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Questions & Answers With Calvin Yeo On Stock Investments

04.22.2012 · Posted in Budgeting & Portfolio, Dividend Stocks

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!

 

For further reading, you may be interested in:

Calvin Yeo and Making Passive Income Featured on Singapore Business Times

5 Basic Investment Asset Classes for Portfolios Part 1 Stocks Fixed Income and Real Estate

Basic Categories of Stocks and Identifying Them Correctly for Diversification Purposes Part 1

My Interview on Next Insight – The Rewards of Investing In Property

Understanding Singapore REITS Part One – REIT Categories

How to Pick A Top Dividend Company for Dividend Income Part 1

My Singapore Stock Portfolio End March 2012

14 Responses to “Questions & Answers With Calvin Yeo On Stock Investments”

  1. Hi Calvin,

    You say that you buy and sell based on Valuations. I am just curious to know what kind of model did you use? Do you really calculate the PV of expected future free cash flows from the co and hence find the intrinsic value per share OR do you merely oberserve the financial statments (looking at ratios and compare with other industry players)?

    Well I have always have doubts on the former (Textbooks methods) so just want to know from a real life example how complicated it actually is?

    Thank you for your time. haha.

    Vion
    Propnex Realty

  2. Peter Lim says:

    You were saying your leverage is 40%. Is it 40% of total assets, or is it 40% of equity?

    In short, if u invest $ 100k, do u take 40k leverage, or take 67k, which means you invest 167k (67k / 167k = 40%) ?

    • Hi Peter Lim,

      I take leverage as Total Debt / Total Assets. So yes, it is 40% of total assets.

      I.e, If my total assets is $100k, $40k is debt, $60k is equity.

      That is the same way REITs use to calculate leverage ratio when meeting debt ceiling requirements.

  3. Hi Calvin you mentioned that you were using 40% of leverage for your investment portfolio? So may i know are you using margin account? If not can sure what tools you using for the leverage? Thanks.

    • Hi Andy,

      No, I am not using leverage on my stocks. My leverage is from my property investments. For shares, it will be margin accounts and keep it to a maximum of 20% as stocks are much more volatile. Remember that CFD and margin accounts are very different, do not use CFDs thinking that they are the same thing.

  4. Peter Lim says:

    20% of Assets is like 25% in Debt to Equity (20% / 80% Equity). It’s still conservative, and can sustain at least 50% drop without worry of margin call. Nice.

  5. Hi Calvin,
    Bank interest is really pathetic, i wanted to invest those with good divident but don’t know which RIGHT counters – RIGHT entry price to buy, buy low can get lower. My broker just want us to buy/sell fast with their signal but it’s too stressful. Hope you could advise me/us here. Many thanks ;)

  6. Hi. Calvin,

    I wanted to ask you if you think SMRT is a good stock to hold. The stock has depreciated in recent times but it still shows some solid projections going forward.
    Do you have any comments on this?

  7. Hi Calvin,
    If a shareholder had pass away, do his shares will be forced sell and his family members get the cash? Does transfer the ownership of shares to his family members is allowed?
    Thank you.

    • Hi grey, the shares will form part of the estate to be distributed according to the will if there is one, or it will be distributed according to intestate succession act in Singapore. You can get the Grant of Probate (with will) or Grant of Letter of Administration (no will) to go to CDP and get them to transfer the shares out.

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