By: Kleer

Back in December 2006, my portfolio value stood at $355,688, and comprised of:

  1. Pan Utd
  2. Chuan Hup
  3. Tat Hong
  4. HMI Corp
  5. AEI Corp
  6. HTL International
  7. Sarin Tech
  8. China Lifestyle
  9. Fung Choi
  10. China Precision
  11. Yongnam
  12. Tai Sin
  13. Sinotech Fibre
  14. SPC
  15. Eastern

The monthly portfolio performance was as follows:

  • January: 37.7% rise.
  • February: -3.2% fall.
  • March: 3.6% rise.
  • April: 18.9 rise.
  • May: 3.7% rise.
  • June: 26.0% rise.
  • July: 0% rise.
  • August: -14.2% fall.
  • September: 11.0% rise.
  • October: 0% rise.
  • November: -13.4% fall.
  • December: -1.0% fall.

Based on the monthly percentage returns, $10,000 invested at the start of 2007 would have increased to approx. $17,500 by end 2007.

As such, I actually managed a return on capital of 75%, excluding dividends, for the 12 months of 2007.

For dividends, I also received a total of $17,258.96 for 2007, which works out to an approx. 3-4% based on my average portfolio size of $500,000.

In comparison, the STI Index began the year at approx. 3,000 pts and closed at 3,482.3 pts, thus managing a return of 16%.

Even the Catalist (formerly SESDAQ) Small Cap Index began the year at approx. 150 pts and closed at 215.85 pts, thus managing a return of 44%.

I am very proud that I managed to beat these two benchmarks significantly.

Winners:

Yongnam and Eastern were my best performing stocks, both having trebled their 2006 closing prices of $0.11 and $0.23 respectively.

Other strong performers for 2007 include Tai Sin, Pan Utd, Tat Hong, and SPC.

I continue to hold on to my remaining stakes in Yongnam, Eastern, Tai Sin, and Pan Utd, as I believe that 2008 will continue to be a very good year from the Singapore economy, and that the property and construction sectors will be natural beneficiaries.

Although Tat Hong should also do very well because of its strong position in crane rental, its valuation is already very rich at 20x PE Vs. its usual 14x historical PE, which is why I chose to switch from it to some of my recent undervalued buys.

As for SPC, I sold my stake at $8.20 when oil broke through the US$100 mark because I believed that oil prices would have a pullback. At present, oil prices stand at US$96, and SPC at $7.57.

Losers:

On the flip side, the underperformers for me were Hengxin, HTL International, and IndoAgri, all of which I have since sold.

For Hengxin:

I purchased my stake at $0.545 because I believed it to be undervalued. Unfortunately then, I had no other how to analyse a company’s balance sheet and failed to realise that it was laden with excessive receivables.

By the time I realised this, its price had already fallen quite a bit. I decided to cut my losses at $0.40. On hindsight, that decision was proven to be correct as Hengxin has since fallen further to $0.265.

For HTL:

I purchased my stake at $1.24 because of its excellent fundamentals, having seen both its revenue and profit rise steadily over the past 5 years.

Unfortunately, things started going downhill as soon as I started being vested. Its profits started to decline due to a combination of plant overcapacity, rising leather and other raw material costs.

An an investor, I always prefer to invest in a growing instead of stagnated or declining business, no matter how strong the company’s reputation, and thus decided to cut my losses after a mere 14 months at $0.940.

Once again, that decision was proven correct as HTl has since fallen to $0.525.

Indo Agri:

I purchased Indo Agri at $1.75 when I calculated its Fair Value to be $2.50. Unfortunately, after my purchase, I realised that I had made some mistakes in my calculations (see here) and that it should have had a Fair Value of $1.80 only.

I believe many other investors made the mistake of over-valuating Indo Agri, as its share price kept on falling from its opening $1.80 to $1.20 in April, and to as low as $0.80 in August.

Thankfully, I averaged in on more stock at its lows, which allowed me to sell my stake in October at $1.52 for a small profit when I felt it was already fully valued.

That decision was proven to be wrong as Indo Agri has since risen more than 50% to $2.42, though the reasons for the meteoric rise have yet to be disclosed.

Source: Extraordinary Profits