Portfolio

Why we sell the stocks even if we still like the companies
SINGAPORE (Apr 22): Let me start by wishing our Christian readers a blessed Easter. This week, I would like to take a bit of space to explain why we recently disposed of several of our investments, some at a loss. We make big mistakes too, and it highlights the limitations of investing based on data analytics. We decided to cut our losses in DIP Corp, a stock that we have held since the ...
We are adding three US consumer-related stocks based on our contrarian view
(Apr 12): Last week, I talked about why US consumers may well be the key driver for near-term global growth, contrary to widely held views. To very quickly recap, thanks to a decade of deleveraging, in the aftermath of the global financial crisis, US households have rebuilt their balance sheets. Household debt now stands at only 71.3% of GDP, down from the peak of 98.6% in 2007. Crucially, debt ...
US consumers may drive near-term global growth, contrary to widely held views
(Apr 5): More words of caution from the US Federal Reserve on the US economy as well as weak manufacturing data from around the world triggered yet another bout of investor panic over recession fears in March, albeit a relatively short-lived one, as it turns out. That said, we could very well see a repeat of similar volatility in the coming weeks and months. The sharp selloff in equities also ...
Perpetual securities are debts, not equity. Here's why
(Apr 1): If it walks like a duck, quacks like a duck, looks like a duck, swims like a duck, then it probably is a duck. Why are companies so intent on classifying perpetual securities (perps) as equity, instead of what they really are: financial liabilities or debts? Looking at a simplified balance sheet and profit-and-loss statement of a hypothetical company (see Table 1) provides the ...
Leverage is fine if you are not ignorant
(Mar 25): To borrow a quote from Warren Buffett: “When you combine ignorance and leverage, you get some pretty interesting results.” Followers of this column would recall that I spent the past two weeks discussing prevailing reporting standards for financial statements and how they can, at times, make it more difficult to determine the underlying fundamentals of a company. Most ...
Total compliance in financial reporting, but was it misleading?
(Mar 18): Last week, I talked about how it can be difficult to interpret published financial statements because of overly ambitious objectives of the accounting profession, evolving reporting standards and the resulting vagaries that could sometimes translate into risky propositions for those relying on them to make investing decisions. This is made worse as financial instruments get more ...
Financial reporting: Myths, interpretations and limitations
(Mar 11): A majority of companies have financial years ending Dec 31. Most would have just finalised or are about to release their FY2018 results. They make headline stories, such as “earnings doubled” or “collapsed in earnings” and these are linked to stock price performances on the stock exchange, for publicly traded companies. It is as if these accounting numbers, as reported in the ...
Falling margins will hold back stock price gains
(Mar 4): Stocks around the world chalked up a second straight month of gains in February. This means that after having suffered one of the worst losses since the end of the global financial crisis in late 2018, markets are now enjoying some of the strongest starts to a new year. The world’s most closely watched bellwether, the Dow Jones Industrial Average has rebounded some 20% from last ...
Investing in late-cycle earnings growth
SINGAPORE (Feb 25): Positive news flow on the ongoing US-China trade talks continued to buoy sentiment for global stocks over the past week. Following reported progress after days of negotiations in Beijing, further discussions have resumed in the US. Clearly, markets have now priced in some sort of deal to avert another tariff hike or, at the very least, an extension to the March 1 ...
A fool's errand
SINGAPORE (Feb 18): Should we panic over a Treasury yield curve inversion? Investors worked themselves into a tizzy in early December last year, sending stock prices tumbling around the world. That was when the Treasury yield spread fell sharply (see Chart 1), to the lowest levels since the global financial crisis. For those unfamiliar with Treasury yield spread, it is the difference ...