Sebastian, a retired accounting professor, and the other four participants have a strong market rally in recent weeks to thank.
In second and third places were DanielXX and Kennysjq with 18% and 6% gains, respectively, on their hypothetical starting capital of $100,000.
These three participants win $350, $100 and $50, respectively - that's real money, which comes from a pool that all five participants had contributed $100 each to.
Our next edition of Stock Challenge, the third in the series, will start soon. Sebastian and Level 13 will take part along with three new participants who have expressed an interest in this exciting competition.
Meantime, here are details of the closing portfolios of Sebastian and company as of Apr 30 and their reflections on how things have gone for them:
| Stock | Number of shares | Purchase price ($) | Sale price ($) | April 30 closing price ($) |
Value of holding ($) |
| SGX | 4,000 | 4.46 | 6.27xd | 25,080 | |
| Jardine C&C | 2,000 | 8.20 | 14.28cd | 28,560 | |
| Capitaland | 3,000 | 2.08 | 2.76cd | 8,280 | |
| KepLand | 3,000 | 1.49 | 1.72 | 5,160 | |
| Wilmar | 3,000 | 1.87 | 3.58cd | 10,740 | |
| Sino-Environment | 20,000 | 0.425 | 0.085 | 1,700 | |
| Straits Asia | 8000 | 0.825 | 1.06cd | 8,480 | |
| Mercator | 50,000 | 0.115 | 0.165 | 8,250 | |
| Li Heng | 20,000 | 0.20 | 0.19 | 0.185cd | - |
| Yanlord | 5000 | 0.74 | 1.44cd | 7,200 | |
| Metro Holdings | 10,000 | 0.37 | 0.34 | 3,400 | |
| Bukit Sembawang | 1000 | 3.61 | 2.55 | 2.42 | - |
| Synear | 20,000 | 0.115 | 0.195 | 3,900 | |
| Ascott REIT | 10,000 | 0.555 | 0.50 | 5,000 | |
| CapitaRetailChina Trust | 10,000 | 0.565 | 0.80 | 8,000 | |
| Capitaland MBLeCW90602 | 15,000 | 0.245 | 0.25 | 0.255 | - |
| Capitaland MBLeCW90602 | 47,000 | 0.15 | 0.125 | 0.255 | - |
| SGXBNPeCW09713 | 10,000 | 0.34 | 0.34 | 0.405 | - |
| Cash | 6,337 | ||||
| Total | 130,087 (+30.1%) |
Sebastian says:
On 30 April 2009, the STI surged by 71 points to 1,920.28. This was on top of the 41 point gain on 29 April. Global markets were not deterred by the potential pandemic from the Mexican H1N1 flu virus.
The STI has risen by about 23% since this round of Stock Challenge began on 28 October 2008. Fortunately the portfolio managed to beat the STI with a gain of 30.1% despite an 80% loss on my initial investment of $8,500 in Sino-Environment. This illustrates the importance of making only small bets on high risk high return stocks.
My core holdings in SGX and Jardine Cycle & Carriage investment paid off handsomely with 41% and 74% returns. The modest holdings in Wilmar and Yanlord nearly doubled in share price.
I tried to trade the covered warrants on Capitaland and SGX but found it difficult and stressful to get the timings right. With hindsight, phenomenal gains could have been made if the timings had been perfect. In practice, no one has hindsight. Fortunately I lost only a little ($1,150) in the experimental trades.
If I had timed the trades perfectly, I would have made $6,700 on a capital of about $7,000 within just a couple of days. You can see from the above table that I bought 47,000 units of Capitaland warrants at 15 cents but cut loss the following day at 12.5 cents because the STI fell for a second day on fears over a swine flu pandemic. But two days after I sold, it shot up to 25.5 cents because the STI went up 41 points on Wednesday and 71 points on Thursday despite the World Health Organization raising the flu alert level from 4 to 5. Short term movements are certainly hard to predict.
My advice is unless you are truly cut out to be a master trader, it is best to just buy and hold undervalued high quality stocks for the long term and to hold 30% to 50% cash so that if the Dow and STI undergo big pullbacks because of the flu or negative surprises on the financial and economic fronts, you still have funds to add more stocks at even lower prices.
It has been a nice experience taking part in Stock Challenge and to share experiences with readers. We shall "meet up" with you again in the next round of the game. Cheers and take care.
Comments on specific stocks in my portfolio:
SGX: Unlike the banks, the Singapore Exchange does not have to worry about non-performing loans. SGX also commands a strong "mindshare" in the minds of investors. The drastic fall in profit in first quarter 2009 did not adversely affect the share price at all despite the negative or neutral calls by certain securities houses. The market is smart enough to look positively beyond the recent quarter. The transformation of SGX since 2003 is likely to continue into the next decade.
Jardine C&C: The Jardines management has done wonders to JC&C since Jardines acquired a 30% stake in 1999 and subsequently increased its stake to 50.1% by 2006. The group has gone into the right businesses in the right countries. I see its huge exposure to Indonesia with 250 million people a cause for optimism rather than worry and its new exposure to Vietnam had already turned profitable. Management foresight and disciplined execution is the hallmark of the Jardines group with its Scottish led management.
Capitaland: It is the biggest property group in ASEAN and has a proven track record in China. Just watch CEO Liew Mun Leong create shareholder value in the next several years using its present warchest of $6 billion.
KepLand: It will continue to lag behind Capitaland but is still worth keeping as the stock is grossly undervalued. Its prime assets include Marina Bay Financial Centre, Ocean Financial Centre, and Reflections condominium development project at Keppel Bay. The outlook for its overseas projects is also improving.
Wilmar: Besides vast oil palm plantations and huge acreage for expansion, the group is also a big player in downstream businesses like branded cooking oil and soy bean processing in China.
Sino-Environment: Executive Chairman Sun Jiangrong has been forced to reduce his majority stake to under 6% by a hedge fund that is believed to have sold off most of his shares pledged to the hedge fund. He owed a substantial amount to the hedge fund. It is not certain if the existing management team will continue to work for Sino if Mr Sun leaves the company. However, if a restructuring is successful, Sino can turn into a multi-bagger in the next decade. My loss on this counter is more than offset by the gains on the other counters. It is not worth selling at 8.5 cents if your exposure is small enough to be written off without much pain.
Straits Asia: One of the cheapest coal mining stocks in the region.
Mercator: This subsidiary of an Indian blue chip company operates a young fleet of bulk carriers (for mostly iron ore and coal) and their charter rates are well above average for its industry.
Li Heng: It faces challenges like most of its peers in the synthetic fibre textile industry in China. However it has a strong balance sheet and there is a good chance of earnings recovering in 2010.
Yanlord: This is a gem. It has doubled in price but there is still great upside in the long term. They have a cheap land bank of which only one-third is under development. Their recent launch of high-end apartments in Shanghai was successful and the upcoming launches in Tianjin in May and Nanjing in July are expected to be equally successful as the property market in China is picking up with low interest rates and reduced down payments.
Metro: It has a war chest to look for suitable sites in China to develop investment properties. Its department stores in Singapore are just barely breaking even but asset wise, it is a small division compared with China property. It may also sell its Penang Gurney Drive shopping complex to
Capitaland. Just be patient with this stock.
Bt Sembawang: I sold it off because it debt level is quite high and its high-end residential units in the Orchard area are not being developed and launched fast enough. There is also slow progress on the development of its very cheap and vast land bank in the Seletar and Sembawang area. Again this is a stock for the very patient investor but there is an opportunity cost involved.
Synear: This group makes frozen meat and other dumplings etc. Their prices are double those of many competitors because they target the high end of the market. Because of the economic slowdown, they are now in the process of switching to the mid-price market. The group is still cash positive but their new plants under construction are likely to deplete their cash reserves. I am less optimistic now than six months ago about their future prospects as they don't seem to be fast moving enough.
Ascott REIT: This is a cheap REIT with a strong brand name for service apartments in Singapore, China, Japan, Indonesia etc.
CapitaRetailChina Trust: It bought some of the retail malls developed by Capitaland in 2006 and added a well-located mall in Beijing last year. The occupancy rates of the retail malls are very high, typically 95% or higher. The rental rates are also holding well as their malls target the middle class masses.
***
| Stock | No. of shares | Price bought at $ | Apr 3 price | Total shareholding value $ | Vested dividend S$ |
| SMB United | 151,515 | 0.11 | $0.16 | 24,242 | - |
| CH Offshore | 75,758 | 0.22 | $0.29 | 21,970 | 0.005 |
| Celestial | 42,735 | 0.39 | $0.185 | 7,906 | - |
| Tat Hong | 28,985 | 0.575 | $0.795 | 23,043 | 0.035 |
| F&N | 14,735 | 2.69 | $2.62 | 38,606 | |
| Total | 115,767 | 2,090 (Total) |
DanielXX says:
As of Apr 30, the total value of my portfolio = shareholding value + dividends = $117,857.
It is up 17.9%. This episode has taught me not to try to time the market too much. I have never exited the market the last 6 months for longer than 2 days.
SMB - Well it’s done well yeah?
CH Offshore - Hold on, I wouldn’t sell it at this price
Celestial - let’s see how its refinancing goes in June.
Tat Hong - long-term hold
F& N - let’s see what the scion of the Lee family can do with this over the next 5 years
***
| Stock | Number of shares | Purchase price ($) | April 30 Closing price ($) | Value of holding ($) |
| Swiber | 37701 | 0.495 | 0.480 | $18096.48 |
| China Taisan | 107142 | 0.140 | 0.115 | $12321.33 |
| China Taisan (Dividend) | 107142 | - | 0.01796 | $1924.27 |
| SMRT | 15723 | 1.590 | 1.550 | $24370.65 |
| Capitaland | 5474 | 2.740 | 2.760 | $15108.24 |
| Capitaland (Rights) | 2737 | 1.300 | 2.760 | $7554.12 |
| Cash | $26441.90 | |||
| Total | $105816.99 |
Kennysjq is a young investor whose investing approach involves studying company fundamentals with a mid-to-long term horizon in mind. He advocates risk taking with caution because he knows we can’t avoid it. Enjoys his daily Business Times, especially so with an americano expresso.
Kennysjq says:
Portfolio gained about 6% over the past half a year. I will be looking to enter the market again when the STI dips. Especially looking to increase my shareholding in Capitaland. Overall I’m satisfied with the gain but disappointed that I succumbed to emotions, especially fears, in the past couple of months.
My plan was to purchase more stocks when the STI dropped to below 1500 points. When the market did fall in March, I succumbed to the fear of share prices plunging even further and so didn’t buy.
***
|
Stock |
Number of shares |
Average |
30 April |
Value of holding ($) |
|
Bright World |
141,000 |
0.293 |
0.12 |
16,920 |
|
Cash |
|
|
|
87,831 |
|
Total |
|
|
|
104,751 (+4.75%) |
Level 13 is a 31-year-old investor and a business analyst with 4 years of investing experience. Check out his blog for insights on financial matters (mainly equities).
Level 13 says:
There was some panic selling on the 21st April so I decided to make use of the opportunity to close my earlier short positions in both Jardine C&C and Olam. As mentioned earlier, they are just meant for trading so no fundamentals involved.
At the onset of the swine flu saga, I shorted 25 lots of SIA at $10.22. As it spread to more countries, there will be a further drop of air passengers and SIA is definitely one of the first few companies to feel a direct impact. Unfortunately, instead of going down, the share price of SIA went up. To cut loss, I closed the SIA position at $10.36 on 29th April.
Looking back at the past 6 months, most positions I took were 'shorts' with the only exception being Bright World. There was not much diversification in my portfolio but this was a calculated decision I made based on the circumstances during the early stages of this competition. At that time, I couldn’t find much reason to go long on equities as the credit collapse came swiftly and all business activities were at a standstill.
Notwithstanding the swine flu, virtually no sector was immune from the downturn. Other than SIA and Jardine C&C, the rest of my short trades were profitable. My portfolio performance was weighed down by Bright World for which the takeover deal did not materialize.
Having less bad news does not equate to a recovery. Economic activities move in cycles and I think that although the situation has stabilized to a great extent, real growth will only take place at a much later date (not within this year). Lastly, congratulations and well done to those who have beaten the market benchmark over this half a year. It has been a great learning experience for me. Cheers!
***
| Stock | Number of shares | Average Purchase price ($) | Apr 3 close ($) |
Value of holding ($) |
| China Milk | 20,000 | 0.39 | 0.325 |
7,700 |
| China Taisan | 200,000 | 0.145 | 0.115 (xd) dividend: 1.63 cts |
26,260 |
| China Zaino | 20,000 | 0.21 | 0.26 |
5,200 |
| Sino Techfibre | 20,000 | 0.18 | 0.09 |
1,800 |
| Li Heng | 260,000 | 0.139 | 0.185 |
48,100 |
| Cash | 10,060 | |||
| Total | 99,120 (-0.9%) |
Gary Teh, 39, is Asia sales director for a semiconductor company. He graduated from Melbourne La Trobe University School of Economics with a Bachelors of Economics with an accounting major in 1991. As for his stock market passion, he has been greatly influenced by his dad who, despite a modest income as a government servant in Malaysia, managed to accumulate a nestegg for a comfortable retirement by investing in stocks for over 30 years. Penang-born Gary has been buying and selling stocks, mainly on the Kuala Lumpur Stock Exchange, since he was around 16. He is married and lives in Singapore.
* Track the participants' month-by-month performance and stock picks in our archive of stories here.
