A Money Printing Machine That Generates $69.8 Mil A Day

In my last blog post , I talked about “The Power of Free Cash Flow” , the important of having consistent and sustainable free cash flow for companies which would allow them to pay dividend or buying back their own shares. Imagine if there is a company that could generate $68 MIL a day , do you think such company exist in world stock market ?
Yes ! It's Berkshire Hathaway (BRK ) and it was sitting on a massive cash pile at the end of 2018 and the cash continue to increase quarter by quarter in billions of dollar.  BRK is sitting with gigantic cash amount of USD 114 Billionsas of 1st Quarter 2019.
For the past 3 years , Berkshire was able to generate Free Cash Flow of USD 25.5 Bil /year(on average) and this will translate to about USD 69.8 Million / Day.

The Power Of Free Cash Flow

Accounting Profit is Fake
Yup, you heard me correctly.
Accountant’s idea of profit is prepared according to tax adjustments and accounting standards. These were established to provide consistency and governance across how accounting is done. The problem is these ‘rules’ are very much open to interpretation — leaving room for ‘creative accounting’.
The collapse of Enron is a prime example of how investors and business owners assess a company’s financial performance is guided by all the wrong numbers.
But if you look at the Net Cash Flow position, you will see that the company was losing cash.
Sounds familiar ?

Are S-REITs Overvalued ?

If you are having more REITsin your portfolio , the chances that you are beating STI is high as most of the REITs are having good "run" so far. Overall YTD returns for FTSE ST REIT Index is 16.5% vs STI of 7.67%. Since I have more than 42% of REITs in my portfolio , quite natural that my portfolio also outperformed STI by +6.3% with YTD returns of +13.97%.

Are REITs Overvalued Now ?

From long term trend perspective, valuation for S-REITs looks "rich " as you may see that is very close to +0.5SD trend line , a level never seen since May 2013.

You may also notice that the dividend yield for some of blue chip REITs been compressed to 4-5% like Capital Mall REIT/ Capital Commercial REIT/ FCT / Ascendas Ind REIT/ ParkWayLife REIT or even Keppel DC REIT.

Know Your Yield , Know Your Risk

Your Portfolio Yield Determine Your Risk-Tolerance , No?
In general, your portfolio yield could be a very good indicator if you are taking too much risk or risk-averse. I plot a chart to show my portfolio yield vs other income investment instrument as below:

My yield from equity is about 6.1% , which is slightly lower than S-REITs averg of around 6.5% (base on OCBC Investment Research S-REIT Tracker-link ). Although I am just having around 42% in REITs but since my other’s holding also mostly dividend play like Telco/ Banks + 2 investment trust ( Hotung Investment and Global Investment) and some other blue chips ( Keppel Corp / ComfortDelgro) etc , which gave me a yield of almost 1.75X higher than STI ( ES3).
My Portfolio Yield (Including Bond + CPF) drops to just around5.1% if I include the Bond and CPF balance where the interest rate are lower than Equity.

You Should Be Worried When FED Starts to Cut Rates

Market rebound strongly in last two days after FED Chairman indicating future rate cut if economy situation is getting worse due to trade war.
Fed Inches Toward Rate Cut as Trade War Frays Patience<From> “The Federal Reserve’s top policy makers aren’t yet ready to cut interest rates, but worsening trade tensions are nudging them in that direction.

When REITs Lead To Large Losses

I would like to share this very good article from SeekingAlpha.comin regard to investing in REITs :

REITs are famous for being defensive income-producing investments. There exists, however, a lot of landmines that can lead to massive losses. We explore the most common reasons that lead to large losses in the REIT sector. Finally, we present how we seek to avoid landmines at High Yield Landlord.
Generally speaking, REITs are famous for three things:
·They pay high dividends. ·They are defensive investments. ·They tend to outperform in the long run:

2nd Qtr 2019 : Dividend & Portfolio Update

Finally, is my turn to update the total dividend and interest income that I will be getting in 2nd Qtr 2019 , after my last company i.e Accordia Golf Trust announcing its result yesterday. I’m really excited because second quarter is normally the highest dividend amount I will get as most of the blue chips are given out their dividend in this quarter.
Total Dividend & Interest Income2nd Qtr 2019 = $59,007 vs 2nd Qtr 2018 ($60,325), decrease by -$1318.
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