Wednesday, March 13, 2013

Sold off all my SPH at $4.47!

I sold off my SPH at almost 5 years high of $4.47 pocketing a nice profit and the dividends since 2007. I received about 6% dividends every year while sitting of paper losses of between 100,000 to 10,000. It was a difficult period to hold on to such a stock with very limited upside.
During the Lehman brother crisis, the generous dividends gave me strength to buy ARA, Fortune Reit, Parkway Life, Starhill Reit, Lippo Malls, Cambridge, OUE etc, while all these counters have gave me nice dividends and I eventually sold off for a profit, SPH was always below my purchase price when it cut dividends in 2008 after Sky Eleven profits was fully recognized.
Currently I am back with more than $200,000 cash and waiting to reinvest SPH and the markets when valuations are lower.
One of the lessons I learnt investing in SPH is diversification. Previously, I have loaded 49,000 shares or almost $213,000 in a single stock. This goes against the principles of diversification and when markets tanked, no matter how defensive a stock is, it is going to go down as well.
I should have switched out of SPH into higher capital gains stocks like Capitaland, UOB or even STI ETF when markets were gloomy in 2009. However, I held on to it and waited almost 4 years to realize a modest gain. Although on an annualized basis, I have about 6% returns, the downside risk I have taken did not justify the modest return I was receiving.
Going forward, I will redeploy my proceeds into at least another 5-10 Singapore blue chips to diversify my dividend streams and market risk.
My targeted returns will be higher now, given I have more experience in the markets. I aim to achieve at least 7% returns from my SPH proceeds going forward.
The first trade I did was to sell a put option for Sembcorp Industries (SCI). The option premium was 7.84% over 1M. My conversion price is $4.9960 (97% of current trading price).
If on 23rd April, SCI is at $4.9960 or lower, I will receive 11,000 shares. However, as my settlement amount is $54,604.28 (after adjusting for option premium), my effective price to buy SCI is $4.964.
If I do not get the shares, I will receive $352 interest. The shares will go XD on 29th April. Hence if capital were to be converted to shares, I will be assured of $0.15 dividends. I do not mind holding SCI for the long term. The only drawback is the low ~3% dividend yield.
I will be looking to invest in put options to aim buying lower than trading prices of stocks.
Take note that as I am working in the derivatives industry, I am paying virtually no spread for my stocks/derivatives investment. For normal retail folks, the maximum interest you are able to receive is actually 3%-4% instead of 7.84%. My colleagues will not want to take in your trade at 0.64% spread (or about $20) to broker an option trade.  I do not wish to disclose my current company as well.
 Stay tuned on my investment journey.

9 comments:

PanzerGrenadier said...

Hi SG Blue Chips

What do you think is the fair value of SPH that you will re-enter this stock?

Be well and prosper.

Drizzt said...

u have a crazy amount of capital.

Sgbluechip said...

Hi PG, $3.90 seems a decent entry price for long term holding. $4.50 seem a good price to sell.

vin luo said...

For 49,000 shares of SPH, the price u bought is at $4.29 per share,why sold it since it was moving in a uptrend because
you are able to hold when it was $2plus in 2009 and have been collecting the dividends steadily.Well if it was for diversification sake,i do agree with your view.

Sgbluechip said...

PER at about 19 now.

Steffi G. said...

Hello, what's your take on buying SPH now?

d said...

Hi , can you tell me what other companies allow u to sell put options? I cant find. Appreciate your kind advise.

Hossain Shakib said...

Hey SG Blue Chips,

Great display of patience with regards to your SPH trade. I might have not have done the same, losing 50% is like...heart pain.

I'm facing similar situation with Hyflux, being patient till the new Desalination Plant opens in 2013.

Hossain Shakib said...

Hi SG Blue Chips,

Great display of patience with regards to your SPH trade. Many would have heart attack losing 50% capital.