Audi Wong on a recent helicopter trip (as a tourist) to the Grand Canyon, USA. Photo by Leong Chan Teik
THE MARKET downturn in recent weeks has taken a toll on the portfolios of our five Stock Challenge participants.
In this third update since the start of the Challenge on April 7, Audi Wong is leading with a 12.4% gain based on stock prices at the close of the market last Friday.
He has overtaken Sebastian Chong, whose gain now stands at 2.6%. It’s a sharp drop from the 58% gain he had just three weeks ago.
So what happened? Sebastian's use of Contracts for Difference (CFD) enabled him to surge ahead with the 58% gain, and it also led to his surrender of almost all the gain. Such is the power and risk of leverage.
Details:
| Stock | No. of shares | Price bought at | June 20 price | Value of shareholding ($) |
Celestial | 75,000 | 84 cts | 83 cts | 62,250 |
| China Sky | 56,000 | $1.03 | $0.895 | 50,120 |
| 112,370 (+12.4%) |
Audi Wong
Audi Wong, 35, is a commercial pilot who has invested very successfully in stocks and properties, especially in recent years. He graduated from the University of New South Wales with a bachelor’s degree in aviation.
Audi says:
On May 26, I bought Celestial and China Sky. I gave my reasons in the previous article updating my portfolio. (Link to the article is provided at the bottom of this page)
Nothing to add. I have held on to the stocks – am a sloth when it comes to investing
*****
| Stock | Number of shares | Price bought at ($) | June 20 price ($) | Value of shareholding ($) |
Straits Asia Resources | 10,000 | 3.50 | 3.50 | 35,000 |
| SembCorp Marine | 10,000 | 4.14 | 4.12 | 41,200 |
| Cash | 32,600 | |||
| Total | 108,800 (+8.8%) |
Aileen Wong
Aileen Goh, 31, has been a trading representative at Phillip Securities for the past eight years since she graduated with an accounting and finance degree from Monash University. She has a mix of investing approaches: long-term fundamentals-based investing coupled with short-term trading, depending on the circumstances.
She says:
I held cash for a couple of weeks because I thought the market was a little stretched. But recently it has corrected quite a bit, so I decided to buy Straits Asia Resources last Friday and SembCorp Marine the day before.
Earlier, I had wanted to buy STX Pan Ocean at under $2.60 but missed the opportunity. It moved up and last Friday it closed at $2.76
Reasons for buying SembMarine:
- technically, support is at $4.12-4.14.
- won a few substantial contracts lately, raising its year-to-date orderbook to S$7.5 billion.
- high oil prices of US$132/barrel augur well for oil & gas exploration and production activities.
- expect more orders for semi-submersible drilling rigs from Seadrill (the last order being 4 jack-up rigs, 2 from SembMarine and 2 from KepFels).
- Petrobras, Brazil's national oil company and major customer of SembMarine, said earlier this year, the oil find in its Carioca field off Brazilian waters, could be the 3rd largest oil field in the world with recoverable 33bln barrels of oil. This discovery is expected to lead to more orders for ultra-deep rigs, an area of expertise of SembMarine.
Reasons for buying Straits Asia:
- has also hit a support of $3.50 technically.
- coal play, an alternative to oil..
- directly benefiting from strong coal price
- strong operational track record, management team is backed by extensive experience of over 30 years in the coal mining, commodities industry.
- has one of the lowest production costs amongst the thermal coal producers in the world, thanks to favorable geographic and geological conditions of the Sebuku and Jembayan mines.
- has a stable, diversified and expanding customer base.
- coal price has been steadily increasing as a result of extremely tight supply caused by infrastructure problems in
Australia and Africa and surging demand from China. (note that there's a positive relationship between coal price and oil price.)
*****
| Stock | No. of shares | Price bought at ($) | Latest market price($) | Full cost of underlying security in CFD ($) | Initial deposit (for CFD) ($) | Total share value ($) |
| Jardine C&C | 5,000(CFD) | 16.52 | 16.60 | 82,600 | 8,260 | 8,660 |
| Sino-Env | 125,000 (CFD) 25,000(CFD) | 1.40 1.58 | 1.43 1.43 | 175,000 39,500 | 17,500 3,950 | 21,250 200 |
| CFD Margin Top-up | -- | |||||
| Capita Retail China Trust | 8,000 | 1.27 | 1.35 | 10,800 | ||
| Swiber Holdings | 5,000 2,000 | 2.53 3.00 | 2.70 2.70 | 14,400 5,760 | ||
| Straits Asia | 4,000 2,000 | 3.03 3.73 | 3.50 3.50 | 14,000 7,000 | ||
| Cash | 20,531 | |||||
| Total | 102,601 (+2.6%) |
Sebastian Chong
Sebastian Chong has invested actively in equities since the 1970s. He is managing director of Financial Info Analysis Pte Ltd, a company he founded after he retired as an accounting professor at the National University of Singapore. He now runs his popular investing website, www.shareowl.com
Sebastian says:
Why is it that from being up 58.34% as of 30 May, my virtual portfolio is now up by only 2.6% from the initial capital of $100,000? There are valuable lessons to be learnt here. I did not transact at all in the last three weeks under an “accidental” buy and hold strategy this round.
In just three weeks it has cost me a big reduction in value of the portfolio because I failed to convert my huge unrealized profit on my CFDs on Sino-Environment into a realized profit. Sino-Env closed at $1.78 on 30 May but ended at only $1.43 on 20 June. I am confident that within the next 1 to 2 years, the stock could easily go above $3 because of the exponential earnings growth prospects of this very well managed environmental engineering company.
But during the last three weeks, I suspected that one or more global funds were unloading shares in Sino-Env and other fundamentally strong China companies listed on SGX, Hong Kong and Shanghai because of fund redemption calls in US and Europe. I strongly believe the share price of Sino-Environment will come bouncing back strongly in the next few months and it will become a multi-bagger in the next few years. “Multi-bagger” is the term coined by Peter Lynch, one of the world’s greatest investors. He was referring to companies the share prices of which multiply by at least a few times in several years.
I am aware that the six-month duration of the game and the three-week monitoring system encourages trading. And the fact that I adopted CFDs (Contracts for Differences) as a tool actually required me to trade rather than buy and hold. I mentioned “accidental” buy-and-hold strategy adopted in the last three weeks.
Like an old accountant who had lost his balance, I was on the middle rung of a ladder at home trying to pull out a suitcase from the top cupboard when I fell and landed on my back. I thought it was an empty suitcase but it was in fact filled with heavy stuff. My unpreparedness for its weight caught me off guard.
The orthopedic doctor’s prescription for fracturing a spinal bone included painkillers, calcium with vitamin D and to lie on the bed most of the time for six weeks. Sitting up for quick meals etc requires the use of a lumbar support corset around the waist. I am typing this report using a laptop on a bolster on my tummy while lying in bed. I am using the same “laid back” mode for checking stock prices and my emails. Such is the pain and inconvenience of losing one’s balance whether in the physical or fiscal sense. The clear moral of the story is that with all CFDs, one cannot afford not to trade in and out especially in a volatile market. Otherwise, losing one’s balance in the stock market can have a painful consequence just like fracturing a lumbar bone in the spine. Not to worry. To quote Arnold Schwarzneggar in The Terminator, “I’ll be back”.
*****
| Stock | Number of shares | Price bought at ($) | Latest market price $ | Dividend $ | Value of shareholding ($) |
| Dutech | 200,000 | 0.23 | 0.22 | 0.02 | 44,000 |
| Sunshine | 250,000 | 0.15 | 0.12 | - | 30,000 |
| China Taisan | 100,000 | 0.235 | 0.23 | - | 23,000 |
| Cash | 3,600 | ||||
| Total | 100,600 (+0.6%) |
Mephisto's avatar
Mephisto is a 30-something investor who says he is a simple man who enjoys his bak ku teh with Chinese tea every weekend morning. Having gone through the 1987-2007 booms and busts, he has a great deal of respect for Mr Market. Nevertheless, he enjoys pitting his wits against the market, which is by itself a learning experience, he says.
Mephisto says:
On June 15, I bought 100,000 shares of China Taisan, which went IPO just this month. It subsequently reported sterling 1Q08 results, with net profit nearly tripling to Rmb 64.5 million (up 188.8% y-o-y).
I recently contributed an article on Dutech, titled DUTECH: Making safes for ATMs around the world.
*****
| Stock | No. of shares | Price bought at ($) | June 20 price | Total shareholding value ($) | Vested dividend ($) | Remarks |
| Pan-United | 31,500 | 0.635 | $0.64 | 20,160 | 0.0265 | Conviction hold |
| CH Offshore | 34,188 15,800 | 0.585 0.655 | $0.64 | 31,992 | - | High oil prices are driving deepwater cycle. |
| Hongguo | 38,460 20,294 | 0.52 0.51 | $0.46 | 27,027 | 0.013 | Strong brand equity suggests sustainable momentum. |
| Silverlake | 50,000 | 0.40 | $0.315 | 15,750 | 0.005 | See my article SILVERLAKE AXIS: Software solutions for Asian banks. |
| Total | 94,929 | 1,585 (Total) |
DanielXX's avatar
DanielXX is a 30-something investor who is well-known in certain online investing forums as well as for his blog, where his writings on investing reflect depth of thought and analysis.
DanielXX says:
As of June 20, the total value of my portfolio = shareholding value + dividends = $96,514.
It is down by 3.5%. On June 4, I had sold my entire holding of 30,000 shares of Stamford Land at $0.69 which I had bought at $0.665 a share. So, a small profit there.
I used all the proceeds to buy 15,800 CH Offshore shares (at $0.655) and 20,294 Hongguo shares (at $0.51).
Small caps are the place to be in. Those with pricing power and upstream positioning will benefit from inflation.
To elaborate, generally, it looks like there're two main categories of stocks that could benefit from a global inflationary environment:
1) Upstream stocks. Not just commodity producers like miners or plantations, though they're the most obvious. But also service providers – such as oil services providers, offshore logistics companies, bulk handlers/shippers (need to watch the looming vessel supply), agricultural machinery/fertiliser/animal feed companies etc. Their margins are likely to be maintained or might even rise.
2) Capital-intensive stocks. Depreciation costs are flat, while selling price (revenue) could be adjusted in-line with inflation. This in effect transforms the inflationary environment to the company's advantage. Asset owners belong to this category: owners of vessels, construction equipment, completed properties (especially those with short leases that are renewed routinely).
Because these capital assets now cost more to build (due to rising raw material costs), they are also worth more now than implied on their balance sheets.
At the same time, stocks with domestic focus in strong economies underpinned by domestic reflation are also likely to continue to do well as long as they are not affected by foreign trade flows (ie. avoid exporters) or foreign capital flows (ie. avoid high-end properties even though they might benefit from the reflation trend). (Note: The above was extracted from my Trendspotting blog write-up on Global Inflation: click on this link to read the full article).
Next update: Monday, July 14.
Previous reports:
STOCK CHALLENGE: Sebastian still No.1 with 58% gain in 8 weeks
STOCK CHALLENGE: Top performer is up 63% in 5 weeks
STOCK CHALLENGE: Results range from 0% to -6.1% after 2 weeks
STOCK CHALLENGE: 5 investors manage $100,000 'windfall'
