Portfolio Review

January has been a yoyo month, and I am guilty of being greedy. Below is my current holdings.


My portfolio cost and market value has increased because I decided to add in the cash that I decide to use for investment into the equation. As such, the percentage gain has been reduced.

Over the month, I increased my average price of First Resources to 1.05 cents (rounded up), while i divested my holdings in Bank of America. The reasons for divesting Bank of America was covered in an earlier blog post.

Palm Oil prices are recovering, albeit at a slower pace due to soybean having a bumper harvest. However, I am still bullish about the palm oil sector with the demand for biofuels increasing.

I am looking at several companies, among which is Novo Group. However, as I am unsure about the future prospects of steel, as well as the company's management, I would need to carry out more research on it.

Dry Bulk Shipping

Just an update if any of my readers were wondering about my Dry Bulk Shipping coverage.

In view of Mercator's results, I will be waiting for the release of the results of Courage, Rickmers and STX PO before updating on this sector.

Mercator's 3Q results were reflective of the Dry Bulk sector, with profits down across the board. I am not bullish about the sector, and as such I am waiting for more results from the other companies.

The Correction

The current correction has sent my portfolio into negative territory for the first time. Over here, I would like to make some recommendations to help people sleep better at night

Invest with what you can afford

As investors, whatever we plough into our stocks is usually for mid to long term, such that we can weather such corrections. Do invest with what you can afford to lose. If you have trouble sleeping at night, it could mean that possibly that you may have invested too much.

Depending on your age, you may wish to keep about anywhere between 10% to 40% of your holdings in cash. I keep about 10% of my holdings in cash. As such I haven't be losing much sleep.

So what about people trading on margin. I have nothing against margin trading, but likewise, don't overload yourself. Put into your account about 70% of the amount you can afford to lose, and keep the other 30% as cash needed just in case of a margin call. That way, you won't lose sleep over margin calls.

Avoid Contra Trading

Contra trading is to purchase a stock, and before the payment is due, usually within 3 to 5 days, the stock is sold off. The difference between the purchase price and selling price is the amount you keep or you repay, depending on whether you made a gain or a loss.

Contra trading is one of the things that will made you stand on edge. If the tide turns against you, for example if China announces changes in monetary policy, these things cannot be detected by technical analysis. Purchasing the stock there and then is also a mistake, as the company may not have fundamentals to support it through the period of time. It may result in you racking up big losses.

With these 2 pointers, I hope that you will have a better sleep over the next few days as we unwind from this major correction.

CFDs

I signed up for a CFD acct with IG markets and it was approved. I intend to put about 5k to 15k into trading, mainly to take advantage of corrections by taking up short positions to hedge my longs as well as take advantage of market corrects. I may also try to hone my technical analysis skills.

Short positions that are used for hedging will be covered in my blog, as well as shorting of overvalued companies. Purchases based solely on technicals will not be covered. I apologize for not covering techincals, but I do not have wish to recommend stocks based solely on technicals.

There are many technical experts out there which you can find on Channel News Asia Forums so you may wish to refer to, such as RallyArtist. Just a disclaimer, I am not recommending to blindly follow him, but possibly use his ideas as a starting point.

Bank of America - Divested

Divested Bank of America @ 14.98 yesterday.

I was not satisfied with the high prospect of further government intervention in the financial sector. When I bought Bank of America, it was due to reduced government intervention due to repayment of TARP funds.

When Obama took his populist stance on limiting proprietary trading and France and UK behind those measures, it would seem like a turbulent few months ahead for banks. With UK readying bankers tax, it seems like bank bashing would continue and regulation may be enforced.

As the fundamentals of the industry has changed, I divested Bank of America yesterday.

As Obama Sneezes

Obama has thrown his weight last night behind the move to curb excessive risk taking, prompting fears of a return to Glass-Steagall style regulation. Obama's plans are to curb excessive risk taking and protecting taxpayers, preventing banks from sponsoring equity or hedge funds.

What is the Glass Steagall Act?

The Glass-Steagall Act, also known as the Banking Act of 1933 (48 Stat. 162), was passed by Congress in 1933 and prohibits commercial banks from engaging in the investment business.

It was enacted as an emergency response to the failure of nearly 5,000 banks during the Great Depression. The act was originally part of President Franklin D. Roosevelt’s New Deal program and became a permanent measure in 1945. It gave tighter regulation of national banks to the Federal Reserve System; prohibited bank sales of securities; and created the Federal Deposit Insurance Corporation (FDIC), which insures bank deposits with a pool of money appropriated from banks.

The Flip Flop

Obama's administration have initially dimissed this idea back in Dec 2009. Lo and behold, the financial typhoon came along yesterday, sending banks spiralling down. The earnings report for Bank of America initially made me optimistic on the prospects of the company. This combined with the reports from other banking companies convinced me that there is not a need to divest my holdings in Bank of America. Now, however, I am reconsidering it.

"Obama administration officials have dismissed the idea that the financial sector should or can be changed in more fundamental ways than they are now proposing. You can't turn back the clock, they say, and the new requirements they plan to impose on big banks to hold more capital in reserve, put up $150 billion for a rainy-day rescue fund, and disclose more of their risky trades should be enough to keep the financial sector from imploding again. Many of these requirements, among others, are contained in two giant bills making their way through Congress—one that passed the House last week and another that will be debated in the Senate in the new year. "I think going back to Glass-Steagall would be like going back to the Walkman," says one senior Treasury official."

The link to the article can be found here

Obama's First Year in Office

I remembered comparing Obama to an iPhone once. The iPhone to me, was one of the coolest gadgets ever invented, however, it was not extremely useful. It was pretty comparable to a WM6 phone, less customizable (unless you jailbreak it), but everyone had the iPhone cause it was just so cool.

Same with Obama. 8 years of Bush administration made me wonder what the Americans were thinking. The previous Republican president before that was George Bush Snr, and made me wonder is their method of contributing to the economy starting wars to gain oil fields and increase manufacturing. Compared to the Clinton era (Lewinsky-gate excluded), Bush era was just a whole lot of turbulence. So when this African American guy came along with the promise to revamp healthcare, pull out of Afghanistan, he was making all the right moves. He inspired people. One just has to look at his town hall speeches and you would get a positive feeling out of it.

One year on, Obama's reluctance to address the economy and stake an all in wager on healthcare disillusioned many. Furthermore, more troops have been sent into Afghanistan. You can't help but wonder if Obama is all hot air, or what most of us describe as NATO (No Action, Talk Only). I definitely wonder from time to time what has this guy done for USA and possibly the world, and is he capable to be the President of the United States.

The key note would be the timing of Obama's backing of raising the wall between commercial banks and investment banks. Once Brown won the seat of Massachusetts, the Democrats lost their super majority in the Senate and thus if the congressmen voted along party lines, Democrats would not be able to force through the Healthcare plan. Brown's victory in a Democrat stronghold also served as a reminder that the citizens are disillusioned with Obama's inaction over the economy. As such, Obama flipped his stance, pushing for walls to be raised, and causing rising fears over a return to the Glass-Steagall era of regulation. This populist move would satisfy Americans, giving them hope over the economy. But is it too little too late?

I, for one, am terribly disappointed with Obama's administration.

Thakral Corporation

For the uninitiated, Thakral Corporation is holding an EGM on the 4th of February to seek an approval from its shareholders on a 5cent cash distribution per share. Before anyone jumps in without looking, I would hope to provide a better view for all people who wish to become vested.

About Thakral Corp

As taken from their website.

Listed on the SGX Mainboard since December 1995 with its Distribution business headquartered in Shanghai, the People's Republic of China, Thakral Corporation Ltd is involved in the distribution business of consumer electronics sector, as well as strategic property and equity investments.

The PRC, Hong Kong and India are presently the Group's key markets for its products. The Group distributes an extensive consumer brand portfolio including global consumer electronics brands such as Apple, Asus, Canon, Casio, Fuji, Kodak, Lenovo, Nikon, Nokia, Olympus, Orion, Panasonic, Pentax, Samsung and Sony. Some of the major products distributed under these key brands include digital video cameras, digital still cameras, plasma TVs, desktop and notebook computers, personal digital assistants (PDAs), data projectors, electronic accessories, mobile phones and audio products including MP3/MP4/MP5 players.

In addition, the Group has also successfully created and marketed trendy consumer products such as audio players and accessories, LCD TVs, memory cards, portable DVD players and digital photo frames under its own “YES" brand.

Cash Distribution

Cash distribution occurs when the company has excess cash and has no use for it. In Singapore, as dividends are not taxed, dividends and cash distributions are similar, except that cash distributions are usually associated as a one-time payout.

About the Distribution

Thakral wished to reposition its primary business from consumer electronics distribution to real estate and related infrastructure. In view of the capital distribution announced on 1st Dec 2009, Thakral decided not to go ahead with the repositioning.

With a 5 cents distribution, share capital will be reduced to 72,528k, while EPS for the 9M09 drops to 0.15cents from 0.22cents. Equity is reduced to 92,886k from 223,692k.

Directors and Shareholders

Thakral Investments Limited has a direct interest of 7.44%, while Venture Delta Limited has a direct interest of 34.38%. The Thakral family has a deemed interest of 29.92%, with Jasvinder Singh Thakral has 5,200,000 share options under the employee option scheme. In short, Thakral Investments Limited has direct interest to SGD9.717million of the dividends paid out.

Vested?

I believe that the cash distribution is done without any harm to the company's day to day operations. However, there are 2 concerns that I wish to raise.

1) Thakral has posted a pre tax loss for 3 of the past 5 years. However, FY09 is slated to turn in a profit. My concern is what happens after the cash distribution, considering that they may not pay dividends after. Thakral has not paid out dividends since 2005.
2) The cash distribution is not approved yet, however when it is propsed on the 1st of December, Thakral Corporation moved up 3 cents, before closing at 8.5cents. Would the price drop more than 5 cents once the cash distribution is approved and XD comes around?

I am not vested but I thought I should write an article to inform people who wish to be vested in Thakral.