Updates to the 20 Singapore Dividend Small Cap

At the start of 2013, I selected 20 small cap stocks listed on SGX that I thought would do well, and allocated $10,000. I put them on a stock portfolio tracker to track them. Interestingly, some colleagues thought I really did put money in this portfolio.

As you will see later, I wouldn’t have performed too badly.

This post serve as an update on the portfolio and whether we can derived some lessons learn.

You can review the back commentaries here:

• Introduction to the stocks
• Jan – Killing it in January
• Apr – 17% year to date
• Jun – Outperforming STI and returning 15.9% YTD

You can view the Google Spreadsheet with all the transactions and portfolio summary here.

Overall Result

For $200,000 invested at the start of 2013, the total unrealized gains is $98,272. the total dividends collected is $34,742.

The total returns is $133,014 or 66.5%. Annualized over 2.45 years, the return is 23%. This was a massive outperformance over the STI in this period, where the STI only gain 7.3% in this period.

Now you see why i wish this is my actual portfolio.

The expected dividend yield on cost of the portfolio grew from my last update in Jun 2013 from 6.3% to 7.35%. That is not bad versus the usually yielders.

(click to view larger table)

Unrealised Hits and Misses

When I select these stocks, some of them have some interesting growth themes, while others presents yield at an attractive price. It turns out that based on total returns, 17 of them turned out well, and 2 of them didn’t.One of them is rather neutral.

3 stocks have paper gains exceeding 100%:

• Riverstone: 199%
• Silverlake: 161%
• Straco: 291%

4 more stocks have paper gains exceeding 50%:

• Sheng Siong: 61%
• UMS: 60%
• Micro Mech: 76%
• CMPacific: 51.3%

2 stocks have massive drawdowns:

• Parkson: –60%
• Elec & Eltek: –52%

Dividend Rises and Falls

In this 2.45 years, there are much changes to the dividends paid out by the companies on this list.

All 20 stocks still paid out dividends.

The notable ones with change in yield on cost are the following:

• UMS: 14.84% to 17.8% ,  1 for 4 Bonus Issues
• Micro Mech: 7.04% to 9.38%
• Straco: 2.82% to 7.52%
• Nam Lee: 5.78% to 4.33%
• Lee Metal: 7.98% to 11.9%
• Parkson Retail: 2.26% to 4.14%
• China Merchant Pacific: 7.78% to 9.9%, 1 for 20 Bonus Issues
• Elec & Eltek: 10% to 2.86%

The lesson learn here is that when business do well, they raise the dividends. What is also observe is that the yields are respectable compared to the business trusts, real estate investment trust.

When business does not do well in Elec’s case, dividends are cut. Parkson Retail was the interesting one, where, the dividend actually was raised in this 2.45 years. It is a question whether they can pay the same amount coming up.

There is also one stock Boustead, which grew and spun off their industrial property business into Boustead Projects. Shareholders were given 3 shares for 10 Boustead shares.

Growth and Dividends are joined at the hip

There are usually comments heard that “I will go for this stock because it is a growth stock”, or “Should I be going for dividend or for growth?”

Growth and Dividends are not mutually exclusive. In the list you would observe many stocks that have shown both growth and dividends.

Straco and Silverlake both grew more than 100%, and their dividend yield on cost are respectable after growth at 7.52% and 9.48%

When you declared higher dividend because your earnings and cash flow is higher, the company gets re-priced upwards as well.

Not all picks will work out

When you put in effort to carry out prospecting each business, it doesn’t mean it will always work the way you wanted. 2 of the picks turn out not to be.

Perhaps is because I didn’t scrutinize whether there are much margin of safety in all my picks. Parkson and Elec will eventually work out over time. Parkson perhaps there is a chance,

Here is where diversification saved the portfolio here. Although these 2 have not done well, the rest did well and balance it up.

Had this been my usual strategy of concentration, I would have been killed here.

If you concentrate, the rewards are plentiful if you get it right, but if you don’t this is what you lived with.

2 to 3 great stocks propel the portfolio

While you may have some duds, where your prospecting skills are not up to scratch, great picks have more than 100% upside. And if you get a Dairy Farm in 2000, it becomes the main driver.

Sometimes I like the idea of sending out a few scouts just to sound out the reasoning of my prospecting, when perhaps there are still some unknown knowns out there (what people know that you do not know, and you do not know you don’t know everyone knows that).

Those turn out to be rather well. The big lesson learn from that is, you have always to revisit your business thesis.

20 stocks are too much for a part time wealth builder

To build on to my last paragraph of my last point, having 20 stocks as a part timer, yet need to focus on removing the weeds and fertilizing the main plant, it gets difficult to do that. You could be able to manage a 20 stocks well, but likely you won’t go deep enough to discern the business as part of risk management.

Perhaps the counter point is, that’s why we have 20 stocks! So that the Parkson and Elec doesn’t kill our portfolio.

I may be lucky here

Rising tide lifts all boats and the good operating environment may have resulted in most of the businesses doing well. I just happen to pick a few that did better. There are still a bunch which did much better that I didn’t pick up.

You could attribute this to skill, but 2.45 years is too short of a time frame and it is likely luck have more to do with the large gains than skill.

Summary

Dividends were not reinvested, and  so the result could have been improved further. I may think whether I would like to rebalance some of the stocks that are fully valued, stocks that i was wrong on the business thesis, into some other small cap stocks.

If you would like to track your portfolio the same way by transactions, you can make use of my stock portfolio tracker here.