For those who do not follow my Facebook activity, there was recently a Questions & Answers (Q&A) done with some of my readers. I thought that the questions are relevant and I feel that I should share them for the benefit of other readers.
How do you manage your portfolio?
I buy and sell based on valuations. I have email alerts to all my company portfolios (if they have) so that I don’t miss out on any press releases or corporate actions. Brokerage houses also help with their daily research coverage so I am always updated.
What’s important to me is whether there are any significant changes to the business. If not, I generally hold most of the portfolio for the long run.
How do you buy and sell your 20+ stocks counter as it is tough monitoring more than 6 stocks.
See answer above. Also, I spend the most time analyzing a company initially before I want to invest. After that, it’s just making sure that the company performs as planned or outperforms. If the company is not performing or have material changes, I may consider dropping it.
Do you trade daily or just when your views that the counter is cheap?
No I don’t trade daily. I trade around valuations. I am normally more active when the economy is in turmoil, looking for good stocks at cheap valuations. When the market is bullish, I don’t usually do much, except maybe unload a bit. For e.g. this year, the only stock I have bought is QAF.
At what percentage gains do you consider selling your stocks?
None. No target percentage gains. Only when the stock becomes grossly overvalued or I have a large percentage of the stock in my portfolio and I want to shift allocations.
Do you clear your counter or just sell partially to balance our portfolio.
If the stock is a good stock, very seldom will I clear the counter. I will always leave some lots behind so I still actively look at it. I move stocks around to balance the portfolio, not just Singapore, but within Singapore, US, Malaysia and different allocations between properties, stocks and fixed income.
Is trading or investing better?
It depends on your personality. No doubt trading has the potential to make more money with a limited amount of capital, however, it also has the potential to lose a lot more money. Traders in particular those who employ high leverage run the highest risks, especially if a black swan hits. I prefer the stable and sure way to make money work for you without having very high risks.
When you are looking for ” any significant changes to the business. “, what exactly are you searching? what number or ratio changes? which ratio has your most significant attention? PE? Debt?
It’s not so much the financial ratios, rather the business fundamentals. It is a qualitative study of the business, the industry whether there are any major impacts to their business plan. Most CEOs follow a certain business plan which can be 5 years or 10 years or more, so if that business plan changes, you have to know. Sometimes its due to the market shifts (i.e. move of mobile phones to Iphone) or govt. regulations (Singapore imposing property curbs), change of CEO (SMRT) etc.
With regards to the financial ratios, they should always be improving or stay stable compared to previous reporting periods. If there is an increase in debt levels, make sure they are investing in high ROI projects. Gross margins, EBITDA margins and net margins should improve over time as the business becomes more proficient at what it is doing
Which brokerage house analysis do you think give more true and deep coverage on stock without much bias? any individual favorite analyst that you follow?
With brokerage house analysis, I don’t particularly favor any, I am impartial and will just analyze them for their respective content. Research reports should be independent and objective, if an analyst is not able to separate fact from opinions, you have to be very careful. Reading a few reports on the same company can give you differing views, so the important thing is to maintain your own opinion and not get unneccesarily affected. Good research reports provide plenty of industry data which can be useful for your own analysis.
Can you share with us how many % leverage for your investment portfolio?
Last I checked it’s about 40+%. Definitely less than 50%. If you are just leveraging your stock investments with a margin account, my recommendation is not more than 20% of your stock portfolio as stocks are a lot more volatile.
Thanks to the readers on Facebook for asking these questions!
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