Value Letters – Reflections from Investing

With the winding down of the US Portfolio, I’ve renamed the blog in view of the upcoming shift in theme of what I hope to cover.

In the coming months, I’ve decided to focus on publishing a series of investing memos that I’ve written. Each piece will focus on different aspects of investing.

Together, they represent my own philosophy and approach. Many of you know that I adopt a long term, fundamental based approach towards investing. I hope to refine and clarify my own thoughts on the subject, and to engage and encourage you to think about it in your free time.

There is no shortage of information available with the advent of the world wide web. However, what is perhaps lacking as a direct result of the easy availability of “knowledge” is a lack of what Howard Marks calls “second-level” thinking.

Things cannot be taken at their face value. As the old adage goes, there’s a good reason why something is done, and the real reason behind it. I hope these memos will spark some interesting discussions, and lead you to arrive at your own conclusions about the subject.

What 153 SGX Companies Have Paid Dividends For The Past 5 Years?

UntitledDividend Champions (Click For The Google Spreadsheet)

I am working on a exciting new database of dividend champions

A company’s dividend track record is one of the most critical tools in assessing whether a company has a real sustainable business model. We are looking for companies with sustained and persist track records in paying dividends.

The following are the 153 companies which have met the stringent criteria of having a track record of 5 years of dividend payouts.  It’s a great starting point for all investors.

I have excluded financial companies, China companies listed in Singapore, and REITs and business trusts.

Access it here on The Asia Report.

Dividend Champions

I am very excited about this project. Let me know what you guys think!

Winding Down of US Portfolio

Since inception, I’ve had a good run investing in large capitalization stocks in the United States. However, the recent and sustained run up in prices has left few opportunities. It’s hard to imagine now that you could purchase well run blue chip stocks trading at less than 10x PE, and companies like Bank of America and AIG at 1/3 of book value.

BAC & AIG were our biggest holdings, and I am happy to say that they have worked out well since taking stakes in them in 2011. While pockets of value still exist, they are much harder to unearth, and I’ve taken the decision to wind down the US equities portion of the portfolio in the coming weeks.

I will be launching a new site later this year with a focus on Asia. Hong Kong and Singapore are filled with the same bargains that I saw in 2011 in the US, and in my opinion, offer a much better return with lower risk attached. However, Asia is a much different market, and certain principles must be adapted.

One prime example is how investing in companies trading at low price-to-book ratios or net-cash companies has led to permanent losses of capital on S-Chips in Singapore.The problem is not unique, and investors investing in China companies listed in the US have come to realize that accounting standards in China are not what we are normally used to.

This project has been in the works for a long time now, and I am excited to see where it will lead to. There are over 2,000 companies in Singapore and Hong Kong alone, plenty without any form of analyst coverage whatsoever. There are plenty of stocks waiting to be unearthed by the hardworking investor with the right framework.

Notable companies in the past year which we have covered include Vicom, Popular Holdings, ABR and Challenger. One company which ticked all the right boxes for me was Old Chang Kee which traded at 30 cents. Alas, I did not pull the trigger then (I kick myself at night when I think about it everytime), and was recently quoted at 96 cents (without including dividends distributed).

While we may have missed that train, there are plenty of other companies that have similar characteristics as Old Chang Kee trading at the same valuations in 2011. I look forward to talking sharing some of these ideas with you in the coming months.

The final quarterly report for the US Fund carries with it some sadness and a sense of satisfaction. Time flies, it has been close to three and a half years since I started this site. It’s been a journey both personally and professionally, and I look forward to the launch of the new site in the coming year.

Tay US Fund NAV Update March 2014

table

Accurate as of 31st March 2014

Initial Net Asset Value: $10.00

Net Asset Value as of  31 March 2014 $18.28

mar 2014

Hypothetical Growth of $10,000 invested since September 2011 (NAV at September 2011 was $9.71)

* A total return index is an index that measures the performance of a group of components by assuming that all cash distributions (dividends) are reinvested, in addition to tracking the components’ price movements

* I have changed the benchmark to the iShares S & P 500 TR Index to reflect the fees of a index fund. NAV is calculated net transaction costs and tax.

* As of the first quarter FY 2014, the reporting date has been shifted to the last trading day of each month e.g. 31st December 2013.

Tay US Fund NAV Update December 2013

table

Accurate as of 31st December 2013

Initial Net Asset Value: $10.00

Net Asset Value as of  31 December 2013: $17.40

dec

Hypothetical Growth of $10,000 invested since September 2011 (NAV at September 2011 was $9.71)

* A total return index is an index that measures the performance of a group of components by assuming that all cash distributions (dividends) are reinvested, in addition to tracking the components’ price movements

* I have changed the benchmark to the iShares S & P 500 TR Index to reflect the fees of a index fund. NAV is calculated net transaction costs and tax.

* As of the first quarter FY 2014, the reporting date has been shifted to the last trading day of each month e.g. 31st December 2013.