Monday, 19 February 2018

Areas Where We Saved for Our House Purchase

I have never been a fan of property investments, mainly because of the demographic changes that Singapore will face in the next few decades. See A Prediction About Properties 13 Years Ago for more information. Yet because I am planning to get married, I have no choice but to get a property of our own. I could not possibly be telling my girlfriend "let's not get married now, considering property prices are so high. 5 years later would be a better time, and 10 years later would be even better". You can guess what would be the outcome if I said that. So, no choice, we had to look for a property. After considering each other's preferences and aspirations, we decided to look for a condo first, before looking for a HDB flat if no suitable condo came up.

The area we looked at is somewhere in between where both our parents are staying. There are a couple of condos in the area, some are more than 10 years old while others are still being built. To simplify the discussion, we will just discuss 3 condos, let me call them Condo A, which is 10 years old (as at last year when we were house hunting), Condo B, which is 5 years old, and Condo C, which is still being built. The types of units we considered are 2-room, 2+study and 3-room. All 3 condos have these units.

Thankfully, we found a 2-room unit in Condo A that we both liked. It turns out that it is also the lowest-priced condo among all the possible permutations. After we bought the condo, I checked the average price transactions for the past 1 year (Jan 2017 to Jan 2018) for the 3 condos on SRX, a portal for buying, selling and renting properties in Singapore. There is quite a large price differential between the different condos and unit types.

However, before I discuss the price differentials, there are a few things to take note. Firstly, the floor area is not the same for different condos even though they may have the same no. of rooms in the units. Based on the 3 condos being discussed, the newer condo tends to have smaller floor areas. To make the comparison more meaningfully across condos, I compare using floor area of the unit instead of how many rooms the unit has. Secondly, while the floor area of an unit is well-defined based on the information from SRX, the no. of rooms is not so certain. There is some guesswork whether the unit is a 2-room unit or 2+study unit based on the floor area. Thirdly, as Condo C is still being built and sold, there are a lot more transactions than the other 2 condos. Its prices will be more reflective of the rising investor sentiments compared to the other 2 condos. On average, Condo A has 3.1 transactions per month, Condo B has 1.6 transactions, while Condo C has 12.2 transactions.

Below is a summary of the average transaction price (not price per square foot) of the condo units, by no. of rooms and floor area respectively.

Rooms Condo A Condo B Condo C
2 $953 $1,000 $1,027
2+Study $979 $1,039 $1,091
3 $1,182 $1,277 $1,226
4 - $1,546 $1,532
5 - - $1,717

Area Condo A Condo B Condo C
701-800 - - $1,027
801-900 $953 $1,000 $1,091
901-1000 $979 - $1,226
1001-1100 - $1,039 -
1101-1200 $1,182 - $1,532
1201-1300 - $1,277 -
1301-1400 - - $1,717
1401-1500 - $1,546 -

Size Differential

As mentioned, all 3 condos have 2-room, 2+study and 3-room units. In condo A, compared to a 2-room unit, a 2+study unit is $26K more expensive on average while a 3-room unit is $229K more expensive.

Across condos, the price differential generally tends to be larger for new condos, at least for the 3 condos discussed. 

Age Differential

For a unit with a floor area of 801-900 square foot (equivalent to a 2-room unit in Condos A and B, but a 2+study unit in Condo C), compared to Condo A (10 years old), Condo B (5 years old) is $47K more expensive and Condo C (still being built) is $138K more expensive.

Similarly, the larger the floor area, the larger is the price differential across condos. For a unit with floor area of 1101-1200 square foot (equivalent to a 3-room unit in Condo A and 4-room unit in Condo C), the price difference is $350K.

Other Differentials

The above 2 factors are only 2 out of many factors that can affect the prices of the units. Some of these include whether the unit is facing a beautiful water body like river/ lake/ reservoir, height of the unit, etc.


Within the limits of affordability and loan eligibility, we did not use price as the yardstick. But by choosing an older condo, we saved $47K to $138K for an equivalent unit of 801-900 square foot and by choosing a smaller unit within the same condo, we saved $26K to $229K. In total, we saved anywhere from $26K to $324K, depending on which unit is being compared against.

There is probably another area that we save money on, but it could have been reflected in the higher prices of the condos. I prefer that the condo we buy must be within walking distance of a MRT station. This way, we save on not having to own a car. A car could easily cost $100K, not to mention the running costs. Since a car can only last for 10 years, we will probably need 2 cars to last us until we retire, so that translates to another $200K in future savings at the minimum.


I still believe that properties are not good investments over the long run. But sometimes, you just cannot choose the timing of your purchase. And thankfully, we found a condo that we like and can afford with a loan.

Last but not least, wishing all readers a Happy and Prosperous Chinese New Year!

See related blog posts:

Sunday, 11 February 2018

Are There Stocks That Can Withstand A Crash Better?

Stocks tanked this week. When I was mulling over whether I should move 22% of my money into 1 stock, Global Logistic Properties (GLP), in Nov 2015, I wondered what would happen if the stock market were to crash. Are there stocks that could better survive a market crash of the same magnitude as the 1997 Asian Financial Crisis or the 2007 Global Financial Crisis? In the end, I reasoned that there are 2 categories of stocks that could withstand a crash better than others: undervalued (or at least not overvalued) growth stocks and dividend stocks.

Growth stocks are stocks of companies that are growing over the long term. If a company could grow over a long period of time, it is a matter of time before the company doubles or triples its earnings and/or book value. Hence, even if a severe market crash were to happen and wipe off 50% of the stock price, the stock price at the bottom of the crash would not be too far off the price that you bought, since the earnings or book value would have doubled. As an example, GLP managed to grow its book value from USD1.33 in 2011 to USD1.78 in 2016, representing an annual growth rate of 6.0%. At this growth rate, it will double its book value in 11.9 years. If a crash were to happen 11.9 years later and cut the prevailing Price-to-Book (P/B) ratio by 50%, I still would not have lost money. Thus, it was with this thinking that I decided to take the risk of moving 22% of my money into GLP. 

Having said the above, there are a few important things to note. Firstly, the company must be growing over the long term. It is no use if the growth is limited to a few years only. The company would not be able to grow its way out of a severe stock market crash. Secondly, the holding period must be long enough. As the example above shows, it will take 11.9 years for GLP to double its book value, assuming it can maintain the growth rate at 6.0%. If the stock were to crash the day after I bought it, I would be losing a lot of money. Thirdly, the growth stock must not be overvalued in the first place. Using P/B valuation as a example, if the average historical P/B ratio is 2.0 but the stock is purchased at 3 times book value and the stock falls to half of the average historical P/B ratio (i.e. 1 times book value), it will take more than 11.9 years to grow its way out of the crash.

There are other psychological benefits of investing in a growth company in a market crash. Even though the stock price might be declining, if you know that the management is doing a good job growing the company, you will feel assured and not sell the stock in a panic during the crash. This is very important in countering the fear that most investors feel when the market crashes.

Having undervalued growth stocks is relying on the company management to get out of trouble. If you do not have a company with good management, you will need to rely on yourself. This means bargain hunting at the depth of the market crash, which requires additional capital beyond what you have already invested. This additional capital can come from either (1) your salary, (2) war chest, or (3) accumulated dividends. The first 2 methods do not need further explanation. For the third method, you just save the dividends collected from the stock during good times and re-invest them when the market crashes. For example, if the stock pays 4% dividend yield and the stock crashes to half its original price, you will need to collect and re-invest 12.5 years of dividends to maintain the value of your investment in the stock. Obviously, the higher the dividend yield, the less number of years of dividends you need to accumulate.

Similar to the growth stock approach, there are a few important factors to note. Firstly, the dividends should be fairly constant in good times and bad times. There are stocks that have high dividend payout ratios but volatile earnings. The dividends they pay are equally volatile and contribute to the volatility in stock prices. In contrast, a stock with fairly constant dividends behaves like a bond and reduces the volatility of its stock price. The lower the stock price goes, the higher is the dividend yield, which would attract other investors to buy into the stock. See What Can We Learn About Stocks From Bonds for more information. Secondly, the stock should not be overvalued in the first place. The more overvalued it is, the lower its dividend yield is, the more number of years of dividends you need to accumulate.

What about other stocks? Can they withstand a market crash equally well? Undervalued stocks will fall less, since they are already undervalued compared to other stocks. However, for an undervalued stock to rise to its intrinsic value, it will take many years and likely requires a catalyst. For cyclic stocks, in all likelihood, the industry downturn will coincide with the stock market crash and you end up with a double whammy -- low earnings, dividends and limited interest from investors.

Thus, before you invest in a stock, have a plan to decide what you would do with it in case the market crashes. It will save you from panic. Good luck!

See related blog posts:

Sunday, 4 February 2018

Potential Replacements for GLP

After it became clear that Global Logistic Properties (GLP) would be privatised, I have been looking for a replacement. The investment thesis for GLP is that it has a REIT manager business model, constantly developing new logistic properties and spinning them off into REITs and private equity funds. The more properties it spins off into REITs and funds, the less it owns them, and the more it resembles Uber, which owns no taxis but is considered the world's largest taxi company. See The GLP Story for more information. Thus, when I look for a replacement for GLP, I am looking at a company with a similar business model.

The easiest leads would be to look at the REITs listed on SGX and identify who are the REIT managers behind them. There are a couple of REIT families, managed by ARA, Ascendas, Capitaland, Frasers Centrepoint (FCL), Keppel Corp, Lippo/OUE and Mapletree. Among the names mentioned above, only Capitaland, FCL, Keppel Corp and OUE are listed on SGX. Keppel Corp is a conglomerate with many businesses, and the key consideration in deciding whether to invest in it is the prospects of its Offshore & Marine business, which is still in a decline. See Is A Recovery for Oil & Gas Shipbuilders Near? for more information. As for OUE, it does not appear to have many properties in the pipeline to inject into the REITs. Thus, only 2 companies from the above-mentioned list are up for consideration as replacements for GLP.

Among the 2 names, FCL is actually the most promising in terms of business model. It has REITs and Business Trusts covering all major property segments -- office, retail, hotel and industrial. Besides rolling out new REITs/ trusts and injecting properties into them, it has also been acquiring new properties with the intention of injecting into the REITs/ trusts subsequently. In addition, it also acquired stakes in like-minded companies that manage REITs. It has a 39.9% stake in Golden Land and 41.0% stake in TICON. Both companies are property developers in Thailand and manage property funds and REITs.

However, the key concern with FCL is its debt levels. As at end Sep 2017, its debt-to-equity ratio is a high 89.1%. That is not counting debts residing in joint ventures and associates, which are reported on a net asset basis instead of separate lines for assets and liabilities. I had been deliberating on FCL when it was trading at $1.66, before finally initiating a small position at $1.92. However, the high debt ratio proved to be too much of a concern and I sold at $2.07. It is a pity and I hope it would reduce its debts progressively before I consider buying again.

The other REIT manager that has fairly extensive scope but is less aggressive in terms of debts and acquisitions is Capitaland. It has REITs in office, retail and hotels but not industrial properties. Its debt-to-equity ratio is a less demanding 62.4% as at end Sep 2017. Business-wise, there is nothing to fault Capitaland. However, I remember the lessons learnt from GLP, which is to buy it cheap even though the market price is within valuation limits. See Bye Bye, GLP! for more information. I decided against buying at $3.50 even though the Net Tangible Asset value is $4.16. This stock will be on the watchlist.

Other than these 2 companies, there are 2 outsiders to the list. The first is Straits Trading. Most people probably would not associate Straits Trading with a REIT manager, but it has a 20.1% stake in ARA and a 30% stake in Far East Hospitality, the REIT manager for Far East Hospitality Trust. It also manages 2 property funds. It is not yet a big-scale REIT manager. I bought a small position at $2.38 just to keep track of its developments. However, its recent developments have been disappointing. Its latest move was to invest $106.5M into a Japanese property fund managed by some other fund managers. I am looking for a REIT manager that sells properties to other investors and manages their funds, not the other way around. I sold it last Fri at a small loss at $2.31.

The other company that I considered is Boustead Projects. Although not a REIT manager, it has been carrying out a couple of Design-Build-Lease projects. Under such projects, Boustead Projects would design, build, and upon completion, lease the buildings to clients for a long period of time. Such portfolio of properties could be spinned off into an industrial REIT. In fact, there were suggestions for such a move, but the portfolio was considered too small to be an independent REIT. Moreover, considering recent market developments of consolidation among smaller industrial REITs into larger ones, the plan to spin off a REIT might be too little, too late. I am still monitoring, through my position in Boustead, which owns 51.3% of Boustead Projects.

In conclusion, after 6 months of searching, I still have not found a good replacement for GLP. It is difficult to find a capable replacement for a good company. This is why I usually do not like privatisations, even though they might offer a good price for the company.

See related blog posts:

Sunday, 28 January 2018

Bye Bye, GLP!

Global Logistic Properties (GLP) was delisted last Mon after being successfully privatised. It is a growth stock, and I had hoped to hold on to it for 15 years or more, but alas, some deep pocket investors recognised its potential as well and privatised it before I could see it mature into a globally recognised name.

GLP has the potential to become similar to Uber in the global logistics industry. See The GLP Story for more info. During the shareholder meeting to vote for the privatisation, a few minority shareholders recognised its potential and spoke out against the privatisation. Although I was sad to see GLP go, I voted for it anyway. The privatisation vote was not an isolated event; it was the culmination of a series of events that started way back in Feb 2014 when shareholders voted to sell 34% of the China subsidiary to a group of Chinese investors. Having tasted the sweetness of the purchase, it was only a matter of time before the Chinese investors came back to have a bigger bite of GLP. Moreover, the Chinese consortium had the support of the CEO, Mr Ming Mei, who is the key architect of what GLP is today. Even if the privatisation were to be miraculously rejected, the process was no longer reversible. The CEO could jump ship to another logistics company, and GLP without Mr Ming Mei is not quite the same GLP, just like Apple without Steve Jobs is not quite the same Apple. Our journey with the CEO together had ended, and the best I could do was to wish GLP and Mr Ming Mei well in their future endeavours.

GLP was my largest stock holding, hence, the profit was quite large. Although I would like to think that the successful investment in GLP is solely due to stock-picking skills, the reality is that a huge dose of good luck was involved. 

Given its Uber-like potential, I could have bought GLP at any time since its listing in Oct 2010. It rose to as high as $3.13 in Nov 2013. As the maximum price I would pay for any stock is 1.8 to 2.0 times book value, this price is easily within my purchase range (GLP's book value was US$1.71 in FY2015; hence, the maximum purchase price was S$4.16). However, I did not notice it until Jul 2015 when it was trading around $2.50. The first trade was carried out even later, in Sep 2015 at $2.10. Even so, the position size was a typical stock holding of 1%. As I read further about GLP after my initial purchase, I began to like it more and more. So much so that I pushed up the stock holding to as high as 22% of my capital in a matter of weeks!

There is also another factor that led to the 22% concentration in GLP. In Oct 2015, OCBC announced that it would redeem its 4.2% preference shares in Dec 2015. I had around 13% of my capital in it. The preference shares served as a cash reservoir, meant for use in the event of a stock market crash. With the redemption, I had lost a reliable cash reservoir with no good replacement. If I were to invest the 13% capital into stocks, I would need to find 13 new good stocks that I had not already bought. Given the rage of privatisations in recent years, there was simply no way to find 13 new good stocks. Hence, I put all the money from OCBC 4.2% preference shares into GLP.

There are a lot of things that I learnt from my investment in GLP, including the differences between a financial investor (for small stock holdings) and a business investor (for large stock holdings). See Being A Co-Owner of GLP for more info. The latest lesson I learnt from it is that you cannot just have skills; you also need luck. Could you imagine what would happen had I invested 22% of my capital when it was trading at the all-time high of $3.13? In Feb 2016, GLP dropped to around $1.60, representing a 49% drop from the all-time high. GLP would easily had become my biggest loser, not my biggest winner. In fact, the more than $0.50 drop barely 2 months after I had built up the concentration in GLP to 22% already caused a lot of emotional roller-coaster, so much so that I had to reduce the concentration from 22% to 16% at a loss, before increasing it again to 19%. See My Roller Coaster Ride with GLP for more info.

This is a lesson that I remember well. Thus, when it was announced that GLP would be privatised at $3.38 in Jul 2017, I began to search for potential replacements. The closest replacement would be Capitaland. But I asked myself if I would have good luck if I were to buy Capitaland at $3.50. The answer was neutral, hence I did not buy it.

It is not just skills that matter in stock investing, you also need good luck!

Thank you and bye bye, GLP!

See related blog posts:

Sunday, 21 January 2018

As A Contrarian, You Will Always Walk Alone

A lot of investors have posted good results for last year. However, if you were like me and had been worrying that the stock market could crash in 2017, a year that ends with 7, you would have missed out on a stock market rally in which the STI rose by 18% in 2017. When everybody else is posting good results online, it does feel depressing occasionally.

I was not totally out of the market last year. Having participated in the stock market for 32 years, I will never be totally out of the market, even though I respect the folklore that the market would experience a crash whenever the year ends with 7. I took a defensive stance, ensuring that I had around 45% to 50% cash to deploy in the event that a crash were to materialise. As I sold stocks that were rising, I continued to invest in stocks that were forgotten by the market. Below are some of the stocks that I bought, did not buy, and sold last year, including the reasons.

Stocks that I Sold

Electronics stocks, especially semiconductors, were the rage last year. Nevertheless, I sold them. Needless to say, they went much higher after I sold them. For the semiconductor stocks, Sunright, sold at $0.305, is now $0.895; ASTI, sold at $0.056, is now $0.084; and UMS, sold at $0.78 on average, is now $1.07. For the electronics stocks, Frencken, sold at $0.515, is now $0.59; and Valuetronics, sold at $0.795, is now $0.93. All these were sold to shore up defence for the crash, if any. On hindsight, they were sold too early, as I did not expect the electronics recovery to be so strong. To-date, I still have not figured out what is behind the strong electronics demand, which will determine whether the strong demand can continue or will fizzle out soon. 

There were also some buying and selling of Oil & Gas (O&G) stocks. A notable sale was Keppel Corp at $6.16, as I was concerned that new orders were not coming in fast enough to replace old orders. Furthermore, existing customers are not collecting their vessels (and paying for the delivery) even though the vessels have been completed. See What Keppel Offshore & Marine's Order Book Can Tell Us for more information.

Stocks that I Did Not Buy

Other than electronics stocks, banks and properties also rose by a lot last year. I had an opportunity to buy OCBC at $8.56 in late 2016, shortly after the US presidential elections. However, I gave it a miss, as I was concerned that O&G losses were still mounting. Although rising interest rates would increase banks' profits, there are also risks that their customers could not cope with the increasing interest expenses given the lacklustre business environment. In the longer term, there are also concerns whether fintech would chip away the traditional profits that banks make as financial intermediaries. In short, I had not figured out the banks.

The only major property stock that I had was Global Logistic Properties (GLP). To be honest, GLP made a lot of money for me last year. But with the privatisation of GLP, I had to find a replacement. Potential replacements were Capitaland and Frasers Centrepoint (FCL). Learning the lessons from GLP, I decided that Capitaland at $3.50 was not cheap enough. As for FCL, I was concerned that it had too much debts. I watched it rose from $1.66 before finally buying at $1.92. Still the lingering concern did not go away and I sold it at $2.07.

Stocks that I Bought

If you had read Howard Marks' famous memo "Yet Again?", he mentioned 6 options that investors could take in the current low-return investing environment. These options are reproduced below for easy reference (please read his original memo for a complete understanding of the 6 options):
  1. Invest as you always have and expect your historic returns.
  2. Invest as you always have and settle for today’s low returns.
  3. Reduce risk to prepare for a correction and accept still-lower returns.
  4. Go to cash at a near-zero return and wait for a better environment.
  5. Increase risk in pursuit of higher returns.
  6. Put more into special niches and special investment managers.
His preferred options? A combination of no. 2, 3 and 6.

The equivalent of option 6 for me is distressed assets and stocks unloved and forgotten by the market. There were 2 distressed asset plays last year. The first was Triyards, which I tried to take advantage of Ezra's troubles and potential sale of a controlling stake in Triyards. Unfortunately, this did not pan out and I lost $33K as a result. See Know Your Customers Well! for more information. The second was First Ship Lease Trust (FSL). Unexpectedly, FSL did not manage to refinance its debts and had to seek a moratorium on debt repayment. Nevertheless, it has been selling ships to pay down the debts. If it can successfully liquidate all its ships (or until the debts are fully paid off), there is residual value for shareholders. See Valuation of First Ship Lease Trust for an estimate of the liquidation value of FSL carried out in May last year.

There is actually quite a no. of unloved industries and stocks. The first is telcos, with concerns over whether the entry of the fourth telco would increase competition and erode away the handsome profits and dividends that telcos used to earn. However, my view is that the fourth telco is fairly irrelevant. Already, the existing telcos are competing fiercely against each other through SIM-only plans, data upsize plans and Mobile Virtual Network Operators, etc. See Do Telco Investors Need to Fear the Fourth Telco? I bought into Singtel and M1. 

The second unloved industry is O&G. Here, it is a little tricky, because some parts of the industry value chain are recovering while other parts are still declining. The recovering part is the upstream Exploration & Production sector with the rise in oil price, while the declining part is the ship/rig building sector, as discussed in Is A Recovery for Oil & Gas Shipbuilders Near? The ones in the middle, the Offshore Support Vessel (OSV) sector, is probably entering a trough as new vessels enter the market and increase the supply glut. I decided it was about time to enter the OSV sector, buying CH Offshore, Ezion warrant (it got suspended the day I bought it), Mermaid and POSH.

The third unloved and forgotten industry is the shipping industry. After the bankruptcy of Hanjin Shipping in late 2016, conditions have actually improved a little, with the Baltic Dry Index and World Container Index slightly higher in 2017 than in 2016. I bought Samudera, Singapore Shipping and Uni-Asia.

Another unloved and forgotten industry is hotels. Investors love hotel business trusts that pay distributions regularly, but not hotel companies like GL and Stamford Land. After being alerted to their undervaluation by Mandarin Oriental's spectacular rise and City Developments' privatisation of Millennium & Copthorne, my analysis shows that there is hidden value in hotels. I bought GL and Stamford Land. See Some Hotels Could Be Very Valuable! for more information.

Needless to say, these stocks that I bought have not risen much compared to the electronics, bank and property stocks.


As contrarian investors, it is sometimes difficult not to be depressed when the market moves in the opposite direction. However, we are the ones responsible for our own money. We carry out analysis independent of the market and invest according to our beliefs. To all fellow contrarians out there, I will leave you with Benjamin Graham's advice to Warren Buffett:
"You’re neither right nor wrong because other people agree with you. You’re right because your facts are right and your reasoning is right — and that’s the only thing that makes you right. And if your facts and reasoning are right, you don’t have to worry about anybody else."

See related blog posts:

Sunday, 14 January 2018

No, the Stock Market Did Not Crash in 2017

A year ago, I blogged about the trend that the stock market usually experiences a crash whenever the year ends with 7 (see Another Year That Ends with 7). As it turns out, not only did the stock market not crash, it rose significantly. The STI rose from 2,880.76 to 3,402.92 for a 18% gain! 

So what happened? Instead of lacklustre growth like the years before it, the global economy in 2017 staged a synchronised recovery. Locally, the government relaxed property cooling measures and both banks and property developers gained. The strong growth caught many people by surprise, including myself. So, what do I still think about the folklore that the market usually experiences a crash whenever the year ends with 7?

A year ago, as mentioned in my post, I had experienced the crash of 1987, 1997 and 2007, so it is a folklore that I respect. However, to believe and act on it, I need evidence that either the stock market is at dangerously high levels or the economy is on the brink of a collapse. Back in late 2016/ early 2017, I was concerned that the massive liquidity pumped by central banks around the world was propping up asset prices, but that did not help the many companies in many industries that were facing poor business and/or low margins. See What Have We Got After 8 Years of Easy Money? for more info.

A year later, as I revisit the above blog posts, the situation has improved for most of the industries mentioned, particularly for banks and properties. However, other industries have only seen modest and/or uneven recovery, such as Oil & Gas and shipping. In addition, there are industries that are still in decline, such as shipbuilding. Even though the consensus economic outlook is promising in 2018, I remain on the defensive. My own assessment of the financial market and economy plays a more important role in my investing decisions than whether the year ends with 7 or not. Certainly, I am not rushing to invest in the stock market just because the market has safely passed 2017.

Even though the market did not crash in 2017, the folklore that the market usually crashes whenever the year ends with 7 is still something that I respect. But to believe and act on it, I need evidence. That viewpoint has not changed.

See related blog posts:

Sunday, 7 January 2018

The Dogs and Puppies of STI for 2018

The Dogs of STI replicates the investment strategy of the Dogs of the Dow. Since 2014, I have been analysing the performance of the Dogs of the Dow strategy as applied to STI (known as the Dogs and Puppies of STI) for the past year and identifying the new Dogs and Puppies for the current year.

The Dogs and Puppies of STI for 2017 are as follows (see The Dogs and Puppies of STI for 2017 for more info):

Puppies of STI 2017
  • A-Reit
  • Capitaland Comm Trust
  • Capitaland Mall Trust
  • HPH Trust
  • Yangzijiang
Other Dogs of STI 2017
  • Keppel Corp
  • SingTel
  • SPH
  • Starhub
  • ST Engineering

How did the Dogs and Puppies of STI perform in 2017? The table below shows their performance relative to STI.

Price 31/12/16 Price 31/12/17 Div Div Yield Return
(excl. Div)
(incl. Div)

  A-Reit $2.27 $2.72 10.07 4.4% 19.8% 24.3%
  CapitaComm $1.48 $1.93 9.25 6.3% 30.4% 36.7%
  CapitaMall $1.89 $2.13 11.14 5.9% 13.0% 18.9%
  HPH Trust $0.44 $0.42 3.35 7.7% -4.6% 3.1%
  YZJ $0.82 $1.47 4.00 4.9% 80.4% 85.3%

  Keppel Corp $5.79 $7.35 20.00 3.5% 26.9% 30.4%
  SingTel $3.65 $3.57 20.50 5.6% -2.2% 3.4%
  SPH $3.53 $2.65 15.00 4.2% -24.9% -20.7%
  ST Engg $3.23 $3.26 15.00 4.6% 0.9% 5.6%
  Starhub $2.81 $2.85 17.00 6.0% 1.4% 7.5%


5.3% 14.1% 19.4%

5.8% 27.8% 33.6%
STI 2880.76 3402.92 101.00 3.5% 18.1% 21.6%

As shown above, the Dogs (both Puppies and Non-Puppies together) underperformed the STI whereas the Puppies outperformed it. Inclusive of dividends, the Dogs returned 19.4% while the Puppies returned 33.6%, against STI's returns of 21.6%. The same trend is observed for the performance excluding dividends.

This is the first time when the Dogs and Puppies as a whole neither outperform nor underperform the STI. In all past years, both either outperformed or underperformed the STI. So far, since 2014, STI has won twice (2014 and 2016), the Dogs and Puppies have won once (2015) and 2017 is a draw, with the Puppies beating the STI while the Dogs losing to it. The performance (inclusive of dividends) for the past years is summarised below.

Year STI Dogs Puppies
2014 9.0% 6.2% 6.1%
2015 -11.5% -8.6% -4.0%
2016 3.2% -1.9% 0.1%
2017 21.6% 19.4% 33.6%

The strong performance of the Puppies in 2017 is due to the rise of Yangzijiang and the REITs. The REITs and business trusts (i.e. HPH Trust) are regulars in the Dogs and Puppies due to their high dividends and low prices. What would happen if we exclude the REITs and business trusts from the Dogs and Puppies? Would the No-REIT Dogs and Puppies perform as well? Their performance is as shown below.

Price 31/12/16 Price 31/12/17 Div Div Yield Return
(excl. Div)
(incl. Div)

  ComfortDelGro $2.47 $1.98 10.40 4.2% -19.8% -15.6%
  SPH $3.53 $2.65 15.00 4.2% -24.9% -20.7%
  ST Engg $3.23 $3.26 15.00 4.6% 0.9% 5.6%
  Starhub $2.81 $2.85 17.00 6.0% 1.4% 7.5%
  YZJ $0.82 $1.47 4.00 4.9% 80.4% 85.3%

  Keppel Corp $5.79 $7.35 20.00 3.5% 26.9% 30.4%
  OCBC $8.92 $12.39 36.00 4.0% 38.9% 42.9%
  SGX $7.16 $7.44 28.00 3.9% 3.9% 7.8%
  SIA $9.67 $10.67 21.00 2.2% 10.3% 12.5%
  SingTel $3.65 $3.57 20.50 5.6% -2.2% 3.4%


4.3% 11.6% 15.9%

4.8% 7.6% 12.4%
STI 2880.76 3402.92 101.00 3.5% 18.1% 21.6%

Both the No-REIT Dogs and Puppies collectively underperformed the STI and the original Dogs and Puppies. Thus, for 4 years in a row, the original Dogs and Puppies beat the No-REIT Dogs and Puppies. Perhaps the original Dogs of Dow theory should not be tinkered with.

Moving on to 2018, the table below shows the dividend yields of STI component stocks in descending order:

Counter Div
Div Yield Remarks
HPH Trust US$ 3.35 $0.42 8.06% Puppy
Starhub 17.00 $2.85 5.96% Dog
SingTel 20.50 $3.57 5.74% Dog
SPH 15.00 $2.65 5.66% Puppy
ComfortDelGro 10.40 $1.98 5.25% Puppy
CapitaMall 11.14 $2.13 5.23% Puppy
CapitaComm 9.25 $1.93 4.79% Puppy
ST Engg 15.00 $3.26 4.60% Dog
SGX 28.00 $7.44 3.76% Dog
A-Reit 10.07 $2.72 3.70% Dog
GoldenAgri 1.33 $0.37 3.59%
SATS 17.00 $5.20 3.27%
OCBC 36.00 $12.39 2.91%
Capitaland 10.00 $3.53 2.83%
Keppel Corp 20.00 $7.35 2.72%
YZJ 4.00 $1.47 2.72%
HKLand US$ 19.00 $7.04 2.70%
ThaiBev 2.47 $0.92 2.68%
UOB 70.00 $26.45 2.65%
DBS 63.00 $24.85 2.54%
JMH US$ 152.00 $60.75 2.50%
SembCorp 7.00 $3.03 2.31%
Genting SP 3.00 $1.31 2.29%
Wilmar 7.00 $3.09 2.27%
SIA 21.00 $10.67 1.97%
JC&C 74.00 $40.67 1.82%
GLP 6.00 $3.37 1.78%
UOL 15.00 $8.87 1.69%
CityDev 16.00 $12.49 1.28%
JSH US$ 30.50 $39.58 0.77%

Just to recap, the Dogs of STI are the 10 highest-yielding dividend stocks in the STI, while the Puppies of STI are the 5 lowest-priced stocks among the Dogs of STI. Thus, the Dogs and Puppies of STI for 2018 are as follows:

Puppies of STI 2018
  • Capitaland Comm Trust
  • Capitaland Mall Trust
  • ComfortDelgro
  • HPH Trust
  • SPH
Other Dogs of STI 2018
  • A-Reit
  • SGX
  • SingTel
  • Starhub
  • ST Engineering

There is an interesting observation for the Dogs and Puppies of 2018. A-Reit, which has been a Puppy for many years like all other REITs given their relatively lower prices, has risen from a Puppy to become a Dog after rising 19.8% in 2017 while SPH has dropped from a Dog to become a Puppy after falling 24.9% over the same period. Is this a sign that the REITs have run up too much and due for a correction? We shall see in 2018.

See related blog posts: