Started the divestment of the Strategic section of the Investment portfolio in September and this month finally completed the process. A summary of the divestment is as followed.
1. Kep REIT @ $1.2394
2. FrasersCom Trust @ $1.6993
3. MapletreeCom Trust @ $2.0596
4. Mapletreelog Trust @ $1.5497
5. CapitaR China Trust @ $1.5992
The above 5 stocks in combine were holding at a cost of $0.2362/unit and with the divestment, this resulted in a capital gain of +584.22% and a dividend return of +54.89% or a combine of +639.12%. The Strategic section was formed in 2015 and this gave an annualized return of +61.73% (exclusive of dividend return) or +64.88% (inclusive of dividend return). Don't be alarmed by those figure, it is rather "meaningless". Reason being if the holding price is $0 cost, all these figures will become infinity. Holding all 5 stocks at $0 cost, possible ? YES, very possible based on strategy being adopted from 孙子兵法. In fact, the cost that was incurred was mainly due to preferential rights subscription to FrasersCom Trust, MapletreeCom Trust, Mapletreelog Trust and CapitaR China Trust. The aim of the Strategic section is not to measure its direct return but a measurement relative to the cost of the non-Strategic section of the Investment portfolio. Hence, the divestment gain obtained is +27.34% of the cost of non-Strategic section at an annualized rate of 6.76% for that 4 years period.
"The global economy is experiencing a shift, driven mainly by emerging markets, European Central Bank President Christine Lagarde said Friday." This statement appeared on 22nd Nov 2019 (refer here). Back in 2014, in one of my blog article, I've already talked about Fundamental Shift in Global Economy (refer here). Actually, that view was mentioned as early as 2012 but can't find that blog post on it. Don't expect for those who happened to read that believe or agree on my view given that I'm not expert in economy and don't even have a degree in economy. That's ok since what I have analyzed was for my own purpose only. I have ample confident to believe in what I've analyzed then because of the analytical skills that was being developed throughout the years as an R&D Engineer and also consistently reading on both biased and unbiased reports. One very effective way to train one analytical skills is to read the very biased state media and not to mention those usual suspects who often wrote to the forum to express their biased views; in laymen term bootlicking view. Only through those when you digging deep to understand how in depth those are being biased then you can develop that critical analytical skills.
"The global economy is experiencing a shift, driven mainly by emerging markets, European Central Bank President Christine Lagarde said Friday." This statement appeared on 22nd Nov 2019 (refer here). Back in 2014, in one of my blog article, I've already talked about Fundamental Shift in Global Economy (refer here). Actually, that view was mentioned as early as 2012 but can't find that blog post on it. Don't expect for those who happened to read that believe or agree on my view given that I'm not expert in economy and don't even have a degree in economy. That's ok since what I have analyzed was for my own purpose only. I have ample confident to believe in what I've analyzed then because of the analytical skills that was being developed throughout the years as an R&D Engineer and also consistently reading on both biased and unbiased reports. One very effective way to train one analytical skills is to read the very biased state media and not to mention those usual suspects who often wrote to the forum to express their biased views; in laymen term bootlicking view. Only through those when you digging deep to understand how in depth those are being biased then you can develop that critical analytical skills.
Thus, with the strong believe of what was being analyzed about global economy then in 2014 (or 2012), I started to think of way to protect my investment. 孙子兵法 came to my mind as back in 2013 I've started to research on how to adopt 孙子兵法 to stock investment. After a year of doing live testing and experimenting in the stock market, 2015 was the year I started the implementation to the Investment portfolio.
孙子兵法 comprises 13 principles and it is through these 13 principles that it build a system (for warfare and governing the country back in ancient times). Naturally, to convert that to use in stock investment, it has to be a system that is bind by these 13 principles. The key part is how to correlate those 13 principles (relating to war strategies) to 13 principles for stock investment and how a system can be derived, implemented and executed from it. That was the research that I did back in 2013.
One of the objective for the Strategic section in the Investment portfolio is to maintain the "Formation" of the portfolio, one of the 13 principles of 孙子兵法 -- 第四篇， 军形篇. Since 2009 after the 2008 GFC, a fixed amount of capital was allocated to the Investment portfolio. Throughout these years, only about 70% of that capital is being used while the remaining approximately 30% is free cash. Always maintain free cash is essential as in the case of emergency you have the cash for it. However, without inject fresh capital will also miss the opportunity in the market to get a much higher return. To overcome this catch-22 situation, the Strategic section was formed in 2015. With the Strategic section, the Investment portfolio is able to always maintain the free cash, no need to inject fresh capital and at the same time able to take any opportunity in the stock market to get a higher return. In 孙子兵法 -- 第五篇，兵势篇 it was mentioned "凡战者，以正合，以奇胜", to correlate to the Investment portfolio, the non-Strategic section is the "正兵" and the Strategic section is the "奇兵". While "正兵“ does the defensive duty (collecting dividend), "奇兵" is the one that win the war. As such, the Investment portfolio will be able to "攻守自如". Another objective of the Strategic section is my answer to bond investing (corporate bond, government bond, SSB, etc), robo advisor and CPF. The result of the Strategic section speaks for itself already !
The decision now to fully divest the Strategic section is merely following 孙子兵法 -- 第七篇，军争篇 (Compete for Superiority). The gain obtained from the full divestment was +27.34% of the cost of the non-Strategic section or +20.07% of the total capital allocated to the Investment portfolio. This amount could be either considered as a permanent realized gain or a reduction of the already injected capital for the stocks in the non-Strategic section. Be it as a permanent gain meaning this portfolio already registered a gain for this financial cycle. Should it be considered as reduction in injected capital for the non-Strategic section, I will have that sum of money to take opportunity either in acquiring more of the existing holdings at bargain price or vesting into new stocks come the next financial crisis. At the same time, the overall "formation" of the Investment portfolio remain unchanged and need not either to sell off or partially sell off them in order to raise cash for the next financial crisis. This is the "superiority" that is achieved through the Strategic section.
Fully divested the Strategic section is just one-half of the strategy. The next half of the strategy is to focus on the non-Strategic section so as to open up more options and make preparations for the next financial crisis. This is merely following 孙子兵法 -- 第十一篇，九地篇. At the same time, reflection and examination will be made to the Strategic section like mentioned in the strategic divestment of the CPFIS and SRS (refer here) to learn what has done right and what hasn't so that the next round can achieve better result.
