Jimmy Chua at the AGM of Food Empire Holdings. Jimmy Chua Ghim Hock (left) is an electrical engineer by training, a former IT software professional, and currently a full-time private investor managing his own investment portfolio, PC600+ Fund.HOW DO YOU manage a portfolio of 500+ stocks?
This question has come out quite often during my conversation with many people and also in readers' comments on my blog. Therefore, I have decided to write this response.
Previously as a Test Development Engineer, I was required to run more than 3000+ regression test cases for my product across various platforms. Nobody asked me how I managed to do so and I was surprised that many people felt that having 500+ stocks is one too many. Imagine running 3000+ test cases!
I had posted some of the commonly asked questions on my portfolio in this blog entry entitled - "Questions, Questions, Questions..." a few years ago. For those who missed it, you can click on the link to read.
There has been a slight change in my strategy since 2007. Previously, I just diversified across a whole basket of stocks and let the market decide which are the ones that would appear as my top holdings. Since I turned full-time investor, I have adopted a strategy of overweighting my better ideas.
There is no secret in managing a portfolio of 500+ stocks. Just like running 3000+ test cases, you need to have a process in place.
One of the most important concepts to me is partitioning, which means breaking up your stocks into categories. Another word for this is 'grouping'.
Basically, as an example, I partitioned my stocks into 3 major categories:
1. One group which require close monitoring
2. One group which I monitor once in a while
3. One group which I do not need to monitor at all.
So, there you have it! The stocks now fall into one of these categories.
So, there you have it! The stocks now fall into one of these categories.
Basically, you can ignore stocks in category 3. as these are mostly insignificant in terms of weightage in the portfolio as they are "bombed out" stocks.
Stocks in category 2. have potential but you really do not need to look at them at all times as they are mostly in the middle part of your portfolio, whereby it is not so significant.
Your core holdings in category 1. which you need to look closely at, and most possibly need to add every now and then.
You can, of course, have your own grouping methodology and you do not need to follow my example. Having a process in place is more important than the number of stocks in your portfolio.
Because if you have a process and you manage your portfolio based on your process as a guideline, everything will fall into place nicely and you won't get off-track easily even if you have 500+ stocks.
In my previous life as a Test Development Engineer, I focused mainly on those problematic test cases that always fail in the first run.
If you have a portfolio of 500+ stocks, you should focus on those that matter most to you in terms of portfolio weightage.
STI closed at around 3210 points at the end of October 2013. Although it seems that STI had gained some ground this month as the US government shutdown issue has been deferred, it is really a bad month for retail investors in Singapore.
This is because of the meltdown of the penny stock segment of the market, mainly due to the trading curbs imposed by broking firms on the now infamous trio of designated counters.
I personally witnessed the chaos at the cashier counter of a broking house, where investors queued to deposit cash upfront in order to buy those designated stocks.
Contra losses were aplenty, with punters trying their luck again at these speculative counters after their designated status was lifted. It had been an eye opening experience for me indeed.
This month, I attended the AGMs/EGMs/briefings of the following companies - VARD Holdings, Cacola, Oxley, CH Offshore, Hai Leck, ASL Marine, Boardroom, K1 Ventures, China Yuanbang, Spindex, Chosen, Micro-Mechanics, GRP, Westminster Travel, Goodpack and FJ Benjamin.
This is because of the meltdown of the penny stock segment of the market, mainly due to the trading curbs imposed by broking firms on the now infamous trio of designated counters.
I personally witnessed the chaos at the cashier counter of a broking house, where investors queued to deposit cash upfront in order to buy those designated stocks.
Contra losses were aplenty, with punters trying their luck again at these speculative counters after their designated status was lifted. It had been an eye opening experience for me indeed.
This month, I attended the AGMs/EGMs/briefings of the following companies - VARD Holdings, Cacola, Oxley, CH Offshore, Hai Leck, ASL Marine, Boardroom, K1 Ventures, China Yuanbang, Spindex, Chosen, Micro-Mechanics, GRP, Westminster Travel, Goodpack and FJ Benjamin.
Sarin Technologies is now my top holding after its good share price performance this month.
Other major movers include UIS (which majority shareholder UOB and related parties want to initiate an EGM to liquidate the closed-end fund), Superbowl (which Hiap Hoe is making a general offer to acquire) and Hiap Hoe (which re-entered my top 30 holdings list after it made a general offer to acquire Superbowl).
I have bought the following companies from the market this month - Chosen, GP Batteries, Hoe Leong, IFS, LC Developments, Lion AsiaPac, Singapore Reinsurance, Tat Seng and Zagro Asia. There was no sale done this month.
I have accepted the following voluntary delisting/cash offers this month - Armstrong and Superior Multi-Packaging. I have also participated in the following scrip dividend scheme - Freight Links.
I have subscribed to the following rights issues - Grand Banks, ISDN and Xpress.
November 2013 is expected to be a quiet month for me, except for a few EGMs and AGMs of companies with financial year ending July/August 2013.
November 2013 is expected to be a quiet month for me, except for a few EGMs and AGMs of companies with financial year ending July/August 2013.
I will seek to re-invest some of the proceeds from Armstrong and Superior Multi-Packaging delisting. I will also attempt to take a closer look at my portfolio and catch up with my reading of investment books and periodicals.
These articles first appeared in GH Chua's blog, http://ghchua.blogspot.sg/, and is reproduced with permission.
Related story: AGGREGATE ASSET MGT: 'Why we invest in more than 100 stocks'
Comments
No human can buy so many companies and knowing in depth info abt them.
Better off keeping money in bank.
Nothing impressive. Anyone can do that.
14 hours ago · Like
William Lim Then jim rogers is what? .. hehe
14 hours ago · Like
Khoo LW so many stocks might as well buy the index
13 hours ago · Like
Christopher Ng Wai Chung Actually I had that conversation with ghchua ages ago. What he has is better than an index. It is closer to an equal weighted index or fundamental weighted index.
13 hours ago · Like
Tan Jun Wei Index is only 30 counters. This guy has enough money and counters to be an index himself lol
Coincidentally I was a test engineer as well
13 hours ago via mobile · Like
Terence Tay May I know what is the job scope of a test engineer?
13 hours ago via mobile · Like
Christopher Ng Wai Chung So investment banks should target test engineers for head hunting. Damn, why did I go into IT ?
13 hours ago · Like
Royston Yang He owns a zoo for a portfolio. I met him before at an AGM - he was ok but didn't make a very deep impression.