Thursday, 28 April 2016

Stocks I would recommend to friends (Which pictures and stock picks!)

I get this question alot

1. I just started working
2. I have 10-20k
3. Where do I park my money, without caring too much about it?

Of course, the actual answer is to shove it in some savings plan, or cpf 'shudders'. If you are not sure where to get a savings plan, just sit in a square outside raffles mrt and get swamped by insurance agents in seconds.

But if you don't want to take the difficult path of buying stocks yourself, here is my recommendations that I would give to my friends based on investments that

1. Have predictable earnings and dividends
2. Have low downside risk
3. Doesn't do anything.


Recommendation 1: Corporate bonds



I would recommend DBS 4.7% preference shares which gives a nice 3.06% cash yield 
(a simple way to think of cash yield is that if you invest $107.6 now, the dividends and $100 you get back when DBS redeems it at par will give you 3.06%)

This mainly because of its
1)Long call date (4.57 years till you have to decide what else to do with the cash)

2)Too big to fail quality (if DBS can't even pay if preference shares, which it has to pay before its dividends then the whole Singapore is in trouble)

If you want to stretch for more yield Genting 5.125% would be great (5.5% cash yield), just that the company has an option to call it back in 1.5 years. The great thing is that casinos are simply money generators. The simple dumb model of casinos are....

1) You spend alot of cash to build the casino
2) you spend little cash maintain the casino
3) you wait for the cash to roll in, even if the cash doesn't roll in your maintenance is so low, that you have excess cash.


As you can see, it spends loads of cash to prepare for its opening in late 2009, after that the casino just literally spews out cash.

Recommendation 2: Vicom

This stock does nothing. Its a bit on the high side atm with a 3% dividend yield only, but if you want a sleep easy stock, this is it. No one covers it, so no one cares about its earnings, which has not been the most exciting. It business is just slapping 'certified' on cars and collecting a cheque which it then gives to you.


Its free cash flow per share vastly outstrips its dividends per share too, ensuring that your dividends are safe, unlike reits


Look at the growth of the cash pile! This company literally has no idea what to do with it!


Recommendation 3: STI ETF when the index is below 2.8k

Look at the nice line!



Actually, the perfect buying price is when the index is at 2.6k. But if you can't wait 2.8k is fine too

But besides drawing lines, usually when the STI hits 2.8k its price to earnings ratio is at 12x, slightly cheaper than its 5 year average of around ~13x, of course ifs earnings keep falling (like it is now) you may want to stagger your buying (dollar cost average). Also 3% yield

Recommendation 4: Singtel when it hits 5% yield ($3.5)

Despite being the bluest chip of the blue, I actually hesitate recommending Singtel, because Singapore telcos have really been earning above average roe than its peers, and its 4th telco entry may lead to a structural decline. Sure you can say Singtel is diversified, but it still gets 50% of its operating income from Singapore


Of course Singtel is never going to back to the levels of 7% yield anytime soon (that was as the smartphone boom has never taken off yet). But if you take levels from 2013 onwards, then investing at 5% yield seems pretty comfortable.

Disclaimer:  Yes I know that the returns I'm promoting are pretty pathetic, but if you have friends that literally know jack shit, these are my top few picks that are most likely to gain steady returns, without suffering much volatility. 3-4% a year isn't saying much, but hey the STI has returned an amazing -8% if you invested in it 5 years ago (April 11)

13 comments:

  1. REITs arent recommended because of rights/placements? Thanks.

    ReplyDelete
    Replies
    1. Not really, the reasons why reits aren't recommended it has a higher chance of capital loss then the other investments i listed above.

      Of course a dividend buffer would help, but a thing to note for reits is that a dividend cut would heavily impact both a reits payout + stock price

      Delete
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      Delete
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      I am writing this Testimony because am really grateful for what Martinez Lexie did for me and my family, when I thought there was no hope he came and make my family feel alive again by lending us loan at a very low interest rate of 2%. Well I have been searching for a loan to settle my debts for the past three months all I met scammed and took my money total 6,500usd until I finally met a God sent Lender. I never thought that there are still genuine loan lenders on the internet but to my greatest surprise i got my loan without wasting much time so if you are out there looking for a loan of any kind for business or other purposes i would advise you to email Mr Martinez via: ( Lexieloancompany@yahoo.com ) or through the Company website: http://lexieloans.bravesites.com OR text: +18168926958 and be free of internet scams. thanks… Jenny Hills CA, United State


      Delete
  2. Hi LX,

    Tks for the very useful info. Just one imaginary question, since DBS pref is non-cumulative, if DBS decide not to pay dividends what will happen?

    If that is the case, is bond a better option compared to pref shares if all remain equal?

    Just curious on ur answer?

    ReplyDelete
    Replies
    1. If it decides not to pay on its preference shares means it can't declare dividends for its normal shares, which probably means dbs is going to collapse along with the rest of singapore.

      And yes if all else is equal a bond is always a better option

      Delete
    2. Testimony On How My Life was Transformed (Lexieloancompany@yahoo.com)..

      I am writing this Testimony because am really grateful for what Martinez Lexie did for me and my family, when I thought there was no hope he came and make my family feel alive again by lending us loan at a very low interest rate of 2%. Well I have been searching for a loan to settle my debts for the past three months all I met scammed and took my money total 6,500usd until I finally met a God sent Lender. I never thought that there are still genuine loan lenders on the internet but to my greatest surprise i got my loan without wasting much time so if you are out there looking for a loan of any kind for business or other purposes i would advise you to email Mr Martinez via: ( Lexieloancompany@yahoo.com ) or through the Company website: http://lexieloans.bravesites.com OR text: +18168926958 and be free of internet scams. thanks… Jenny Hills CA, United State


      Delete

  3. Hi LX,

    Yes, I get what u mean about the DBS. And I am sure u know and I hope u do not mind that while DBS NCPS is a good deal, but perhaps there are more things readers show know, so they are not mistaken.

    Theoretically if a company do not pay dividends it does not means it's going to collapse. Eg DBS may for some reason do not pay dividends on a particular year due to some reasons.

    Unlike Bond, if a company does not pay its interest payment that may spells problems.

    Moreover something which I think it's good to highlight is Preferential Shares is perpetual which means no maturity date and DBS has an option not to recall it back

    This means again "theoretically" there is no certainty that u can redeem at par unlike bond.

    As I have not read the entire booklet of the DBS 4.7%, I am saying above base on what I know.

    Just curious if this is the correct case?

    Always good to learn together!

    ReplyDelete
    Replies
    1. Yep yep there is a risk.

      1) For DBS, a stock that has been constantly paying out dividends, cutting or not paying is A HUGE SIGN that the stock is in trouble.

      DBS management knows this and will not allow that to happen unless in really crisis scenarios

      2)Yes DBS has the option but not the right to call it at 2020. Generally, the bank will call back when the prefs interest rate is higher than the prevalent rate and vice versa.

      As the excel table assumes that the prefs gets called back at par, a hidden risk is that interest rate shoots up by so much (think 6%) which may cause the prefs to trade below par

      Delete
  4. Thanks,for the very sound advice.

    ReplyDelete
  5. Warm greetings. I was wondering if SingSaver.com.sg can contribute weekly editorials about personal finance? Thank you so very much, Kat.

    KATRINA KARIM
    VICE PRESIDENT, COMMUNICATIONS
    SingSaver.com.sg Ι Singapore’s #1 financial comparison platform
    A part of the CompareAsiaGroup Ι Asia’s #1 financial comparison platform
    Mobile +65 9844 6618 Ι Email katrina.karim@singsaver.com.sg Ι Skype katrinakarim1 Ι LinkedIn http://bit.ly/1nJ2Nxg

    ReplyDelete
  6. Testimony On How My Life was Transformed (Lexieloancompany@yahoo.com)..

    I am writing this Testimony because am really grateful for what Martinez Lexie did for me and my family, when I thought there was no hope he came and make my family feel alive again by lending us loan at a very low interest rate of 2%. Well I have been searching for a loan to settle my debts for the past three months all I met scammed and took my money total 6,500usd until I finally met a God sent Lender. I never thought that there are still genuine loan lenders on the internet but to my greatest surprise i got my loan without wasting much time so if you are out there looking for a loan of any kind for business or other purposes i would advise you to email Mr Martinez via: ( Lexieloancompany@yahoo.com ) or through the Company website: http://lexieloans.bravesites.com OR text: +18168926958 and be free of internet scams. thanks… Jenny Hills CA, United State


    ReplyDelete