In May, They Sold, I Bought & I hope I am right

In the investment world, there is a saying “Sell in May and Go Away”.  May 2019 was no exception, if you had shorted STI index on 30 April and bought it back on 31 May, you would have gained 8% in value.

And this saying seems to have some basis. According to Investopedia, the Dow Jones Industrial Average had an average return of only 0.3% during the May to October period in the years 1950-2013. In contrast, it had an average gain of 7.5% during the November to April period.

I can’t say I am a believer of this saying but personally, as a long term income investor, if it happens, it may surface good opportunities for me to accumulate shares of good quality companies.

And this is precisely what I did last month.

The Singapore banks were hit badly. Within a month, the value of their share prices dropped by about 15%. I sensed an opportunity and decided to add more banks shares, in particularly UOB. I am looking to UOB;s 50 cents dividend next quarter while DBS is expected to distribute 30 cents only. Furthermore, UOB share price is cheaper in absolute terms and the projected yield is higher because both banks are expected to maintain their $1.20 annual dividend.

I also loaded up on property counters – Capitaland and City Development. They had declined by about 8%. Capitaland is a much stronger company now after its merger with ASB and I think this downgrade was excessive.

I bought OUE too, hoping to take advantage of the 15% decline in a month. Furthermore, I notice that OUE has been selling assets and I have this feeling that they will do a special dividend distribution again and return money to their biggest shareholder, who is in a little bit of cash crunch currently. The proposed plan to combine the 2 Reits under their management – OUE Commercial and OUE Hospitality – should also bring a windfall to them.

Last but not least, guess what, I bought Eagle Hospitality Trust at 70 cents, almost 10% off their IPO price. At 70 cents, the projected yield is almost 9% and Price/Book Value is about 80%. While there are several parts about Eagle Hospitality Trust that I don’t like, I think it should be relative “safe” at this price.

What else did I do … oh yes, I trimmed my holding of Q&M slightly. I have accumulated and built up quite a sizable holding of Q&M over the last one year by averaging my cost down. It seemed to recover a fair bit lately and I observed that there seemed to be some “invisible” support at 52 cents level – maybe it is the CEO who has been building up his stake. He knows about the company operation and its potential much more than us. i am still happy to hold a large stake of Q&M in my portfolio, so recent action is more to reduce exposure 🙂

I also took a small position in Clearbridge … if you have been following this company, it has been extremely active lately with setting up new collaboration, doing acquisition and raising funds. I like a company that is active in growing their business. I hope they will eventually manage this steep growth trajectory well.

Are these good decisions? I don’t know but I hope so.

However, I am more comfortable to acquire them (banks, property) at this price than what was a month or two ago. If their share prices continue to decline, I will probably dip into my war chest and accumulate more.

This is the main difference between a trader and a long term income investors.

I look at value and dividends with a longer term perspective. If I were a trader, I would have shorted and bought them back later down the road.

I am keeping my finger crossed and hope these decisions will turn out well.

Have a great holiday today for those of you who have a public holiday.

Have a great investment week too.

Stay safe

Regards,

Warriortan