A Path to Forever Financial Freedom (3Fs)

My Thought Process On Writing a Put Option - With Actual Case Study On Citibank (NYSE: C)

2021-06-20T18:39:00.001-07:00

Since venturing into the options world and posting this part of the series into my monthly portfolio update, I've received quite a few emails from readers asking me the strategy I have used for my positions.

Now, before we start, I must do warn that options are a derivative tool which can be complicated and dangerous if you are not careful about it. There are plenty of risk management lessons to learn about options which I might do in a separate article because they are just so important.

Personally, I have undertook quite a few strategies with options play depending on the type and exposure I wanted to get myself involved in.

In this article, I will write one of the most favorite strategies employed by folks on writing a put option.

Writing a Put Option

First, let us be clear on what's a put option is.

According to Investopedia, a put is an option contract that gives the holder the right, but not the obligation, to sell the underlying asset at a pre-determined price at or before the contract's expiration.

As a writer of the put option, you would then consent to purchase the underlying stock at the strike price, if the contract finishes in-the-money.

Writing a put option is generally used as a way to generate income for investors as the writer would receive the premium that they lock in regardless of what happens to the price of the stock market. In other words, not only will you receive that premium, but will also front-load your expectation on how much you will need to break-even, make a loss or at what stop-loss price should you set.

This information is all front-loaded for you to make that preparation well in advance.

Pros & Cons

In an options contract, you have two parties that transact simultaneously.

When you write a put option, there will be someone opposite your end who has formulated strategies that will benefit his positions over the long term.

As a writer of the put option, your profits are capped at the premium that you locked in right from the start, regardless where the market might moves. Depending on your risk tolerance, you can be ultra conservative with your strategy and write a put option that you are comfortable with. For instance, you can write an ultra-conservative option today for Amazon (Nasdaq: AMZN) at a strike price of $2,500 expiring next month for a premium of $380 per contract (100 shares).

This is what I usually call as ultra-conservative play and the premium that you have written is almost like a 99.9% win scenario. I mean how often do you expect a company like Amazon to fall by 25% in a period of 1 month. That just doesn't happen very often.

This is also why writing an option is such a popular marketing gimmicks in many courses because gurus can easily tout their winning % rate to participants as it's almost always a winning trade.

Source: Analyst prep

Unfortunately, and like most things in life, things are often taken for granted.

Writing a put option does has its massive disadvantages in the form of an unlimited loss, especially if you didn't set a stop-loss in your trade.

Like the above mentioned example for Amazon, it is indeed very rare to see the company dropping more than 25% in a single month. But in a very rare event, it can still happen and this is the risk which I think can easily wipe out an investor's one year gain in a single swipe.

For instance, did you know that at the peak of the Covid-19 crisis, even companies like Amazon shed 34% from the peak to the trough in a matter of 3 weeks. What this means for investors is that should you be caught in a situation like this as a writer of the put option, you'd be "forced" to purchase Amazon at your strike price at the expiration date. Since the market value is lower than the strike value you will purchase, you will be immediately holding on to an unrealized loss.

Of course, the alternative to that is to close your positions before the expiry and book yourself a nice hot bath in a nice looking hotel to forget your loss.

With that basics understanding of the pros and cons of writing a put option, now let's get straight to the actual thought process when I usually write a put option.

Actual Case Study - Citigroup (NYSE: C)

Generally speaking, I tend to be very conservative in my strategy when writing a put option.

My goal isn't really to generate returns and earn passively from writing a put option. In fact, for most of the time, I'm just using this passively to wait for the big moments in the stock market where I could take up positions in the market.

I also do not try to roll-over my position month after month even though that can yield the most returns due to the time-decay playing to the writer's advantage.

The main objective here is to not get caught unnecessarily when then market turns southwards and you are left with little or no capital to take advantage of that situation when it happens. The premium is a relatively smaller amount in the larger scheme of things that pays you to wait and be patience. Of course, if the market continues to move upwards over time, then the premium will get larger and more significant over time.

Having said that, the mental has to be trained to understand that the strike must be a good entry and one that you are comfortable taking regardless of the situation (entry can always get better in a bear market scenario, we're trying to get to the very best entry as we can).

So articulating all this theory with a position that I recently undertook on Citigroup (NYSE: C) last Friday.

Citigroup is a company I have been keeping in my watchlist since the post-recovery play takes dominant in the market. I have not tried to put my foot in so far as I thought some of these run looks over-extended. Since then, I've been waiting for a pullback and a safer entry range.

Like most other US banks, Citigroup has been on a correction in the past few days since the Federal Reserve concluded the meeting during the mid-week of its June meeting. If you look at the 10-year Treasury Bonds, it spiked up to 1.57% a day after the meeting is concluded to before reverting back to go lower at 1.47%.

The 2-year Treasury Bonds however spiked up and did not come down.

What this means is that while the market is certain in the short-term rates are going up, the market is somewhat less certain that this will spill over to the long term perspective of the bond market. We just don't know if we are going to get that recovery over the long term or not.

As a consequence, most banks and economic recovery stocks have dropped in the past few days, giving way to another run for tech plays.

Source: CNBC

Citigroup, in particular have dropped a consecutive of 13 days in a row since it hits the recent peak of around $80 just earlier this month.

It last closed the day at $67.6.

Sensing this as an opportunity play, I quickly draw a chart and found out that there is a strong support at about $67 which it last hits that support back in April. Further, it also coincides with the peak around Jan which I highlighted in red.

Adding to that, there is also a strong upcoming EMA200 daily support at $66, which also coincides with the EMA50 weekly support at $65. I do expect price to rebound somewhat at this level due to the stock being oversold.

To further add to my thesis, there is also a Dow Jones weekly EMA20 support at $33,175 which is not far from here. There is just so much support at this level being justified.

As I mentioned earlier in my article, I tend to take a more conservative approach when writing a put, just to make sure I further reduced the chance of things going horribly wrong when it does.

So, I looked on to the next level of support and found that there is a next layer of strong support at $61.70 and then also at $57.5. This is between another 10-15% drop from today's oversold level.

Citigroup (C) Daily Chart - As of 19 June 2021

Using all this to come up with my decision, I decided to write a put option at the strike price of $60 (in between the next level of support at $57 and $62) at various expiry date, mainly July, August and October.

This coincides with the conservative approach of trying to diversify my exposure through a staggered ladder that I have created for my various options play in the event the market suddenly moves in one particular direction.

3Fs writing put options on Citigroup

Fundamentally, I am expecting Citi to report an earnings of about $7-8/share for FY2022 which will bring its PER to around 7-8x. Its current book value is at $75 so we do get some sort of margin safety there.

My mental tells me that this is a good price for entry even if I do get assigned at the worst case scenario. This is important because as a writer of a put option, you need to be convinced that you are not overpaying for a company even if you get assigned and you'd be happy either way to receive the premium or the stock itself at $60.

I hope this formulation and articulation of thought helps in the question that some readers ask me.

There are obviously a hundred and one strategies to articulate and it is very difficult to say which strategies are the best out there. I would just say that get into the strategy that you are comfortable in and works for you and then stick and do some simple and trial error yourself to try a new one.

In my next series, I'll talk about some of the other strategies I have on other options strategies and the risk I use to mitigate.

Stay tuned.

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How To Profit Against Huge Inflation Ahead

2021-06-17T22:39:00.002-07:00

I was walking past my favorite fast food chain today when I remembered reading a news a few days ago that several fast food chains in the US - namely Chipotle Mexican Grill, McDonald and Burger King have decided to raise prices for their products across their menus due to rising raw material and labor costs.

U.S Consumer Price Index (CPI), which represents a basket including food, energy, groceries, housing and sales across a spectrum of goods, rose 5% year on year in May. This represents their fastest pace of increase in nearly 13 years. The last CPI gain which was above 5% was dated back in August 2008 when CPI gains 5.3% that year.

Source: CNBC

For a long time in this decade, we have grappled with the expectation and live with low inflation since the Great Financial Crisis in 2008. While many are still recovering from the post-pandemic era, there are still an obvious clear trend of laggard for job availability and rising wages, which may dampen the overall recovery of the economy before they can call it a success.

This can create a disparity between expectation and reality in purchasing power, and while nominal income may seem to increase on the surface, real income may actually suffer. This can then result in an overall drop in the standard of living.

Why is Inflation bad for the stock market?

Long-lasting episodes of high inflation are often the result of imbalance monetary policy.

For many years, central banks have kept interest rates near to zero which boosted productive borrowings from companies to grow and expand its offerings. This resulted in an overall increase in job creations and demand to purchase, which pushed many stock prices to its record high.

Unfortunately, the Federal Reserve has not acted fast enough to restore the interest rates when economy is recovering and many of these fueled money has gone into investment and speculative assets rather than concessionary spending, leading to inflation expectation over time.

Businesses have for many years enjoyed low costs of borrowings and a sudden increase in the interest rates will send mixed signal to the economy as companies have to cope with higher cost of borrowings. Risk premium expectation will also increase which will lead to a lower valuation of its business.

Inflation. Inflation..Inflation

Michael Burry - who famously shot to fame by betting against mortgage securities leading up to the Great Financial Crisis and was depicted in a movie called "The Big Short" (I would strongly recommend you to watch it if you haven't watched the movie) revealed his positions in a funds he held through Scion Asset Management in the recent 13F quarterly filing.

On the 21st Feb 2021, he shot a warning to the rest of the market in his tweet - a prediction he has similarly taken in the past leading up to the Great Financial Crisis which he calls it as "no one listened".

He tweeted:

"People say I didn't warn last time. I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned."

Source: Twitter

Further, he has also compared the upcoming US inflation to the hyperinflation that happened in Germany during the 1920s and what the consequences that the country should be prepared to pay for. In his most recent tweet, he also called the market the greatest speculative bubble of all time is forming at the moment.

In the recent 13F Filing (ended March 2021), he shared his open positions and direct inflation strategy that includes some of his positions profiting from the rise in inflation expectation:

Source: Scion's 13F Filing

The most prominent one is his positions on the Put options Ishares 20+ Year Treasury Bond ETF (TLT) - which represents 12.7% of portfolio holdings and also one of his largest current stake (other than the short position on Tesla).

This particular ETF tracks the investment results of the ICE U.S. Treasury 20+ Year Bond Index (the "underlying index") and performance of the U.S Treasury that have a remaining maturity of greater than twenty years.

A rising inflation over time will force the hands of the Federal Reserve to increase interest rates earlier than expected which would lead to a decline in the value of these bonds. Longer maturity term bonds would be more sensitive to changes in the interest rates which would likely give way to more volatility in the price action of these bonds.

Source: 3Fs Working Compilation

Burry has used options in majority of his positions in order to magnify the return of his investment, but has also taken more risks should the thesis gone the other way against him.

Other than TLT, he has also taken a couple of positions in the call option ProShares UltraShort 20+ Year Treasury (TBT) and ProShares UltraPro 20+ Year Treasury (TTT) which is an inverse of the bond ETF so he is betting that these ETF will go up. He uses call option further in order to magnify his positions even more to signal his conviction.

P.S: TBT UltraShort goes up 2x when bond index goes down and TTT UltraPro goes up 3x when bond index goes down.

Most of his positions should be largely profitable by now and while inflation fears have tapered a little in recent weeks depicted by a drop in treasury yields, Burry should still be sitting quite comfortably in the black.

If you are interested to take a position in TLT, you can take advantage of the offer from Phillip MetaTrader5 and open a direct short position. This will put you in a similar position with the put option which Michael Burry undertakes.

Do note that there are no limitations on how much users should trade and users are allowed to trade as small as 1 ETF CFD on the platform. There is also no minimum fee incurred on the user and commission trading is zero.

Source: Phillip MetaTrader5 (iShares Barc 20+ Yr Treasury ETF)

Alternative Investment: Energy Select Sector SPDR ETF (XLE)

An alternative investment that will be a good hedge against inflation is an exposure to Energy stocks.

XLE is an ETF made up of the 23 largest Energy companies in the S&P 500 - valued today at around $26 billion of assets under management. It comprises of some of the largest name companies such as Exxon Mobil (XOM), Chevron (CVX) and ConocoPhillips (COP).

Energy is one of the commodities that correlates strongly to inflation movement. In the past 5 years, you can see that whenever there is a hint of inflation spikes, energy commodities values also went up subsequently.

The underlying reason for this is because oil price setting is a balance between demand and supply and with inflation trending up, the likelihood of oil following suit is very probable. These companies included in the ETF would then be direct beneficiaries of rising oil prices.

Source: U.S Labor of Statistics

A quick benchmark of the mentioned ETF against S&P shows that it came out a clear winner this year, returning over 47% as compared to S&P which only returned 13%. Forward valuation for the ETF is also modest at around 20.8x and is still below pre-Covid days.

Source: 3Fs Working Compilation

Source: Phillip MetaTrader5 (Energy Select Sector SPDR ETF)

Conclusion

The takeaway here is that fast and rising inflation can hit the fan really hard when and should it comes and there will hardly be any place to run and take cover for it.

In the past few weeks, prominent figures such as Michael Burry, Warren Buffett, Ray Dalio and Bill Ackman have all warned about an unprecedented rise in inflation this year which the Fed continued to brush away, giving the market assurance that these inflation increases are likely to be temporary in nature and will stabilize soon.

But if there is anything, the recent data in the past couple of months tells us otherwise and it is better to be safe than sorry.

Do take note that the two abovementioned ETF CFDs only require 20% of the margin requirement which grants your capital a greater efficiency. For instance, if you decide to purchase 100 shares of the Energy Select Sector SPDR ETF, you would usually require a capital of 100 x $55 = $5,500. In this platform, you would only require 20% of the $5,500 = $1,100 to purchase that same 100 shares.

Do check out the full comprehensive list of all the available ETF CFDs in this link here.

If you are interested in downloading the free Demo account, click the link here to get started.

If it something that you like, you may register your interest and account by scanning the below QR code with your phone which will direct you straight to the registration page for the next step.

Disclaimer: This post is written in collaboration with Phillip Futures. However, all opinions stated are that of my own.

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HUYA Inc. - Post-Merger + Transformation in Business Model + Undemanding Valuation

2021-06-15T01:46:00.007-07:00

In my last portfolio update, I revealed a position in HUYA Inc. (NYSE: HUYA) which I recently undertook. I had a long position in the company at a purchase price of USD 14.88.

I was a little skeptical at first given the uncertainty of the Chinese strict regulation and a lot of the Chinese companies have been impacted negatively in the past few months. However, upon further deep dive into the company and its prospectus, I decided to put faith in my decision.

Based on the price action alone in the past 5 years, this does not look anywhere near justice. In fact, it looks like a company in trouble. Basically, it is a very predictable movement in the price action where the share price visited near the low of $15 in each of the year in 2018, 2019, 2020 and 2021 and then bounced back up strongly thereafter.

While growth rate is visibly slowing down in some of the key operational metrics in the past few quarters due to a saturated market where DOUYU and BILIBILI are competing with them, I believe there will be a transitional change in the business monetization model once post-merger with DOUYU is approved and done with.

Together with an undemanding valuation which I have explained more in detail below, this makes it a calculated buy at this point.

But first, let's take a look at the business model of this company.

Source: Yahoo Finance

Business Model

HUYA INC. is a one of the leading game live streaming platform in China with a large and active game live streaming community.

The company was initially established in 2014 as a game live streaming business unit of YY INC.

HUYA cooperates with e-sports event organizers as well as major game developers and publishers, and has developed e-sports live streaming as one of the most popular content genres on its platform.

Popularly known as the "Twitch of China", HUYA is the first Chinese company to expand into the West with its first ground breaking deal with Team Liquid (one of the most valuable e-sports team around the world).

Emergence and Popularity of E-Sports

The emergence and popularity of e-sports tournament worldwide is on the rise.

In the West, e-sports tournament has consistently attracted more than 100m viewers in the past 3 years and this number is growing rapidly across the years.

In Asia, e-sports was featured as a medal event in the 2019 SEA Games in Manilla while there are discussion about including e-sports tournament as a demonstration sport in the upcoming 2024 Paris Summer Games.

Source: DBS

These development built the foundation for the industry needed to succeed in today's world.

We see massive number of organizers holding gaming competitions where the top prizes can amount to million of dollars. In fact, the prize money for 2019 DOTA 2 International competition held in Shanghai amounted to a total of USD34 million.

According to a report by NewZoo, the industry is expected to grow at an exponential of 25% over the next 3 years. This bodes well for a relatively young industry which is gaining momentum.

Source: NewZoo

HUYA's Huge Opportunities Lies in its Transformation of its Business Model

When someone look at HUYA earnings result, they quickly point out that the growth has been stalling and slowing in the past few quarters.

If we look at some of the data from the earlier years, they've managed well to sustain the growth in the Monthly Active Users (MAU), Mobile MAU and Paying Users (PUs) - building an ecosystem around the platform to keep them engaged.

The current business model of monetizing the platform today is tricky as HUYA generates the majority of 95% of their revenue from the sales of its virtual gifts on its live streaming platform while only 5% of the revenue comes in from digital advertising.

This means paying users, also known as "fans" come in to stream and watch their favorite gamers perform and then purchase and send gifts to them. As a streaming platform, HUYA gets a cut of that gift fees.

You can see that the room to maneuver this is very low as conversion tends to gyrate within the 3-4% rate.

This means that for every 100 active users you bring in to the platform, only 3-4 people are contributing to its topline. The rest of the 97 are what I call as active but non-contributing to the company's revenue. In other words, opportunities are "wasted".

Source: 3Fs Working Compilation

Our generation today consume a large part of information from the internet today.

The ability to create an eco-system inside and within its large monthly active customers mean that there is clearly huge opportunities within the monetization model that they have yet to tap into.

While this currently contributes only 5% of the company's topline revenue, they will be able to quickly scale up their growth topline should they change their business model to incorporate more advertising, subscription and broadcasting - which I am sure is already in the pipeline now that Tencent is the controlling shareholders post-merger.

HUYA needs to monetize the model better to utilize all these available and engaged MAUs

Lesson to learn from Twitch

Twitch was a company that was bought by Amazon back in 2014 for $970m at a valuation of 70x Price to Sales. Clearly, Amazon sees an opportunity back in the days that no one saw and has clearly made that investment paid off in the long run.

The company main revenue stream comes in three main channels - Advertising, Subscriptions and Broadcasting.

According to a source from SuperData, Twitch's revenue surpassed Youtube's gaming revenue from 2018 onwards, racking up over 20% from the overall gaming streaming channel.

The biggest income stream comes from advertising, which they managed to chalk up over $400m in 2020, followed by subscription and broadcasting. In the space of subscription, subscribers can sign up to Twitch Prime for $7.99/month for which they are also entitled to streaming content from Amazon Prime video (a good thing that post-merger HUYA-DOUYU Controlling shareholder is the mighty Tencent Holdings).

Today, the company is estimated to be worth more than $20billion in market cap, which is almost a 20x investment return for Amazon within the space of 7 years.

Merger with DouYu

For a long time, the competition within the streaming and gaming space has been dominated by big players such as HUYA and DOUYU. The planned merger of HUYA and DOUYU will create one large dominant player in the industry.

This means that once the two companies merge, a gigantic one combined platform with a market value of over US$7 billion will be created and it captures more than 80% of the entire market share within China.

The merger may provide many economies of scale within the space of sharing one common platform and operational efficiencies without having to think about wastage and challenges that they have previously faced against one another.

Like HUYA, DOUYU's unit economic growth is visibly slowing down as well, as evident from the lower increase in the monthly active user and paying users conversion.

Post-merger, should it be approved, will see DOUYU gets delisted from the US market while HUYA will remain as an enlarged entity.

HUYA is offering 0.73 American Depository Shares (ADS) for each DOUYU ADS

Source: CaixinGlobal

Financials: Cheap Valuation

HUYA is today valued at a market cap of around US$3.5b while DOUYU is valued at around US$2.9b - I think it's incredibly cheap at how the market is valuing them at the moment.

A quick look at the balance sheet across the past 5 years and you can see that the net assets of the company have been growing larger and healthier. This gives us the assurance that at least the company is moving into the right direction.

As at 31 March 2021, the company has more than RMB 9.7b in cash equivalent (sum of Cash and cash equivalent, Restricted Cash and Short-term deposits) and no debt borrowings. Most of the liabilities are related to the accrued and deferred revenues.

If we take the total of the cash equivalent of RMB 9.7b (~USD 1,481m) divided by the 236.2m number of shares outstanding, we get around USD 6.2 / share.

This means that at the current market cap of around $3.5b, close to 40% of current market cap belongs to cash value in their books. If we further add the investments portion, this will add another 10% of the current market cap to 50% overall.

Source: Balance Sheet FY2016-2020

Source: Earnings Result Q1 FY2021

Furthermore, the company has garnered US$1.67b in total revenues for FY2020, which puts the current valuation at Price/Sales of only 2x (Current Market Cap / Total Annual Revenue).

If we exclude the abovementioned existing cash and investment, this will put the company's valuation at only Price/Sales 1x (ex-cash and investment). This is incredible cheap even for a company that's not growing, let alone one that is in the industry leader like HUYA.

To give a perspective of reminder, Amazon bought Twitch back in 2014 at a value of $970m at around Price/Sales of 70x and today Twitch is estimated to be worth $20b. While we don't expect the combined entity of HUYA and DOUYU to get anywhere near Twitch for the near term, I think there's still room for upside.

Final Thoughts

I've put some money in my position for HUYA because I thought there are greater risk reward for the company at the moment which might paid-off.

Clearly, a lot of things can go wrong from here, for example the merger is not approved which might provide a setback to the company going forward.

Currently, HUYA short volume ratio is a high 32% and I believe there are many who are suppressing the company's actual worth because of many of such uncertainty.

With the post-merger play ongoing and a transformation in the business model, as well as an undemanding valuation, a 100% upside target to $32 is not unlikely in the next 12 months. This puts the company at a market cap of around $7b or a price to sales (TTM) multiple of 4x, which is still very much reasonable for such a company.

As always, do your own due diligence and let me know what you think in the comments below.

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Jun 2021 - Portfolio & Transaction Updates

2021-06-09T23:13:00.002-07:00

No.	Counters	No. of Shares	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %	Category
1.	Alibaba	300	US$213	84,350.00	23.0%	Growth
2.	Lendlease Reit	85,000	S$0.79	67,150.00	17.0%	Dividend
3.	JD	300	US$72.7	29,000.00	8.0%	Growth
4.	Ping An	2000	HK$81.3	28,400.00	8.0%	Matured
5.	Huya	1,000	US$16.2	21,380.00	6.0%	Growth
6.	AMD	100	US$80	10,500.00	3.0%	Growth
7.	ISHARESHSTECH	1,200	HK$16.70	3,500.00	1.0%	Growth
8.	Ho Bee Land	300	S$2.40	720.00	1.0%	Leftover
9.	Options / Cash	-	-	135,500.00	35.0%	Options Premium

Total				380,500.00	100%	100%

I am going to do an earlier update for the June portfolio this month as I will be busier in the later parts of the month.

We have seen a good rebound in the overall market in the early part of June after a rather turbulence month of May where we saw a couple of overbought companies falling from its peak.

Some of the companies in my portfolio also rebounded with the overall market while there are still a lot of laggards play inside the portfolio which might need some good amount of patience.

The jobs report for the month of Jun (one of the three critical reports that always spooked the market) looks decent enough, sparking an overall optimism surrounding the faster rebound of the economy.

Over in Asia, many countries are still grappling across lockdown and re-infection numbers so we are unlikely to rebound as fast yet as compared to some of these Western countries.

Portfolio Updates

My first update of the portfolio was for the divestment of my previously largest position in Manulife REIT as I saw opportunities elsewhere where I wanted to deploy the funds to. While the company was managed in superb condition, I was also somewhat cautious of the impending inflation rise which might result in the earlier hike of the interest rates which might dampen plays like Manulife REIT, which has borrowings done in the US (although they are unlikely to be impacted much as they have just refinanced not long ago).

Using this opportunity, I also doubled my position in Ping An at around HK$80+. The upcoming interest rate hike as well as inflation should bode well for the insurance company and with China recently announcing and allowing the 3-child policy, it looks like there is a good amount of organic TAM over the mid to longer term.

I have also added a new position in Huya, one of the biggest gaming stream company in China. Their share price has been wrecked since they hit a peak of around $34 just a few months ago. At the current valuation and market cap, I reckon it's worth a shot at this company. I'll do a more thorough writing in the next article on Huya articulating my thoughts and reasoning behind this move.

I am starting to sort of accumulate back positions in cash - keeping quite a lot of powder dry in the form of cash and short term options which allow me to move swiftly against the tide of the market. At the moment, not much compelling plays yet apart from what I think I already have to ride in this market but otherwise the majority of the play are still on waiting.

P.S: I don't publish my options position publicly here but occasionally share insights in my social media sites (Facebook and Instagram) so if you are interested, do follow them here.

Networth Updates

I am happy enough to see the portfolio rebounding from the drop in the previous month to end this month higher at $380,500.

There's no surprise to this really, it's just growing at a very slow pace at the moment but I am happy to see it trending in the right direction and there's still a good 6 months away to see where I'd end up till the end of the year.

My target at the start of this year was to hit $350k by the end of the year and it looks like so far it has been a pretty good progress overall. I am pushing this target up now to $400k by the end of the year.

Another 3 more days to go before we finally see the end of the heightened alert in phase 2. Hopefully, the case keeps going down and we can finally have some breathe air outside.

Continue to stay safe and well.

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Can Gold Future-Proof Your Investment Portfolio?

2021-06-07T18:06:00.001-07:00

Since its discovery, gold has been used for ages as an efficient means to preserve wealth. However, in recent years, it has been sought after by most investors for several reasons. One major argument is that its desirability in the market doesn’t decline.

It’s because unlike other speculative financial investments, whose worth has gradually decreased over time, this precious metal still holds its high value. In fact, the cost of gold has continually increased over the years. Among other factors, its scarcity and ever-increasing demand are some of the reasons its prices keep going up.

Additionally, gold has lesser losses when the market is unstable. Also, economic or political changes have lesser correlation on its price. Therefore, most individuals consider it a haven for their capital, especially in times of turmoil. Overall, this makes this valuable metal a good and stable long-term investment option that could help protect your portfolio.

Are There Challenges To Owning Gold?

In the past, gold was mainly held as a physical possession. Some people still consider this. However, there are several challenges involved in owning this metal tangibly.

A major risk, especially for novice buyers who don’t know how to identify genuineness, is the danger of being sold a substandard product. Also, there’s the possibility of theft or misplacing your precious metal. Proper storage is, therefore, a significant consideration. Some people buy safes or store their gold in banks. But as security may not be fully guaranteed by these two, some individuals would consider insurance covers.

For some people, it may be too risky to possess physical gold. Also, the cost of secure storage systems and insurance premiums may be a bit high. Therefore, they prefer other ways to invest in this asset besides having it as a tangible commodity. Other options available are gold certificates, exchange-traded funds, and mining companies’ stocks. You can buy these alternatives or the metal itself from banks or dealers like Gainesville Coins and other precious metal dealers. However, ensure you first verify the credibility of the supplier before purchase.

For those who are residing in Singapore, you may check out their office located at 1 Harbourfront Place Singapore 098633.

Is Gold A Good Long-Term Investment?

Regardless of the investment method you pick, adding this precious metal to your collection of financial assets could be quite beneficial. Here are some reasons why it may deserve a place in your portfolio:

1.) It’s A Good Portfolio Diversifier

Adding gold to your collection of investments may be advisable since it offers some sense of comfortability. This is because it’s inversely related to the United States dollar and the stock market. This means when stocks and the value of the dollar fall, gold prices go up. Hence, having this metal could guarantee protection against future market conditions that may be unfavorable.

Usually, it’s recommendable to diversify your assets in a way that offers your portfolio a reward and risk balance. Therefore, adding gold to it may be an excellent consideration.

2.) It Holds Its Value Over Time

Unlike money and other assets, gold either maintains its current value or appreciates over time. Thus, it could be an excellent investment for your future and could also be a better asset to pass on to other generations.

3.) It’s A Hedge Against Inflation

Some individuals prefer gold to other investment options like stocks, fiat currencies, or savings because this precious metal isn’t affected by inflation. Usually, inflation makes the cost of commodities go up, reducing the purchasing power of the dollar. Despite this, gold prices increase in such times. Therefore, you could consider adding it to your portfolio because it’s a hedge against inflation, which could help secure your hard-earned money.

4.) It’s Scarce And Has High Demand

The demand for gold is ever increasing. As people continue to realize its benefits, more individuals want to own it. However, besides being utilized as a financial investment option, it’s also used in several other manufacturing industries.

The jewelry sector has been one of the largest markets for this precious metal over the years. This commodity is also used in making electronics, medical devices, awards, and many other products.

That being so, gold is a natural resource with a limited supply. Furthermore, today, most mining fields have been closed down, and new locations with large deposits are rarely discovered. Therefore, unlike other assets, this metal may have more potential to guarantee you good profits in the coming years.

Conclusion

As you seek to diversify your investment portfolio, gold could be a good addition. For several years, it has been recognized as an asset that maintains or increases value over time. Also, unlike other financial instruments, its prices aren’t affected by geopolitical or economic changes. Therefore, these aspects make the metal an excellent long-term investment option to safeguard one’s portfolio against unfavorable market conditions.

Some of the factors that may guarantee a promising future with gold are its ever-increasing demand and low supply. Additionally, this precious metal is considered a hedge against inflation and could help balance the risks and rewards in an investment portfolio.

Disclaimer: This is a sponsored collaboration post article with Gainesville Coins. Please do your own due diligence before investing in any assets.

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Intel: Every Cloud Has A Silver Lining For Investors

2021-06-05T01:12:00.001-07:00

In my previous article, I wrote a piece on AMD which looks like for the most part largely dominant in the competition of chips design in the CPUs space against Intel and GPUs against Nvidia.

One thing about investing in a growth company that you have to be comfortable at as an investor is the market will be pricing in premium expanded valuation to the company and at some point the growth will taper and that expanded valuation will have to come down quickly. Bluntly said, the market is pricing in a perfection and any risk that might deter the projected growth progress would send the company's share price quickly downwards.

In this article, I'll transform myself and take the opposite view and see Intel as a company from the angle of a contrarian value investor and see what's left of value for Intel.

Source: Intel Infographics

What are Intel's biggest problems?

I think I covered this pretty thoroughly in my previous article on AMD but for those who'd like a summary - basically Intel's biggest problem lies in its delayed development in its modern generation of chips which allowed companies like AMD to gain ground in the CPU market quickly.

While Intel's 10NM CPUs are comparable to AMD's 7NM CPUs, the nodes are measured differently and the latter offer similar performance with a much cheaper price. Intel is trying to catch up quickly by investing huge amount of capex into its foundry, hoping that they could close the gap with AMD in terms of its own 7NM chips but even at the earliest it will not be until 2023.

Meanwhile, latest news that came out in the last few days that AMD has proceeded and signed a 2 year contract with TSMC to manufacture its 3NM and 5NM chips for the next two years leading up to 2024.

In March 2021 earlier this year, Intel CEO - Pat Gelsinger announced the company's new vision for "IDM 2.0", a major evolution of the Integrated Device Manufacturing (IDM) model. This includes spending an approximately $20 billion investment to build two new factories in Arizona and aims to become a major provider of foundry capacity in the US and Europe.

While having its own foundry has its own benefits in terms of being able to control its own supply, it also means that they will have to spend huge amount of upfront capex to build these factories and manufacturing capabilities and this can erode the company's margin while having to compete with the other foundries globally across the globe.

Where Does Intel's Value Lies At?

So we already know (the market knows too) that Intel is facing all sorts of problem where it has to compete with the other foundries in terms of margins and manpower capabilities and AMD is also eating its bread and butter in the CPU and Data Center space.

Because of this, the market has priced in lots of negativity in the company's valuation and today it is only trading at a PER of 12.4x, which is below the long term average of around 15x. In comparison, AMD is trading at a valuation of 34.5x (triple of Intel) and TSMC is trading at a valuation of 32.7x (almost triple of Intel).

In terms of FCF yield, Intel is still generating plenty of free cash flow with a yield of around 8.5% before they have to start spending on its growth capex on building the foundry to start manufacturing chips on its own.

As an investor, it might be worthwhile to look at Intel as a company from a bottom-up where you calculate your potential internal rate of return from your investment and the worst case scenario where most of the thesis surrounding the semi-conductor play doesn't go according to plan.

First, Intel is currently trading at an earnings yield of 8.1% and FCF yield of 8.5% and it also pays a dividend of around $1.39/share which translates into a 2.42% yield for the investor. The company has also guided for a $10.5 billion FCF for the full year ended 2021.

In comparison, AMD is trading at an earnings yield of 2.9% and FCF yield of 1.8%. AMD also does not pay dividends to investor.

Second, and this is probably big and will be quite significant to movement on its earnings, is the announcement of the $10 billion accelerated buyback program which it announced late last year. While CEO Pat has played down some of the buybacks in recent weeks since the announcement of the $20b capex investment in building its own foundry, it is a program which has been approved by the Board and can be done given that Intel has generated so much FCF in recent years.

In other words, assuming Intel divide this buyback equally across 4 years, the company would spend a sum of $2.5b each year which will be approximately 10% of the FCF they are generating.

Third, the entire global IoT industry is screaming an increasing demand of chips while there is a huge lag of supply in today's context which gives an opportunity to companies like Intel to catch up and continue to grow, despite losing market share to AMD.

What this means is that while AMD can continue to grow at 40-50%, Intel is likely to see a modest growth of between 5-10% over the next few years which is very decent for a company with their enticing valuation as compared to their peers.

Combining all the three metrics together - with dividends of around 2.4%, EPS growth of 3% through buyback and organic growth of around 5-10% would mean that it will still make a decent investment for an investor.

Let me explain here what I mean by that.

Putting it into Numbers

Intel has traditionally spend a maintenance and growth capex of between $13-$14b, which resulted in the FCF in the past two years of around $20b. The company has guided for a $20b investment for its own foundry in 2021 which means FCF is likely to half to around $10.5 billion which the company has already guided in its Q1 earnings call. This is an anomaly one-off spent which is likely to resume to normal from 2022 onwards. I have projected for a conservative 5-8% growth thereafter.

The company spent $2.6 billion in share buyback program last year and if we divide this number by the number of shares outstanding, it will add around $0.63 to the organic earnings per share.

In other words, just by doing buyback, Intel can actually "grow" its earnings per share by around 10% each year. Assuming the exit PE multiple remains equal, this means it is a 10% internal rate of return to an investor.

On top of this, investors get to enjoy a 2.4% dividend each year which should also be taken into consideration.

Last but not least, assuming the company still continue to grow at between 5-8% per year due to the overall sector boom, the company's intrinsic value will be at around $63, which if we take across a 3 year CAGR, it is around 3.5% return per year.

If we add up the entire thing, an investor could well end up with a "10% + 2.4% + 3.5% return" each year from investing in Intel. Whether that is good enough it is subjective for each individual.

Source: 3F Working Compilation

Final Thoughts

I know there are likely many investors who are writing off Intel as an investment as compared to the other popular choices such as AMD and TSMC but I think it might be worthwhile to consider them from a bottom-up value investor point of view.

The risk about investment is having to pay high enough for a company that has its valuation expanded and the last thing we want to see is that thesis failing to play out and price action go down rather quickly.

For Intel, I think there are plenty of bad news that have been taken into account and you may be interested to look at it as a reversion to mean play.

Personally, I have enough exposure in this sector in my portfolio so I will not be adding Intel at this price range, although I would be interested should they go back to test around $44-$45 - a support line which have been tested 5 times in the last 4 years.

Source: Tiger Brokers

Source: Shareinvestor Web Pro (Peer Comparison)

Intel (Nasdaq: INTC) is a company that is available for trade in Tiger Brokers, CFD Phillip MT5, LT ATP Program. You can find further information on Intel at Shareinvestor and Fundamental Scorecard (use the code "brian5" upon checkout)

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AMD: Why I Think You Should Ride On This Semi-Conductor Company

2021-06-03T04:56:00.002-07:00

Advanced Micro Devices (Nasdaq: AMD) is one of the semi-conductor companies which saw a strong surge run in 2020, gaining close to 100% return in that year alone.

In fact, if we take a look at the semi-conductor company closer, we can see that the secular growth has started its run from as early as in 2018, where the company gains 79.6% and then a further 148.1% in 2019. The unprecedented Covid-19 situation we have right now accelerates the demand we have towards particular sectors such as gaming and Internet of Things (IOT) - which begs for faster and more efficient chips processor to accommodate for these things.

Source: 3F compilation from Yahoo Finance

Business Model

Let's first take a look at what is the business model that makes this a strong company.

The company earns revenue mainly from selling high-performance CPUs and GPUs used in gaming processors, content creators, professionals, gaming consoles such as PS5 and Xbox and data centers.

While the company once used to manufacture its own chips, the company no longer owns its own foundry and chooses to design its own chips and outsource its manufacture of the chips mainly to TSMC (Taiwan Semi-Conductor Company), the largest semi-conductor foundry in the world.

This works well to their advantage as the business model is much less capital intensive and they can focus on the research design and deliveries to their customers. For example, their NM processors are more advanced and efficient than Intel's top end processors and this results in increased demand and pricing power. Because of this, you can see that their profit margins and free cash flow generation has improved considerably over time.

Below is a snapshot of their most recent Q1 2021 results which shows a much improved operating margin and free cash flow generating capability.

Source: AMD's Q1 2021 Results Presentation

AMD's Radeon RX 6000 Series graphics cards, featuring the breakthrough AMD RDNA 2 architecture is engineered for ultra high performance and resolution - one that competes very closely with NVIDIA's top end GeForce RTX 3000 series.

In fact, if you compare the competitiveness of the two processors in terms of both performance and pricing, they are neck to neck with one another. Browsing through various forums, it appears that Nvidia's slight advantage is mainly in the deep learning super sampling (DLSS), which refers to an anti-aliasing method that smooths the jagged edges that show up on the rendered graphics. This allows them to train A.I models with high-resolution scans.

The gamers can probably attest better to this than me.

Source: esportstalk.com

Source: techedged.com (Memory Configuration)

Source: techedged.com (Price competitiveness)

AMD's high performance desktop and laptop processors for gaming requirement

Financial Performance

In the recent Q1 2021 results, AMD's revenue grew by as much as 93% while operating income grew by 274% due to the higher margin. Earnings per share (EPS) grew to $0.45 per quarter, which if we annualized them at nil growth, we will get a full year EPS of $1.80.

This translates into a forward annualized PER of about 44x (you can expect this number to go down if they continue to grow their numbers which most likely is the case).

Source: AMD's Q1 2021 Results Presentation

If we break it down into segments, you can see that the core growth is still coming in from the CPUs and GPUs, growing at 46% year on year basis and up 7% quarter on quarter. This is due to the higher demand from higher end processors used in gaming, laptops as working from home becomes the norm during the Covid-19 lockdown.

One thing which is talked less often but brought up during the recent earnings call is the demand for powerful processors used as a requirement for mining cryptocurrency which requires very powerful and energy efficient gaming processors, which are often stronger than the normal CPUs.

Source: AMD's Q1 2021 Results Presentation

In the earnings transcript of the recent Q1 2021 call, CEO Dr Lisa Su said this about the company's prospect:

" Against the backdrop of strong overall PC demand, our revenue is growing significantly faster than the market, particularly in the ultrathin, gaming and commercial segments. As a result, we believe that we gained client processor revenue share in the quarter. Our revenue share has doubled over the last two years as we have expanded in the premium products. In notebooks, we delivered our sixth straight quarter of record mobile processor revenue based on sustained demand for Ryzen 4000 series processors and the launch of our new Ryzen 5000 series processors.

Ryzen Mobile 5000 series processors revenue has ramped twice as fast as the prior generation. We expect continued growth in 2021 as the number of notebook platforms powered by our new processors is on track to increase by 50% compared to our prior generation.

In graphics, we introduced our Radeon 6700 XT desktop GPU with leadership 1440p gaming performance in March this year and are on track for the first notebooks featuring our leading-edge mobile RDNA 2 architecture to launch later this quarter. We expect Radeon 6000 Series GPU sales to grow significantly over the coming quarters as we ramp up production."

Catalysts & Roadmap Ahead

If we take a look at the roadmap ahead for AMD, you can see that they are blasting gun ahead in all areas of CPUs, GPUs as well as Data Center - which will be key today as they are still predominantly dominated by Intel.

AMD's next generation of 5NM chips which will be launched in 2022 is at least one generation away from Intel's current plan ahead of the 7NM which management mentioned will be for the next 5 years .

AMD CPU Roadmap

AMD GPU Roadmap

AMD Data Center Roadmap

If we take a look at the graph across all CPUs comparison, you can see that there is still plenty of room for AMD to take away Intel's market share in terms of CPU and the shorter it takes for Intel to dominate. My guess is with Intel focusing on its own foundry now, they are looking to at least retain their market share through improving margins and more predictability of the supply.

In terms of the desktop market share, AMD's has leapfrogged Intel's dominance by taking it over in late 2020 and the gap looks set to be widened over the next few quarters.

Next-gen popular game consoles such as Playstation 5 and Xbox are also very lacking in supply despite the launch in November last year. These consoles are using the semi-custom as well as EPYC processor sales which is now in scarcity due to the chips supply shortage scenario.

In its latest earnings call, Dr. Lisa Su said that she expect semi-custom sales growth to remain strong in 2021 and 2022 and EPYC processor sales to double by the end of the year as Microsoft, Azure, Amazon, Google, IBM, Oracle, and Tencent significantly expand their offerings with third-gen EPYC processors.

Perhaps, the most exciting of the lot is the competition with Intel over Data Center processors where currently its 3rd Gen "Milan" processor is stronger than Intel's top end processor due to the superior memory performance through huge caches and superior per-thread performance with specialized dedicated SKUs.

AMD's 4th Gen "Genoa" 5NM processor is only going to take that market share even much bigger and it will be interesting to see the graph moves exponentially over the next few years.

Below are some of the cloud and enterprise customers that are already using AMD's processors for server. These include big brand names such as AWS, Alibaba Cloud, Google Cloud, Microsoft Azure, Oracle.

Risks

While the growth in a large TAM is obvious, there are some risks to the company that we have to watch out for.

One of them in particular is the increasing competition from Intel and Nvidia in the CPU market and GPU market (mainly Nvidia).

Already earlier, I mentioned about the competition between the AMD's Radeon RX 6000 graphics card which comes neck to neck with Nvidia's GeForce RTX 3000 series. With Nvidia set to release its GeForce RTX 4000 series sometime in 2022, it looks like the competition between AMD and Nvidia will be very hot.

In the CPU competition front, Intel has also announced that it will spend up to $20b capex on building its own foundry in order to manufacture their own chips. This will result in more predictability of supply and can cater better to production, which is likely result in higher margins.

From the product front, Intel is also planning to release its 12th Gen Alder Lake chip which looks to give AMD's Ryzen 5000 series processors a good run for money.

The second risk for the semi-conductor company is coming from a global chip shortage scenario.

AMD is currently dependent on TSMC to manufacture its 7NM chips and a global shortage of this will make it liable to short of supply to meet the rising demand of the customers.

Having said that, this shortage is not just a risk to the semi-conductor companies but pretty much every connected industries such as automotive, gaming, mobile, and Internet of Things.

The third risk is there may be a reliant on ARM based processors for CPUs which companies like Apple and Samsung has now decided to design on its own. For example, in late 2020, Apple announced that it will design its own chips for its new laptops and desktops using the 5NM and are going away with processors from Intel. This will eventually take market share away from both Intel and AMD and may provide a risk of entrance from new players.

Valuation

We will evaluate AMD's valuation based on its discounted cashflow using both the cashflow and exit multiple.

AMD's current debt value on the books is at $330m, so we'll deduct this off from our terminal cashflow calculation in deriving at our intrinsic value for conservative purpose. We have not taken in the cash balance on the books worth $1.76b.

2020Actual cashflow number also contains the last 12 months trailing from Q2 2020 to Q1 2021 (latest result).

Source: Actual working from 3Fs compilation

Worst Case Scenario

For our worst case scenario, we assume a terminal growth rate of 30%, which we've pegged the same level to the capex to arrive at the underlying unlevered free cash flow.

The terminal value is then substracted by the net debt of $330m for conservativeness before we discount it to the net present value of today's price.

WACC sensitivity rate used throughout is leveled across from 8-10% for reference, but a middle of 9% is likely more sensible.

Different cashflow multiple of 15x, 20x and 25x is tabled consistently across the three scenarios in order to arrive at the same conclusion throughout.

Based on the 30% growth rate, WACC of 9% and a cashflow multiple of 20x, we arrive at the intrinsic value of $80.42, which is slightly than the current market value of around $82.

Do note that this is on a conservative run-rate, given on Q1 2021 alone FCF has grown by over 108.2% year on year and 73.3% even on a quarter on quarter basis.

Source: Actual working from 3Fs compilation

Base Case Scenario

For our base case scenario, we assume a scenario of 40% growth rate throughout which is likely more probable the case.

This growth rate makes sense given that we are currently still in the midst of a secular growth and chip shortage and is likely to dominate the industry over the next few years. Also, there is plenty of room for AMD to steal more market share from Intel, especially with regards to the data center.

The same WACC and cashflow multiple sensitivity are used throughout to arrive at the same conclusion thereabout.

Based on the 40% growth rate, WACC of 9% and a cashflow multiple of 20x, we arrive at the intrinsic value of $114.63, which is about 39% upside from today current price.

Source: Actual working from 3Fs compilation

Best Case Scenario

The best case scenario assumes a strong growth of 50% over the next 3 years and then subsequently taper off to 40% and then 30% the following year.

I think that even at this scenario, there is a good likelihood it may play out given the product roadmap on the GPU that AMD will launch its new NDNA3 or "RX3" to compete with Nvidia's upcoming launch of the RTX 4000 series which will also likely launch in 2022.

From a data center CPU roadmap, the 5NM "Genoa" is likely going to see the biggest steal of the revenue market share from Intel.

The same WACC and cashflow multiple sensitivity are used throughout to arrive at the same conclusion thereabout.

Based on the abovementioned growth of 50% for the next three years, 40% and then 30% the following year, WACC of 9% and a cashflow multiple of 20x, we arrive at the intrinsic value of $131.43, which is about 59% upside from today current price.

Source: Actual working from 3Fs compilation

Blended Average:

Next, we assign a probability of likelihood to all the three scenario - with 10% attributed to the worst case scenario, 50% attributed to the base case scenario and 40% attributed to the best case scenario.

The resulted blended intrinsic value came up to 10% x $80.42 + 50% x $114.63 + 40% x $131.43 = $117.9.

Technical Analysis:

From a chart perspective, the previous support of around $76-$77 doesn't break so we should expect this to hold over the next few terms. It hasn't had as much volume yet in terms of buying as Nvidia since it announces its plan for a stock split.

7-days momentum is strong and is align with the overall market sentiment in the past recent days.

If I were looking to enter, I'd probably prefer for it to test and retrace back to the MA20 and MA50 support before entering.

MetaTrader5

AMD is a company that is both available for trade in the recent CFD Phillip MT5 and Lim & Tan ATP Program. Do check them out if you are keen.

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Lim & Tan Intra-Day Active Trader Program (ATP) - Trading With No Pre-Funding Required

2021-05-28T01:05:00.003-07:00

As a trader, we often hear market professionals emphasize the importance of "discipline" to indicate trading strategies that helps to minimize heuristic factors such as behavioral influences and emotional decisions.

While these are lesson 101 that is easy in theory, it is something which is difficult to implement in practice.

We tend to often engage in irrational behavior when we are put to a test that is challenging. Most traders tend to deviate from their strategies they have put in place and hold on to losses significantly longer than positions that are in the black. The psychological factor of just waiting for another day or two before it bounces back up always come to haunt them back when everything else has ended.

Understanding this limitation of requiring a trading discipline that is so critical for success, Lim & Tan Securities has recently launched the Intra-Day Active Trader Program (ATP) to meet the discipline needs of a daily trader.

What is the Intra-Day Active Trader Program (ATP)

The Intra-Day Active Trader Program (ATP) is an exclusive program launched by Lim & Tan Securities that allow traders to trade US and HK shares at a special commission rate of 0.07% and 0.12% respectively.

While the low commission rate is just an icing on the cake, the fact that no pre-funding of accounts required is the real deal that makes the difference.

US Shares ATP

The US ATP brokerage rate of 0.07% (minimum of U$10) is applied to counters bought and sold within the same trading day with a minimum of 2 US online intra-day contra trades.

For example, if you decide to purchase 100 shares of Apple on day 1, and 60 shares are sold on day 1, only these 60 shares qualify for the ATP rates. These will be counted as 1 US online intra-day contra trades for the purpose of determining the minimum of 2 US online intra-day contra trades. Remember that you will need to fulfil a minimum of 2 online intra-day contra trades in order to qualify for the special ATP rates.

The US ATP brokerage rate is applicable for trades up to USD30,000 and if you intend to purchase above that, it will be subjected to the usual normal rate of 0.3%. But this should not be an issue to most day traders as the cap limit given is pretty generous in my opinion and should suffice your day trade appetite. Alternatively, you can always break up your order to remain below USD30,000 per order.

If you are intending to short US Shares on ATP, you will have to do so on a separate US Short ATP account.

The reason for this is because Lim & Tan Securities require clients to close their short positions within the same US trading day by the designated time (defined as 10 minutes before market close). Short positions that are not closed by the client by the designated time will be subject to forced buy-in by Lim & Tan Securities with both legs subject to the standard US 0.3% commission fees.

HK Shares ATP

The HK ATP brokerage rate of 0.12% (minimum of HKD80) is applied to stock quantities that are opened and closed within the same trading day. You also need to online trade at least 2 different HK stocks intra-day in order to meet the minimum 2 HK intra-day contra trade criteria.

For example, if you decide to purchase 100 shares of Alibaba on day 1, and 60 shares are sold on day 1, only these 60 shares qualify for the ATP rates. These will be counted as 1 HK online intra-day contra trades for the purpose of determining the minimum of 2 different HK online intra-day contra trades. Remember that you will need to fulfil a minimum of 2 online intra-day contra trades and a separate counter that is different from your first order in order to qualify for the special ATP rates. In this case, you will need to purchase another 100 shares of say JD, and then sell them within the same trading day in order to qualify for the special brokerage rates.

For HK orders, do note that there is an amalgamation of orders for HK shares traded on the same day and because of this if you buy and sell the same counter (for example Alibaba) twice on the same day, it will just be counted as one amalgamate order.

The HK ATP brokerage rate is applicable for trades up to HKD200,000 and if you intend to purchase above that, it will be subjected to the usual normal rate of 0.25%. Again, this is unlikely to be a deal breaker to most day traders as the cap limit given is pretty generous in my opinion and should suffice your day trading appetite.

My Thoughts:

The first thing that caught my eye while reviewing this is why in the world are they charging commission fees when there are a few others today which are offering seemingly lower or even free commission brokerage rates.

However, one needs to consider that those charging lower brokerage rates require up-front Cash, the Lim & Tan ATP does not and allows no-collateral Contra trading. Secondly, for those who put up SGD cash collateral at other firms, you may be charged FOREX conversion on the full USD or HKD traded value on both your opening and closing trades, whereas for contra trading only your profit or loss difference after the contra is subject to FOREX if you choose the SGD settlement. This is a significant cost saving since most FOREX conversions can amount anywhere from 0.05% to 0.50% in fees.

Also, when you deep dive and look into it, you will soon realize how miniscule it is to make a difference in your trading plan.

Taking an illustration of Apple (Nasdaq: AAPL), if you decide to trade Apple under the US ATP and purchase 100 shares at $128, the brokerage fees will be applied at minimum USD10 x 2 (buy and sell) to you, which will make your total average costs become $12,820. What this means for traders is that you will need to sell Apple at least above $12,820 in order to make a profit (above the break-even point).

Even so, Apple intra-day movement is usually +-$2 such that the brokerage fees will almost be negligible to your trading plan.

Additionally, I find the ATP a really suitable program for people who engage in day trading.

In the beginning of the article, I mentioned about a factor that is very important to traders and that is discipline. With ATP, you are technically "motivated" to open and close your trading positions within the same day in order to minimize your losses and make the most out of your trading strategies. In a day when the market seems to react irrationally against your strategy, this can actually help you dictate discipline into your trading plan.

Over time, this is one habit which you can ingrain and take with you to strategize for bigger things.

One way you can play this is to look for companies that is near the strong support and look to bounce off the support on an intra-day basis. By establishing the support as your entry price and keeping an appropriate stop-loss below that, you can get a higher probability conversion into profits while minimizing your losses low if the stock continues to go down broader.

Chartnexus - free for all Lim&Tan users

In summary, the ATP is a program launched to target daily traders with no pre-funding amount required who are looking to capitalize the movement of the stocks within the day. The lower commission encourages traders to close within the same trading day, establishing discipline into their trading plans and this should work in favor over the long term period for day traders.

If you are interested to explore, do sign-up over at their website here and start your trading experience.

Disclaimer: This is a collaboration with Lim & Tan Securities (a security brokerage firm I have used for over 10 years) on their latest product. All opinions stated above are purely mine.

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May 2021 - Portfolio & Transaction Updates

2021-05-23T01:33:00.008-07:00

No.	Counters	No. of Shares	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %	Category
1.	Manulife Reit	100,000	US$0.74	98,300.00	26.0%	Dividend
2.	Alibaba	300	US$211	84,200.00	23.0%	Growth
3.	Lendlease Reit	85,000	S$0.74	62,900.00	17.0%	Dividend
4.	JD	300	US$72.7	29,000.00	8.0%	Growth
5.	Ping An	1000	HK$81.3	14,200.00	4.0%	Growth
6.	AMD	100	US$77.1	10,000.00	3.0%	Growth
7.	ISHARESHSTECH	1,300	HK$16.77	3,700.00	1.0%	Growth
8.	Ho Bee Land	300	S$2.40	720.00	1.0%	Leftover
9.	Options	-	-	70,000.00	19.0%	Options Premium

Total				373,020.00	100%	100%

What a month we have so far in May!

The old saying of “Sell in May and Go Away” certainly doesn’t disappoint this year - not only does this affected the stock market but also the crypto market and it certainly resets some of the expectations the market have towards these assets.

In the local Singapore market context, unfortunately our cases are also rising and we are back to the scenario where we almost had circuit breaker last year so it does feel a little like dejavu that we are back to square one amidst the past one year of restrictions.

Not much panic yet in the market as buying the dip continues to dominate despite the fear of inflation rising faster than expected which would mean a tightening in the monetary policy.

Using this opportunity, I have also made a couple of rotation by allocating more into the US and HK market.

Portfolio Updates

I was fortunate in the sense that the tech market correction came in slightly earlier than the heightened alert period announcement which I already have some plans to do some rotation - this means I managed to divest my position in STARHILL REIT at a slightly better valuation ahead of the announcement. But you can see that it affected my other position such as Lendlease REIT which I have continued to hold and it has fallen quite a bit from the recent peak since the announcement was made.

I used this month's opportunity in the market to take an initiation position at Ping An at HKD 81.3 and JD (options at strike price $70 which I was assigned at expiry).

I also accumulated slightly more shares into iShares HSI Tech as the entire HK tech sector is still undergoing correction at the moment which I think makes a good compelling reason to load more at this stage.

The rest of the funds are moved mostly into options play, and this month I managed to get the majority of the options to expire with exception to JD which I have gladly taken assignment at.

P.S: I don't published my option positions here but do occasionally give hints on my Facebook and Instagram page so do remember to subscribe and follow.

Networth Updates

After what it seemed to be a smooth transition year, the portfolio finally takes a little breather in line with the overall market as certain assets and sectors take a hit.

The equity portfolio for this month falls slightly to $373,020 from the previous month high but I think there's really some nice set-up here which I am personally very optimistic about. We'll have to see if this pans out positively over the course of the next few months.

Meanwhile, do check out some of the past few affiliate articles partners I've worked with over the past month if you missed them. These partners offer products which I thought might be a good fit for some of us:

- Phillip MT5

- Syfe Core Portfolio

We are back to the heightened alert period, so stay home as much as you can, and stay safe.

Thanks for reading.

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Trade CFD Confidently With Phillip MetaTrader 5

2021-05-19T19:37:00.000-07:00

In my previous article, I introduced Phillip MetaTrader 5 as a comprehensive trading platform featuring multiple products such as CFDs, bullions and Forex, which makes it easy for investors to consolidate their positions into one common platform.

In this article, I will explain into the detail what are CFDs and how as investors we can strategize CFDs to optimize our own capital. This illustration will be done using the Phillip MetaTrader 5 platform to showcase how CFDs can enhance your profits.

What is a Contract For Difference (CFD)?

First, we must understand what is CFD.

Contract For Difference (CFD) is leveraged tool that allows users to trade on margins and uses a small amount of capital to control a large amount of assets, thereby enhancing the potential profits one could make.

Currently, Phillip Futures offers the following types of CFDs:

Global Indices CFD
Commodities CFD
Shares CFD
Cryptocurrencies CFD
ETFs CFD

CFD contracts have no expiry dates, which means that investors are able to keep the CFD positions open for as long as they maintain the margin requirements though the open positions are subjected to a charge called the "holding cost" which can vary throughout different products.

Margin Requirement

When you are trading in CFD, you are leveraging on your capital which means any gains and losses will be magnified.

As an investor, it is important to always keep track of the margin requirement in order to avoid a margin call. If the cash balance in your account is less than the initial margin required to maintain your positions, the firm will issue a margin call on the next business day to ask you to top up the margin shortfall. You may also close your positions in order to maintain the required capital strategically.

To illustrate an example:

The margin for 1 CFD on Dow Jones Industrial Average Index (DJI) is at 5%. When you buy 1 contract at the prevailing market price of USD33,000, the initial margin you will have to cough out is USD 1,650.

Assuming the market falls which brings the Dow Jones Index to USD30,000, the notional value of your contract is now USD 30,000. Assuming the margin requirement to maintain the contract is at USD 1,000, this means that you would have to top up USD2,350 ($1,650 - $3,000 + $1,000) in order to avoid a margin call and your positions being closed.

You can work out the different scenario in place to ensure that you have a margin of safety and buffer for your capital so your positions remain solvent.

How You Can Strategize To Optimize Your Capital

There are many ways you can use to strategize your CFD positions - these are some of my personal favorites:

1.) Martingale Strategy

The entire idea of positioning our strategies and aligning it with CFD hinges upon stretching the use of our limited capital (if you are someone with an unlimited capital, then obviously that would be different) so that we can take chances when there are opportunities in the market.

Martingale Strategy is one of the most effective strategy to implement with CFD because it allows allocating increasing amount of capital by doubling up as the market value falls and in doing so, we increase the probability of a faster turnaround or breakeven in the expectation of a future increase.

To illustrate this - Imagine having a $100,000 investment capital which you have originally intended to purchase DBS at a tranche each at $27.10, $25.1 and $23.4. This level can be anything that you think makes sense, but I have chosen in this illustration a level which coincides with the respective key level of the price to book value of the company.

Assuming you are buying this in 3 equal tranches with no leverage, you are only able to purchase 1,300 shares equally at $27.1, $25.1 and $23.4, bringing the average value of $25.2.

With CFD, you are only required with an initial margin requirement of 10% of its value. This means instead of requiring $27,100 of capital to purchase 1000 shares of DBS, you only require $2,710 to purchase 1000 shares of DBS with CFD.

In other words, you are now able to not only purchase 1,300 shares at $27.1, requiring an initial margin of only $3,523, but also double up your position to purchase 2,600 shares at the next key level of $25.1 and then lastly 5,200 shares at the last key level at $23.4.

With only a capital of $100,000, you can purchase 9,100 DBS shares at an average price of $24.4 - this level is lower than had you purchased them without CFD.

Your initial margin stands at $22,217 and your margin requirement continues to be at 350% ((100,000 - $22,217) / $22,217).

2.) Buying At Critical Support Level

The USDSGD has been correcting in the past recent weeks since it hits a high of 1.353 a few weeks ago due to the massive stimulus bill passed by the Biden's administration which gives way to rising inflation and devaluation of USD.

The Stochastics indicator is one of the chart indicators that you can navigate around on Phillip MetaTrader 5 - an oscillator that can help signal an overbought or oversold case scenario. An oscillator that hits above the 20 signal is likely to indicate that the tide is turning the other way.

The stochastics indicator is best paired with a trend identifier - something with the likes of the MACD crossover signal which shows the direction of the market it is moving towards to.

To illustrate the case, the MACD indicator turned up on the 19th Feb 2021 - signaling a change in the direction of the market. Together with the stochastics indicator signal, this trend continues upward for the next 6 days, and if you had bought the pairs, you would be able to make a maximum of 10 pips profits on the trade.

These critical levels are likely to yield a favorable risk-adjusted return in the long run given the impetus of the high hit rate.

3.) Short-Selling

Short-selling is a bearish strategy that involves the sale of a security that is borrowed and needed to be returned by closing the position at the end of the trade.

This strategy has been getting a lot of attention in the past few years as investors are looking to short over-valued companies and digital assets such as cryptocurrencies which has been gaining popularity recently.

For instance, there are many people who are bearish on cryptocurrency today because they do not think they deserved that sort of valuation in the market. Furthermore, the sharp rise is fueled by market hype from many speculators around the world. This hype can be seen from the 7-days Momentum signal and 5-days CCI which signals an extended overbought situation.

From time to time, there may also be instances where Hard Forks may result in increasing volatility which might spook the market.

With Phillip MetaTrader5, you can open a direct short position on Bitcoin and Ethereum if you are feeling bearish and would like to take advantage of such situation.

Conclusion

All of the above illustrations are my own formed opinions and strategies that traders and investors can undertake on the Phillip MetaTrader 5 platform.

With effect from the 3rd May 2021, you may also notice that all shares CFD on the Phillip MT5 platform have been resized to 1 share per lot. This makes it a lot easier if you are taking a position in larger cap companies such as Google, Amazon, Netflix and so on.

I also like the fact that most margin requirement for larger cap companies are at 10% while major indices such as Dow and Nasdaq are only at 5%. For Cryptocurrency however, they require a bigger margin requirement at 60% as they are much more volatile.

There is also a new batch lists of 23 ETFs which was launched recently on the 17th May 2021 which you may want to check it out.

For the full comprehensive lists of the CFD contract specification that is offered in the platform, you may refer to the link provided here.

Also, it is worth noting that at Phillip MT5 - you can further save on your trading costs by eliminating the fees (commission-free).

I'd encourage you to download their free Demo account in this link here and see if you like it.

If it is something that you like, you may register your interest and account by scanning the below QR code with your phone which they will direct you straight to the registration page on your mobile.

Feel free to let me know what you think of the platform, and/or how it helps you to strategize your positions better.

Disclaimer: This post is written in a collaboration with Phillip Futures. However, all opinions stated are that of my own, based on my experience and services received from Phillip Futures.

Thanks for reading.

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JD Q1 FY2021 Results - Followed with Q&A

2021-05-19T19:35:00.000-07:00

JD.com Inc. announced its first quarter results yesterday evening for FY2021 which is followed by a Q&A conference call which I attended at 7.30pm in the evening.

For those of you who missed my earlier article a few weeks ago on JD, you may refer to them here.

Q1 FY2021 Results

Net Revenues for the first quarter of 2021 were at an impressive 39% increase year on year to RMB 203.2 billion (US$31 billion). Net service revenues for the first quarter of 2021 were at RMB 27.9 billion (US$4.3 billion), an increase of 73.1% from the first quarter of last year.

Net Income attributed to ordinary shareholders for the first quarter of 2021 also improved from RMB 1.1 billion the same period last year to RMB 3.6 billion (US$ 600m). You can see that they are not just growing topline at the expense of bottomline but they are balancing between the two.

Key operating metrics such as annual active customer accounts increased by 29% from 387 million last year to 500 million, signaling that they are still growing their market share within the customer base.

Working capital remained great for such business model, as it is evident that it takes on average 2-3 days for them to collect their money and 45-50 days to pay their merchants and suppliers.

Operating margin also increased during this period as they started to leverage through stronger logistics and supply chain network and beginning to show in their bottomline. We'll cover more on that when we get to the Q&A section which was addressed by Richard (CEO) and Sandy (CFO).

Free cash flow in the first quarter was negative as the company continues to pile on investment in its logistics and supply chain network and spend on marketing initiatives to boost organic traffic into the platform.

There were some other highlights that were worth mentioning in the first quarter:

JD.com and Louis Vuitton launched an innovative collaboration in April this year, bringing luxury brands and new shopping experience for the higher retail market. Other key notable luxury brands they have secured for collaboration also includes John Lobb (luxury shoes and boot brands under Hermes).
JD Home entered into strategic cooperation with Honor, Xiaomi, OPPO, OnePlus, and other cellphone brands to collaborate under an omni-channel strategy.
JD Health announced the launch of the Rare Disease Care Project - which creates a comprehensive healthcare offerings to create a one-stop solution for ongoing diagnosis and treatment.
JD Logistics and Tencent Smart Retail jointly announced the launch of JD-Tencent Cloud Warehouse. JD Logistics now operate over 1,000 warehouses nationwide, which covered under an aggregate gross floor area of over 21 million square meters.

Q&A Session

I took some time to listen to the 1-hour long conference call which the management covered some key Q&A in the call.

Let me summarize here what I have.

The first analyst posed a question regarding JD's omni-channel strategies and collaboration with brands and the differentiation and unique selling point for JD's platform to attract these key merchants.

Management replied by first reiterating the de-centralized trend of merchants moving from offline to online, especially since the Covid days. By moving into the online channels, it does not cannibalize the sales of their offline stores but rather enhance and increase the overall brand awareness of the merchants through the marketing initiatives they run.

Management went on by providing specific examples in the space of FMCG - where baby and maternal products consumption channel are starting to penetrate the market. Sales of alcohol products are also increasing and JD has become the number one platform for alcohol brands to go to. These were some of the penetrations they attract in order to meet the rising needs of their younger population users.

In the electronic products category, they are currently focusing to help merchants move from offline into online channel. However, the management also reiterated the overall chip shortage issue might dampen the increased sales in this segment as globally it seems to be a bottleneck across.

Another analyst asked about the focus growth of large ticket items vs smaller ticket items.

Management reiterated the importance of gaining market share through the lower-tiered cities where there are bigger opportunities ahead and JD's competence and advantage in their wide chain of supply chain network and logistics infrastructure makes it a compelling case for them to reach out nationwide to the lower-tiered cities. Management then cited an example where they have local supply chain for lower tiered cities where they can transport freshly produced products with competitive pricing and these wouldn't be possible without their extensive network distribution.

One other analyst asked about the balance between growing topline via investment in logistics and new businesses versus spending that will impact profitability.

Management replied that at this stage they are very clear that topline growth and market share is their number one priority as they are still in the growth phase. While retail business will maintain a strong growth momentum, net margin has actually increased due to better economies of scale. Net margin are currently about 5% higher for online versus offline customers so while they convert more into online there will be net margin improvement that will show in the future.

Having said that, JD logistics are currently in the hyper growth stage and more investment will be focused on this segment. Logistics also have higher fixed costs so this might pull down the entire blended margins.

Lastly, there was one analyst who questioned about the guidance for the second quarter, given such a strong performance in Q1 and this is where I think it's worth a caution if you can read between the line of what was said.

Management guided for a growth somewhere between the past 2 year CAGR and a similar first half year on year growth. Given that this quarter they have registered a strong 39% topline growth - which the management has reiterated that it is due to the lower base first quarter last year due to Covid situation (China started their Covid earlier than most of the other countries), this means that working backwards, it is implying for a slower second quarter growth which will only be in the likes of 20% second quarter year on year growth.

Final Thoughts

JD.com has an impressive first quarter which I think surpassed many of the analyst' prediction. However, I get the feeling that market may be pricing in the extrapolated 39% increase for full-year on year growth which is not going to happen.

If you read between the lines of what management has replied, it is indirectly guiding for a slower second quarter growth year on year of around 20% and management wants to caution ahead that it's not all rosy just because they have a blow-out first quarter earnings.

If you look at the valuation in my previous article, 20% growth will still be impressive and likely to fall under the base scenario where JD today is still very much trading below their fair valuation.

Given that I was just recently being assigned JD shares at $70, and had another option that will expire in Jun for a strike price of also $70, I will defer my purchase for now and will let nature takes its course first.

Over the long run however, I think it is still a great company trading under the fair value so it might be worthwhile looking at them closely after the second quarter to get a better overall picture.

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Syfe's Core Portfolio May Be The Right Fit For You

2021-05-15T17:18:00.000-07:00

As an active investor myself, I spent countless hours browsing through different reports of the companies I am researching in order to be a step ahead of the other investors when it comes to investing.

Even so, it is always difficult to be a step ahead when the market works almost round the clock twenty-four hours a day (businesses run in multiple different time zones). Furthermore, it is also impossible to expect every individual to spend the same amount of effort and training to obtain the desired results that they are expecting in every economic cycle.

Capitalizing on these limitations, Syfe came bursting the scene in 2019 - with a goal to make investing easily accessible to every individual.

About Syfe

Laying the foundation as one of the early robo-advisors in Singapore, Syfe is a twenty-first century digital wealth manager whose modus-operandi is to offer a diverse range of portfolios for investors of all stripes, from 100% equities to 100% REITs.

The company is licensed and regulated by the Monetary Authority of Singapore ("MAS") under a Capital Markets Services ("CMS") License for conducting retail fund management activities so investors can be sure that their money will be safeguarded.

A schematic approach of Syfe's investment product workflow is tailored to meet the suitability of the client based on his or her investment objectives, risk tolerance and other heuristic factors that leads to the most optimal risk-adjusted return.

One of the products which we will be covering today is its latest launch - the Core Portfolio.

Core Portfolios

Managed by Syfe's experienced investment team, the Syfe Core Portfolios are curated as an all-in-one portfolios that hold a mixture of equity, bond, gold ETFs.

Depending on the types of Core Portfolios which investors can choose from, this will portray a different mix of each allocation that will cater to each investor's risk appetite.

The portfolio retains its growth characteristics through the equity allocation but provides an additional defensive to the portfolio with the inclusion of bond and gold, which tends to typically outperform during periods of uncertainty. Furthermore, the portfolios are constructed using an Asset Class Risk Budgeting approach to achieve a stable asset allocation, making it ideal for investors who are looking for passive investing.

The equity component and allocation in the Core Portfolios are optimized using Smart Beta factors, namely growth, low-volatility, and China exposure.

The three portfolios within Syfe's Core that investors can choose are:

- Core Defensive

- Core Balanced

- Core Growth

Let's take a look at each of them and how they cater differently to each investors' risk appetite.

Core Defensive

The Core Defensive portfolio is a low-risk portfolio that is invested mainly in high-quality bond ETFs. It also contains an allocation to stock and gold ETFs for added diversification.

As of the last update on the 12th April 2021, its asset allocations within the portfolio consisted of 71% Bonds, 20% Equity and 9% Gold.

The majority of the components of the Bond ETFs within the portfolio is concentrated on US Treasury with maturity ranging from 1 to 20 years. In fact, US Treasury alone makes up more than 50% of the entire component of the Core Defensive portfolio.

Clearly, as the name itself suggests, this portfolio is designed for investors who are more risk-averse and prefer stable returns that can beat inflation.

According to Syfe, Core Defensive should not lose more than 9% per year, with a greater than 95% degree of confidence.

A back-testing strategy was performed to see how the portfolio would have performed if it were incepted 8 years ago. The performance of the Core Defensive portfolio based on historical performance returned 4.9% per annum on average.

Core Balanced

The Core Balanced portfolio is a medium-risk portfolio with an optimal mix of stock, bond and gold ETFs. The asset allocation focuses on better risk-adjusted returns, with the ETFs collectively invested in over 3,500 stocks of the world's top companies.

As of the last update on the 1st April 2021, its asset allocations within the portfolio made up of 50% Bonds, 39% Equity and 11% Gold.

While the highest component of Core Balanced is still US Treasury, the portfolio also holds the Invesco QQQ ETF which focuses on technology stocks. This is to inject a little more growth into the portfolio from the rising trend of technology adoption across the world.

At the same time, the portfolio also provides a global stock exposure via iShares MSCI EAFE ETF (developed market exposure), iShares Core S&P 500 UCITS ETF (US exposure), iShares MSCI China ETF (China exposure) and iShares Core MSCI Emerging Markets ETF (emerging market exposure).

Nevertheless, as the name itself suggests, this portfolio is designed for investors who are comfortable sitting in the middle of both risk-averse and risk-seekers and would like to seek a stable long term return for his or her portfolio.

According to Syfe, Core Balanced should not lose more than 13% per year, with a greater than 95% degree of confidence.

A back-testing strategy was performed to see how the portfolio would have performed if it were incepted 8 years ago. The performance of the Core Balanced portfolio based on historical performance returned 7.2% per annum on average.

Core Growth

The Core Growth portfolio is a higher risk portfolio that is invested mainly in stock ETFs. These ETFs collectively invest in over 3,500 stocks of the world's top companies. To provide additional diversification, the portfolio also contains an allocation to bond and gold ETFs.

As of the last update on the 1st April 2021, its asset allocations within the portfolio consisted of 70% Equity, 25% Bonds and 5% Gold.

As the name itself suggests, the Core Growth portfolio is heavy on the equity component across different sectors and countries. This means the portfolio retains its global characteristics yet provides additional strategic exposure to China and other sectors such as technology and consumer discretionary to capture the promising future yield and growth potential.

The portfolio is designed for investors seeking to maximize the long-term risk-adjusted returns of their portfolio and who are comfortable with short-term market volatility.

According to Syfe, Core Growth should not lose more than 19% per year, with a greater than 95% degree of confidence.

A back-testing strategy was performed to see how the portfolio would have performed if it were incepted 8 years ago. The performance of the Core Growth portfolio based on historical performance returned an impressive 11.2% per annum on average.

My Thoughts

I can see how the Core Portfolios can have an important place in anyone's portfolios.

Based on the asset allocation created for each of the portfolios, you can see what they are trying to do - i.e to be market-agnostic admitting that none of us know what the future will hold yet each allocations that have been carefully crafted are designed to serve differently for each investor with his or her own unique risk appetite.

The inclusion of bond ETFs and gold ETFs in each of the three crafted portfolios are often overlooked by investors - and this is understandably so given that the general market sentiment has been bullish in the past few years but these are nevertheless crucial asset classes that are likely to provide cushion to the portfolio when things go most unexpected.

To analyze each portfolio's volatility and investment's risk based on the respective allocation, you can view them from the portfolio's standard deviation - which is the rate of return used to measure the inherent volatility of the portfolio.

You can see that the inclusion of gold and bonds as part of the asset allocation in the portfolio helps to mitigate the downside risk in a period of uncertainty, thereby reducing the volatility risk while equity portion helps to boost the annual return in a period of growth.

So how do you choose among the three Core Portfolios that are available to you?

Your income, spending habits, priorities, and growing phases of life are all determinant factors that will affect your decisions and investment needs.

If you are someone who has just graduated and has a 20-30 years horizon to retirement, you may want to consider investing in the Core Growth portfolio as it is an ideal choice for growth-oriented investors with a longer time horizon.

However, if you are someone who is approaching the retirement age and are looking to settle down, you may consider the relatively low-risk Core Defensive portfolio.

If you are someone who is in between the middle of the two - and you are happy with returns ranging from 6 - 8%, you may consider the Core Balanced portfolio approach.

In fact, you can even set up more than one Core portfolio in your account to meet your different needs. For example, you may invest in the Core Growth portfolio for your retirement while choosing the Core Balanced portfolio to save for your kid's future education. The Core Defensive can be a shorter term investment for objectives such as having to pay for a house down-payment or marriage.

I like the fact that all the three Core Portfolios (Defensive, Balanced and Growth) contain China focused ETFs with the likes of iShares MSCI China ETF (MCHI) and KraneShares CSI China Internet ETF (KWEB). This allows exposure to the rising digital tech economy in China as well as the growing domestic consumption by China's rising middle class.

It will be interesting if the Core Growth portfolio can take on a small allocation towards Cryptocurrency ETF in order to ride the upside since we are in a world of digital currency adoption but including it is likely to increase the volatility risk, hence there is likelihood of a need to increase the gold allocation a little more to balance the volatility in the portfolio.

Syfe also does not receive trailer fees from any of the ETFs that they select in the portfolio and this allows them to be objective in their selection process.

3Fs x Syfe Collaboration

Readers who are interested to sign up for an account with Syfe to invest their funds into the Core Portfolio or any of the investment portfolio (e.g Syfe Equity100, etc) can do so by using our referral code - "3FSYFE".

With no minimum amount requirement to start a Syfe portfolio account, there is no reason why you should delay opening an account with them. Furthermore, there is no lock-in period which means you get to exit your positions and withdraw any time you want without any penalty.

Our collaboration will also allow you to enjoy a fee waiver of 6 months on the first $30,000 invested in your investment portfolio.

One thing to take note if you are putting your money into Syfe Cash+, it has 0% management fees to begin with, so the fee waiver will be automatically applied to the other investment portfolios.

Disclaimer: This post is a collaboration with Syfe but all opinions stated are purely mine based on the review of the product.

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Patience Is Required for Alibaba and JD.com

2021-05-13T23:30:00.001-07:00

I thought I'll pen down my thoughts after receiving a number of emails this week from various sources asking for guidance on two big China cap names - Alibaba and JD.com - both of which have seen shares plummeting each day for the past few consecutive weeks.

Many readers would also know that I own Alibaba shares from my last monthly update and have also recently written a piece on JD analysis so it's something which I'll walk the talk.

Alibaba Group Holding Ltd (NYSE: Baba)

Let's start with Baba first.

This is probably the most hated large cap company right now in the entire planet.

The entire saga started when the intention to list Ant IPO was shelved and the State Administration for Market Regulators went to investigate the entire company's holding structure.

Since then, the State of Administration has concluded by fining the company US$2.8billion - which the company chose to take in the Q4 FY2021 report announced last night.

The entire saga has shed the company 37% (more than 1/3) of its market cap from the peak - which in my opinion is a bit overdone. The RSI indicator confirmed the same by showing that the counter is currently in oversold territory.

If we look at the results announced yesterday, total revenue for the quarter was RMB 717 billion, an increase of 41% year on year.

The growth was driven by robust revenue growth of the China commerce retail business (Taobao, Tmall) and the continued growth of its cloud computing business.

Total adjusted EBITDA was RMB 170 billion, which is an increase of 24% year on year. There was the one-off adjustment from the anti-monopoly fine which was taken in the quarter, so it pushed the net comprehensive income for the quarter to negative loss territory.

Cash position remains solid at RMB 479 million with free cash flow coming in strongly at 32% to RMB 173 million.

During the conference call held yesterday, management has reiterated its intention to continue investing in R&D and also new seed of businesses such as Taobao Deals (which aims for the lowest of the market segment tiers), Taobao Grocery, Freshippo supermarket (which is the community marketplace business) and new features on the core platform such as Taobao Live and short-form video. The company is also enhancing its logistics arms, CaiNiao to give its competitors such as JD a good run for their money.

The management guided for a RMB 930 billion in revenue for the fiscal year 2022, which is a 29.7% increase over the latest FY2021 results.

From a quick envelope valuation perspective, Baba is trading at 6x Price to Sales FY2021 multiple, and a 4.7x forward FY2022 sales multiple. That's very cheap in my opinion for a company that has the upper hold of connecting all the industries in China.

On top of the current 300 shares I have owned for Baba at an average price of about USD230, I also have a couple of put expiring in between $210, $200 and $195. It is likely that I get assigned for my puts for this week and the next couple of months ahead if we are seeing further weakness so I am letting it sit and come to me instead. If I managed to get assigned all of them, I would have around 600 shares at an average price of $215 by the end of August - which I think is a really solid entry point in the long run.

From a chart perspective, Baba has broken through each and every support line in the past few weeks. I think we'll likely see $198 being a strong support barrier before the next strong support at $180 which will revisit the March low in 2020. I hardly doubt though that they will reach $180 at this point so I won't bet them to reach there if you are planning to make this your long term investment.

JD.com INC (NYSE: JD)

JD.com is a company I've just written a week ago so I won't repeat much of what I have said.

The next earnings will be on the 21st May 2021, so all eyes will be on its Q1 earnings by then.

Since the article last week, JD has plummeted 10% further to around $67, which is a price I have assigned for my worst case scenario. I do really think that like Baba, there is a good potential for a re-rating once all the pessimism has been buried.

At this valuation, the company is trading at only 1x Price to Sales, and a forward 0.7x FY2022 sales multiple. If you compare that across all the valuations that you currently have in the US market (big or small), you'd know how cheap the market has been rating JD is at the moment.

While I do not previously have a position for JD, I do have put contracts that are expiring today at $70 which I am likely getting assigned. Again, I think it is a very solid entry which I will start building up my positions so I have also started selling put options at the various $67, $65, and $60 levels over the next coming months.

JD's RSI is currently in an oversold territory - albeit only 29 at the moment so it can fall deeper but I see every drop as a good opportunity to add positions into the market at this level.

From a chart perspective, there is some good support at $65 from the previously resistance turned support in back in July so we might be able to visit that pretty soon.

Final Thoughts

Many of the indices underwent a correction this month so like many of you, we are feeling the pinch when we see our portfolio goes down.

But in moments like this that we get to pick up some really solid opportunities for winners in the market and I am confident that this will make a case for a stronger run once the sell-off is over.

If you need a reminder on why you should be buying the dip on great companies, you can look no further than what happened in the market last year and see where those companies are today.

Patience is required for those who's willing to wait and I think it will reward handsomely when it does.

Thanks for reading.

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What Does Working In a Start-Up Feels Like?

2021-05-07T01:44:00.001-07:00

Today, we'll talk about something that's more personal - my own working experience since joining the start-up scene.

As an avid traveler in the past who have been keeping tabs on some of the world's most interesting places to visit, I was devastated as just about as many people have had due to the impact of the pandemic that has ferociously destroy the world for the past 1.5 years.

Covid-19 has brought travel and tourism to a standstill - calamities that befell both smaller providers and tourists as we enter into a new paradigm of world without travel.

Tourism - in particular for such a small city state of Singapore, is an important part of culture and revenue generator for the economy. Having a strategic location in the middle across many open borders, the service industry played a vital role in the national economy, with the Singapore Tourism Board (STB) strengthening to spend to bring tourism and travelers back into Singapore for the next few years post-Covid.

So what does all of this has to do with me?

I Joined a Start-Up In The Tourism Industry In The Middle of the Pandemic

In the early part of this year, I left my previous firm and joined a new start-up company in the tourism sector.

Since we are still bruising our wounds in the middle of the pandemic, this decision was met with a lot of heightened eyebrows - particularly from my own family members including my wife, and also a few good friends who were concerned if this was the right move after all at this point.

The company that I joined is called Pelago - a Singapore Airlines backed venture start-up company.

Everyone would have heard of Singapore Airlines and under their belt they have a few subsidiaries and associates including Scoot, SilkAir, SIA Engineering, Krishop and a few others. Pelago was also one under the umbrella.

Throughout my entire professional career, I have been in the accounting and finance role and this was no different (Okay, I didn't become a genius overnight by becoming a programmer suddenly). I went through (if I recall) 6-7 rounds of interview with some of the leadership team members before being hired.

P.S: I had another 4-5 rounds in my previous role at another start-up company but most of the companies should conclude in between 3-4 rounds.

I had expectations of what I was going into when I applied for the role but I was nevertheless still skeptical about the industry given my habits of reviewing companies for investing. Not only does the pandemic impacted the industry, but there are also many competitors in the space that were fighting for a bigger market share and had stronger backers and more cash to burn.

Over time, as I spoke to the different leads and began to understand a little more about the company, what the vision stands for and how they are differentiating themselves with competitors, the situation became clearer and it convinced me to join the company.

What's My Day to Day Work Like?

As with all the start-up companies, there are plenty of the nitty-gritty issues which you will have to pick-up and collaborate with other departments to solve and close the case.

I started off my day by opening my email and look for any urgent case that I have to reply in the first half of the day. While clearing my emails, I also took the initiative to plan for meetings ahead in order to get your agenda sorted as there are many priority cases that will start to build up in a start-up that has to be addressed (Trust me, everything is urgent!).

One example is the case on payment cadence to providers - where you have a process in place on when you should be paying to your providers but at the same time maintaining a good standing balance of your working capital cashflow in the book.

One good thing about being in the start-up is you get a lot of autonomy in some of the style of your work that you would like to design and we are not talking about being in a designer or product role here. You can implement process workflow and introduce policies which is appropriate for the company and have them discussed within the internal department.

I also like the flat hierarchy in most start-up companies - which gives you a faster turnaround of decisions being made without the need to go round and round the bushes. For someone who's as impatient as me, this works well to my advantage.

We also work in a co-working space where we get to share the common areas. With community cases still on the rise, working from home becomes the default option since Covid-19 started. In fact, we can almost work from anywhere in the world we like (one of our colleague started working while holidaying in Maldives a couple of weeks ago, while our CEO is serving his quarantine in India after visiting his family).

Being part of a listed company's subsidiary (Singapore Airlines is a listed public entity), there are tons of regulatory work and reporting paper that I will have to report back up to the Group. Some of the accounting adoptions such as the revenue recognition logic, IFS116, tax reporting will also have to be approved from the top and Group level.

This reminds me of the nature of work I used to deal with while working for MNCs in the past.

Examples of Interesting Projects That I Have Recently Worked On

To illustrate one or two examples of interesting projects that I have worked on recently with the rest of team.

The first is an exclusive deal that we have partnered for bringing Chihuly into Singapore. As the only exclusive Online Travel Agency (OTA) allowed to sell the tickets, this project is massive as volume is estimated to be in the mid-6 digits. Heavy preparations involving the legal, commercial, marketing, product, engineering, operations and finance have been involved from the start to make this a successful project.

This also brings us closer to future partnership collaboration with STB as this event becomes the marked marquee event for 2021 which is held at the Garden by the Bay.

Another project that the team have been working on for a couple of months now and we have finally launched is the KrisFlyer (KF) redemption.

Being connected with the national carrier in Singapore Airlines has its own advantages, as we manage to tap into their existing product and distribution channel that the entire ecosystem can collaborate with.

Any Drawback About Working In a Start-up?

As with any companies in the world, there will be drawbacks or improvements that can be made better.

One drawback about working in a start-up environment, in my opinion, would be a slower career progression as compared to a larger set-up MNCs.

While this doesn't generalizes for all start-up companies, a fresh graduate could be at a disadvantage to his or her peers if one chooses to work for a flatter hierarchy set-up where organic progression is not as visible. If you are a fresh graduate and are pondering where to head for your career, your best bet for a career progression serves in traditional accounting companies or financial institutions where most of the sharks and meats are left to be desired.

Clearly, this is not a problem for me at this point as my priority has changed since I turned 35 (the year I have decided I would live life differently after FI). These days, I value satisfaction, health and free time a lot more than simply the allure of money alone. I think we can all somewhat agree that Covid-19 to some extent has taught us an important lesson.

Stability can be a little tricky with most start-up burning through cash in the first few years of venture and there is no assurance that the company will be able to secure enough funding rounds to go beyond the expectation.

However, if there is another lesson that Covid-19 can teach us it is that no one's job is irreplaceable. Covid-19 has decimated many organizations and even some of world's most renowned companies are not spared either.

Conclusion

So, would you rather be a small fish in an ocean or a bigger fish in a pond?

There is no right or wrong answer to that.

Clearly, there are both pros and cons to working for a large organization versus a small start-up and it would depend on an individual's value to decide what matters to them most.

If you decide that money and career progression are important, then it will make more sense to work for a large organization in the early few years of your career. I made a point early in my career that I would like to achieve financial independence by the time I hit 35, so I had to go with the big players. Over time, I decided that autonomy and flexibility are important to me so I made a switch to companies that has a culture like that.

P.S: I had originally wanted to make this article a bit more technical and related to accounting or finance a little more but I figured it would bore most people that are not in my line of work.

For those of you that had worked in both a large organization and a start-up environment, would like to hear your views on your thoughts.

Disclaimer: I work at Pelago but receive no compensation for any of the referral links above, if any for sake of illustration will only make my work load more for the higher volume increase - should you decide to make a booking via our platform.

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Is This The Right Time To Buy JD.com?

2021-04-29T22:07:00.002-07:00

JD.com Inc., also known as Jingdong, is a leading Chinese e-commerce company headquartered and based in China.

Although I don't think investors need any form of introduction to the e-commerce retail space giants, many may not know that JD is not just a pretty face e-commerce marketplace that is gathering market share throughout and across China.

As a technology-driven company, JD.com builds reliable and scalable platforms that complete the eco-system and bring value to partners and customers in sectors such as e-commerce, logistics, internet finance, health, cloud computing and smart technology.

The key tenet of the business model lies in getting its users, both demand and supply benefit from the entire eco-system it has built, from product to technology to service delivery - a concept that a network liquidity flywheel has so much impact and exponential function of growth it does to the business.

This helps to create a vicious powerful flywheel cycle and an enormous net retention value as well as boosting the customer's lifetime value in the key unit economy (LTV).

Q4 FY2020 Earnings Results

If you look at the recent results and breakdown below, you would notice that 87.4% of JD.com revenue comes from its product revenues while the rest of the 12.6% is derived from its service streams. This validates the amount of effort JD has tried to build its product to integrate with its entire ecosystem.

Core revenues for Q4 from its product increased by 28% YoY while services increased by 53% coming in from a lower base. If we look at the average CAGR across the past 5 years from 2015-2020, JD has an impressive CAGR of 31% and 48% for its product and services segment respectively and its latest Q4 results doesn't disappoint.

Source: JD.com Earnings Results

If we look at the breakdown of its Product Revenues segment, both general merchandising and electronics and home appliances are registering strong YoY increases. This is attributed to the company moving in to the lower-tiered cities where access to online merchandizing and electronics aren't as prevalent as yet.

Source: JD.com Earnings Results

For breakdown of its Services Revenues segment, you can see that Logistics will be a key play in the next few years. Q4 Logistics revenues increased by as much as 95% YoY and past 5 years CAGR has increased by 76%.

Source: JD.com Earnings Results

While revenues have been registering mind-blowing growth, topline and operating margins on the other hand are something which investors need to take a close look at, as this will indicate if the productivity and economies of scale ecosystem they have been trying to build up is taking places and making positive movement.

Topline Margins for Q4 has dropped marginally from 14.1% to 13.9% and Fulfilled orders margins have also dropped from 7.6% to 7.3% - something to monitor a bit more closely.

Source: JD.com Earnings Results

JD business model which results in its free cash-flow generative ability is a lot to envy and die for.

The company business model quantifies its strong cashflow through its excellent working capital turnover, as the company takes typically around 50 days to pay their supplier but only 2 to 3 days to receive that cash from its customer which they can continue to pump and regenerate back into the profits through investing in capex.

The company spent an average of about RMB 10 billions on capex throughout the years, with exception to 2018 when they had to spend RMB 21 billions for its development properties (which by the way today is generating cash-flow business).

We should expect the free-cash flow to run through the roof in the upcoming few years to come assuming capex stays at a constant RMB 10 billions a year. If they decide to plough it back into a new business, we should see a new revenue stream to come.

Source: JD.com Earnings Results

Regulatory Risk To Take Note

The State Administration for Market Regulation announced an investigation into Alibaba monopolistic conduct a few months ago with the likes of Taobao and Tmall particularly in scope, which was investigated for its exclusive ultimatum pick for providers to choose either "one out of the two but not both" - essentially forcing providers a binary decision to go with or without.

As it turns out, the regulators weren't singling out on Alibaba's model solely.

Chinese regulators also started imposing a wide-ranging restrictions on fast-growing e-commerce companies with the likes of Meituan and JD being summoned for investigation.

The result of the investigation could result in the companies splitting up to meet the regulatory requirement moving forward. The changes will likely hit profits and growths as they have to set up several holding companies as vehicle, which will require more capital and be more regulatory sanctioned and monitored.

Valuation

JD is a highly cash generative business, so we'll use the discounted cashflow to see where its valuation is.

Current net debt in their books is at RMB 37.7 billions, which is translated to about USD 5.8 billions. For conservative purpose, we'll deduct off this debt portion from our terminal cashflow calculation in deriving our intrinsic value.

Actual Cashflow from 2015 - 2020 (Source: Author's Working)

Worst Case Scenario:

For our worst case scenario, we assume a terminal growth rate of 10%, which we've pegged the same level to the capex to arrive at the underlying unlevered free cash flow.

The terminal value is then subtracted by the net debt of $5.8 billions for conservativeness before we discount it to our net present value of today's price.

WACC sensitivity rate used throughout is leveled across from 8-10% for reference, but a middle of 9% is likely more sensible.

Different Cashflow multiple of 10x, 15x and 20x is tabled consistently across the three scenarios in order to arrive at the same conclusion throughout.

Based on a 10% growth rate, WACC 9% and a cashflow multiple of 15x (Morningstar recommended), we arrive at the intrinsic value of $68.5, which is about 10% off today's market price of around $76.

Worst-Case Scenario (Source: Author's Working)

Base Case Scenario:

We assume our base case as the scenario that is more probably and likely to happen.

For our base case scenario, we assume a terminal growth rate of 20% - still below the average range of the past 5 years CAGR and also its most recent Q4 results which a kind reminder to readers is still growing at 28%. We've pegged the same level to the capex to arrive at the underlying unlevered free cash flow.

Similarly, the terminal value is then subtracted by the net debt of $5.8 billions for conservativeness before we discount it to our net present value of today's price.

The same WACC and Cashflow Multiple sensitivity rate used throughout to arrive at the same conclusion thereabout.

Based on a 20% growth rate, WACC 9% and a cashflow multiple of 15x (Morningstar recommended), we arrive at the intrinsic value of $103.7, which is about 35% upside today's market price of around $76.

Base Case Scenario (Source: Author's Working)

Best Case Scenario:

We try not to be overly optimistic but there is a good chance the best case scenario could play out right in our hands.

For our best case scenario, we assume a terminal growth rate of 28% - right on spot with its most recent Q4 results with a gentle reminder to readers that the logistic arms is still growing from a low base and has grown by over 90% YoY in Q4. While the logistic arms will continue to massively grow by high double digit over the next few years, it may not trickle down the same to the free cash flow as logistics tend to incur higher amount of cape and upfront working capital, which could negate the impact on its cashflow.

We've pegged the same level to the capex to arrive at the underlying unlevered free cash flow.

Similarly, the terminal value is then subtracted by the net debt of $5.8 billions for conservativeness before we discount it to our net present value of today's price.

The same WACC and Cashflow Multiple sensitivity rate used throughout to arrive at the same conclusion thereabout.

Based on a blended 28% growth rate, WACC 9% and a cashflow multiple of 15x (Morningstar recommended), we arrive at the intrinsic value of $141.2, which is about 83% upside today's market price of around $76.

Best Case Scenario (Source: Author's Working)

Blended Average:

Next, we attribute the probability of all the three scenario happening - with 10% attributed to worst case scenario, 60% attributed to base case scenario, and 30% attributed to best case scenario.

It resulted in an blended intrinsic value of 10% x $68.5 + 60% x $103.7 + 30% x $141.2 = $111.4.

Technical Charts & Entry Level:

JD's immediate support is at $75.5, which coincides with the EMA50 weekly support. Next immediate support level is at $72, which is not too far away.

Source: Chartnexus

With the worst case scenario intrinsic value coming in at $68.5, and immediate support right at $72 and $75, I have taken a position on the sell put for these three levels for the next few months all the way leading up to December.

Premiums for December with strike price $70 is still at mouth-watering level of $4.40, which translates into a "yield" of around 6.3% for a period of 8 months or 9.5% annualized.

If the stock rises ahead of schedule, you will have the option to close out your positions early and reinvest it elsewhere. If it hits your strike price, you are in a good position where you are buying the company at a pretty good level.

Win-win in either case.

Alternatively, you can also take up a direct long position at around the $72-$75 level to ride the upside.

Do remember that selling put robs you of potentially enjoying the upside and with a blended average intrinsic value computed above of around $111, it might just be worthwhile getting the stock directly.

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5 Reasons to Invest in the LionGlobal Dynamic Growth: Asian Perspective portfolio

2021-04-26T20:56:00.010-07:00

Lion Global Investors ("Lion Global") - one of Asia's leading asset management companies, has recently announced the launch of their latest managed portfolio - LionGlobal Dynamic Growth: Asian Perspective, exclusively available through Saxo Markets' platforms.

Led by experienced professionals and portfolio managers, the Lion Global Investors' Curated Portfolios team has curated a globally diversified multi-asset portfolio designed with an Asian lens. This means the portfolio retains its global characteristics but provides an additional strategic exposure to China, broad Asia and the Emerging Markets as key sources of future yield and growth potential.

Previously, Saxo Markets' other managed portfolios were created with other industry leading names such as BlackRock, Nasdaq Dorsey Wright, Morningstar and Brown Advisory.

The new portfolio is suitable for investors who are looking to achieve superior risk-adjusted returns ensuring risks taken are commensurate with potential returns, particularly in industry and geographical sectors that will be booming in the next few years.

In this article, I have listed 5 reasons why the LionGlobal Dynamic Growth: Asian Perspective portfolio might be suitable for you:

1.) Globally Diversified Portfolio With Targeted Exposure to Asia and the Emerging Markets

The portfolio comprises of nine best-in-class mutual funds and low-cost ETFs and is managed dynamically by investment professionals so its composition can change and respond to market events.

The Curated Portfolios team uses open architecture when selecting funds. Therefore, they can select any fund available on Saxo Markets' platform. Lion Global does not receive trailer fees from any of the fund managers of funds selected in the portfolio and this allows them to remain objective in their fund selection process.

The portfolio is well diversified across major asset classes (Equities/Fixed Income/Commodities) and Regions (Developed markets/Emerging markets/US/Europe/Asia). Leveraging on Lion's Global's expertise in Asian markets, the Asian lens means there is additional strategic exposure to China, broad Asia and the Emerging Markets as key sources of future yield and growth potential compared to a typical global portfolio that may have less weighting to these regions as they tend to lean more towards the US and European equities and fixed income.

Unless it is not ideal to do so from an investment perspective, the portfolio will be rebalanced on a quarterly basis. Rebalancing means either the exposure of each mutual fund/ETF in the portfolio is increased/decreased or, if necessary, mutual funds/ETFs can be added or removed.

This helps the portfolio strike a balanced allocation for optimal return and risk management.

Geographically, this will cover the major markets such as exposure to US, Europe, China, Japan and Indonesia with targeted exposure in various growing sectors such as Electric Vehicles, 5G Communications and Emerging Market equities.

In essence, Lion Global and Saxo Markets have created a premium private-banking type investment solution, managed by investment professionals that offer the best possible asset allocation, fund selection, portfolio monitoring and quarterly rebalancing and made it simple and easy to access for the retail investor.

2.) Past Performance Returns Based on Back-Testing Strategy

A back-testing strategy was performed to see how the portfolio would have performed if it were incepted 5 years ago.

While the product has only been recently launched in February, past simulated returns based on the back-testing strategy have been nothing less than impressive.

Each of the mutual funds/ETFs in the portfolio has its own live track record. The performance return of the portfolio is simulated by using the past 5-years live track records of each mutual fund/ETF in the portfolio according to their respective exposures (i.e pro-rata exposure) within the overall portfolio.

YTD: 2.38%
2020: 25.61%
2019: 23.49%
2018: -7.72%
2017: 24.79%

Note: Past-performance simulation is not indicative of future performance.

3.) Expense Ratio and any other costs involved

A service fees is charged at 0.25% per annum.

The service fee is an annualized fee that is paid for having the portfolio managed and actively rebalanced as necessary.

It is charged to the portfolio at the end of each quarter based on the daily value of the portfolio and calculated on a daily pro-rata basis.

There are no other hidden costs involved such as platform or commission fees.

Expected ETF Costs: If your portfolio invests into ETFs, you should know that the ETF manufacturer takes their charge from within the ETF. This is convenient as it means there are no cash transactions (to the ETF manufacture to cover costs), costs are simply reflected in the performance of the ETF.

4.) No Lock-in Period

There is no lock-in period.

What this means is that as investors, you are able to exit your positions at any point in time if, for instance, you want to realize your profits, or you need your funds urgently without any penalty.

However, do note that the managed portfolio is designed for investors who are looking for mid-to long-term investing so it is best to align your perspective before investing.

5.) How Much (Minimum) Can I Invest?

The minimum investment for the USD denominated portfolio is a lump sum of USD10,000.

There is also a Regular Savings Plan (RSP) option for the SGD denominated portfolio which starts from an initial investment as low as SGD2,000, and then regular monthly contributions will start from a minimum of SGD100 subsequently.

The RSP has its own distinct advantages in that it allows you to start small and then slowly work your way up through accumulation over time.

You will also benefit from the time value of dollar-cost averaging - a concept I have written about in my past articles.

Final Thoughts

I find the LionGlobal Dynamic Growth: Asian Perspective portfolio an investment solution that is suitable for investors who are looking to invest in several high growth markets in one portfolio and who would like to leave their investments in the good hands of a professional.

It is also suitable for investors who may feel there are too many funds and ETFs out there for them to research, analyze and rank by themselves efficiently and who would like a professional investor to do it for them so they can free up their time for other things.

While there is one small cost, a service fee of 0.25% per annum (for example, a $10,000 investment would attract a service fee of only $25 per annum), this is relatively small change as compared to the amount of time and effort you would have to put in on your own with a DIY portfolio.

As with all investment risks, do note the risks involved before you make your own decision regarding your investments.

For those of you who are interested in opening a Saxo account, simply use this quick link.

Disclaimer: This is a collaboration article with Saxo Markets.

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Apr 2021 - Portfolio & Transaction Updates

2021-04-12T23:10:00.001-07:00

No.	Counters	No. of Shares	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %	Category
1.	Manulife REIT	100,000	US$0.74	98,300.00	26.0%	Dividend
2.	Alibaba	300	US$245	97,000.00	25.0%	Growth
3.	Lendlease REIT	85,000	S$0.80	68,000.00	18.0%	Dividend
4.	Starhill REIT	90,000	S$0.55	49,500.00	13.0%	Dividend
5.	AMD	100	US$79.1	10,500.00	3.0%	Growth
6.	ISHARESHSTECH	1,000	HK$17.07	3,100.00	1.0%	Growth
7.	Ho Bee Land	300	S$2.40	720.00	1.0%	Leftover
8.	Options (sell put) (IBKR/Tigers)	-	-	50,000.00	13.0%	Options Premium

Total				377,120.00	100%	100%

I don't know if it is just me but time has flew really fast this year so much that it's hard to believe that we are already in the month of April.

If we just take a couple of moments back, we just had the US election in Nov 2020 and then soon after that we had Chinese New Year in the early part of the year. The overall standstill in the movement of the human population makes it feel like we are repeating the week in a flash with every seconds gone by.

Anyway, let's get straight down to business.

The end of Quarter 1 heading towards April was a great one.

I received dividends from the couple of REITs that I owned - with the likes of Manulife REIT, Lendlease REIT, Starhill REIT, Ascendas REIT and Prime REIT. At the same time, the tech market, especially the one listed in HKG was also undergoing a little bit of correction and volatility. The chip shortage ongoing issues also mean that manufacturers and production was mostly delayed and this presents an opportunity for investors to start loading up their warchest and accumulate slowly.

Portfolio Updates

This month, I've made a little rotation out of my dividend yielding companies back into growth, particularly those that have been beaten down due to short term factors.

I sold my positions for Ascendas REIT and Prime REIT at a decent gain of 5% and 11% respectively (excluding dividends) in order to raise cash to purchase other beaten down growth stocks.

I am still keeping my top few positions in Manulife REIT, Lendlease REIT and Starhill REIT because I think they still have a good runway to go given the reopening of the economy back into the workforce.

In the US market front, I purchased a giant e-commerce conglomerate Alibaba as I managed to catch them at a decent low before the recent results of the $2.8billion fine which they accepted. For Alibaba, many of the bad recent news have been priced into the market so there is a good risk reward opportunity for investors to load up given how badly they have been priced in by the market.

Together with Manulife REIT, Alibaba is now my biggest holding position.

I had also purchased a small position for AMD at near $75 during the recent tech correction as I found them to be unfairly punished by the market. The sector is currently undergoing a secular cycle where demand is outstripping supply by a wide haul so we should expect margins to continue going up as chip shortage continues to dominate the market. At $75, it is also sitting nicely at the EMA50 weekly chart.

My other remaining positions for Options (Sell Put) are mostly at the likes of Alibaba, JD, AMD, Qualcomm, MU, Palantir, Meituan, Geely and other small ones as these are companies which I found to be great leaders in their respective sector but unfairly punished by short term volatility of the market. The premiums are also enticing especially in the recent market correction where the premium would spike.

As mentioned in my previous update, I am still playing it safe so I have not really tapped into my leverage CFD account just yet. If you are interested to explore CFD, Phillip MT5 is now offering zero commission for CFD play which you can try out the demo here or sign up right away here.

Networth Updates

It has been a really good first Quarter as the net worth picks up quite significantly beyond what I expect to be quite a rough year. Turns out there are ample opportunity even in a market that is accommodative like what we have today.

The equity portfolio for this month climbs to $377,120, which is a good improvement over last month and on a good trajectory upwards year to date despite the recent tech correction.

With reopening still in the play, I am confident there are more upside to come and it is likely that the market will see it good this year with most economies bouncing back up.

Stay safe and sound.

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Trade At Zero Commission With Phillip MetaTrader 5

2021-04-09T01:49:00.000-07:00

Investing is a marathon journey that most of us would probably have to cope with for a long time in our lifetime.

Choosing the right brokerage service and platform to safely put your money is an important aspect of the entire investing and trading journey for an investor. This is especially so for the beginner investors as they seek to trial and error on a variety of different assets that suits their needs.

Some may like the excitement of the fast and furious markets such as FOREX or Cryptocurrency while others may enjoy the stability of investing in a relatively less volatile market such as equities.

This article is written to address both needs - the availability of trading in multiple products in the convenience of one account under one platform.

We'll discuss about this in more detail later on but first let me introduce who and what Phillip Futures is all about.

About Phillip Futures

Phillip Futures Pte Ltd was inaugurated in 1983 as a member of the PhillipCapital Group and is one of the founding members of the Singapore Exchange Derivatives Trading (SGX-DT).

The Group has been dominant in setting up a presence and clearing membership in 21 major global exchanges which include APEX, BMD, CME Group Exchanges, DGCX, HKEX, ICDX, JPX and SGX.

Together in total, PhillipCapital has become one of the major powerhouse in the industry with assets under management amounting to more than USD 35 billion and shareholder funds in excess of USD1.5 billion.

While sharing the same parent group, Phillip Futures is actually a different entity altogether with Phillip Securities (some know it better as POEMS) but both offered overlap in products such as CFD on POEMS and CFD on Phillip MT5.

Phillip Futures holds a Capital Markets Services ("CMS") license from the Monetary Authority of Singapore (MAS) and customer's funds are held in a separate trustee licensed bank account so the funds cannot be used to pay for the obligations even in the unlikely event Phillip Futures Pte Ltd goes into liquidation.

Multiple Products In One Platform

One of the most challenging experience as an investor myself is to own multiple accounts on different platforms to trade on multiple products.

It is not only difficult to keep track on the progress of each individual accounts and statement but it can also be messy when you're trying to consolidate your positions , especially if you are also trying to keep tab on the performance of each account individually.

Phillip MetaTrader 5 (MT5) offers a one stop platform for investors to trade on a comprehensive range of products available such as CFD, Bullion and FOREX that meets the suits and needs of the investor.

0% Commission For CFD Trades

Some of you might know that I have frequently used CFD as one of my active investing strategies.

Trading in CFD enable users to trade on margin, which incur interests costs for overnight charges. These charges are called "financing costs" - which vary between 2.8% and 3.2% across for different brokerages. Similarly, Phillip Futures charges a competitive financing costs which varies from product to product. Since there are individual elements associated with the financing costs for each product and it floats on a daily basis, it will be difficult to put an absolute figure in this article.

To view the financing costs for each individual product on Phillip MT5, you can:

Right-click on the desired product you wish to trade
Pick "Specifications"
Scroll all the way down on the pop-up window
Look at the long or short rates

Commission charges is another trading costs that can quickly add up to your overall charges. This is especially so for traders who get in and out of the market frequently.

You can see below how much I spent on commission charges just based on a few trades I made in February using other CFD brokers previously.

3Fs Previous CFD Trading Activity

With Phillip Futures, you are able to eliminate that costs as trading on Philip MetaTrader 5 is commission-free.

They were also open to share with me that they are able to offer 0% commission (and no platform or admin fee) because they wanted provide an avenue for traders and investors to earn as much as possible from these savings. In turn, Phillip Futures earn their money from the bid-sell spread as market maker.

For instance, the buy and sell spread for EURUSD is 0.6 pips, which is a rather small change if we compare it against the commissions other brokerages might have charged. Similarly, the buy and sell spread for Apple (Nasdaq: APPL) is 0.053, which is only 0.04% if we translate it into percentages.

0.6 pips spread

Nasdaq - Apple bid-sell spread

Ease of Opening an Account

One of the considerations almost every investor would have is the easiness of opening an account, especially in the 21st century digital environment we are living today.

In order to ascertain the efficiency of their account opening workflow, I have tested it myself by sending in my application on a weekday evening.

I used my phone to scan on the below QR link and register myself using a SingPass MyInfo, where it will help to populate all my information and details at an instant.

If you prefer to register using your desktop, you can also click the link here to register.

The entire registration process was seamless - it took me 5 minutes to complete the registrations (including uploading my bank statement), and Phillips came back to finalize my application within the next half-hour (speaking of efficiency).

Scan QR here to sign-up

I also received an email instruction notifying me that the registration was successful and I can deposit my funds using the different funding method available.

PayNow seems to be the quickest method at the moment for transferring funds inside so I chose this method.

In a blink of an eye, my funds are successfully deposited and I can start to trade immediately at any moment.

Mobile Apps view

In case you wanted to give the platform a try first, you can also download their free 30-day Phillip MT5 Demo account in this link here.

In the next chapter, I will write more about the pros and cons of trading CFD, including the risk management involved and what as investors or traders you should be looking out for.

Disclaimer: This post is written in a collaboration with Phillip Futures. However, all opinions stated are that of my own, based on my experience and services received from Phillip Futures.

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Evaluating The Thought Process Behind Putting Financial Independence As a Goal That Is Worth Pursuing

2021-04-05T20:51:00.005-07:00

During the gathering over the lunch break in your office, you overheard a conversation regarding one of your colleague that he has decided to call it a day after working 15 years in a corporate world. He was apparently quitting not because he was going to move roles into another company but rather decided to focus on his philanthropist aspect of making a social impact on a non-profit organization (NPO).

Given his relatively young age at 40 years old, the fact that he has a family to take care of and he has only commanded a middle management position throughout his entire career - it garnered your immediate attention and sparks your curiosity as to how he is able to achieve all of that.

With all the trending talk about achieving Financial Independence earlier and younger in our lives, you may be thinking about this concept and wondering if it's a viable goal worth pursuing for you.

After all, we are talking about a project that requires many years (minimally one decade) of dedicated attention, and not just a split weekend to achieve. If you are motivated this week but give up the following week, which by the way is very common around what is happening, then it will be for nothing.

In this blog, I've articulated my provocation and thoughts around the idea of Financial Independence over a number of articles in the past.

Many of the articles were written with a systematic focus towards achieving a more attainable income and savings through personal savings tips, career tips at work, and investment opportunity.

In this article, the framework is a little different from some of the past articles I've written on this topic.

It's about evaluating the thought process behind putting financial independence as a goal that is worth pursuing and I am going to use my own experience to validate some of the process itself.

So let's begin.

Assume you are someone who just graduated and was introduced the concept of Financial Independence. You know what it means on the surface and every articles you read on F.I.R.E seems to be fun but you aren't sure if you are going to commit yourself into this project for the next 10-20 years in your life.

You find yourself suddenly in doubt.

I was once in the same position and I used some of these questions that hopefully it can also help you sort your thinking.

Do I find Joy or Satisfaction in what I'm currently doing?

There's a lot of perception in thinking that people who are seeking financial independence possess a lower satisfaction level in their jobs.

I think that is somewhat true to a certain extent.

If we think about it in reverse, people who enjoy thriving and excelling in their jobs are likely to do well because they have put pride into the work that they believe are worth pursuing a lot more than anything else. In the same context, you need time and effort to do well financially and a commitment to promise.

The largest category pool of people - is the group where they are in the "I am not satisfied and happy with my current job" but "I am also not going to do anything else to change my life apart from moaning". This is the worst category that you will not want to be in.

Does this reflect what is important to me (my values)?

Values is something that you held to your own conviction and belief, what it brings to the table (importance), and what you get in return (worth).

It can be quantifiable as a monetary worth if your values are consigned with the purpose of having more money, increasing net-worth or having an alternate income to boost your savings.

It can also be the way it is being done in a certain manner - that you believe are an important aspect in the way you live, work and play. For example, you are someone who treasure not only work hard, play hard but also time for your families and your personal growth well-being.

All of these values are treasures that means a lot to you and financial independence can give you more of these options.

Regardless, it has to be an extract of what you believe in and not by hearsay because everyone else says so.

Does this draw on my strengths?

On your way to becoming financially independent, you'd start to learn and cope with a lot of new things that you've never encountered before previously in your life.

You'll start to do budgeting, limit the amount of Starbucks coffee you can drink, pay for your own utilities, and care for your own emergency funds.

You will start to strategize what is good for your own pocket and well-being without over compromising too much one over another.

The process of having to go through this presents an opportunity to be at your very best every single day and learn how to live an independent life socially.

Source: DeviantArt

Is this target goal feasible? Do I believe that it can be achievable?

Set yourself a realistic goal based on your current circumstances.

If you are a sole breadwinner of the family with two children and are part of a sandwich generation, it may be tough to set a stretch goal that is comparable to someone who is single and possess a stronger family background.

On my way towards financial independence, I've always given myself accountability gunning towards a stretch yet achievable target. The objective is to make it not an easy goal to reach yet not an overly impossible task to achieve.

What Opportunity Costs will I give up in order for me to reach this goal?

The hardest part about making changes to your habits and lifestyle is the restraint that you will have to accept.

It is likely that you will have to settle with less (coffee, bags, shoes, night life entertainment) and go for more (nature, exercise, bonding, writing) to fill in those gaps.

They'll be very difficult to achieve at the beginning as you start to suffer from the symptom of withdrawal effect but as time goes by, it becomes the norm which you will accept and take in.

The question that you constantly have to ask yourself is if it's all worth the effort you are trying to push.

Source: AZ Quotes

Am I progressing well?

You know how most people usually get excited when they make their New Year's resolution at the start and then fizzles out a couple of weeks later.

The same goes for this one.

Checking in on the progress will not only allow you to understand where you are in terms of standing but also keep yourself in check when you are swaying sideways between the good and evil.

If you find yourself constantly struggling to meet the objective you've set, do use this opportunity to review them accordingly and make appropriate changes that will help you gets better.

Remember - the only person you are competing with is the same person you were yesterday. If you are progressing every single day, that's an encouraging step to be in.

What changes do I notice in myself?

Over time, you'd find yourself a totally changed person - someone whose goals are aligned with your own values and a reason to believe and look forward.

You'd also likely grow in confidence because you know you've taken that first step, made a promise to yourself and try to achieve them. That will likely help raise the confidence in everything else that you do, knowing that you can do it no matter the resistance.

You'd also do yourself justice, understanding the impact that organization has done to the world and similarly the same powerful impact you've done to your families.

You'd be happier, more open to opinions from friends and colleagues who actually truly cared for you and whose goals are aligned with you. You'd auto-shelf out the nasty people in your lives or people whom you are not bothered with because there is no spark and connection between the two of you.

You'd live a life where you look forward there is a tomorrow.

Conclusion

Throughout your entire experience looking for a way to achieve Financial Independence, you'll find that it is a means to an end, and not an end in itself.

It allows you to attain greater autonomy in making choices and you are happier making that choices because you know there are always options and alternatives you can take.

You choose this path because only you know it's worth pursuing.

No one forces a gun pointing at your direction to submit.

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Top 5 Common Spending Triggers

2021-03-29T19:04:00.005-07:00

Many companies employ good digital marketers to come up with marketing ploys targeted at human preys whom they know have low boundaries to accept their very own spending triggers and emotions.

Spending triggers subconsciously make many prey to temptation and spend money to replace and magnify an emotion they're feeling - usually desperate, that resulted in a spur of the moment purchase.

They've been so successful at this such that the level amount of consumption is at a record high, with a plethora and flurry of news pouring to us daily in our inbox.

These are the top 5 common spending triggers:

1.) Buy Now Pay Later (BNPL)

A major disruptor over the past few years, the "Buy Now Pay Later" is here to stay to challenge the stereotypes traditional industry of debit and credit cards.

The entire business model for BNPL is built around the premise that these companies are helping consumers manage their cashflow and getting merchants more business from the increase in consumption, but also getting consumers to pay on time.

Unlike a credit card model which relies on consumers paying late beyond the given 30 days term so that they can charge exorbitant charges, the BNPL model relies on consumers paying not just on time but also in full so they will not run into a default. These companies will then charge their merchants a service fee charge in order to make money.

For consumers, this is a viable option that one can utilize and might just be the spending triggers that the business wants.

Local BNPL players such as Hoolah, Atome, OctiFi are some of the leading players in Singapore.

2.) Discounted Deals

Discounting has long been used as one of the effective strategies to incentivize consumers and prospects to make a purchase.

Digital marketers used discounts to get consumers to try their product and in turn get more leads and sales for future purchases.

Companies do this by offering discounts promo code that consumers can key in when they check-out. Some websites are even smart enough to include the amount of savings the consumers can save by purchasing at their website. This gives consumers a sense of satisfaction that they are actually saving when they are actually spending (I know how ridiculous this can sound).

This can be a win-win for both parties because while the company makes an upfront burn by incurring more costs, they can overtime track the amount of return customers as they become more familiar with the product and use them as part of their daily lives.

Local players such as Fave, Pelago, and the Entertainer are good for such deals.

3.) Stress Trigger

Stress spending is an impulsive behavior that makes one jittery and anxious when feeling stressed and one way to cope with the emotion is through reckless spending.

Studies show that most people reacts to stressful challenges with an increase in the hormone cortisol, which leads them to focus their attention toward the threat so that they can alleviate the pain.

These people used money as a form of medication so they can feel better at ease, especially if they have a low level of control of their emotions in check.

For instance, most stressed people would be desperate to rush down to grab a drink or two after office hours so they could finally destress after the long week. This would not only be bad for the pocket but also damage the liver in the long run, if one drinks excessively on frequent occasion.

4.) Fear of Missing Out (FOMO)

According to a study conducted on millennials, FOMO-fueled spending is on the rise and gaining momentum - thanks to the ubiquity of social media leading to millennials overspending to keep up with their peers.

Some companies added another feature in the form of scarcity to toy around with the emotions of buyers to show what it feels missing out on a good deal.

The threat of missing out on something is a powerful motivator in the human psychology, outweighing the prospect of an equivalent gain. For instance, you may not need to upgrade to the latest IPhone 12, but the fear of missing out being one of the first few among your social media friends might be enough for you to hit a buy right away.

5.) Extra Money

Additional income, which most working employees referred to as a bonus, is often a blessing.

It comes and goes as with the performance of the company which often correlates closely on the macroeconomic factors.

Most people will feel on top of the world when they receive additional income that they could spend on.

For some, they may even feel compelled to spend on things that they might not need and use that as an avenue to upgrade their lifestyle.

The problem comes when the season becomes dry and it left them feeling with a sense of helplessness trying to justify the lifestyle they have already upgraded.

Conclusion

Spending triggers happen to everyone at one time or another.

The key to avoid falling into the pit of spending triggers is to have a proper money management that you can rely on and allow you to fall back on.

Set yourself a realistic target and avoid social media as much as you can if you are one of those who have a low threshold tolerance of spending trigger.

With the convenience of online digital marketers reaching its consumers in this era, it's even more important to be able to resist the many temptations and to protect yourself against the fallpit.

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Dividend Investing vs Options Income Strategy - 3Fs Strategy

2021-03-22T00:21:00.003-07:00

I've been getting quite a bit of questions from some people who have been following my writing for some time and they noticed the recent strategy changes in my equity portfolio and so they wrote to me to understand the thinking behind the idea.

For those who are relatively new to my blog, my equity investing strategy for the past few years entails investing in dividend paying companies in the Singapore market (and more recently HKG market) while hoping for some sort of small growth as part of the overall capital appreciation.

I termed this as the "X+Y" strategy in my past article here or the "6+4"% strategy if you had attended my past talk during the 2018 BIGS Investing Conference.

Until today, I remain a huge believer of investing in dividend paying companies because of several fundamental factors which I will not talked about it in this article.

Like most people, my strategy evolves over time - and I am constantly opening my mind in pursuit of a better strategy that would fit my investing temperament and style better.

There is the CFD, a platform which I have been actively using for the past 4-5 years and activate whenever there is a huge market downturn and constraint for funds.

In the past year since I have also entered the US market, I have also tried out options investing and this will be the main topic which I will today compare and contrast the difference with dividend investing as both of them threw out similar characteristics in the form of cashflow.

I've been thinking for a while on how I can structure my answers logically because the strategy fits so well with my own philosophy that it feels very natural to me when implementing, yet it can be foreign to others.

I'll try my best and hopefully it makes sense.

In this article, I'll break down the comparison between these few categories:

Cash Flow Frequency
Predictability
Passiveness
Volatility
Risk Management
Leverage
Total Return

1.) Cash Flow Frequency

I'll start with a really easy one.

Both strategy entails you to receiving a consistent amount of cashflow strategy depending on the companies and timeframe you choose.

For Singapore dividend paying companies, the frequency is typically quarterly or semi-annually (quite rarely but there are some who pays out annually), and this can be a huge revolving benefit amongst the retirees who are likely dependent on these income to survive.

For options, the typical amount of cashflow frequency is 30-45 days (for maximum time-decay ROI) but you can structure it to be a bit earlier/later depending on your strategy.

Many investors, including myself, love the psychological benefits of receiving dividends or income as a form of cashflow as this amount of pot can continue to grow over time should you decide to reinvest them.

Winner: Both Dividend and Options Strategy

2.) Predictability

Most dividend paying companies (especially if you analyze through the fundamentals of the company to ensure the payouts are sustainable) are relatively predictable in nature. Not only do they give out at a certain recurring period, but also the amount or payout ratio that they give out to their shareholders. The precedence over this is you have to put your invested money in solid companies with strong fundamental earnings and balance sheet.

Occasionally, you might get once in a lifetime cut in the dividend like what we experience during Covid where most companies in traditional industries are struggling but they are usually short in nature and you should get them back up for stronger companies.

One thing which I really like about option investing (in this case, selling cash secured puts and selling covered calls) is that you get to set the amount of premiums income that you are going to get at the start regardless of where the market is going. Sure, you might "make a loss" if the amount of premium doesn't offset the falling/rising market price but you are supposed to be happy with your strike price if assigned/sold regardless.

Winner: Options Strategy

3.) Passiveness

Most people who embark on a dividend investing strategy did most of their initial research at the start and bought them for the long term because it will continue to pay them dividend for as long as they continue to own the business and the business remains relevant.

There is little to no need to having frequently revisit the thesis unless there are big fundamental changes to the company itself.

For option investors, there is a need to get a little bit more involved as you would have to relook and replace at the whole option premium risk model to get your trade set-up. For those who are looking at the shorter time-frame such as 14 days, then you'd need to frequently revisit again your set-up based on market conditions.

Winner: Dividend Strategy

4.) Volatility

The Singapore market tends to be a little more protected in terms of volatility movement as compared to the other markets thus the share price doesn't move as much as the investors is going to get from the opportunity. Still, at the peak of the crisis, some positions can get really interesting from the forward yield point of view for long term investment.

However, when compared to the options market in HK and US, it pales in comparison as the implied volatility for these premiums at the peak of the crisis can go extremely high, sending the returns really good from a risk-reward view. The GME implied volatility, for instance, at the peak of the times was more than 600% back then, but have since subdued down to around 300% at the moment.

Winner: Options Strategy

5.) Risk Management

Risk management can get a little tricky with both strategies because we are talking about a permanent loss of capital from downside should things go south from here.

Unfortunately, neither dividend nor the options strategy are insulated from downside risk, as investors who engage in both strategies are susceptible to losses if they didn't put a stop loss to their position.

For options however, you are able to get much better risk calculation should you decide to engage long on a call or put but this is a different strategy than what I have which I will talk and cover another day.

Winner: Can be both if applied properly

6.) Leverage

Leverage can be applied to both investing strategies, which can have a double-edged sword that can amplify either gains or losses and significantly increase/decrease your net worth and cashflow.

Maybank margin financing, for instance, is offering 3.3% p.a interests for Grade 1 SGD securities, which include some of the listed REITS under their purview. This can significantly boost the income you received from the dividends, especially if the companies yielded higher than 3.3% dividend yield per annum (which is not very difficult to find in SGX market).

For US stocks, IBKR offers competitive rate for margin financing for as low as 0.85% if you have an AUM of above $3.5m with them, or 0.98% for AUM above $1.5m. Even if you just have $25k with them, their margin financing is still competitive at 1.55%.

Options trading has an advantage in a way such that an investor can sell a naked put and they will not have to pay interests on the margin unless he or she is assigned to the stock. Even so, there are ways to get away with the margin interest such as rolling away the dates.

Winner: Options Strategy

7.) Total Return

Total Return will include the dividends received including any potential form of capital appreciation, if there are any. This goes back to my earlier strategy of talking about the "X+Y", where X is the dividend you received, and Y is the capital growth appreciation you can get from owning the business.

Investing in dividend paying companies during the peak of the crisis has its own merits.

Take for instance, a company which I've invested in during the peak of the Covid - Lendlease REIT.

During the peak of the crisis when the government announced a circuit breaker lockdown, Lendlease REIT has fallen from the pre-Covid price of 90 cents to 46 cents. If you had bought the REIT back then, not only will you be able to get a recurring 5 cents dividends from the REIT every year, you will also enjoy capital appreciation when the share price rebounds back. Today, the REIT is trading at a price of 80 cents, giving investors both dividend as well as capital appreciation.

For option investors who are focusing on the income generating strategy, the return is capped at the premium you know you are getting right from the start. One downside of this strategy is that investors will not be able to enjoy the upside should the company compounds its growth and continue to make its high.

In this regard, the potential total return favors the dividend investing strategy.

Winner: Dividend Strategy

Final Thoughts

There are multiple ways you can use to construct your own portfolio strategy but I find these two income generating strategy to best fit my profile and risk.

I like the very fact that I am keeping the strategy relatively simple and easy to learn for any beginners and it is something which I think almost everyone can construct within their own portfolio.

Clearly, at this point, I am also still receiving income from my full-time job and we also have rental income from the property we rented out (maybe not in terms of cashflow increase but definitely equity increase). I also do occasionally receive side-gig income from my writing.

These income generating multiple ways impacted us favorably month after month and I definitely can already see the snowball compounding takes a good effect to that.

I hope these explanations are useful and for those who wanted more clarifications or exchange on the ideas, you can drop me a comment in the link below.

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Mar 2021 - Portfolio & Transaction Updates

2021-03-14T05:05:00.005-07:00

No.	Counters	No. of Shares	Market Price (SGD)	Total Value (SGD) based on market price	Allocation %	Category
1.	Manulife Reit	100,000	US$0.70	93,000.00	26.0%	Dividend
2.	Lendlease Reit	85,000	S$0.79	67,150.00	19.0%	Dividend
3.	Starhill Reit	90,000	S$0.53	47,700.00	14.0%	Dividend
4.	Ascendas Reit	12,000	S$2.91	34,920.00	9.0%	Dividend
5.	Prime US Reit	30,100	US$0.80	32,000.00	9.0%	Dividend
6.	ISHARESHSTECH	1,000	HK$17.07	3,100.00	1.0%	Growth
7.	Ho Bee Land	300	S$2.40	720.00	1.0%	Leftover
8.	Options (IBKR/Tigers)	-	-	80,000.00	22.0%

Total				$358,590.00	100%	100%

I apologize for the lack of recent updates in the recent weeks as I was busy transitioning into a new job since late February. As there's more focus being given to the handover, I didn't manage to think much about writing as yet.

The month of March has finally given us a glimpse of opportunities of what the market can do to us. Within just a few days surrounding the fear of treasury yield going back up, we have seen an increase in volatility as rotation within sectors take place into the recovery sectors which include the laggards and badly beaten down banks, oil & gas, hospitality industry, and airlines.

With the increase in volatility across the market, I managed to do some rotations from within the portfolio itself to take advantage of the situation.

Portfolio Updates

I divested three of my lower-weighted non-REIT holdings in my portfolio as I began to raise for more cash.

The first divestment was Hotung on the back of very strong full-year earnings and an increase in dividends, the share price shot up by about 10% the day following the announcement. I was a little hesitant whether I was going to keep for the longer term, but I decided to divest it nevertheless given a better opportunity to park the funds elsewhere.

I also divested non-core holdings - Comfortdelgro and Netlink Trust, mainly to allocate them for better opportunities given that they are consolidating and are likely to return low single-digit return likely this year. CDG's dividend for full-year earnings was also somewhat disappointing and doesn't make up for the wait for now.

I took this month to load up on Manulife Reit after the share price was beaten down quite badly following the XD session. I still believe that this represents upside in both recovery play as well as USD strengthening, so I think there's a lot of story to like about Manulife and other US Reit going forward. For those who are curious about the recent updates on MUST, you can view my AGM article here.

I have also dedicated more of my funds towards the US market for this month as there seem to be some opportunities in the US market that I could take advantage of.

Most of the positions I have for the US market are currently in the options market with long-dated put options. Because these are derivatives leveraged positions and not direct positions, I will not update them here. However, if you are interested, you may follow my Facebook or Instagram page where I will at times update my live position there.

Networth Updates

Steady but slow - this is in stark contrast to some other position such as meme stocks or cryptocurrency.

The good silver lining is the equity portfolio is still climbing up slowly to a year-to-date high of $358,590 despite a slow start this year.

I am still positioning my portfolio to be extremely low risk in my opinion and I will continue to remain patient in waiting for the big moment to arrive where I will go take on a slightly more risk-on mode.

I am also waiting to receive the dividend payouts in later weeks this month which will be a good booster to the portfolio should we see further opportunities in the market.

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Taking Advantage of The Recent Tech Correction

2021-03-06T01:44:00.003-08:00

The recent tech correction has presented a delightful opportunity for some of the late tech entry players like myself as the market moves funds from some of these heavy tech names into value laggard stocks which have been battered heavily by the Covid-19 impact.

While we have yet to see a full-blown impact from the rotation (doubt it will happen), Nasdaq100 has just broken its weekly chart of EMA20 before closing the week right above the support.

Like many others who are delighted of such an opportunity, I have been aggressively positioning to take advantage of such recent correction, albeit through a sell put long-dated option which based on my computation, can return me great returns for this year.

As some of you might know, I have been putting my excess war chest in the recent weeks in GME, and thanks to the high implied volatility caused by the Reddit army, I have managed to secure low-risk high reward returns which I have blogged in the past few articles through a portfolio update. In fact, I considered this to be as safe back then as a fixed deposit element that I have no qualms putting all of my war chests into it while keeping the bulk majority of my position in the Singapore market intact.

With time decay working as a general characteristic of a put option in my favor, my plan was to take profits off the table when an opportunity landed on my plate and channel the funds through by switching positions. If there isn’t any good or decent enough opportunity, I can continue to wait for my options position at GME to expire.

This was what I have for my open position on Thursday (4th March).

With Tiger Brokers (and I believe all other Brokers as well) requiring a full 100% margin requirement for riskier play such as GME, AMC, KOSS, and FIZZ, it means I could suddenly free up my entire capital with a value above $50k should I decide to close out my positions.

What I Have Added Into My US Positions

Clearly, while the tech correction seems oversold in the past recent week, it is by large still relatively small as tech has enjoyed a very solid run towards the second half of 2020 until recently.

As such, I do not think it warrants a direct long position yet into the portfolio as there is a chance things could go further southward from here.

In such a case, I want to exercise higher prudence by not being caught out in this correction.

1.) Advanced Micro Devices (AMD)

The fundamentals of AMD look strong given its recent Q4 earnings and guidance.

Sales revenue top line grew 53% year on year while net profit broke the record with an over 900% increase year on year during this upcycle season. The company is still in the midst of winning more market share through the CPU and GPU market and is expected to be a growth driver in 2021.

From the chart, it broke through the weekly chart for EMA20 last week before resuming this week's downtrend testing the EMA50 support at $75.

Given the recent correction that sends AMD's share price down which resulted in an increase in implied volatility, the premium has been going up and it came to my alert as it descended towards the support line on Friday intraday.

Using this as a golden opportunity, I have opened a couple of contract positions in AMD by selling put on various intervals period from March all the way until Jul 2021, with strike price ranging from $75 to $77.5.

For instance, I managed to open a position when the market tanks during the intraday for the 16 Jul 2021 expiry at a strike price of $77.5 for a premium of $9.24. Translating this into returns, this position would yield me $9.24 / $77.5 = 11.9% in a span of 4 months, or 35% annualized.

The other way I could look at it is if I am somewhat assigned at $77.5 in July because of a bigger market correction, my actual average price would have actually gone down to $68.2 because of the premium I have already received.

I believe this is a pretty good deal from a risk-reward point of view.

2.) Fastly (FSLY)

Fastly has a pretty predictable pattern in the last few quarters as the company continues to remain volatile over the past few sessions leading up and after the earnings result.

For instance, based on the below appended monthly chart, you can see that share price has gone up to as high as $136 before dropping to as low as $62 during the post earnings of the previous quarter. The market then priced it up again to above $120 before sending the share price down again to as low as below $60 in yesterday's intraday trading session before closing off above the double bottom support.

Sensing this as an opportunity, I have also opened a couple of contract positions for FSLY by selling put on various intervals period from March to September with strike price ranging from $60 to $70.

To illustrate just how good the premium is, Fastly Put options expiring on 17th September 2021 with a strike price of $60 (I consider this to be relatively safe) are trading at $12.40 when I got it. Translating this into returns, this position would yield me $12.40 / $60 = 20.7% in a span of 6 months, or above 40% annualized.

For whatever reason in case I am assigned later in September, my average price for the company would have been at $47.6 considering the premium I have received. I think that's an insanely good deal and value for money.

In addition, unlike GME, Tiger only requires a 55% margin requirement for FSLY (not sure if the same with other brokers) which technically means your leverage returns would have been much higher because of this.

Again, from a risk-reward perspective, I think it deals with a pretty decent deck to option traders.

3.) Palantir Technologies (PLTR)

Palantir is another position I have been following quite religiously with all the contract winnings, the moat strength, the expiry of the lock-in period, and its busty valuations before the crash.

While there is a strong argument to its competitive moats and its dealings with the government agency, the Foundry business is one which they will face strong competition among its other commercial competitors as it appeals to its strong unique data system and analytic software to other commercial deals out there.

While growth remains on schedule in the next few years, I remain fairly cautious on its expansive valuations despite the strong moats it could bring to investors.

Palantir has been battered recently since the lock-up expiry, sending the shares down from their all-time high of $45 to the intraday low session of below $22 on Friday, before closing at $23.95.

Daily EMA200 and Weekly EMA50 support are converging, so I would think that this will be a good position to start going long.

Nevertheless, I have sold quite some contract positions at strike $18 for the 19 Mar expiry. I am also ready to turn direct long should the $18 support holds.

4.) Xpeng (XPEV)

Xpeng is another company I have started to open long-dated sell put option positions since the returns yield is rather enticing.

I have opened some considerable positions for the 15th Oct 2021 at strike $25 for a premium of $5.35.

I have also opened another position for the same period at a higher strike of $30 for a premium of $8.35.

It's not currently a big position and I remain skeptical over the entire saga surrounding the future of an EV vehicle coming into the market and the valuations of how much these companies should trade at.

Regardless, from a chart point of view, I believe the selling has been overdone and I believe the weekly EMA200 support at $26 should hold.

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Feb 2021 - Portfolio & Transaction Updates

2021-02-12T17:21:00.001-08:00

No.	Counters	No. of Shares	Market Price (SGD)	Total Value (SGD) based on the market price	Allocation %	Category
1.	Lendlease Reit	85,000	S$0.79	67,150.00	20.0%	Dividend
2.	Manulife Reit	60,000	US$0.72	58,000.00	17.0%	Dividend
3.	Starhill Reit	90,000	S$0.52	46,800.00	14.0%	Dividend
4.	Ascendas Reit	12,000	S$3.07	36,840.00	11.0%	Dividend
5.	Prime US Reit	30,100	US$0.81	32,260.00	10.0%	Dividend
6.	Netlink Trust	20,000	S$0.95	19,000.00	6.0%	Dividend
7.	Comfortdelgro	10,000	S$1.57	15,700.00	5.0%	Recovery
8.	Hotung	9,000	S$1.70	15,300.00	5.0%	Dividend
9.	Ho Bee Land	300	S$2.40	720.00	1.0%	Leftover
10.	Options (IBKR/Tigers)	-	-	50,000.00	16.0%

Total				341,770.00	100%	100%

It's the month of February and I am using the long CNY weekend to slide in some updates on the portfolio before I will commence my new job.

I tendered my resignation not too long ago and am in the midst of serving my notice period at my current company. It has been a great learning experience since I've been in the company pre-covid days and I wanted to take on a slightly different set of challenges in the role hence the move. With a heavy heart, I will be leaving some of the really good working colleagues and culture but at the same time excited to be joining a new adventure ahead.

In the past few weeks, we've seen a lot of dramas in the stock market.

Just when I thought Mr. Market Trump has left the office and we'll be back to boring days in 2021, the market never ceased to surprise me as the short saga surrounding the Gamestop and AMC caught the world's attention and has provided me with many days of entertainment the past couple of nights.

Contrary to the many out there who were "punting" about the next move on GME, and are likely losing sleep, I am taking this opportunity to boost a couple of dollars into the portfolio through options that I sold for these plays. I documented this opportunity a couple of weeks ago here if you are interested to read it. Below are some of my plays for GME which has still open dates.

Given how frothy is some of the valuations in the overall market out there I actually consider this one of my safest plays at the moment.

Separately, I have also written an article on one of Tiger's new products last week on global mutual funds - "Fund Mall" -> Here. Do check it out if you are curious about it.

3Fs "Fund Mall" Account

Portfolio Updates

Ok, quick portfolio updates for this month.

Basically, I took the opportunity to sell out a couple of my holdings and positions in the portfolio given how frothy and bullish the overall market is at the moment. Even though most of the bullish play is concentrated in the crypto and spacs, we can see just how easy it is to make money in the stock market these days that it feels very predictable. Furthermore, we've seen a lot of new entrants into the market and media covering how a 10 or 12 years old kid can make multi-returns in the past few months.

I think these are all signs that signal to me something and I wanted to be a little more cautious on my position such that I have tampered down on all my CFD positions to empty at the moment.

Most of my major REITs positions have announced results in the past few days so I am expecting a good amount of dividend to be paid out in the next few weeks. This will be a good welcome to boost the portfolio and to enjoy some dividend income.

I am not seeing too much opportunity in the market out there for a straight long position but am recently bullish on the freight and container companies out there which are seeing good demand and rates have increased pretty decently since Q4. I have some small position of play in a US company that is exposed to this sector.

Networth Updates

The equity portfolio continues to climb up slowly this month to $341,770, which is up from the previous month of $322,015.

While the goal is to continue pushing the portfolio upwards over time, I wanted to exercise caution so as not to get caught out when the eventual turn comes. That will just mean the portfolio return is likely to trail the others while I continue to look for some safe plays on the options side.

Meanwhile, if you are looking for a brokerage and research platform you may want to check out my experience using ShareInvestor WebPro and Tiger Brokers. These are my most commonly used platform for research ideas and transact platform.

Till then, stay safe, and continue to exercise prudence and caution out there.

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Invest Like a Pro During This Year With ShareInvestor WebPro

2021-02-09T17:32:00.004-08:00

Putting myself in the shoes of someone who has just started investing, it can be overwhelming to know where and how to start given the abundance of information we have on the internet to choose from.

Because of this, there is often information that was published that we were unsure if the source provided is correct, and this can be vital especially if you are relying on the information to make a key important decision to put your money on.

WebPro - is a one-stop web-based comprehensive information developed by ShareInvestor to consolidate all of this information into one single platform.

As an investor myself who spent countless hours each day browsing through the financials and information on the company, I can totally see the benefits of using WebPro in terms of efficiency and productivity.

These are some of the key features of WebPro which I personally find useful and interesting:

Fundamental Analysis

Webpro features a comprehensive profile on the company's fundamental and financial information that would please a fundamental investor's desire to deep-dive into the analysis.

The table appended below shows how the Profit & Loss, Balance Sheet, and Cash-Flow information are presented in a single chart, which provides an easy quick glance for investors to make an informed decision.

The Financial Ratios chart is also very useful because it embedded very comprehensive lists of ratios that would be important in an analysis such as the Price/Free Cash-Flow, Cash Conversion Cycle, Inventory Turnover Ratio, Debt to Equity, Cash Ratio, and many more.

The platform also allows investors to compare the performance of up to 10 stocks at a single time.

This could be particularly useful if you are trying to compare the financial metrics of different companies in a sector (e.g banks).

Insider Trades

According to SGX Listing Rules, companies are required to disclose material information pertaining to substantial shareholder's buy or sell trades once the shareholder's stake exceeds the 5% threshold. This will allow minority investors to have a transparent view of what is happening and make key important decisions to their stakes.

To find out this information, investors may head to the SGX website, go to "Securities", and then under the announcement select "Disclosures / Change of Interests".

While the SGX website is able to allow investors to view this information openly, investors can alternatively use the Webpro feature to view this consolidated information easily.

To view the insider trades, go to "Fundamental", then select "Insider Trades".

For instance, in the table appended below, Yangzijiang (BS6:SI) has insider trades on the 7th January 2021 this year, while the previous one before that was on the 2nd March 2020.

Investors may view insider's trades as positively or negatively depending on the decision and number of shares the trade was made.

Seasonality Monthly Chart

One thing I particularly like about the Webpro feature is the Seasonality Chart which breaks down the historical return of a company by each month for the past 10 years. The Seasonality Charts returns are calculated using the adjusted historical data - which means the adjustment would have taken into account the likes of any rights issue, bonus issuance, share splits, and dividends paid out.

This is important for some industries because certain parts of the year might be more cyclical than others (e.g: retail, e-commerce). Some companies may also return better during the period before they report for their full-year earnings, so these are small clues and patterns which you can investigate further.

For instance, Jardine Cycle & Carriage tends to perform better historically in the months of April and December as compared to the other months. This could be because it coincides with the peak season sales of their automotive industry in December and also upon the announcement of their full-year earnings in early March which they will usually announce also a dividend declared.

C2 Chart

The C2 Chart is an interactive charting tool for technical analysis that allows traders to plot indicators such as Moving Average (MA), Average True Range (ATR), and Donchian Channel Indicator.

The ATR14 is an indicator commonly used to track the level volatility in a particular stock. It is taken by taking the greatest of the current high less the current low, the absolute value of the current high less the previous close, and the absolute value of the current low less the previous close. Simply put, a stock with a higher level of volatility spread will have a higher ATR, and a lower level of volatility stock has a lower ATR.

For instance, you might notice that DBS tends to have a higher ATR than its peers such as OCBC.

When the market is bullish, DBS is exhibiting a higher ATR14 than OCBC, and the same characteristics vice versa when the market is going down. This suggests that investors who are invested in DBS will experience a larger spread price movement than its counterpart in OCBC.

DBS Chart

OCBC Chart

The C2 chart also features popular break-out indicators such as the Donchian Channel strategy.

The Donchian Channel indicator is a strategy play that tracks the upper and lower band of a particular stock movement that provides a signal on potential breakout or breakdown movement.

The Donchian Channel has 3 parts:

i.) Upper Band: 20-Day High

ii.) Middle Band: Average of the Upper and Lower Band

iii.) Lower Band: 20-Day Low

The default setting for the Donchian channel is 20 days but you can change it to 50 days if you like slightly mid to longer term.

To identify breakouts, look out for intraday movement of the stock that crosses the band of the Donchian upper band, as indicated in the charts below.

This yields a better result if you have a higher volume and lower ATR than the normal trading period.

As you can see in the Micro-Mechanics example below, the stock gave a couple of potential breakout signals in Jul, Sep, Oct, and early January this year before the big run-up.

Screener

One of my favorite features in WebPro (apart from the C2 chart), is the ability to screen for companies.

You can do this by screening bottoms-up where you filter for certain criteria that you like such as dividend yield > 5%, ROE > 10%, Debt/Equity < 30%, and then the screen will filter out for you.

What I particularly like as part of the portfolio series in screening is that they have already pre-selected the metrics for you depending on the style of investing you are as an investor.

For example, if I am a trader and a momentum follower (which I am mostly for overseas stocks), I would be interested in selecting the trend following metrics.

The screen will then filter based on the few key metrics such as RSI, ADX Trend, Bullish ADX, and Moving Average and return lists of stocks that meet this criterion.

The screener also has very specific pre-selected defined templates based on the requirement you want to generate the lists of stocks you desire. I have so far tried out bullish reversal stocks, so I'll be looking to try out the rest in due time.

Final Thoughts

WebPro is a very useful platform that I tend to use on a daily basis when I am searching for information and doing chart analysis.

The great thing about the platform is it covers a wide array of overseas stock markets as well as on top of the local Singapore market. So if you are someone who is keen on investing in the overseas market (my wife is interested in the Indonesian market), she is able to also use the chart and information on WebPro.

If you are keen on trying out some of the features themselves, do head down to the sign-up link here Membership Subscription - ShareInvestor.com with a 3F Coupon Code / Promo Code (SG3FFF) that will allow you to enjoy a $10 rebate, so don't forget to use it when you check out.

After the $10 rebate off using my promo code, you are now entitled to only pay $221.80 when you sign-up for the 12-month subscription service. This is only equivalent to about 60 cents per day (which is like a cup of coffee that you order from your neighbourhood hawker these days).

So have a go and try it. You might get savvier in your investment this year.

Disclaimer: This post is a collaboration with ShareInvestor but all opinions stated are purely mine based on my own experience using WebPro.