Tuesday, 27 December 2016

2016 Portfolio Review (Part 2): Foundation Stocks

2016 is another challenging year for investment.  Many "marketquakes" starting with China market's failed circuit breaker implementation, the ever present oil price worry, the continuing terrorist threat, the surprising Brexit and Donald Trump victory, the rate hike in December and perhaps further hikes in 2017.   Sometimes when you think you are moving a step forward, but actually you are forced taking two steps backward due to strong headwinds.

My portfolio crossed two milestones in 2016.  First, the 200K point was surpassed. Then, the special dividend from Saizen Reit gave a great turbocharge to my 2016 dividends and the 12K mark was exceeded for the first time in my investment journey. 

My portfolio was set up using SGX, Starhub and SPH as foundation stocks, and Reits and other dividend stocks are supporting casts.  SPH, Starhub and the Reits were all battered hard this year.  Although the foundation stock trees grow deep roots over the years, it is time to review the continued relevance of them as foundation stocks.

1. SGX

Trading activities and volumes continue to languish despite reduction of lot size from 1,000 to 100 shares.  Still waiting for an IPO blockbuster...

Chance of SGX failing as a company is minimal.  My SGX tree already has very deep roots and I like the quarterly dividend payouts (like a REIT).  I will add more SGX if it comes low enough.

2. Starhub 

The company is facing stiff direct streaming competition on cable TV, mobile phone operations and uncertainties in market dilution after the 4th telco starts operation.

Starhub has long history in consistent dividend payments, but it remains uncertain whether dividend would be cut in 2017.  However, the Starhub dividend is juicy, even factoring in a 10-20% cut. But I will not add onto my current position. 

3. SPH 

The continuing decline in SPH's core business earnings and its dividend payout is a concern.  Though I do not think the old stalwart is about to die yet, I will not add onto my current position.

My foundation stocks have served their purpose in the build up of my portfolio, but I think it is time for change.  So, I decided to revamp my holdings as such:

1. Keep SGX as my foundation stock.
2. Group Starhub, SPH, banks, KC/SCI, the two Enggs into in a STI-component group.
3. REIT group on selective reit counters.
4. Small portion for non-STI and non-REIT counters.

Let's see how it work out in 2017. 

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