I LOST about $300,000 playing contra in the stock market in 2007. It was money I could afford to lose but I still felt rotten about the loss. (Later in this article, I will give you details about my bad experience)
I have thought hard about my mistakes, and I have made a big change in my approach to investing.
Over many months recently, I took a close look at REITs and became convinced that this is the kind of investment I have knowledge about and confidence in.
The dividend yields of some REITs are very attractive to me as the prices of the REITs had been bashed down more than 70% in the market downturn. Their net asset values were also far higher than the stock prices.
In April this year, I accumulated a lot of different types of REITs. I now have spent $250,000 of my own money and another $184,000 from my $250,000 margin financing facility.
As you know, the market has been rallying. My investment now has a gain of about $200,000, which means a return of 80% on my cash! (This gain includes $62,800 in dividends that I have received or will be receiving as the stocks have gone ex-dividend recently.)
I am a mortgage broker and I am comfortable with investing in property-related stocks, such as REITs. I can check rental rates, I can pose as a tenant. It’s real investment as I have something to fall back on.
Currently, the stock market is giving me better returns than investing in physical properties. But when the sentiment improves in the physical property market, I will move my money there.
I will sell my stocks, including REITS, if they jump high enough. I think I understand the risk of being too greedy.
| No. of units | Average price bought at | Closing price on Tuesday (May 19) | Profit | |
K-REIT |
150,000 | 66.5 cts | 87.5 cts | $31,500 |
| Suntec REIT | 150,000 | 67 cts | 90.5 cts | $35,250 |
| CDL H Trust | 150,000 | 53 cts | 79 cts | $39,000 |
| ARA | 100,000 | 46 cts | 57.5 cts | $11,500 |
| Plife REIT | 100,000 | 73.5 cts | 88 cts | $14,500 |
| Rickmers Maritime | 100,000 | 34.5 cts | 41.5 cts | $7,000 |
| $138,750* |
*Does not include dividends totalling $62,800
I believe only physical properties can held for a longer term. Property investments yield rental and there will be housing demand from expatriates.
The property market has improved but I don’t think it’s time for me to re-enter it. It will pick up strongly when banks increase their maximum loan close to 90% again for the second property. Now it’s only 65-70%.
Easier financing and investor sentiment will go hand in hand. My philosophy is: Buy property when the sentiment gets better – instead of buying based mainly on factors such as amenities, location next to MRT station, and en-bloc potential.
Now I will tell you about my mistake in 2007 and what I learnt from it.
Lost big-time on Jade
I was naïve. It was my very first time playing the market. I had made money in my mortgage financing business and some property investments.
I started by playing the penny stocks, such as Armstrong, Rowsley and Atlantac. The one I made hundreds of thousands of dollars on was Jade Technologies.
I went in and came out of Jade as it climbed from 12 cents to over 50 cents. There were stories of how it would go into various profitable ventures.
I became greedy. Then the stock collapsed all the way to 3 cents and, boy, was I burnt. I didn’t know how to cut loss quickly. I stubbornly held on. I would say I had naïve thinking.
This is the stock I lost the most on. Now, I believe only in stocks which have solid fundamentals.
If a stock has negative news, or a number of negative developments, I will also avoid it. An example is a certain company which has reported 94% drop in its profit recently, and is going for a rights issue.
I have become allergic to stocks with bad news.
I want steady dividend plays with lots of upside in capital gains.
There is a non-REIT I now hold: Oceanus, which I bought on May 13. This business is very scalable. If I am not mistaken, the company has grown its abalone population to 150 million already and will not stop there.
Abalones are a delicacy for the Chinese people, who see it as a sign of prosperity and luck. I have bought shares of Oceanus at 25 cents each.
The money came partly from the over $100,000 I have pocketed from selling off Yangzijiang Shipbuilding and Suntec REIT in just two weeks.
By the way, I have a trading portfolio, and I have buddies to discuss trades with. I have learnt a lot also from my interaction with my clients. Most important, I have learnt a lot from reflecting on myself and my mistakes.
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Bryan Ong is director of BC Group, a leading mortgage broker in Singapore. To watch a Channel News Asia programme on him, click www.bcgroup.com.sg
Bryan Ong can be contacted at 6401-5678
