I have a confession to make.
You know about the SGX stocks related to the oil and gas sector with falling share prices? The darlings of yesterdays like Keppel Corporation, SembCorp Marine and SembCorp Industries? The very ones with juicy yields right now?
I’m invested in those.
You know SGX stocks that were targeted by heavy short-selling in December 2015 and January 2016? Yes, these commodities related businesses have had it pretty rough these couple of months. Google for the battered share prices of Wilmar, Golden-Agri Resources or Noble Group and weep silently.
I’m invested in those, too.
Catching A Falling Knife Block
I’m primarily an index investor, and I invest into all 30 Straits Times Index component stocks. This means that in addition to the 6 duds mentioned earlier, there are 24 others which make up the Straits Times Index.
No doubt, it could be a massive payoffs for many to invest in specific individual stocks with severely distressed prices. For me, I chose not to make concentrated bets on these individual stocks. If we take a look at their weightage in the STI, you might be surprised.
The oil & gas stocks make up about 5% of the STI now.
The commodities businesses? Another 5%.
Then, who are the real heavy-weights? As of the today, the banks are at 33%, real estate investment and services at 13% and telcos at another 13%. (ironically, these are concentrated bets on Singapore banks by virtue of their weightage in STI)
Yes, I’m invested in all of these as well, via a Straits Times Index exchange traded fund (ETF).
Warnings of catching a falling knife can be seen every single day. People have advised against continued buying of these battered stocks with seemingly high yields – falling knives, while others have indicated the tremendous value of buying them now – “cheap” stocks.
Yes, perhaps some of them could be falling knives. I would like to think of the STI as a falling knife block, and I intend to catch it, because I believe in the overall integrity of the collection of 30 knives which would eventually make for great cutting tools.
I seldom write on my activities anymore. I mean, how boring is that? Just buying STI ETF every month isn’t exciting to blog about, right? But I guess in current context, it would be interesting to take a look at my latest purchase prices over the last months.
Here we go –
3.40, 3.43, 3.46,
3.33, 3.07, 2.81,
3.05, 2.92, 2.95,
2.72, 2.63 and 2.65.
Some purchases were made during monthly buys, whereas some were additional purchases. I’m not particularly distressed by the drop in STI ETF price and have enjoyed making purchases at discounted prices. I actually hope that it lasts for a little while more.