FY2008 Summary & Review

FY2008 is characterized as a tumultuous year, nothing short of explosive incidents. The Housing bubble in the US and the financial greed in Wall Street caused great mayhem in the Financial Institutions all round the world, with many of them going under. Great names like Bear Sterns, Lehman Brothers and Merill Lynch became nothing but a footnote in history as they went under or forced to seek refuge. Even countries like Iceland (had to be bailed out with loans of 2.1 Bill from IMF and 2.5 from othe Nordic countries) and Turkey need IMF infusion.

Many billions and trillions were lost in this year as we see many stock market crashed in one of the worst financial crisis and looming economic crisis.

DJI 13044 8776 -32.7%
S&P 1447 903 -37.6%
Nasdaq 2610 1557 -40.3%
Nikkei 14691 8860 -39.7%
HangSeng 27560 14387 -47.8%
STI 3461 1761 -49.1%

As we see that even though the Financial crisis emanated from the US, everywhere else is hit as liquidity dries up, and export roriented economies like Japan/China/Singapore gets hits badly.

I had already anticipated the a big downward movement in the stock market last year (see my post in August/September 2007), cashing out most of my stocks. However I was lured in March again when stocks dropped 20% (STI) and some stocks I was eyeing dropped 30-40%.

It was a bad move, as with PE of 5 was not a sufficient buffer, where companies can drop to a PE of 2.5 ~ a 50% drop.

My portfolio in FY2008 is down 5.9%, ending with a 43.5% in stocks, 11% in FD and the rest in cash 44%. However, my performance should not mask my longs which was massacred, down 50% to 80%.

My biggest company 39% Celestial is now priced at 37 cents, at a PE of 2.5. It is fundamentally sound and although it is expected to be hit with the current downturn, I believe it is a multi bagger in the making. It has a strong brand recognition in the retail market for their beverages and nutrifood. With its new investment in candies and protein milk, I believe it can capture greater market share and propel to greater heights. In a downturn, I will probably have to aim for PE of 3 for small caps.

My next company is SMRT 3% now price at 1.65. I was holding it and expecting to average down but did not due to its PE is still high 15 . However it is recession proof which will give me a dividend 4.7%. Some things to consider, tourists numbers are falling, in recession, more people will stay at home in Singapore. Some people may give up their cars for public transport.

Macquerie now consists 0.6% of my portfolio, dropping from 1.02 to now 0.295 . It is indeed a horrible drop. I have thought that with a infrastructure fund, it is relatively recession proof. What went wrong ? This is actually a fund investing in infastructure. Thus, it has a debt of its own + its investment have extra debts of their own. In a credit crisis, it will have a double whamming, where both the parent fund and the subsidary itself will have to face risks of refinancing. Where to go from here ? MIIF has indicated that it will pare down debt and reduce its payout ot 3 cents half yearly. This translates to a dividend of about 20%. I have not made too much movement because by the time I realise this, it is a bit too late. At this price, it is not worth selling. If this goes down further, I may contemplate averaging down. Lets see what 2009 brings.

Darco dropped 83% from my purchase price of 34 cents to 6 cents. It has a high visibility of book orders and have been making inroads in Middle East. What went wrong ? A poisonous convertible which is highly disadvantageous to Darco. The agreement lets the issuer convert shares at a discount at at the market and they can just dump it in the open market. The conseqences shows that the share price plunging with itself a not very liquid stock.
Why did they go into such an agreement ? I have really not much idea, maybe it was hard to raise money. This consists 0.2% of my portfolio.

My strategy this year was to keep most of it in cash, but divered to buying stocks and shorting futures. My latter strategy did not do too well, as my longs was around 60-70%, and shorts around 30-40%. My longs also dropped about 50% while my shorting of indexes only dropped 30-40%. What helped me was a trading strategy and pure luck where I was able to hold my shorts where they made the most movement. It is luck as there were many times I wanted to close my shorts when the stock market went down quite alot. For eg, I was luckly to have a position in place when the FED initially did not approve the 700 billion bailout. The major markets dropped 6-7% that night.

Since last christmas it has been rallying on low volume. I closed my short (from the announcement of the Auto bailout S&P 890) at 868. I expect that stock market should recover after a horrible Aug till Nov. With volume light, stock market might be trending up. Anyway the risk is getting higher for shorting and I have to be careful about shorting.

For 2009, I believe we are not out of the woods yet. It will be another challenging year and expect another volatile season. Obama will be inagurated as President of US on 20 January, and will be expecting Congress to sign the stimulus package.....

Here wishing my family and friends a Happy New Year.... good health and prosperity