spinoff from SIA many years ago. Although both SATS and SIA are low optimism stocks (both related to airlines industry, suffering in Coronavirus crisis), SATS is a much better opportunity than SIA to buy at low optimism.

SATS controls about 80% of Changi Airport’s ground handling and catering business. SATS has 2 main businesses (about half each), gateway services and food catering services (including to non-airlines sectors). Similar to SIA, SATS is also affected by airlines sector crisis due to Coronavirus spreading, over 90% flights are down, business will be affected in next 12 months. However, in a longer term, SATS has 2 times stronger business fundamental than SIA. The performances of 3 key financial statements over the past decade are exactly opposite for SATS and SIA:

Income Statement:

SATS = increasing earnings

SIA = declining earnings

Balance Sheet:

SATS = increasing equity, declining debt / equity

SIA = declining equity, increasing debt / equity

Cashflow Statement:

SATS = increasing free cashflow

SIA = declining free cashflow

At current share prices, SIA is about 4.9% dividend yield (potential value trap, crisis is crisis), SATS is 5.6% dividend yield (crisis is opportunity).

For SIA investor who holds to SIA stocks with losses but could not sell due to loss aversion, may sell SIA and buy SATS on the same day with same capital remaining (fine even if 50% loss), transferring the fund (soul) from a old horse (SIA) to a young horse (SATS) which has a brighter future and strong energy than SIA to climb higher for capital gains in long term.

This is Dr Tee (Ein55) powerful “Change Horse” Strategy, suitable for those “stubborn” long term investors holding losing stocks for many years. This is a strong Personal Analysis (PA) method as an investor could tell husband or wife that they never actually sell the stock (eg. SIA), just change the stock name to SATS, offspring of SIA. This is important for those who assume sell a losing weaker stock implies immediate loss, they could continue to hold the stock but through transfer of capital to another giant stock, future winning probability would be higher than continue with than the weak stock (may be worse if double the investment with average cost strategy with new rights).

SIA vs SATS may not be the best example to illustrate “Change Horse” strategy because SIA is not a junk stock and SATS is a giant stock but suffering Level 2 (sector) crisis of airlines industry. This strategy will be even more powerful if readers could apply changing a junk stock with a strong giant stock in a promising sector (low optimism in stock prices but not having crisis in business or sector).

A mistake (eg. making losses in stock investing) is not a mistake if one could learn from the mistake, not too late, even knowing after this article. It is a blessing in disguise（塞翁失马、焉知非福）if an investor could learn to overcome own biggest enemy (oneself) to change a weak stock with a giant stock immediately. SATS may not be the best example to “change horse” as there are over 1500+ global giant stocks based on Ein55 giant stock criteria, one may select 10 giant stocks aligned with own unique personality to form a dream team stock portfolio.

You are invited to join Dr Tee private investment forum (educational platform, no commercial is allowed) to learn more investment knowledge, interacting with over 9000 members.

Filed Under: Personal Analysis, Stock Market Tagged: airlines, Blue Chip Stocks, crisis stock, f&b stocks, growth stock, investing strategies, sats, SGX, sia, singapore airlines, stock strategies, temasek

Singapore Airlines Rights/Bonds Issues (插翅难飞)

Posted on March 27, 2020 Written by Dr Tee (Ein55)

SIA Singapore Airlines Rights Bonds Issues

Singapore Airlines (SGX: C6L), SIA, is Singapore national airlines, icon of Singapore when flying proudly in the air for decades. Over the past few months of Coronavirus crisis, Singapore Airlines fall in share prices over 30%, aligned with the airlines industry as the business drops by about 90% due to international travel restrictions in many countries.

As a customer, many people enjoy the premium services given by SIA, including the high safety standard with newer aircraft than the peers. However, as an investor, SIA is not a giant stock worth investing (mentioned before in earlier post). The high standard services, skillful pilots and newer aircraft come with a price which affects the business.

Therefore, the on-going Coronavirus crisis may not be a short term crisis for SIA, even when Coronavirus may stop by this summer. In the mid term (within a year), airlines industry would recover gradually, those weaker in free cashflow (including SIA) would need extra funding. SIA has decided to issue rights and convertible bonds.

Luckily, both the rights and bonds issues are renounceable, meaning investors who have SIA, has the options to sell (or buy more) such rights, although the price may not be up to expected prices under current crisis for airlines industry including SIA.

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Let’s examine both options (sharing for educational purpose, please make your own investment decision):

1) Rights Issues

SIA just announced 3-for-2 rights issue, for every 2 shares owned, entitled to 3 rights to buy at $3/share. Comparing to last price of $6.50/share, the theoretical ex-rights price,

TERP = [($6.5 x 2) + ($3 x 3)] / 5 = $4.40/share

Rights issues usually is a pain for investor who looks for passive income (eg. collecting dividend), now may need to pay passive income in return. If an investor does not buy the extra shares of rights nor sell the rights, then the shares holding will be diluted, TERP price of $4.40 is just a reference, actual price after ex-rights could be lower when market sentiment is bearish.

Therefore, the decision for rights (whether renounceable or not) should be base on a new investing perspective. It is as if someone look at the current SIA stock, need to decide to buy at current SIA price at low optimism (regardless of rights issues). Is it a good investment?

“Crisis is Opportunity” (eg share price drops by over 30-50% to low optimism < 25%) only if it is a giant stock with strong business fundamental. Unfortunately, SIA is a blue chip stock (big reputable company with strong sponsor, Temasek which holds 55% SIA shares) but not a giant stock following Ein55 criteria. A giant stock is not defined by the size of company, rather it is by its internal strength. So, even a small cap stock could be a giant stock, many of these companies which are stronger than SIA, share prices even fall more than SIA over the past few months, therefore from investment perspective, SIA rights issues are not attractive.

“Crisis is Crisis” if the company has poor business fundamental. SIA is not a junk stock, it has reasonable business performance but over a long term period (10 years), all 3 key financial statements are not doing well:

1) Declining earning (intense price competition in industry with higher cost of extra services),

2) Declining free cashflow (negative due to high capex, eg, purchase of new aircraft),

3) Declining net asset value (NAV or equity) with higher debt / equity (therefore this time SIA prefers to borrow money from shareholders through rights and bonds issues with little cost).

The worst is SIA is a long term cyclic stock, average capital gains for long term investor over the past 10 years of holding is nearly 0% (eg. share price from $9/share in year 2009 to same $9/share in year 2019, before falling to $6+/share in the next 1 year). It means SIA is more suitable for short term / mid term trading within months or years, following the price trends.

So, taking up rights issues, even at low optimism price of SIA now, an investor has to take the risk of potential mid-term risk as airlines industry may take more than 6-12 months to recover, even Coronavirus may end in this summer. Buying shares with rights issues are more suitable if this is under short term with bullish stock market (if so, one may consider the stocks directly, not the rights).

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2) Bonds Issues

Besides short term “borrow” of money from shareholders through rights issues, SIA also borrow money in long term through Mandatory Convertible Bonds, MCB (amount could be converted to shares upon maturity). For every 1000 SIA shares, there is option to buy 2950 MCB at $1/unit with zero coupon (no interest paid).

Over the next 10 years, value of bonds would increase with average growth rate of 6% CAGR, $1000 MCB value would become $1806.11, if not redeem earlier (like a bond price with about 6% higher price yearly), will be converted back into shares at a fixed price of $4.84/share (near to TERP price).

This decision has to think from long term investing perspective. If SIA share could be more than $10/share after 10 years and bond not redeem earlier, then $4.84 equivalent of entry price is good. However, based on SIA past 10 years of price record (0% capital gains), for share price to be above $10/share after 10 years is even a question mark, although it is possible to be more than $5/share as this is a low optimism price, therefore less likely to make a loss, although may not be huge capital gains (depending which price cycle of SIA after exactly 10 years later, high, mid or low optimism).

Even for bond investor perspective (about 6% equivalent of coupon, assuming SIA redeem earlier, possible if share price may be low, SIA may not let long term supporter to make a loss as they help SIA during crisis), the deal is average as there are other short term corporate bonds (bond reasonable coupon and bond price discount) or dividend stocks which could easily pay 6-10% dividend yield while having 10 years to sell for extra capital gains.

The main strength of SIA is having a strong sponsor, Temasek. Even if minority shareholders don’t follow to buy rights or bonds issues, SIA can still “fly” with 55% funding from Temasek to help in low free cashflow (negative) now, not to mention extra funding from government to airlines industry to fight against Coronavirus crisis.

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In summary, rights and bonds issues of SIA is not attractive (but safe for long term investing as company unlikely to go bankrupt with strong sponsor). Since there are so many giant stocks with stronger fundamental and lower optimism (more discount in price below intrinsic values) in global stock market, an investor may not need to take up the offer, especially it is renounceable (can be traded, eg selling the rights to others but may not at a fair price).

We believe SIA will recover again soon, can fly again proudly in the sky, we will continue to be their faithful customers (passengers) but not a long term investor. Even one is interested in crisis investing on airlines stocks, therefore are other much stronger airlines giant stocks (please search past articles by Dr Tee if interested).

Although the analysis above for rights and bonds issues are for SIA, the same consideration could be applied for any stock with similar corporate actions. Check the stocks are for investing or trading, whether it is a giant stock, then align the decision making with own personality.

There are at least 26 Temasek / GLC stocks in Singapore including Singapore Airlines, controlling shareholder with 15% or more ownership directly or indirectly (investor needs to focus only on giant Temasek stocks):
Singtel (SGX: Z74), DBS Bank (SGX: D05), ST Engineering (SGX: S63), Singapore Airlines (SGX: C6L), SIA Engineering (SGX: S59), Singapore Exchange (SGX: S68), SATS (SGX: S58), Sembcorp Industries (SGX: U96), Sembcorp Marine (SGX: S51), Olam (SGX: O32), CapitaLand (SGX: C31), CapitaLand Mall Trust (SGX: C38U), CapitaLand Commercial Trust (SGX: C61U), Ascendas Reit (SGX: A17U), Ascott Hospitality Trust (SGX: HMN), Ascendas Hospitality Trust (SGX: Q1P), CapitaLand Retail China Trust (SGX: AU8U), Ascendas-iTrust (SGX: CY6U), Keppel Corp (SGX: BN4), Keppel Reit (SGX: K71U), Keppel DC Reit (SGX: AJBU), Keppel Infrastructure Trust (SGX: A7RU), Mapletree Logistics Trust (SGX: M44U), Mapletree Commercial Trust (SGX: N2IU), Mapletree Industrial Trust (SGX: ME8U), Mapletree NAC Trust (SGX: RW0U).

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Learn from Dr Tee free 4hr investment course to position in global giant stocks (stronger than SIA) with tremendous discount in share price below the intrinsic values, suitable for long term value investing for capital gains and passive income (high dividend yield during stock crisis).

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Filed Under: Market Outlook, Stock Market Tagged: airlines, Blue Chip Stocks, bond market, crisis stock, rights issues, sia, singapore airlines, stock market crisis, temasek

Source of Stock Market Fear (解铃还须系铃人)

Posted on March 27, 2020 Written by Dr Tee (Ein55)

Based on simple calculation, with over 13k new daily Coronavirus infected cases, US will overtake Italy in 1-2 days as No 2, then in 2-3 days will overtake China as No 1 for # infected cases (based on reported data, not actual happened). Italy has shown declining number of new daily infected cases over the past 5 days.

It means the Top 3 ranking of Coronavirus would change in position in about 3 days from:

1) China, 2) Italy, 3) US

1) US, 2) Italy, 3) China

In fact, based on # death cases (more reliable comparison as it is easy not to report mild infected cases but difficult to ignore death cases even happened at home), true ranking should be:

1) Italy, 2) Spain, 3) China, 4) Iran, 5) France, 6) USA

Reason is there are many mild cases not reported in Europe (limited medical resources).

In Europe / Iran, fatality rate of 8-10% is much higher than norm of 1-5%, not aligned with China (5%, which is already high) and Singapore / Germany (0.5%, both countries considered golden standard as most cases are detected and treated with top medical services). So, actual fatality could be around 1% (assuming full detection but average medical services), therefore actual cases in Europe / Iran should be 10 times higher than actual. So, the actual fatality should be close to 0.5 – 1% if most infected cases are considered (including those without symptoms).

US has about 1000 death cases from Coronavirus, assuming 10x more to 10,000 cases, still 10X lower than common flu (eg H1N1) which results in over 100,000 death in US yearly.

So, it is not the deadly virus which causes the crisis. It is the fear of unknown virus which immobilize the movement of people, causing loss in jobs and income, therefore falling in stock market and economy.

So, the root of the crisis is fear, which needs to wait for # new daily cases to decline over the next 1-2 months in the world (India started later, may end later), only then the crisis may be over. Even if Coronavirus is back in next winter in Dec 2020, strain likely will be lower, could be another H1N1-like of long term virus with mankind.

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Trump knows market greed vs fear very well. Therefore, unlimited QE is introduced. In fact, the highest level of QE is no need to spend 1 cent, just an announcement to restore the confidence but actual money may take months, eventually the fear of crisis could end in summer before actual QE money is printed.

Therefore, in the past, the Fed Chairman has to think twice in wordings after each FOMC meeting, especially during Alan Greenspan time, few people understands, therefore stock market has to guess his mind. From Ben Bernanke to Janet Yellen to Jerome Powell, it is more transparent and predictable.

Global stock market is similar to Coronavirus, fact or illusion is not critical. Most important is the perception which instantly affect the emotions, greed or fear, the winner would drive the stock market up or down.

Since the source of all “evils” are fear of Coronavirus started in Jan 2020, then the crisis could only end when the Coronavirus die down around summer (解铃还须系铃人、心病还得心药医). Jan-Jun 2020 will be a record in human history, 6 months of mass vacation for most people at home, spending more time with family which was a luxury last time.

If the market fear of Coronavirus disappear in coming summer, then global stock market would have good chance to recover, with condition that current global QE must provide quick short term help in next few months to both business and individual through direct money allocation (similar to blood transfusion to a weak patient), or literary “throwing money from helicopter” to everyone to manage the short term fear to sustain the economy, until the real evil of fear, Coronavirus is away for its summer vacation.

If it is flash stock market crash (falling in Mar-Apr 2020, then gradually recover by summer), this could be a record of fastest fear and quickest greed in human investment market history. If not, then the short term fear would bring along a long term pain of global financial crisis to the world. So, summer is critical.

Learn from Dr Tee free 4hr course on how to position in global stock markets before the critical summer (Jun-July) with both counter-trend investing and follow-trend trading strategies. Register Here: www.ein55.com

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https://www.facebook.com/groups/ein55forum/

Filed Under: Market Cycle Investing, Market Outlook, Stock Market Tagged: coronavirus, global financial crisis, stock market crisis, stock market fear

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