Review 2014 / Preview 2015

Review 2014

The last quarter of 2014 is a bad quarter for my share portfolio, which saw year-to-date return plunged from 71.2% in Sep to 38.6% in Dec.

If this momentum continues into 2015, it will not be a surprise that all the gain will be wiped out.

At the end of Sep14, I was still dreaming of 100% return at the end of 2014! Doesn't it sound ridiculous?

This year-end bear is a good lesson for me and many other relatively new investors I guess. It reminds me that stock market is volatile and making money from it is not as easy as I think (even though I already knew this from the very beginning).

A good reality check indeed.


Lesson no.1 in 2014: Always keep some cash

Anyway, I'm still glad that I can make a commendable gain from stock market in 2014. Including the dividends received, the total YTD return will be 44.5%, slightly higher than year 2013 (July13-Dec13) return of 39.0%.

My calculation of return might be different from others as I use approximation equation. 

For example if I started 2014 with shares worth RM100,000 and I put in another RM20,000 during the year and end the year with shares worth RM120,000, what will be my return for 2014?

Using the approximation formula, my return for year 2014 will be

[ 120,000 - 0.5(20,000) / 100,000 + 0.5(20,000) ] - 1 =  0

So it will be 0% return, which makes sense.

If I received total dividends of RM10,000 in 2014, my overall return will be

[ 130,000 - 0.5(20,000) / 100,000 + 0.5(20,000) ] - 1 = 0.09 = 9%

From those 8 stocks I am holding now, 6 of them are held for more than one year.

Stocks	End Dec13	End Dec14	G/L (%)
GTRONIC	3.17	4.30	35.6
INARI	1.63	2.54	55.8
LATITUD	2.08	3.65	75.5
MATRIX	# 2.27	2.70	18.9
SCIENTEX	5.69	7.09	24.6
TAMBUN	1.51	1.62	7.3

# adjusted for 1:2 bonus issue

Latitude appears to be the best performer with 75.5% annual gain in share price. It helps my portfolio a lot since it carries the greatest weightage.

Anyway, I failed to lift Latitude to my core portfolio in 2014 as planned, though it is close.

Inari's share price performs well too with 55.8% annual gain despite its share price fell from a high of RM3.40, while Gtronic also registers a decent gain of 35.6%.

All 3 stocks above are expected to benefit from stronger USD and US economy recovery in 2015. So I think it is wise not to sell them unless in unforeseen circumstances.

       My portfolio as at 1st Jan 2015 by initial capital invested

Everyone expects property market to suffer in 2015. I share the same view too.

I have 3.5 property stocks in my portfolio currently... sweating |||

Though Huayang has quite a lot of debts, I'm still optimistic about it due to its high earning visibility in the next 2 years.

It can give high dividend yield for the next 2 years base on 40% dividend payout. Its prime land at Puchong & proven management team serve as an insurance for me.

Matrix's business achievement is quite remarkable, with its successful Bandar Sri Sendayan development which includes Sendayan Tech Valley, Matrix global school & the prestigious clubhouse. It still has enough landbank to replicate this success elsewhere in Negeri Sembilan.

Most importantly, its management is also superb.

The proposed 50% Bumiputera new house quota might worry some investors even though BSS is said to have about 50% Bumiputera buyers. If we think from other way, it may reduce competitor's entry into the state.

As for Tambun, its new projects in Pearl City still sell well up to today. However, it lacks diversification of location so acquisition of new development land is vital. It won't have too much problem to do this in term of cash.

Tambun should start to enjoy rental income for GEMS International School and Pearl City Mall in the final quarter of year 2015, though I think not much. It plans to launch RM470mil worth of new projects in 2015.

Scientex's future is bright due to massive expansion in its packaging division. It might be affected by stronger USD due to its USD-denominated loans. However I think its export should be in USD as well.

Its property division faces the same problem as of other property developers but I am confident with its management team. 

HHGroup is still a very new company which lacks track record. I was a little impulsive in buying its shares. A slowdown in China's growth will not do it a favour as it exports most of its products there.

Anyway, it is still early to judge this company. It will be nice if it can find new markets in Europe and US.

In early 2014, I planned to add plantation and O&G stocks, and reduce property shares in my portfolio.

It turns out that I did not buy anything from plantation & O&G. Is this a lucky escape?

The reason I planned to reduce property shares last year was because I thought property price has reached the level where middle class can't really afford hence new property sales will drop.

Nevertheless, most property developers' stock price surged in the first 9 months of 2014, only to succumb to sell down in the last quarter of 2014.

I have to admit that I was carried away by this euphoria until I "forgot" my initial plan.

I pared down the shares of Tambun gradually throughout 2014 and sold all Tropicana's shares. I bought and then sold all of Asiapac & Protasco.

However, I increased Matrix shares in Feb14 and added in Huayang in Oct14 (the by-product of euphoria).

Even though property exposure (except Scientex) in my portfolio has reduced from 51% in the end of 2013 to 43% in the end of 2014, it is obvious that I did not follow my initial plan to cut down property shares when the concern of slow property market still stays the same throughout the year.


Lesson no.2 in 2014: Don't be carried away. Always stay awake & alert

I didn't buy O&G stocks mainly because I still don't understand it much. The more "understandable" target Coastal did not reach my desired entry level until the recent sell down.

If I have lots of cash, most likely Coastal will be in my portfolio now. But I don't.

According to "buy when everyone is panic" rule, perhaps it's time to accumulate O&G stocks. I think I should watch closely first.

As for plantation, I still plan to get one as I think current CPO price is already on the low side, but none has reach my desired price.

Low crude oil price will significantly reduce the demand for biodiesel so it might not be good for CPO if crude oil continue to trade at lowish level.

Anyway, if the stock price is right, I will still consider it.

Preview 2015

I don't think 30% annual return can be achieved in 2015 due to weak market sentiment and outlook in Malaysia. 

If I sell ALL my shares now and buy selectively for short-term trading, will I have better chance to hit 30%? 

For year 2015, I will try not to increase my exposure to property stocks with the similar reason like last year. I will probably keep those existing property stocks at a comfortable level for their dividends.

The focus of 2015 should be export-orientated companies, better if their products are exported to the US.

To insulate from an unexpected market crash, a net cash or low debts company will always be ideal.

Perhaps investing in US stock market is much better but I am still not ready for it at the moment.

This year will be a challenge for Malaysia if the crude oil price continue to trade at a low. Major money-eater projects such as MRT2, LRT3, TRX, KL118, HSR etc might have to be delayed.

Award of any kind of contracts by government might slow down and the already-awarded contracts might be delayed or cancelled in the worst case.

Anyway I don't see the worst case happening in 2015.

Looking back into the history, recent world economy crisis occurred in 1987, 1997 and 2007-2008. Is 2015 too early?

Famous value investors said: Don't time the market! 

So just buy good stocks anytime when they reach undervalued level, but be prepared to hold for long term.

Wish everyone a Happy, Healthy & Prosperous Year 2015.