INVESTOR: How my stocks bought with CPF savings have done

Sandy Chin, an avid reader of NextInsight, sent us this article to share her ideas and experience of investing. She also hopes to provoke other investors to comment and share their views.

In just the last 2 years, the total dividends received for the first, second and last stock amounted to $8,000. Dividends paid are not reflected in the market value in the table above.

THIS IS an image of the latest statement on my stock investments bought with my Central Provident Fund (CPF) savings.

Looking at it, I cannot help but smile at the capital gain which amounts to about 82%. Throw in the dividends, and the total gain easily exceeds 100%.

For three stocks, the dividends I have received totalled about $8,000 over the past two years. The fourth stock hasn't paid a dividend since 2007.

These three out of four stocks have been invested in for some 10 years or so. The fourth, which happens to be the worst-performer, was accumulated at various times in recent years with the average price being 18 cents (as shown in the statement image). 

Taking into account the long horizon, the portfolio gains have been decent but not extraordinary. But they certainly have beaten the 2.5% interest if the money had been left untouched in the CPF Ordinary Account.

I guess I am lucky to have even gains to start with. There are many investors who would have done better just sitting on their retirement savings, instead of investing in stocks or unit trusts.

My current portfolio has only four stocks as it has been scaled down from what it was at various times in the past when the CPF Board was more liberal with the use of CPF savings for stocks.

You may next ask what my overall cumulative result was, considering the stocks that I have bought and sold. I would say it was definitely positive.

I have a couple of nuggets of investment experience to share.

To start with, as you can see, there are extremes in the performance of my four stocks. One was a 3-bagger, rising from $20,000 to $61,000 in value.

The worst stock? It crashed from being worth $18,000 to a paltry $2,000. Actually, the value can be said to be nothing as the stock is now illiquid and I cannot unload it if I wanted to.

Another stock went nowhere, while the fourth did pretty well. However, the latter was not a major investment at the start as I put in only $4,670 - the smallest investment among the 4 stocks. It surprised me to become a 4-bagger worth $17,931.

I am no investing genius, and never expected such a result.

I dare say that, in many ways, other people’s investments could resemble the performance of my CPF portfolio.

By that I mean some stocks soared, some stayed stubbornly flat, some collapsed. I have not come across anyone who has a hit rate of, say, more than 80% success with his stock picks. Always, there has been some rotten apples in the barrel -- or at least, flattish non-performers.

What makes all the difference to one's portfolio result is the weightage one has placed on each stock.

If one had parked a good amount of money in a few stocks that became multi-baggers, then the overall gain would still be very handsome even if one suffered severe losses on small holdings.

 

Stock market = 50% casino

In my view, the stock market is akin to a casino - maybe 40-50% casino. Skill and analysis can help one pick gainers to a certain extent, but luck has such a big role.

I recognise that there is only so much that I understand and know about a stock. Beyond that is a landscape that is hazy and gets hazier if I try to peer further into the future.

The future is ever uncertain. How is one to know for certain how a business' profitability would change over months and years?

The business environment is too complex for anyone to be sure - let alone predict the sudden changes that can visit it. The vagaries of business are especially punishing on small companies.

My stock pick that crashed from $18K to $2K is a case in point. To start with, it was a small cap – very small now. No, it is not an S-chip.

I cursed my luck in picking this stock. It had appeared like a decent investment as its regional business seemed to be growing from strength to strength.

Turned out that the books had been cooked! The accounting fraud brought the house down and the (former) chairman and the (former) CFO - both Singaporeans - were fined and sentenced to jail, and most deservedly so.

My other 3 stock picks are Singapore blue chips with multi-billion-dollar market capitalisation.

They are relatively more resilient but does it mean that blue chips are good investments? I don’t necessarily think so.

The two stock picks that became multi-baggers were purchased prior to some M&A activities that transformed the businesses into more profitable entities that enjoyed economies of scale, and became big enough to attract more fund managers.

Does it mean that the stock (worth $2K) is as good as buried alive? Nope.

This is a hope I did not have last year. I may finally get lucky as this particular stock is currently the subject of an acquisition, already announced on the Singapore Exchange.

A new owner has plans to capitalise on business synergies which could revitalize this stock. I’d be the most lucky chap around if I could get back my original monies in this stock. That does sound like a miracle – or in simple market terms, a nine-bagger, if it happens.

Wish me luck!

Please feel free to comment as I would like to learn too from you.