Performance in 2012

[CityFarmer]

For those interested

STI return is 19.7% (without dividend)
STI total return is 23.5% (with dividend)

[snowcap]

I use NAV and update my portfolio once a month at the end of the month (with the CDP statement). For 2012 I recorded an increase of 39% in the NAV.

Main winners were Wing Tai (entry at 0.955 in Dec 11); Osim (entry between 1.15 and 1.26); Breadtalk (average entry at 0.488); and Supergroup (average entry 1.70). I was also weighted in property (HPL, OUE, Capitaland, UOL, Wing Tai) and REITs (AREIT, Cache, Capmall, Capcomm, CDL HT, FrasersCT, Suntec) and these gave nice returns.

No major losers, but several mistakes (sold too early, bought too high) were causes of lower profits.

One lucky move was to divest my entire stake of Berlian Laju in Jan 12 at 0.026 (entry price averaged 0.18), before the counter was suspended. 85% loss of capital. A hard lesson from a rash decision 3-4 years ago. The silver lining is that housekeeping the rubbish did save me from a 100% loss.

I remind myself not to mistake a bull market for brains, although outperforming the STI does feel good.

[pianist]

what do u mean 'mistake a bull market for brains"?

[specuvestor]

^^ In a bull market, everyone thinks they are investment geniuses... Just look at the property market Nonetheless the stock market is choppy....

Freedom and Cory... The issues with IRR is well known:
http://en.wikipedia.org/wiki/Modified_in..._of_return

I agree with using the NAV method which is how annual return of funds are based on. But some of us may forget to include cash drag unless we are certain we are zero cash

[snowcap]

what do u mean 'mistake a bull market for brains"?

That means when the market is going up and up, don't make the mistake of thinking that your portfolio also going up is due to your own brains or smart investment choices.

There is a saying "When the tide rises, even rubbish floats" (the opposite is that when the tide goes out, even the diamonds fall to the sea floor).

So it is important for me to outperform the STI, whether the STI goes up down or sideways.

And, I do hedge by buying put warrants. This hedging did very well in 2008 (NAV -17% vs STI -40%), but only so-so in 2011 (NAV -12% vs STI -17%).

[pianist]

i see.. thanks..do u mean structure warrants..i tot they have a limited lifespan..how r u gg to hedge for the entire long year?

is it possible to sell/write warrants on sgx?

[RBM]

There has been some very informative and constructive sharing on this particular VB thread over the last couple of days.

Reflecting on what I have read on this thread and a couple of other VB threads, particularly where other forummers have done well (i.e. better than me!), my three big personal learnings from 2012 ............... learned the hard way as usual ............... are as follows:

1. I must have at least one Singapore REIT holding - I have zero REIT holdings at the moment. Alas, one of my chums is of the strong view that now is not a good time to get in!

2. I must reduce my holdings in Perpetual Bonds/Preference shares and not be tempted by any further high yielding Perpetual offerings. As the Olam case shows, when there are problems, the Perpetuals get hit far harder than paper with a clearly defined maturity date, even long dated paper. I'm now highlysensitised to "duration risk"!

3. I must not be sucked in by claimed high cash balances, particularly when the company doesn't buy-back its shares or invest, e.g. as is the case with Foreland Fabritech and Eratat. Fortunately I have not been vested in either counter but I have in the past placed too much weight on cash : book and similar indicators when making my investment choices.

No doubt I'll have learned some more by end 2013!

[corydorus]

^^ In a bull market, everyone thinks they are investment geniuses... Just look at the property market Nonetheless the stock market is choppy....

Freedom and Cory... The issues with IRR is well known:
http://en.wikipedia.org/wiki/Modified_in..._of_return

I agree with using the NAV method which is how annual return of funds are based on. But some of us may forget to include cash drag unless we are certain we are zero cash

We are using XIRR ...

[Musicwhiz]

Yes, in times of market exuberance many people tend to think they have the Midas touch. It's tough to convince yourself that it's old-fashioned hard work and rummaging through years of financials which will help give you sustainable long-term returns.

It feels a little exuberant currently, but nowhere near the peak in 2007 as I recall.

[specuvestor]

I wasn't referring to excel functions. I was referring to the pitfall in the CONCEPT of IRR.

IRR assumes that your returns are compounded within and ANNUALISED, which may not be true especially when you have windfall, which is what you are saying below. That is why investment industry we always look at beginning NAV vs ending NAV and use the derived % return. Nonetheless for a lengthened period of time, for eg Buffett or 10 years track, IRR is pretty reliable because any single year windfall would have been smoothened out

Conversely it is similar reason why arithmetic mean is used for bills calculation vs geometric YTM for notes and bonds. We have to understand the impact.

Is not the volatility. Scenario one performs better because you made 100% in a day and pull the money out right after.
Thus XIRR is just trying to annualized to a year with that kind of margins. Thus is way better than Scenario two as your money is held up for the year.

Some pp may for ego reason may invest just $1, make ten times in a day and quit. In quality wise you achieved but very very small absolute.
Therefore need to try to invest as much as possible. And when you do this, to achieve daily 100% multiple for full year is impossible.


Cory