Author: The Asia Report

Why Dollar Cost Averaging with single stocks is almost always a bad idea

Dollar cost averaging (or DCA) is a simple technique that allows you to invest large sums of money over a period of time. For example, if you have $12,000, you don’t invest the lump sum right away but split if over let’s say 12 months. This way, when prices are low, investors will automatically purchase more with $1,000 and when prices are high, he will purchase less. The goal is not to time the market to get the cheapest price, but to obtain the average price. Dollar cost averaging is primarily used by long term investors who do not...

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Singapore Bank Series – What are non-performing loans & how do they affect prices?

Banks lend out money with the hope that whoever is borrowing it is going to pay it back. However, that doesn’t always happen and borrowers are sometime unable to pay the money back. What that happens, you get the formation of non-performing loans (or NPL or short), which is exactly what it sounds like. NPLs are formed when principal and interest payments are overdue by a certain number of days – and are considered bad debt because the likelihood of getting paid back on that debt decreases. Secured vs Un-secured Loans are typically secured or unsecured. Unsecured loans typically...

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Is Singapore Press Holdings a good buy? Part 1 / 2

One of the first ever articles I wrote (this was back in 2011) was on local companies with economic moats. This was really long ago and thanks to the power of the internet its still out there: https://quantitativevalue.org/2011/01/16/economic-moats-of-locally-listed-companies/ Back then, I wrote: SPH is the dominant provider of printed newspaper and magazines in Singapore. It has done extremely well over the years. However, its economic moat has weakened somewhat in recent years with the rising popularity of the Internet.   Ah, if only I realized the significance of what I wrote. It was also one of the first companies...

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And the best investment for 2019 is…

Now I know that this is predominantly a finance blog, and readers will be thinking about financial ideas. But having thought about it a lot, I have come to the conclusion that the best investment by far for 2019 is really not financial in nature, but in one’s health. Cliche I know – but let me explain. Life isn’t a excel spreadsheet Its easy to get caught up in the numbers of planning scenarios with rosy projections showing us living long into the future. And to a large extent – that is true. But averages disguise certain hard realities...

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Top clicks on The Asia Report Last Week

Last week, we covered plenty of great topics. In our educational posts, we talked about free cash flow and its importance in looking for stocks that pay good sustainable dividends. I tried to explain it in an easy to relate analogy in a video that I hope will really drive home the point of how important it is. Understanding this concept will allow you to understand why dividends are sometimes unsustainable or cut further down the road. We also posted our third article in our Singapore Bank Series where we went through the importance of understanding a bank’s loan...

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What is free cash flow and why is it so important? [Case Study: Starhub & Hyflux]

Most people have heard the phrase cash is king. Let me embellish on that by saying – free cash flow is king. So just what is free cash flow? Free Cash Flow (FCF) = Cash flow from operations – Capital Expenditures You can sign up to watch an additional video further explaining free cash flow and a case study on both Hyflux and Starhub here: How To Invest Profitably Like Warren Buffett: A Crash Course on Value Investing What is free cash flow and why is it so important? Getting to the heart of free cash flow Now, there...

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The trade war – cutting through the noise

The intensity of the trade war is something that has caught plenty of people by surprise – myself included. With China rolling out the red carpet for Trump when he visited, and subsequent “deals” negotiated with his underlings, the markets assumption was that there was plenty of smoke but no fire. The actual implementation of the tariffs represented something quite new in the dynamic between US/China relationships. Still, the recent set-back during the mid-term elections has given Trump some pause and both sides seem to be moving towards a deal. Several things are on my mind as of now....

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Singapore Banks Series (UOB, OCBC, DBS) – Understanding what loan books are and why they matter

This is the third part of our Singapore Banking series. As discussed in the last post, the main driver of earnings for banks are interest income (or specifically net interest income). Net interest income = Interest income – interest expense And profitability of these loans are dictated by net interest margins. If you were to add up all their loans, you get their “loan book” which is simply the collective value of all their loans added up together. Thinking more about loan books Going back to our example of a money lender – you could choose to lend your...

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The best and cheapest way to get exposure to Hong Kong

In our last post, we talked about the Hong Kong markets and how undervalued it was in reference to its historical 7 year price-to-book chart. You can read it here if you have missed it: How cheap is the Hong Kong market? [Hang Seng Index 7 Year Valuations] Getting exposure to a specific country is best done through a low cost index fund or ETF. Hong Kong’s hidden gem – the Tracker Fund of Hong Kong [SEHK:2800] The history of the tracker fund is unique and worth telling. In 1998, the Hong Kong Government intervened dramatically to restore confidence...

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Singapore Stock Market Valuation [10 Year Price-to-Book Ratio]

Someone requested the data for stock market valuations stretching back to 2008 low so I thought I share it with everyone. Just a reference point for everyone. Changes in composition I was having a discussion with a friend who was commenting that the composition of the STI had changed significantly over the last decade – with the banks making up a larger percentage of the index today (upwards of 40%). He remarked that Singtel used to make up a bigger proportion of the Straits Times Index but that the banks had really powered ahead post GFC – continually making up...

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Top Reads from Around The Web – Week (49/52)

7 things to take note of when buying old properties in Singapore https://www.channelnewsasia.com/news/business/7-things-take-note-of-buying-old-properties-singapore-99-co-10980872 Cheap doesn’t necessarily mean good. Key takeaway is that you have to know what you’re buying and that property isn’t necessarily a passive thing. At the same time for active investors, you can generate increased returns by adding value to your investment property. Similar thinking applies to stocks whereby you can decide on whether to be more passive (index investing) vs active investing which requires more time and skill but potentially may lead to higher returns. Noble probe: Timing matters less than thoroughness https://www.businesstimes.com.sg/companies-markets/noble-probe-timing-matters-less-than-thoroughness Not sure...

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How cheap is the Hong Kong market? [Hang Seng Index 7 Year Valuations]

Valuations, valuations, valuations: Based on the P/B chart, the Hang Seng Index is trading at the cheaper end of its range but not yet at levels seen in 2016. Top 10 components of the Index People are far more bearish than just 6 months ago – with highflying companies like Tencent bearing the brunt of the sell-off. Expectations earlier in the year that the trade war would be resolved in earlier discussions proved wishful thinking as Trump ripped apart earlier agreements negotiated by his staff. A subject which I will touch upon more in a subsequent post is that...

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Is value investing really about not drinking Starbucks and eating avocado toast?

Value investing at its core is really a simple methodology of finding cheap “undervalued” stocks at bargain prices. Its founder, Benjamin Graham lived through the great depression where times were truly tough. That experience has also fed into the psychology and thinking of the framework in The Intelligent Investor – his most famous and well known book. Many of his disciples are fond of talking about frugality and thrift despite amassing staggering wealth. Warren Buffett for example is famous for still staying in his original house and driving his own car. That begs the question – is shunning material...

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Singapore Banks Series (UOB, OCBC, DBS) – How do they really make money?

Most people have an intuitive understanding of how banks money given their daily interactions with it. In this post, we are going to break it down for investors so that they can better analyze the financials. The biggest money maker – net interest income At their heart, banks are quite easy to understand and most people do have an understanding of how they work. Let me use a simple analogy. Imagine you were a money lender – lending money out at let’s say 10%. In order to raise the money that you lend out, you borrow it from your...

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Enterprise Value Case Study [Hutchinson Port Trust]

In the last post, we talked about enterprise value and how you could use it to avoid making potentially loss making investments in dividend plays which were unsustainable. You can check it out here: What is enterprise value and how can it help you avoid losing money? [Case Study: Asian Pay TV] Another company which debuted to great fanfare but has languished over the last few years has been Hutchinson Port Trust. Digging deeper A typical characteristic of companies with high debt load are that they are extremely capital intensive in nature and require continual investment. This makes the...

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