Are you surprised that the debt ceiling has been raised further? I am certainly not.
The last quarter of the year has begun, everything is in full swing, an exciting time for people who are just coming back to the markets.
I could have held on to my capital a little longer as the ongoing US government shutdown continued to bring the broader market down and with it many high quality stocks. However i chose to ignore the noise and buy on fundamental strength. Having a vision for the long-term is very important in investing in equities. Build on your portfolio when things are looking down, sit back and relax as people rush into the markets because you have already taken positions.
For example, I have been buying more of Far East Hospitality REITs and CACHE REIT when they were down. My average buy price has come down quite a bit. Fundamentally FarEast is strong but still quite RISKY, technically speaking.
As it is with all recent IPOs, we cannot really judge the fair market value. However we know that there is support at IPO price of $0.93 and more recenly $0.84 (recent bottom). The problem is we do not know how low it can go. What i do know is that Far East is a great organisation and proper management and their property portfolio is strong. If its share price is a true reflection of how hotels and service residences perform during end of year tourism spikes, I am confident that its share price will definitely test resistance levels of $0.96. That is a critical resistance level to cross if the trend is going to reverse. Otherwise, we may be looking at a downward trend without a significant bottom.
As we all know by now, REITs have outperformed the general index. High yielding REITs were plenty back in 2010, slowly they are becoming overpriced. If you have positions in it, you are probably holding onto them till the last minute to see how much further they can go. I know i am. I decided to highlight some winning REITs who are still offering above average dividend returns.
Of course, this is not an invitation to buy into these selected REITs because most of them are already quite expensive. Did you pick these REITs back in 2010?
I held 4 out of 5 of these top yielding REITs in the past. Recently sold Suntec REIT and First REIT at a very good profit making me happy. While i still hold onto Ascott REIT and Sabanna REIT, i do ask myself how much longer do i have to hold them? The average current yield in each sub-group is already close to 5. Will we see a drop in popularity when this average drops below 4? That is definitely a yes.
For the time being though, let me be greedy and hope for bigger returns. We should be worried when average yield goes below 4%. But i suppose Ascott REIT is something i will have a hard time deciding to sell.
Its the time of the year when i usually do a re-assessment of my investment strategy and capital allocation in order to stay ahead of market cycles. I am guilty of holding onto some counters for way too long even after they have reached my target price. It seems most brokerage houses keep upgrading stocks and shifting their target higher and higher. One such example is Singtel, now its target is $4.20? sure, maybe but not in the short term. I had to take profit early and trust me Singtel will come down eventually to find support at a lower level before the final push to the $4 region. All of my REIT holdings are also above target prices, Genting seems to be under the bus at the moment so i shall have to wait longer for it to reach my target price.
Anyway in order to do capital relocation, i need to free up some money. Chinese stocks look super attractive at the moment, with such valuations one cannot resist. I am going to pick individual counters which are growth stocks and play the broader index to diversify.
Another point, I know for a fact, battery technology we currently use is outdated (over a century old). Cant wait to say goodbye to the pencil batteries. Having worked on Lithium-Air batteries myself, next generation battery technology is headed towards leaner, paper thin, Lithium Ion batteries with a greater capacity and recyclability than any existing alkaline or lithium cadmium ion battery. Therefore, i invested in BYD, manufacturers of next generation lithium ion batteries, PV cells and Electric cars. They are registered on the HKSE since 2002. Even Warren Buffet himself bought a huge stake for himself, however i must say, his timing was way way off. But you know what, this is a long term play and he knows it. Small retail investors just dont have the sort of capital to throw around so our timing has to be at least accurate.
*Additional note: Interestingly fellow blogger WealthBuch also started taking profits. Refer to posted link below:
http://wealthbuch.blogspot.sg/2013/05/taking-little-profit-off-table.html
Disclaimer: Same as usual, dont just take my word for it. Perform your due dilligence before making an investment decision.
Recently I have been paying attention to Singapore REITs because i am invested in some of them for over a year. Having also taken profit too early on Suntec REIT, i wonder if I should have adjusted my exit strategy.
Fellow blogger KFC1973-Stock wrote an article today: "REIT Sector Still outperform the benchmark"
If you read the article, S-REITs have beaten the broader market YTD and i believe it has been outperforming the benchmark for a couple of years now. This makes me worried, because i look at valuations, for me it is starting to get overvalued. One has to remember that during the 2008 crash, almost all REITs got slashed pretty badly (almost 60-80% for some). So definitely REITs are vulnerable to market crashes...no doubt!
I suppose when looking at REITS, we value it based on dividend returns above price. Isnt that why people are still buying overvalued REITS because it still pays out more than 5% dividends?
REITs start to get unattractive as their dividend rate drops and this is inversely proportional to its market price. I would still HOLD onto several REITs because of their potential but I'll be out as soon as dividend rate drops below 4%. One more thing, very important... As soon as interest rates go up, its game over! Cost of borrowing goes up, dividend yields will drop. REITs will be in trouble.
Of course i regret selling First REIT and Suntec REIT too early. They are trading much higher then my profit taking target. Sigh*
In my portfolio, I consider Hospitality REITs one of the strongest in Singapore and i would hold on to them. Industrial REITs would be the first to go as soon as their dividend rate drops! Remember they were the worst affected during a market crash. Look at graph below from FSM; Pick up REITs when price is low, dividends are high. In 2009 average dividend yield from S REITs was super high!
Disclaimer: I have long positions in Far East Hospitality, Ascott Residence Trust, Cache Logistics, Sabana Shari'ah REIT. Please do your own due diligence before investing.
