A Tale of Diversification ( Part 2 )

In previous blog post , I have shared my experience of diversification into Telcos and O&G industries which is still sitting on paper loss of more than - $12 K ( here ). In today’s part 2 , I am going to further elaborate my story of diversification into banking sector since 2016.

Some may still vividly remember that banking stocks has been beaten-down in end 2015 and early 2016 due to market’s projection on slow-down in China’s economy as well as others emerging market ( BRICs ).

Others that “ China’s factor “ , struggling in O&G companies which also affecting the balance sheet of banking stocks due to increase of provision in bad debts and impairment.

STI Index was down from the peak of 3539 point in Apr 2015 to 2529 in Jan 2016 , a whopping decrease of around -28.5%.

< image credit goes to one of the blogger who have produce this chart which I have forgotten the source , my apologies>

We know that sometimes “ Crisis could be an Opportunity “ as you may refer to my explanation of this in “ My Investment Strategy 1-2-3 “ (here ).

I have started to apply some of my war-chest in end 2015 and early 2016 in few blue chips counters including banking stocks which been affected the most at the time.

At that time, I haven’t start my own blog and have written a guest blog posted under AK’s blog in Feb 2016 on how I view the market and would apply my war-chest under that volatile market.

You may find the link – here .

 Tea with STE: How I stage and apply my war-chest in current volatile market.

Thursday, February 25, 2016

By taking advantage of the market volatility and diversify some of my war-chest into these bank stocks has so far given me a good return ( with XIRR ranging from 16-20 % ) and total profit (realized + unrealized + dividend ) of around $34 K.

As hindsight , nobody really know where the market will be heading at that time and it may go down further , end up in much severe situation. Current returns is just that market sentiment has changed, hence these 3 banking stocks ( and others STI component stocks ) have lifted the index from lowest of 2529 to current level of 3236 , an increase of around 28% from the low.

Since the 3 Big Banks ( DBS/ OCBC/ UOB ) accounted for around 32% of market cap in STI Index , my returns was just in line with market as better sentiment pushing up the index while the fundamental and earning growth remain unchanged in challenging situation.

DBS’s CEO just sold 500,000 share of DBS at $20.53 !!

Yes ! , Mr. Piyush Gupta had just disposed off 500 K of DBS share at average price of $20.53 with total value of more than $10 Mil . But if you could recall, in Feb 2016 , he bought 200,000 share of DBS at average price of $13.88 .. you may find the news ( here ).

Yes !! this is exactly the strategy of “ Buy Low , Sell High “ … he racked up profit or more than $ 1.33 Mil base on price different of these 200,000 share in just 15 months.

Well, there is only 1 reason in buying share i.e  making money but there are be thousands of reason in selling the share , nobody know for sure what was his reason to dispose off these share , could it be due to “valuation “ or may be he wanted to deploy the capital in other's investment or business.

Now , let’s look at the valuation of these banking stocks base on “ Long term Mean “ perspective :

It seems that I shall also taking advantage of current DBS’s price movement of moving above +1 STDV ( close to +2 STDV ) and “ taking some money off the table “.

What do you think ? about the valuation and decision of selling the share ?

Cheers !!

“Forecasting is like trying to turn lead into gold.” by Philip Fisher