Strategic Investor 2023 Review

FTSE STI ended the year 2023 at 3,240.27 compared to 3,251.32 a year ago, down 11.05 points or 0.34%.  Pretty much a flat performance for the year.  If not for a late upsurge in December, the loss would have been bigger.  Individually, a review of the various stock portfolio in holding as followed.

Investment Portfolio

	2023	2022	Variant
Non-Strategic (Income) Unrealized Gain/Loss	+99.17%	+82.49%	+20.22%
Strategic Unrealized Gain/Loss	+7.94%	+9.75%	-18.56%
Crypto Unrealized Gain/Loss	+16.06%	+2.84%	+465.49%
Portfolio Unrealized Gain/Loss	+20.11%	+15.53%	+29.49%
Realized Gain/Loss	+18.37%	+18.37%	0%
Dividend Return	+71.91%	+70.16%	+2.49%
Cash Holding	+83.37%	+83.37%	0%
Portfolio	+110.39%	+104.05%	+6.09%
STI	3240.27	3251.32	-0.34%

	Annualized (w/o dividend)	Annualized (with dividend)
CapitaMall Trust	+4.12%	+8.22%
MapletreeInd Trust	+8.11%	+10.73%
Kep DC Reit	+7.73%	+11.11%
Frasers Cpt Trust	+4.13%	+8.36%
Lendlease Reit	--	--

Investment Portfolio performance gain 6.09% for the year.  Despite the positive performance of the portfolio with most of the category returning positive, there was a dip in the Strategic Unrealized section registering a decline of 18.56%.  The reason was due to the underperforming of InnoTek and Fu Yu.  Overall, the portfolio performance was boosted and holding up by the Crypto investment registering a gain of 465.49% for the year.  This eventually led to the 6.09% of the Investment Portfolio compared to a dip of 0.34% for FTSE STI.

Stock Incubator

	2023	2022	Variant
Unrealized Gain/Loss	+41.96%	+64.78%	-38.09%
Realized Gain/Loss	+45.26%	+32.29%	+40.17%
Dividend Return	+26.81%	+22.74%	+17.90%
Cash Holding	+70.35%	+65.39%	+7.59%
Portfolio	+114.03%	+119.82%	-4.83%
STI	3240.27	3251.32	-0.34%

	Annualized (w/o dividend)	Annualized (with dividend)
Nordic	+16.55%	+20.20%
Valuetronics	--	--
Creative	-13.58%	--

Stock Incubator portfolio registered a decline of 4.83%.  The negative performance was not actually due to poor performance of the 3 stocks in the portfolio but rather a re-adjustment for Nordic Group (refer here).  Due to the re-adjustment, Nordic Group closing price for 2023 was $0.36 vs $0.4242 in 2022.  On the other hand, Valuetronics was $0.595 vs $0.52 and Creative was $1.43 vs $1.42.

Looking Ahead

Global economy continues to be uncertain for 2024 and this should be the case for stock markets.  For the Investment Portfolio, the wild card should be the Crypto investment.  This is even more unpredictable than stocks in general.  It could record further gain thus pushing up the performance of the portfolio, it could spring a surprise drop either.  The Income section of the Investment Portfolio shall continue to collect dividend and maintaining a steady growth.  For the Strategic section, will be looking out for opportunity to increase holding.  As for the Stock Incubator Portfolio, capital recovery shall be continued for Creative Technology.

Though inflation has shown signs of cooling down, it is still at elevated level with interest rate maintaining at elevated level too.  Many might be looking toward rate cut this year, this is not the main focus point.  The problem still remain at how fast inflation can be bring down.  Prolong period of elevated inflation and interest rate could eventually lead to stagflation.  Stagflation is a thorny crisis.  There isn't any quick fix for it.  To make matter worse, whatever policies dish out to counter that are nothing but trial and error type.  Stagflation can last for decades !!!

 

Nordic Group Part 1.5 -- Another Objective Achieved

Nordic Group went XD on 8th May 2023 with a dividend distribution of 0.906 cents/share.  With that dividend, the total dividend collected since 2014 (year of first investment) has breached the 100% mark.  That is to say, the amount of dividend collected for all these years has surpassed the total capital being injected initially.  Another perspective to look at it is mathematically this investment is impossible to make a loss even if divested.

While delighted with this achievement, realized that a strategic action was being taken in 2021 in which 30.12% of the holding was being locked in at $0.355/share (refer here). That portion unfortunately didn't contribute to any dividend distribution since then.  Now, want to consider that portion as being divested away.   This movement has some major implication to the overall holding and rate of return nevertheless.  To make adjustment for that, the capital of that 30.12% was removed and whatever dividend collected since 2014 till 2021 for that portion also being chalked off from the total amount of dividend as recorded.  However, one thing remained unchanged is the overall holding price, still being at $0.0902/share.   To my shock, after rectifying those figure, the 100% dividend return mark was actually being achieved in the previous distribution in 17th Aug 2022 with a distribution of 1.162 cents/share.  That is to say, the objective and mathematically impossible to make a loss was being achieved in 2022 instead now.  That was like a 8 year period to achieve that.

So, what so special that it takes 8 years to achieve that ?  Well, prior to this, the fastest was First Reit which took me 10 years (refer here).  The next fastest was CapitaMall Trust (now known as CICT) 11 years (refer here).  MapletreeInd Trust was another that took me 11 years to achieve that but unfortunately, soon after achieving that due to a subsequent subscription of preferential offering, the dividend return fell back below 100%.  For those that have done the 100% dividend return were all Reits and Reits are renowned for higher dividend rate compared to normal stocks.  For Nordic Group, a normal stock, to be able to outperform a Reit in a knockdown fashion is something extraordinary !!!

As of now, after considering the strategic action in 2021 as divestment, at current price of $0.46/share (as of 12th May 2023), the dividend return stood at 115.76%, an unrealized profit of 407.64% with a holding price of $0.0902/share.  This translate to an annual return  w/o dividend of +19.78% and with dividend +22.55%.  If you think this statistic is very impressive, this is not the overall picture yet.  Backtracking all those actions (strategic) that were being carried out since 2014, there is more to it.

In 2017, 48.39% of the initial holding was divested at $0.32/share netting a capital gain of 207.60% and a dividend return of 19.95%, translating to a total gain of 227.45%.  As a result of this divestment, the amount of profit is already more than the initial capital being injected, making the stock already mathematically impossible to lose money (refer here).  That was the first objective being achieved and took 3 years only.  As such, now this dividend return hitting the 100% mark is just another increased in realized profit technically speaking.  In additional, since 2014, strategic actions were carried out to increase the holding at $0 cost.  As of now, the amount of holding being increased at $0 cost is 11.33% with reference to the initial holding.  Due to this, the holding price also went down from the initial of $0.1072/share to $0.0902/share as of now without additional capital being injected.  It is perhaps due to this strategic action that managed to hit the 100% dividend return mark just 8 years after first investment.

Now, consider the perspective that since first investment in 2014 and nothing was done (divestment, increasing holding at $0 cost, etc) is it possible to hit the 100% mark dividend return all these years.  Below are the list of dividend distribution since first investment in late 2014 (year 2014 didn't collect a single distribution as investment was done after 2014 dividend distribution)

Year 2015  --  dividend of 0.65 cents/share

Year 2016  --  dividend of 1.1872 cents/share

Year 2017  --  dividend of 1.384 cents/share

Year 2018  --  dividend of 1.652 cents/share

Year 2019  --  dividend of 0.782 cents/share

Year 2020  --  dividend of 0.606 cents/share

Year 2021  --  dividend of 0.562 cents/share

Year 2022  --  dividend of 1.314 cents/share

Year 2023  --  dividend of 0.906 cents/share (as of now)

The sum of dividend being added up all those years is 9.0432 cents/share.  This is till below the initial holding price of 10.72 cents/share.  It is still short of 1.6768 cents/share of dividend to hit the 100% mark and given the dividend record of the company, this might be able to achieve in 2024 fastest (10 years) and very highly likely in 2025 (11 years).  Even if it is able to achieve in 2024, that is just get back the initial capital being injected (a mathematically impossible to lose money scenario).  On the performance, as of now, at price $0.46/share, this will translate to approximately +329% return and add in another +84.38% from dividend all with reference to the initial capital cost.  This is what plain buy and hold can achieve.

Now factoring in all those strategic actions that were being carried out since 2014 (partial divestment and increasing holding strategically at $0 cost, etc), the followings are achieved :-

-- mathematically impossible to lose money achieved in just 3 years after first investing

-- dividend return hit 100% mark in 8 years compared with 10 years (fastest) on existing holding

-- realized profit from partial divestment in 2017 and 2021 translating to +203.18% with reference to initial capital cost

-- dividend return of those partial divestment in 2017 and 2021 translating to +19.76% with reference to initial capital cost

-- dividend return of existing holding since 2014 translating to +43.51% with reference to initial capital cost

-- Total realized (divestment + dividend) since 2014 translating to +266.46% with reference to initial capital cost

-- Unrealized profit at $0.46/share translating to +190.80% with reference to initial capital cost

Should I divest the whole investment now at $0.46/share, with the plain buy and hold method, I could register a return of approximately +413% from both capital and dividend.  On the other hand, for the one with strategic actions, this return would be +457.26% from both capital and dividend.  It might look very little difference and one might argue if continue holding for another few years, the plain buy and hold method might be better (if price moves higher up).  Well nobody can assure share price going forward will be higher or drop lower.  Whereas for the strategic action method, one thing can be assured of is continue to increase holding at $0 cost going forward which will contribute to both dividend and capital return.  Another key difference is as of now, the plain buy and hold method has yet to achieve mathematically impossible to lose money status whereas the later has already achieved that in 2017.

All those strategic actions are what being adopted from years of research on using Sun Tzu's The Art of War (孙子兵法) as a system for investment.

Strategic Investor 2022 Review

FTSE STI ended the year 2022 at 3,251.32 compared to 3,123.68 a year ago, up 127.64 points or 4.09%.  One of the selective few market globally managed to edge out a gain for the year while stock market like US ended down double digit percentage.  Individually, a review of the various stock portfolio in holding as followed.

Investment Portfolio

	2022	2021	Variant
Non-Strategic (Income) Unrealized Gain/Loss	+82.49%	+33.40%	+146.98%
Strategic Unrealized Gain/Loss	+9.75%	+2.88%	+238.54%
Crypto Unrealized Gain/Loss	+2.84%	--	--
Portfolio Unrealized Gain/Loss	+15.53%	+16.67%	-6.83%
Realized Gain/Loss	+18.37%	+20.05%	-8.38%
Dividend Return	+70.16%	+68.51%	+2.41%
Cash Holding	+83.37%	+54.05%	+54.25%
Portfolio	+104.05%	+105.23%	-0.69%
STI	3251.32	3123.68	+4.09%

	Annualized (w/o dividend)	Annualized (with dividend)
Genting SP	+2.47%  (divested)	+4.03%  (divested)
CapitaMall Trust	+4.37%	+8.57%
SIA-SATS	-2.24%  (divested)	+0.14% (divested)
Kep Corp	-3.36% (divested)	+0.08% (divested)
MapletreeInd Trust	+7.58%	+10.35%
Kep DC Reit	+7.42%	+10.96%
Frasers Cpt Trust	+3.55%	+8.01%
Lendlease Reit	--	--

Investment Portfolio performance dipped marginally 0.69% for the year.  There were couple of divestment namely SIA-SATS, Genting SP and Kep Corp as part of the continuation of the portfolio restructuring which started late 2021.  With these divestment, the restructuring has finally completed and the newly portfolio is the 3rd portfolio that was being built up since started investing 3 decades ago.  There were some rearrangement of stocks between Non-Strategic (renamed to Income) section and Strategic.  STI ETF was moved to Strategic and Lendlease Reit becomes part of the Income section.  As Lendlease Reit at the moment still holding at $0 cost, there will be no statistic on its Annualized performance (with and without dividend).  In addition, a new section Crypto was added to the Investment Portfolio.  As the name suggested, this houses all the Cryptocurrency investment.  Since this involves $0 capital, the performance is measured its market value with respect the the cost of the Income section.

Due to the divestment, Cash holding was increased by 54.25%.  Unfortunately, the realized gain portion saw a dipped of 8.38%.  This is mainly due to of the 3 divestment stock (Genting, SIA-SATS and Kep Corp), 2 of them (SIA-SATS and Kep Corp) registered realized capital loss.  However, with the inclusion of dividend return all these years for the 2 stocks, the net divestment still manage to register a positive return

The positive aspect of the portfolio is that the total portfolio performance still able to maintain above 100%.

Stock Incubator

	2022	2021	Variant
Unrealized Gain/Loss	+64.78%	+55.80%	+16.09%
Realized Gain/Loss	+32.29%	+32.29%	+0.00%
Dividend Return	+22.74%	+18.99%	+19.75%
Cash Holding	+65.39%	+62.67%	+4.34%
Portfolio	+119.82%	+107.09%	+11.89%
STI	3251.32	3123.68	+4.09%

	Annualized (w/o dividend)	Annualized (with dividend)
Nordic	+21.30%	+24.90%
Valuetronics	--	--
Creative	-17.36%	--

Stock Incubator portfolio registered an increase of 11.89%.  There wasn't any change in composition of the stocks in this portfolio or any restructuring (not ruling out possible restructuring in the future too).  The Cash holding registered an increase of 4.34% and this was mainly due to the cost recovery process for Creative Technology stock.  

Of the 3 stocks in this portfolio, only Nordic Group managed to close higher compared a year ago, while Valuetronics closed at $0.52 vs $0.545 in 2021, the unrealized loss is insignificant.  The worst performance was Creative Technology as it closed at $1.42 vs $2.39 in 2021, a drop of 40.59%.  The huge drop luckily didn't create a big impact on the overall portfolio performance as the unrealized gain from Nordic Group is more than enough to offset it.  Creative Technology cost was $$3.4562/share in 2021 and the recovery managed to reduce it to $3.0031/share in 2022.

Overall, the Stock Incubator portfolio continued to maintain above 100% and almost triple outperformance STI index, that the bright spot of it.

Looking Ahead

The restructuring of the Investment Portfolio has completed and going forward will be concentrating in building up the quantity in the Strategic section.   As for the Stock Incubator Portfolio, capital recovery shall continue with Creative Technology and it is also about time to resume accumulating Valuetronics, which has paused for last year.

Most were expecting a recessionary year for global economy this year.  Unfortunately, recession is not that scary and worried as past experiences had shown that within 2 years economy recovered from it.  Stagflation should be the one to be mostly concerned and worried.  In stagflation, central bankers can't lower interest rate to spur economy grow as inflation is at elevated level and the moment interest rate is cut, inflation will jump.  Central bankers can't continue to hike up in attempt to bring down inflation to acceptable level as the already low level of economy growth will sink into recession.  Unlike recession whereby within 2 years can be exited, stagflation can last for decades !!!

Strategic Investor 2021 Review

FTSE STI ended the year 2021 at 3,123.68 compared with 2,843.81 a year ago, representing a gain of 279.87 points or +9.84%.  Most would like the performance was due to the recovery from the Covid-19 pandemic which started in January 2020.  While the pandemic is still ongoing with the latest being the mutated Omicron variant, it is still too early to conclude the pandemic is over or stock market correction is over.  Just a food of thought, if vaccine is able to get the world out of pandemic, those nations who have been mass vaccinating the population out of the pandemic are still requiring further booster shot against newly mutated variant why ?

The following summarized the Investment Portfolio performance for 2021 vs 2020

	2021	2020	Variant
Non-Strategic Unrealized Gain/Loss	+33.40%	+14.08%	+137.22%
Strategic Unrealized Gain/Loss	+2.88%	1.26%	+128.57%
Portfolio Unrealized Gain/Loss	+16.67%	+11.21%	+48.71%
Realized Gain/Loss	+20.05%	+29.08%	-31.05%
Dividend Return	+68.51%	+66.31%	+3.32%
Cash Holding	+54.05%	+26.91%	+100.85%
Portfolio	+105.23%	+106.60%	-1.29%
STI	3123.68	2843.81	+9.84%

	Annualized (w/o dividend)	Annualized (with dividend)
Genting SP	+2.52%	+4.14%
CapitaMall Trust	+4.74%	+9.03%
SIA-SATS	-2.52%	+0.08%
SingPost	-3.39%  (divested)	+1.34%  (divested)
Kep Corp	-3.36%	+0.08%
MapletreeInd Trust	+9.73%	+12.44%
Kep DC Reit	+13.83%	+16.52%
Frasers Cpt Trust	+6.29%	+10.39%
SIA MCBz300608	+1.27%  (divested)	+6.07%  (divested)
STI ETF	+28.89%	+33.93%

Investment Portfolio performance dipped 1.29% compared to STI gain of +9.84%.  This was mainly due to the Investment Portfolio doesn't have local bank stocks which contributed to most of STI gain for the year.  Next, was due to dividend contribution which only contributed a marginally increased of 3.32%.  In the past, First Reit contributed a bulk of the dividend return but that was divested in Dec 2020.

There was a dip in the realized gain from +29.08% to +20.05%.  This was due to the ongoing Investment Portfolio restructuring and rebuilding (refer here) in which both SIA MCBz300608 and SingPost were divested.  While the former netted a positive return (refer here), the later registered a capital loss of 36.17% (refer here), the main factor for the overall dip.

After the divestment, Cash holding increased from +26.91% to +54.05%.  Strategic section unrealized gain moved up from +1.26% to +2.88% as 2 more stocks (Fu Yu and InnoTek) were added.

Overall, total portfolio performance still able to maintain above 100%.

The following summarized the performance of the Stock Incubator portfolio for 2021 vs 2020.

	2021	2020	Variant
Unrealized Gain/Loss	+55.80%	+28.74%	+94.15%
Realized Gain/Loss	+32.29%	+32.29%	+0.00%
Dividend Return	+18.99%	+16.05%	+18.32%
Cash Holding	+62.67%	+61.98%	+1.11%
Portfolio	+107.09%	+77.09%	+38.92%
STI	3123.68	2843.81	+9.84%

The Stock Incubator portfolio basically blew the STI away with a +38.92% performance even outperforming S&P 500 which was up 27% for 2021.

The solid performance was mainly due to the performance of Nordic Group.  It closed S$0.23/share in 2020 but S$0.41/share in 2021, a jump of 78.26%.  However, for my holding the price was locked at S$0.3934/share due to a strategic locked in price at S$0.355/share for 31.25% of the holdings.  Nevertheless, this still register a jump of 71.04% in unrealized gain.  While both Valuetronics and Creative closed lower than in 2020, the jump in Nordic Group was more than enough to offset those two and gave an overall increase of 38.92%.

Dividend return also recorded a gain of 18.32%.  Cash holding increased 1.11% due to the continue recovery of the capital being injected into Creative as the holding price reduced from S$3.5718/share in 2020 to S$3.4562/share in 2021.

Total portfolio rebounded back to above 100% for 2021

Looking Ahead

Investment Portfolio will continue to restructure and rebuild to form the 3rd Investment Portfolio since 1993.  If everything work out as planned, the whole restructuring and rebuild should be able to complete within 1Q 2022 and hopefully before STI correction.  

While most people in particular analysts will be more optimistic about STI in 2022 with reason being the Covid-19 pandemic should be ending in 2022, from the STI analysis I did on the STI Analysis -- the next peak and trough series coupled with my "6.5th sense", a final correction is not a big surprise and something expecting for me.

Stock Incubator Part 1.4 -- Nordic Group

With reference to the news dated 10th Nov 2021 of Nordic Group launched an acquisition of Starburst Holdings Limited.  The announcement was for Nordic Group to acquire Starburst with a pre-conditional voluntary offer.  The offer shall only be triggered when it has satisfied or waived off the pre-condition on or before 10th February 2022.  Should the deal go through, the offer will be S$0.238/share in cash to all Starburst Holdings Limited's shareholders.

As a shareholder of Nordic Group since 2014, this piece of news really caught me off guard.  Firstly, Starburst Holdings Limited is not a competitor of Nordic Group in term of business.  While Nordic Group's business is mainly focused on O&G or O&M sector, Starburst on the other hand is focused on the military related business.  Not even a bit of overlap and that really puzzled me about the news.  Another concern is the financial impact after the acquisition for Nordic Group.

NTA (as at 30th Jun 2021) shall be reduced from 16.9 cents to 10.7 cents

NAV (as at 30th Jun 2021) shall be reduced from 24.5 cents to 22.3 cents

EPS (as at 30th Jun 2021) shall be increased from 2.0 cents to 3.9 cents

Net Cash (as at 30th Jun 2021) shall be from +S$12.5M to -S$48.3M

Gearing (as at 30th June 2021) shall be from -0.13x to +0.56x

The last two are the concerning points as the company will swing from a net cash to a net debt, a swing of S$60.8M.  

There will be plus points to the proposed acquisition, if not why go ahead.  So what's the benefit of it ?  The followings are the rationale for the acquisition as according to the company :-

1. Business synergy

Starburst's business and operation is a strategic fit for the company as the engineering competencies, know-how and resources of both companies are complementary.  Starburst will add civil and mechanical form structure products and services to Nordic Group.  Nordic Group's client base will be enlarged due to Starburst and a strong potential for cross-selling of Nordic Group's mechanical, electrical and instrumentation, insulation and scaffolding services to Starburst Group.

2. Potential for Continued Growth

Starburst Group's business could be considered a niche sector meaning there shall be less competition and growth's trajectory should be very well defined.  After all, military expenses globally is very difficult to see sudden reduction.  Even if in bad economy situation, military spending from countries to countries don't seem to be drastically effected.

From the above, the technical knowledge of Starburst should be that little overlap.  Another factor based on personal analysis could be foreseen declining revenue in the O&G or O&M sector and the company in need another growth sector for the company in the long run.  Kep Corp already sold off the rig building business to Sem Mar and in the past few years, couple of O&M companies like Swiber and Ezra also running into problems.

Given the benefit of doubts the company is making the right decision for the acquisition, the question as a shareholder is what's the time frame the company have to revert back to net cash position and what kind of growth trajectory is expected of Starburst ?

As a precaution, have sold off 30.12% of holding at S$0.355/share.  However, would consider that as locking in that 30.12% at the price of S$0.355 rather than divestment.  My overall holding price is S$0.10/share, so have that buffer to wait and see and regard this locking in as a strategic move.

Strategic Investor 2020 Review

FTSE STI ended 2020 at 2,843.81 compared with 3,222.83 a year ago, representing a drop of 379.02 points or 11.76%.  This is the year known as Covid-19 which even worse than 2003 SARS despite the fatality rate being lower.  Covid-19 first struck the world in January but technically should be December 2019 when it was first reported in China.  However, then not much people took it seriously.  That is why the coronavirus is officially named as Covid-19.  For the whole of 2020, the world is "conquered" by Covid-19.  After battling for almost half the year, it looked like stabilized and under-control but it came back "strongly" with mutation in December 2020.  While vaccination finally available but can these vaccinations be the answered to the mutated strain (not 1 but 2 found so far) still an unknown.

The following summarized my Investment Portfolio performance for 2020 vs 2019

	2020	2019	Variant
Non-Strategic Unrealized Gain/Loss	+31.80%	+46.74%	-45.58%
Strategic Unrealized Gain/Loss	+1.71%	0%	N/A
Portfolio Unrealized Gain/Loss	+17.99%	+31.37%	-42.66%
Realized Gain/Loss	+22.31%	+29.08%	-23.30%
Dividend Return	+66.31%	+62.60%	+5.92%
Cash Holding	+46.32%	+32.89%	+40.85%
Portfolio	+106.60%	+123.05%	-8.42%
STI	2843.81	3222.83	-11.76%

	Annualized (w/o dividend)	Annualized (with dividend)
Genting SP	+3.38%	+4.93%
First Reit	-3.25%  (divested)	+5.62%  (divested)
CapitaMall Trust	+5.73%	+10.05%
SIA	-3.25%	-0.29%
SingPost	-3.01%	+1.75%
Kep Corp	-3.21%	+0.09%
MapletreeInd Trust	+13.46%	+16.19%
Kep DC Reit	+18.85%	+21.04%
Frasers Cpt Trust	+9.65%	+13.46%
SIA MCBz300608	N/A	N/A
STI ETF	N/A	N/A

There should be no surprised if not all most of the performance are in the red given how Covid-19 has a serious impact on not just Singapore but global economy.  Singapore even has to enter a lockdown from April to June 2020.  Some key points for the 2020 portfolio performance :-

1. Non-Strategic suffered an unrealized dip of 45.58% as majority of the stocks suffered the drop with the exception of MapletreeInd Trust and Kep DC Reit in which both closing price at the end of the year were higher than a year before.  However, those 2 can't prevent the overall drop in portfolio performance.  Unrealized gain for 2019 included First Reit but not 2020.

2. The Strategic portion is N/A as previous batch was divested in 2019 and 2020 was the new batch.

3. First Reit was divested in Dec 2020 (refer here) with a capital and dividend return of -34.91% and +138.36% respectively.  Together with the partial divestment of the same stock back in 2013, the overall investment net a capital and dividend return of +8.45% and +110.57% respectively.  The -34.91% capital return was the main cause of the dip in realized gain of 6.77% despite overall investment on the stock netted positive return.

4. Cash holding due to the divestment of First Reit after offsetting capital used for SIA rights issues (both the normal share and MCB) and addition of STI ETF increased by 40.85%.

5. Dividend return continued to rise but at a slower pace despite all stocks suffered cut in dividend payout due to Covid-19 crisis.  That the only bright spot for the portfolio in 2020.

6.  Strategic section was rebuild with CapitaR China Trust and Lendlease Reit compared to 5 stocks in the previous batch.  Might consider adding some more.  Strategic section also added STI ETF

7.  Some strategic action was taken for the Non-strategic section.  SIA after taking up the rights issue (normal and MCB) was strategically diversify to SIA-SATS (for the normal stock) and locked into a dividend given stock for the MCB.  Frasers Cpt Trust also did a rights issue but didn't take up the offer.  Instead, so far managed to claim 50% of the entitled rights through some strategic action at $0 cost.  

8. Overall portfolio performance saw a dip of 8.42% as compared to a dip of 11.76% for STI.  

The following summarized the Stock Incubator portfolio performance for 2020 vs 2019.

	2020	2019	Variant
Unrealized Gain/Loss	+28.74%	+40.93%	-29.77%
Realized Gain/Loss	+32.29%	+32.29%	+0.00%
Dividend Return	+16.05%	+14.22%	+12.89%
Cash Holding	+61.98%	+58.93%	+5.18%
Portfolio	+77.09%	+87.44%	-11.84%
STI	2843.81	3222.83	-11.76%

Key points for 2020 performance :-

1. Stock Incubator Portfolio unrealized gain saw a dip of 29.77%.

2. Dividend return saw a +12.89% increment for the year.

3. Nordic holding was increased by 1.84% at $0 cost lowering holding price from $0.1018/share to $0.1000/share.  Valuetronics holding was increased by 25% at $0 cost while Creative holding price was reduced from $4.0804/share to $3.5718/share strategically.  These are the strategic actions taken that caused the overall portfolio performance to be better than STI and Investment Portfolio.

4. Overall portfolio performance saw a dip of 11.84% as compared to a dip of 11.76% for STI

Overall, 2020 is never a good year for stock performance in STI with the backdrop of Covid-19 crisis.  However, as one always said whenever there is crisis, there will be opportunity.  So for 2021, it is the opportunities that will be looking forward to.

Looking ahead 2021, the Strategic section of the Investment Portfolio will continue to increase its holding and hopefully able to maintain $0 capital cost.  For the Non-Strategic section of the Investment Portfolio, apart from adding more STI ETF when opportunities rise, have no intention at the moment to add more stocks.  For existing holdings, will take up some strategic actions either to reduce the holding price or increase holding at $0 cost.  The Incubator Stock Portfolio will continue to monitor for opportunity to increase holding at $0 cost (for Nordic and Valuetronics) and reduce holding price of Creative.

While most believe 2021 will be a better year than 2020.  There might be true to it if you just look at the end of the year value but according to my Elliott Wave analysis, there should be one more deadly last leg down.

Strategic Investor Update

STI plunged to an intra-day low of 2510.88 on 13th Mar 2020 breaking the low of 2528.44 in 2016 and that is the event I've been anticipating and waiting for as everything just working according to the script.  This event finally allows me to move into the next step -- start monitoring for opportunity.

The list of stocks that I had compiled in 2015 when I started the 孙子兵法 system in building up portfolio finally can be taken out of the freezer.  This list consists of stocks that I wanted to add to my portfolio during the next financial crisis.  Since 2015 till now, lot of things have changed.  The fundamental of those stocks could have changed too.  So, it is time to reassess their respective fundamental and at the same time re-evaluate their respective margin of safety price level too.

Frankly speaking, since the start of strategic divestment of the Strategic section of my portfolio in September 2019, I kind of like in "semi-hiatus" in stock market to eventually "completely hiatus" in December when the Strategic section was fully divested.  Taking up new passion (not really new just that something I wanted to do at a younger age but never got a chance and time to do then) and "enjoying" some existing passions.  Despite the bullish sentiment from stock markets and analysts, I still continue to wait as I have strong confident in my own analysis the year 2020 is the one.  Looking at those EW analysis in the blog should know already.

To be exact, during this current crisis (due to Covid-19), I am more prepared, more calm, more relax, less panic and less fear compared to the 2007-2009 period.  Perhaps, it was the lesson that I've learned and the stringent self critical that I put on myself for what I've not done right in the 2007-2008 GFC.  To certain extend, I even feel more "enjoyable and satisfying" to see market crashes like nobody business now.  Don't get me wrong it is not because I have short positions that gain from it but rather it is that kind of satisfaction that I get from the toughest challenge in this world -- analyzing the irrational stock market correctly, beating irrational with rational.

Although now it is a very simple straight forward thing, I get the financial crisis that I've been anticipating and waiting for, stock prices are no longer expensive (well not really super dirt cheap either at this moment), my list of stocks is there, the cash holding is there (additional cash holding after the strategic divestment last year) and I just have to wait for the correct timing to pull the trigger.  However, now I have second thought.  Given the outcome that I've achieved in the Strategic section after the divestment last year, this prompts me a question, is the conventional way of investment still remain attractive ?  The very low cost I could get (ideally $0 cost) from the Strategic section doesn't give me any incentive to continue with the conventional investment methodology which I have to put in and lock in the capital to the stock.

So it won't be a surprise at the end of this financial crisis, I did nothing via the conventional methodology and instead pile everything into the strategic methodology.  With that, I still retain most part of the cash holding (putting in bank to get peanut interest) and yet enjoying a much better profit margin than the conventional mean.

Another thing different from 2007-2009 is during that time, I only have 2 portfolio -- Cash and CPFIS.  The cash portfolio only consists of 3 stocks -- First Reit, Cambridge Industrial Trust and Genting while the CPFIS consists of 2 -- First Reit and STI ETF.  Now, I have a cash portfolio (divided into Strategic and non-Strategic section, holding 9 stocks), a CPFIS portfolio (2 stocks), a SRS portfolio (0 at the moment), an Incubator portfolio (3 stocks) and a kid portfolio (4 stocks, using my children ang pow over the year to invest) so relying just solely on conventional mean might not be the best way going forward.

While now it is the time to monitor for opportunity, it is also the time to refine all the strategies that I've planed for so that I could get the best out of this financial crisis for all my portfolios.

STI breaking below 2528.44 is like the morning alarm clock that wakes me up (back from hiatus), feeling fresh from the sleep and ready for the go.

Strategic Investor Update

As mentioned in Investment Portfolio Strategic Divestment dated 7th Dec 2019 the full divestment of the Strategic section of the portfolio was to prepare for the fore coming crisis as according to 孙子兵法 -- 第十一篇， 九地篇.  The ongoing Covid-19 crisis is definitely one of the "地" as accord to the principle.  No, I do not have a crystal ball or the ability to predict the fore coming crisis is this Covid-19 when I started the full divestment from Sep to Dec 2019.  It is just merely the combination of the Elliott wave analysis I did (latest series STI Analysis -- the next peak and trough ? (59)) plus following the 孙子兵法 system that is bind by the 13 principles (or the technical analysis is part of the system).  The full divestment registering a profit gain of +27.34% (reference to the total cost of the non-Strategic section) is a mean to increase the options to execute 孙子兵法 -- 第八篇，九变篇 to counter the 孙子兵法 -- 第十一篇，九地篇.  For the record, though the full divestment was a good move for this Covid-19 crisis, the process in doing that has couple of mistakes (in particular the timing of divestment) and that should not be overlooked.

The preparation for the fore coming crisis did not start when the Covid-19 started or the moment I divested the Strategic section last year.  It was in fact started way back in 2015 when I first adopted 孙子兵法 as a system into my investing.  It is part of the system when I restructured my Investment Portfolio into non-Strategic and Strategic section and also created the Stock Incubator portfolio.  The preparation is what the principle of 孙子兵法 -- 第一篇，计篇 about.  Along the way, it's just continue revising and refining to what was as of now.  To summarize, since 2015 I'm already prepared for the fore coming crisis or this Covid-19 crisis.

There are stocks that I wanted to add to my existing non-Strategic section for the fore coming crisis, the possibility of adding more of the existing stocks either via cash call (if there is one) or the usual mean.  However, at the end of the crisis it could end up none of the above was done.  This is not because miss the opportunity but for the reason due to value and fundamental investing.  In value and fundamental investing you only invest when there is a margin of safety.  Thus, even if the fore coming crisis leads to a fall in the stock price, should that price level still unable to provide that margin of safety no action will be taken.

In order not to miss the opportunity of a battled down stock price which many consider as cheap bargain, this is where the Strategic section and strategic mean to reduce the existing holding price at $0 cost come in.

故用兵之法，无恃其不来，恃吾有以待之；无恃其不攻，恃吾有所不可攻也

The above was mentioned in 孙子兵法 -- 第八篇，九变篇.  It means never hope enemies will not come but always prepared for it, never hope enemies will not attack but make it such that enemies could not find a mean to attack.  To put it in investing perspective, never hope crisis will not come but always prepared for one.

Strategic Investor 2019 Review

FTSE STI ended 2019 at 3222.83 compared with 3068.76 a year ago, representing a gain of  154.07 point or 5.02%.  It was a good year for global stock market with US markets leading the top performance of more than 20% for the year.  This happened despite the year long ongoing trade war between the US and China which started in 2018.  After few round of tit-for-tat sparring between the 2, they have finally reached a "Phase One" deal to prevent further escalation.  The deal as of now is expected to be signed on the 15th January 2020.  Much detail on the deal still remain unclear.  Since it is just a "Phase One" and not sure how many more phases it can go on, expectation for the "Phase One" should not remain high and of any high quality.  The following summarized my Investment Portfolio performance for 2019 vs 2018

	2019	2018	Variant
Non-Strategic Unrealized Gain/Loss	+46.74%	+34.89%	+33.96%
Strategic Unrealized Gain/Loss	+27.34%	+22.20%	+23.15%
Portfolio Unrealized Gain/Loss	+31.37%	+36.59%	-14.27%
Realized Gain/Loss	+29.08%	+10.73%	+171.02%
Dividend Return	+62.60%	+57.15%	+9.53%
Cash Holding	+32.89%	+33.13%	-0.72%
Portfolio	+123.05%	+104.48%	+17.77%
STI	3222.83	3068.76	+5.02%

	Annualized (w/o dividend)	Annualized (with dividend)
Genting SP	+4.28%	+5.66%
First Reit	+4.32%	+9.45%
CapitaMall Trust	+7.72%	+11.75%
SIA	-2.87%	+1.19%
SingPost	-0.75%	+3.36%
Kep Corp	-1.05%	+0.11%
MapletreeInd Trust	+13.71%	+16.58%
Kep DC Reit	+15.83%	+18.62%
Frasers Cpt Trust	+13.65%	+17.70%

STI was relatively weaker than regional bourses given its 5.02% rise in 2019 but my Investment Portfolio fared much better than STI compared to being under-performed than STI in 2018.  Some key points for 2019 performance :-

1. The solid performance of CapitaMall Trust, MapletreeInd Trust, Kep DC Reit and Frasers Cpt Trust helped pushed up the Non-Strategic unrealized gain, registering a rise of +33.96%.

2. The Strategic section continued to perform and helping the overall portfolio despite not doing much in acquiring more units in 2019. 

3. Portfolio unrealized gain fell from +36.59% in 2018 to +31.37% in 2019 due to realizing the gain in the Strategic section.  This is why the Portfolio realized gain jumped from +10.73% in 2018 to +29.08% in 2019.

4. Portfolio dividend return continued to provide a constant stream of gain in 2019, contributing a rise of +9.53%.  As such, Portfolio dividend return has exceeded the 60% mark.

5. Cash holding saw a dip from +33.13% in 2018 to +32.89% in 2019 mainly due to preferential offering subscription in Frasers Cpt Trust and Kep DC Reit.

6. As in 2018, there was three stocks (SIA, Kep Corp and SingPost) registered negative annualized return (excluding dividend) and still remained the same in 2019

7. Overall Portfolio return still maintain above the 100% level which was first reached in February 2017 but just a slight below the highest of +125.65% registered in January 2018.  +123.47% was the highest in 2019 registered in November.

The following summarized the Stock Incubator portfolio performance for 2019 vs 2018.

	2019	2018	Variant
Unrealized Gain/Loss	+40.93%	+48.82%	-16.16%
Realized Gain/Loss	+32.29%	+32.29%	+0.00%
Dividend Return	+14.22%	+12.36%	+15.05%
Cash Holding	+58.93%	+55.99%	+5.25%
Portfolio	+87.44%	+93.47%	-6.45%
STI	3222.83	3068.76	+5.02%

Key points for 2019 performance :-

1. Unlike the Investment Portfolio, Stock Incubator Portfolio under-performed STI in 2019, registered a dip of -6.45% due to a -16.16% drop in the unrealized gain.

2. The main culprit for the under-performing was Nordic Group as it closed $0.29 in 2019 vs $0.40 in 2018.  That is a drop of unrealized profit from +283.93% to +183.13%.

3. Creative Technology also contributed part of the poor performance as it closed $3.17 in 2019 vs $3.79 in 2018. 

4. Dividend return continued to cushion the portfolio with a increase of +15.05% compared to previous year.

5. The first bright spot for Stock Incubator Portfolio was strategically reduced the holding price of Creative Technology from $5.4838 in 2018 to $4.0804 in 2019, a reduction of 25.59%, thereby recovering some of the capital being invested.

6. The second bright spot for Stock Incubator Portfolio was finally double the quantity of Valuetronics at $0 cost since first vested in 2017.  This is also the only stock in this portfolio that closed higher than 2018.

7. Due to strategic action in recovering capital, cash holding rose from +55.99% in 2018 to +58.93% in 2019

Based on 2019 performance, the following conclusion can be derived from it :-

1. The effort in the Strategic section which was first built up in 2015 according to 孙子兵法 finally paid off after fully divested in 2019.  Though the total quantity from the 5 stocks that were accumulated was just 21.28% of what was initially targeted, the impact is not something to be ignored in the overall Portfolio performance.

2. For Stock Incubator portfolio, the overall performance was disappointing but it is in a much safer hand than the Investment Portfolio given that both Nordic Group and Valuetronics practically considered vested at $0 cost and Creative Technology is aggressively recovering the capital being invested.

Looking ahead 2020, after several actions to the portfolios in particular the Investment Portfolio, are in a better situation to cushion any financial crisis in 2020 if happens.  This was purely working according to 孙子兵法.

Stock Incubator -- Valuetronics Holdings Ltd

Finally, after 2 years and 4 months, I've double the holding in Valuetronics Holdings Ltd at $0 cost.

Started investing in Valuetronics Holdings Ltd in Jun 2017 taking the opportunity of then 1 for 10 bonus issue (refer here).  During those periods was waiting for opportunity to add more at bargain valuation after putting aside designated capital in the Stock Incubator portfolio.  At the same time feeling nothing to lose also adopt the 孙子兵法 strategy that I was using in the Strategic portion of my Investment portfolio.  Slowly and with utmost patience, a milestone has reached whereby the holding is doubled, all at $0 cost.  Not to mention has been collecting dividend along the way.  Based on the closing price of $0.69 on 25th Oct 2019 and assuming I've invested with the quantity that I've at that price, the amount of dividend collected is 12.45%.  Not a bad deal at all during these 2 years period.

Doing a recap for those 2 years plus duration, realized that I should have reached this milestone (double the holding at $0 cost) much earlier if not for being over cautious in not incurring cost.  Nevertheless, putting aside the time frame for that milestone to be achieved, this proves the 孙子兵法 is working perfectly.  Though it is the same concept and underlying as what was being adopted in the Strategic portion of the Investment portfolio, the CPFIS and SRS portfolio, the procedure in doing so is not totally the same. 

Going forward, the capital being put aside to acquire more when cheap valuation arises is still there and waiting for opportunity to come.  So while waiting, will continue to apply the proven 孙子兵法 strategy to further increase the holding at $0 cost. 

Now will have to 2 options in mind.  One option is to be more aggressive in the strategy meaning taking more calculated risk to increase the holding in the shortest possible time frame but potentially could incur some cost at some point.  The other option is to maintain the same cautiousness to avoid incurring cost but at the expense of perhaps long duration to achieve it.

孙子日 : 凡战者，以正合，以奇胜

Strategic Investor 2018 Review

FTSE STI ended 2018 at 3068.76 compared with 3402.92 a year ago, representing a loss of  334.16 point or 9.82%.  It was never a good year for global stock market not just STI.  Most of the year STI was in correction mode with a high of 3641.65 in May and a low of 2955.68 in October.  The following summarized my Investment Portfolio performance for 2018 vs 2017

	2018	2017	Variant
Non-Strategic Unrealized Gain/Loss	+34.89%	+68.72%	-49.23%
Strategic Unrealized Gain/Loss	+22.20%	+21.29%	+4.27%
Portfolio Unrealized Gain/Loss	+36.59%	+57.69%	-36.57%
Realized Gain/Loss	+10.73%	+10.73%	+0.00%
Dividend Return	+57.15%	+51.79%	+10.35%
Cash Holding	+33.13%	+33.13%	+0.00%
Portfolio	+104.48%	+120.22%	-13.09%
STI	3068.76	3402.92	-9.82%

	Annualized (w/o dividend)	Annualized (with dividend)
Genting SP	+5.16%	+6.31%
First Reit	+4.63%	+9.79%
CapitaMall Trust	+7.60%	+12.07%
SIA	-2.77%	+1.35%
SingPost	-1.04%	+3.30%
Kep Corp	-2.85%	+0.13%
MapletreeInd Trust	+10.73%	+14.65%
Kep DC Reit	+10.64%	+14.61%
Frasers Cpt Trust	+14.59%	+23.63%

With no surprise as STI fared worse than 2017, the investment portfolio also fared worse than 2017.  Not only that, investment portfolio also under-performed STI (-13.09% vs -9.82%).  Probably, that the first time since 2009 the performance of my investment portfolio lagged behind STI.  Some key points for 2018 performance :-

1. The main contributor for the drag in the portfolio was First Reit.  Price of it was $1.39 in 2017 vs $0.985 in 2018, a drop of 29.14%.  As Firs Reit is the largest holding in the overall portfolio, the return (including dividend) also fell from +232.61% to +114.82%.

2. SingPost became the 3rd stock in my portfolio to enter negative annualized return (excluding dividend) compared with 2 in 2017 (SIA & Kep Corp).

3. Dividend return increased 10.35% for 2018 but that was not enough to offset the drop in capital gain in the portfolio.

4. The other positive for the portfolio was Strategic Unrealized Gain increased by 4.27%.  This was helped by addition of those units at $0 cost

5. Overall portfolio return still maintain above the 100% which was first reached in February 2017 (+100.63%).  It hits a highest of +125.65% in January 2018.

The following summarized the Stock Incubator portfolio performance for 2018 vs 2017.

	2018	2017	Variant
Unrealized Gain/Loss	+48.82%	+81.53%	-40.12%
Realized Gain/Loss	+32.29%	+32.29%	+0.00%
Dividend Return	+12.36%	+9.06%	+36.42%
Cash Holding	+55.99%	+83.41%	-32.87%
Portfolio	+93.47%	+122.89%	-23.94%
STI	3068.76	3402.92	-9.82%

Key points for 2018 performance :-

1. Creative Technology was added to the stock incubator portfolio in October at initial holding price of $5.69 but was later reduce to $5.66 and $5.4838 by strategic mean at $0 cost.

2. Cash holding was reduced from 83.41% to 55.99% due to the addition of Creative Technology to the portfolio.

3. Dividend return continued to grow by 36.42% in 2018 was the only positive event for the portfolio.

4. The fell in unrealized gain and overall portfolio return resulting in under-performing STI was due to the drop in stock prices for the holding.

5. The other positive event was the holding of Valuetronics increased by 60% at $0 cost.

Based on 2018 performance, the following conclusion can be derived from it :-

1. The Strategic section of the Investment Portfolio still insufficient to provide the much need cushion for the Non-Strategic section as the building up of that is still ongoing.  This would mean for 2019, much work would have to be done to speed up the build up process.

2. For Stock Incubator portfolio, apart from Creative Technology, Nordic Group and Valuetroncis were in a much safer hand as themselves are providing the self-cushioning with their "freehold" status.  Initially, was quite contempt to put in capital for the investment in Creative Technology.  However, seeing the volatility of its price movement the past few days, it just fire up my desire to make it to $0 holding.  In just 1 single attempt the holding price was reduced from $5.66 to $5.4838, so it is not something impossible for me.  That probably shall be the top goal for 2019 for Stock Incubator portfolio.

On the surface, the performance for Investment and Stock Incubator portfolio were not something to cheer about but behind the scene should I add in those amount of gain that was achieved by flipping with those holdings, things will be totally different.  However, will not be doing that as was trying to maintain the original status for archive purpose.  In addition, by doing that will imply the main purpose of my investment in those stocks are merely following metric (eg XIIR).  Investing in a stock is like investing in a business, the forever metric tracking will not allow me to appreciate the business the I have invested in.  Moreover, since adopting 孙子兵法 in investing, whatever metric like XIIR is meaningless already as holding can be reduced to $0.

Stock Incubator Part 3.1 -- Creative Technology Limited

On 29th Nov 2018 Creative Technology made an announcement titled "75 Million Users To Enjoy Super X-Fi Headphone Holography As Creative Partners With iVideoSmart".  That is a piece of positive news as it signals Super X-Fi technology is being used commercially but definitely not as bombastic as "Creative Partner Smartphone Maker For Super X-Fi Solution".  This is mainly because not many people know iVideoSmart and what products/services/solutions its offers.  iVideoSmart might have seen something in Creative's Super X-Fi technology that could give an edge to business if not the partnership doesn't make any business sense.  Nevertheless, this is a little positive step forward for Creative on its Super X-Fi technology.

On 3rd Dec 2018 another announcement from Creative Technology surfaced titled "Creative and POPULAR Announce Partnership To Bring Super X-Fi Products To Singapore Islandwide".  This time I believe the reaction of the public to this piece of news is rather muted and puzzled as compared to the iVideoSmart partnership.  Many would wonder who would go buy electronics gadgets from a bookstore.  In actual fact, POPULAR has been selling Creative limited range of products like speaker, headphone, earpiece, etc on its chain of outlets for as long as I could remember so including the Super X-Fi Amp is just another additional item on the shelves that all.  Creative used to have flagship store in Funan IT Mall but now if anyone want to buy Creative products, it can only be done either online or go down personally to its office if POPULAR does not have that product.  Thus, the partnership opens up another channel for consumers to purchase the Super X-Fi Amp.  I won't take that as negative news as through the partnership, POPULAR could in a way help in the marketing of the Super X-Fi Amp.

The above is the setup I have for my Super X-Fi Amp.  An AUX splitter at the output end of the Super X-Fi Amp to allow for a wired output and a wireless output via the Bluetooth audio transmitter.  As I only use the Super X-Fi Amp on my laptop or desktop for listening to music & songs while working and watching drama for entertainment, this setup is probably the best solution for me to enjoy both wired and wireless connection.  The wired portion is being connected to Stereo Speaker while the Bluetooth transmitter is for wireless headphone.  

While Super X-Fi is meant for headphone/earpiece, the effect it has on speaker is still a significant difference compared to without.  For my setup, if I have a pair of Stereo Speaker that has some enhancement on the bass (must have enhancement) and in Windows/Mac I set the configuration to allow a 7.1 surround sound being output from the Super X-Fi Amp, the sound coming out of the speakers gives a feel like you are listening from a soundbar.  A soundbar has a minimum 3 speakers to a maximum of 7 speakers in the unit plus a subwoofer but in my case I only have 2 speakers.  Moreover, if without the Super X-Fi Amp, the sound being heard is like being punched out from the speakers to your ear.  With the Super X-Fi Amp, that effect is gone and sound just reaches my ear naturally.  This is due to the directional effect of the Super X-Fi.

The wireless connection is for sometime I wanted to enjoy the listening at a distance.  In fact this wireless connection can also apply to wireless speaker (my Stereo Speaker has the bluetooth feature too and that pair of speaker cost me less than $100).  Bluetooth audio transmitter (or transmitter cum receiver) with Bluetooth version 4.1 or 4.2 or even 5.0 supporting SBC, AptX, AptX Low Latency, AptX HD codec is easily available for sub $50.  The key is must be able to support at least AptX codec apart from the de facto SBC and the wireless headphone must have the same feature too.  This is to ensure you won't get the lip sync effect in the sound you hear from the movie or drama.  For pure listening to music and songs, SBC codec is sufficient.  This is also the case why Sony PS4 has disabled its bluetooth headsets feature to avoid the sound lag issue.  The wireless connection terminology is quite similar to the SXFI Air which Creative is yet to launch (suppose to target iPhone users) but there is an actual difference.  SXFI Air is processed the bluetooth transmitted signal to give user the holography effect.  My setup on the other hand is the post processed holography data are being bluetooth transmitted.  Microscopically, looking at the "1" and "0" of the data there should be difference as codec is not totally lossless.  However, most people should not be able to hear the difference.

So why not just wait for the SXFI Air and don't need such a "complicated" setup ?  Well that personal preference as I do not enjoy prolong usage of headphone/earpiece and at the same time I want to enjoy the Super X-Fi holography effect from speakers.  Moreover, it is still unclear the exact technical specification of SXFI Air, will it support at least AptX codec ?  If it does, I believe Creative has to license from Qualcomm and that could increase the cost of SXFI Air compared to without.

So what do the above test have on decision to invest in Creative stock for its Super X-Fi technology ?  Well put it this way, the setup above affirm that the Super X-Fi holography effect is workable outside headphone/earpiece.  This means opening up more options in partnership instead to just headphone/earpiece makers.  Having the Super X-Fi technology inside a smartphone, a tablet, a game console, a TV set, a motherboard for laptop or desktop or even speakers are becoming feasible.

Now, with all these options, the success of Super X-Fi for Creative will boil down to the strategy the management going to take.  I believe the management this time having learned the lesson from its past Sound Card and Zen MP3 player failure will not just sell the Super X-Fi products.  It is licensing the technology or the solution to third party to avoid getting into the scenario that should the products sale fail, the decade long research & development will just go down the drain.  This is similar to the concept of 孙子兵法第七篇军争篇 I believe.

Meanwhile, just have to wait patiently for other partnerships to materialize.

Stock Incubator Part 1.3 -- Nordic Group

Price of Nordic Group has fallen from an all time high of $0.63 (unadjusted for dividend) on 29 Jan 2018 to a low of $0.395 on 23 Nov 2018, a drop of 37.3%.  If it is adjusted for dividend, the price drop is from $0.61 to $0.395, 35.25%.  Alarming and shocking ?  Is the price drop due to fundamental change or correction for price overrun fundamental ?  Well, to me the price correction is something expecting as it is a correction for price overrun fundamental.

When I first invested in 2014, the price was just $0.1037 and at a price of $0.63, that translates to a capital gain of more than 500% apart from a dividend yield 10.13% with reference to my holding price.  Those figures do look good on my investment but deep down I knew the price has overrun its fundamental already.  In fact back in March 2017 I divested 48.39% of my initial stake at a price of $0.32, a realized gain of 207.60% excluding dividend return of 19.95% (refer here).  At that price I felt it was fairly valued then and the divestment decision was a strategic one as the amount of realized gain equate the initial capital I've put in.  As such, all the initial capital that I've put in is gotten back, making whatever I'm holding as free hold and whatever the price it is now is just pure floating profit.  This is to strengthen my margin of safety for this investment and at the same time remove the cut-loss level.

So, why am I saying the price correction now is price overrun fundamental rather than change in fundamental ?  When I first invested, I have expectations for its business (investing in the stock is like investing in the business and not investing for the stock price).  Those expectations were listed in previous write out and reproduces as followed.

1. Total Revenue for the company to hit the S$100M level
2. Profit Margain for the company to hit the 20% level
3. ROE of the company to hit 20% level
4. Current Ration for the company to hit 2.0

The above are the basic expectations I have for the management to grow the company business going forward.

The above chart showed the data for the above 4 expectations since 2014.  As can seen only the ROE part has reached the expectation while the other 3 still moving towards their respective expectation.  As a whole, the trajectory is still moving toward the expectation and hence the fundamental remain intact.  However, as not all expectations have been met, the share price is already hitting 6 times of my holding price (at its all time high).  This is clearly price overrun fundamental.  Moreover, the company has always been in net cash position since 2014 when I first invested but in the current FY18 it starts to chalk up net debt of S$4.66M due to the acquisition the company has made over the past years.  This does have a little concern for me and probably reflected by the price correction too.

Swiber was one of my past Stock Incubator holding but was sold off due to price hitting the cut-loss level before things gotten worse and I only suffered a small capital loss.  Then the aggressive in winning contracts to grow the company accompanied by increasing debt level with the profit margin failed to offset the rising debts was the cause of how it ended up in today state.  That was the lesson I've learned and taking that lesson into consideration, I would rather Nordic Group's management to slow down on possible acquisition to grow the company at this moment and focus on managing the debt level.  While the debt level has not increased into an alarming level, I believe the management is cost conservative enough to realize the importance of containing the debt over growing the company at all cost.  As such, this further justify the current correction of the price -- a potential drop in revenue and profit margin for the short to mid term.

Now, what the fair value since price is being corrected due to price overrun fundamental ?  How to judge the fundamental of a business is very subjective to each individual and as such, the fair value is also subjective to each individual.  It makes no sense for me to state the fair value since it is a subjective figure.  Rather than focusing on the share price movement, it would be better off focusing on how the management going to run the business with each of the decisions they are going to make.

From a subjective point of view on the company fundamental, it is still intact with the trajectory toward meeting the expectations on course despite the current short to mid term weakness.

Stock Incubator -- Creative Technology

Never have I invested in a stock in the past was first looking at its Technical Analysis instead of its fundamental.  Normally, the nature of the company's business, the quality of the products or services being offered, the quality of management, etc will be the first few factors that will attract me to do more research on the company and determine is it worth to invest in.  However, for Creative Technology, this will be the first stock (and hopefully last) that I get attracted to initially is from the Technical Analysis of its price performance.  I was analyzing for the price to move in Elliott Wave pattern after the company announced its new product, the Super X-Fi, which many said is the "holy grail" (refer here and here). 

I wasn't impressed with the product initially as I'm not a fan of using headphone/earphone for listening.  Ever since the release of 5.1 sounds system (now 7.1) I practically gave up on using headphone/earphone as sound is not natural and realistic when using those.  In addition, I do not like the feel of sound being push into my ears, amplifying one side to make it louder than the other just to create that "realistic" effect.  I do not own any headphone/earphone and also forgot when was the last time I used those.  Even a cheap pair of speakers capable of doing 2.1 sound with positioning, using the walls to bounce off sound can produce more realistic and natural sound than a pair of expensive headphone/earphone.  Well, the only good thing about headphone/earphone is you won't be disrupted what you are hearing from external noise.

As I get deep into the analysis looking the possibility of the reward in its share price, my instinct suddenly told me this could be a gem on its latest product.  Hence, I started to research on what's the Super X-Fi is all about.

I'll skipped the research on the company history, the management, the present and past range of products its has offered as there are nothing for me not to know.  I grew up in the era watching Sim Wong Hoo co-founded Creative Technology, witnessing its first failed product, the Cubic 99 or Cubic CT talking PC (in fact I was an owner of this product in the past) to the success of Sound Blaster card, a revolution to the PC industry then.  After that success, many in my generation then were inspired to be the next Sim Wong Hoo.  Having witness how Creative Technology rises from the ash, I also witnessed how its fall from its grace in its sound card business and finally the battle loss on its Zen player against Apple's iPod.  After that, most probably forgotten about Creative Technology already.  Well, I still using their speakers now for quality reason.

Artificial Intelligence, AI, is one of the key feature.  It captures the user shape of ears and face to construct a profile using some algorithm for that individual to be stored in the Super X-Fi Amp.  That means each individual will have different output from the Amp.  We cannot deny the world going forward will be AI.  Now, we already have AI like self-driving car, Robo Advisor, etc.  Thus, the AI feature should provide certain degree of attractiveness for this Super X-Fi.

Algorithm, that should be patented and it will become a valuable asset to the company.  Anybody who have worked in R&D before will know this is something that must be done of higher priority regardless the product is a success or failure.

These 2 points made me realized it is the technology instead of the product that I should looking into for reason to invest.  This means the quantity sale of the Super X-Fi Amp or the Super X-Fi Air will not be a deciding factor for me.  It is Creative's ability to sell this technology to be integrated into smartphone, tablet, earphone, headphone, game console, TV set, set-top box, PC, laptop, notebook or any electronics devices that produce sound that will define the success of Super X-Fi.

To convince further my decision or instinct, I purchased a Super X-Fi Amp and went to personalize and a demo session to experience myself what this technology is about.  My first reaction when I put on the headphone (connected to the Amp) was the Amp is faulty, not working as the sound I heard was from the speakers in the demo room.  I've accustomed myself for years on listening through speakers for the natural and realistic sound effect and despite not being an audiophile or a sound engineer, my past R&D experience did provide me some knowledge of what audio is about, what the Super X-Fi produces really shock me.  Since I'm not doing a technical review, to summarize my experience of the Super X-Fi technology -- It makes me feel like I'm not using a headphone/earphone !

In short, my decision to invest in this stock at a price of $5.69 is to invest in its technology and not its products.  As this technology might be new and believe it still have rooms to improve, I'll have to put this investment in my Stock Incubator portfolio as I classify this technology as a "startup".

Creative Technology is a company with no debt and a cash pile of S$156.7M.  Its market cap is S$406.52M and at a price of $5.78, that translates into having a public float of 70.33M of share.  This means the cash pile it has is equivalent to S$2.23/share.  The other 2 stocks (Nordic and Valuetronics) in my Stock Incubator portfolio all having net cash, no debt at the point of my investment so this is a positive thing.  As for other fundamental like PE, EPS, ROE, etc, I do not think is the appropriate time to look at as those figures are not meant for this new technology.  Going forward, there will be some expectations and concerns for this investment.

Expectations
1. Creative can successfully sell this technology to be integrated into electronics/mobile devices
2. Creative main focus is on the technology rather than the products they could develop from it
3. The technology or the algorithm used is being patented and more could be generated in the future
4. Having learnt of the failure in its sound card and Zen player, the management should not repeat the same mistake in this technology
5. Creative continues to research on this technology to make it better

Concerns
1. Competitors, every business will have competition.  Creative might be the first to create this technology but letting its competitors to overtake it in the future will be a big concern
2. Creative ability to market this technology.  In the past it was their weak marketing strategy as compared to Apple that led to the failure of Zen player against iPod
3. Complacency, the most common weakness of human being.  

Unlike Nordic and Valuetronics which now both are "free holding" (either without paying a single cent of capital or through other means the original invested capital is being recovered), a stop loss in the stock price have to be placed to minimize investment risk.

As now this has became one of my invested stock, I will cease blogging on its Technical Analysis, a norm for me in not blogging about the technical aspect of the price performance.  The only exception is when the technical analysis aspect is in an unique situation that I will blog it down for archive purpose.

In case anyone want a $20 off in purchasing the Super X-Fi Amp, you can use this referral link.