Two “disadvantages” of buying stocks that are not very popular are that…
- They are virtually illiquid (very low trading volume)
- The spread (bid/ask) price of the stock is immensely huge.
Unlike the famous stocks that people buy in the STI (e.g. Singtel), where the spread can be just 1 cent, stocks like Keong Hong and Tat Seng Packaging can drop a few percentage points in 1 day of trading.
Needless to say, the smaller (yet, maybe not cheaper) the price of the stock, each spread will also affect the price more. A mere 0.5 cent movement in the current price of Indofood Agri at 24.5 cents can cause a 2% change in your initial investment. Imagine that!
In late May, there was news that showed that Keong Hong was fined for offering poor living conditions to their employees. This caused her price to drop 11% when the stock market opened and recovered so quickly that she actually closed 1 cent higher than her previous close price.
That was a very good example of my missed opportunity to accumulate at lower prices, when already undervalued.
Any buy or sell trade will also have its own opportunity cost to me. I had so many opportunities to buy some stocks on my watchlist, yet was unable to take any action. Is everything too expensive now? I’ll keep telling myself that.
The right temperament
After almost 10 months of holding ComfortDelgro, it is now green in my portfolio with a 10.19% gain (including dividends). I can’t imagine having sold it when it was trading at 1.9x. Unintentionally, it has also became a nice dividend stock for me at 4.45% over the past year. Well, it could have been higher if I accumulated more. But I am pretty happy for now.
Things seem to be looking more optimistic with them. With Grab as their only main competition now, I do not doubt that CDG has a ability to remain market leader with a strong balance sheet and matured experience in the transportation industry. They have even more cash holdings now that their deal with Uber has been cancelled.
Stable prices with REITs
Prices among our REITs have remained stagnant last month, and are way less volatile than my other stocks. In fact, REITs have surprisingly became the most underperforming stocks in our portfolio, even if I factor in distributions!
Did you notice though, that I used “our” in the previous paragraph? Well, out of the three REITs, 2 actually belong to BF. If he remains rooted to invest in high dividend yields instead of taking a leaf out of Uncle Warren’s page about stock analysis, I guess we will be holding those REITs for a long time.
Indofood Agri more undervalued?
As mentioned in my last portfolio update, Indofood Agri has a significant drop in earnings in their latest announcement. This would also mean that my new target price will be much, much lower than my buy price of 37 cents.
As of now, Indofood Agri stands as the biggest paper loss that I have at -32%. This has kept me on my toes and to give myself some time to make the right decision – to either sell, or accumulate more when opportunity comes knocking.
Dividends collected (based on Ex-Date):
AIMSAMP Cap REIT – 1.89% ($97.31)
Indofood Agri – 1.89% ($189)
Starhill Global REIT – 1.43% ($71.94)
ComfortDelgro – 2.59% ($133.10)
Upcoming dividends in June:
Keong Hong – 1.03% ($52)
YTD Dividends collected: $1,279.29