Wednesday, January 1, 2020

Dividend Warrior FY2019 Portfolio Update - A Year Of Financial Milestones

Top 15 Core Holdings (Dec 2019)

Portfolio Actions in 4Q2019:
  • Full divestment of MNACT in 2 batches. Half at $1.25 and the other half at $1.18, making a profit of +39.7% over 4 years. Including cash distributions collected, the total return is around +72%.
  • Full divestment of SATS at $5.01, making a profit of +4.6% in 5 months.
  • Full divestment of APAC Realty at $0.51, making a loss of -5.6% in 8 months.
  • Applied for Ascendas REIT’s rights with excess. Fully allocated.
  • Applied for Mapletree Commercial Trust’s preferential offering with excess. Fully allocated.
  • Applied for Keppel DC REIT’s preferential offering with excess. Fully allocated.
  • Accumulated more Suntec REIT at $1.81

Best. Year. Ever.
2017 set the previous record for the best investment returns in my investing journey. Back then, I was convinced that performance would not be bettered, ever. Little did I expect for the record to be broken in 2019. Remember all the pessimistic, doom-and-gloom media headlines in Dec 2018 & Jan 2019? US-China trade tensions, US Fed rate hikes, British government struggling to deliver Brexit and later in 2019, the prolonged Hong Kong protests. In such a volatile geo-political year, my REIT positions went on a tear, thus leading my portfolio value to hit 2 milestones in 2019, $500k in May then $600k in September. Investors are seeking refuge in defensive, cash-generating assets. I had to, sort of, thank President Trump for a spectacular 2019 (investment-wise). Yeah, I know, we live in strange times. Without the trade war, the global economy would not have slowed down as much, the US Fed would not have turned dovish abruptly and my portfolio performance would be mediocre. Well, seems like the old adage of ‘time in market is better than timing the market’ is still the cast-iron truth.

Rising Geopolitical Tensions & Socio-economic Problems
I had to make a big decision, divesting MNACT. The majority of net property income of MNACT comes from Festival Walk Mall. During the early days of the Hong Kong protests, the violence was limited to the CBD area, far from Festival Walk. Weeks later, violence escalated and chaos spread to the sub-urban neighbourhoods. I was still in observation mode, hoping that the situation will calm down eventually, like the yellow umbrella movement. Unfortunately, the situation escalated until a student was shot by the police. That was the moment when I decided to divest half of my MNACT position. The next phase of the protest shifted to the university campuses, where students made Molotov bombs, arrows, bows, shields and built barriers. This was when I divested the remaining half. I was lucky as the violence finally reached Festival Walk shortly afterwards. The mall was heavily vandalised and a giant Christmas tree was burnt down by angry protesters. 

There was a secondary reason for divesting MNACT. I found a decent replacement in Suntec REIT. Similar to MNACT, it is also a commercial/retail hybrid REIT, but with quality assets in Singapore and Australia where violent protests are rare. Political stability and social peace are vital to rental collection. I believe Suntec REIT is well-poised for growth in 2020 and beyond.

2020 Investing Strategy – Keep Riding On The Rental Economy

"You build an empire by owning the land upon which that burger is cooked. Land.... that's where the money is."

One of the biggest monopolies in Singapore (and other matured economies) is the rental monopoly which is dominated by large-cap REITs. Collecting rental income as a landlord is a business model that stood the test of time. It has been one of the more solid business ideas that human ingenuity has devised. As a new decade starts, I am counting my blessings in stable, 'never-rock-the-boat' Singapore. Singaporeans don't aim to break or change the system. We love the status quo. We actually embrace it. The diligent ones find ways to benefit from it. This beautiful, capitalistic rental economy has been painstakingly built by our forefathers over decades. Serious blood and sweat. Do not let it go to waste. Let’s harvest the hell out of it! 

FCT doing all the 'heavy-lifting' through the years. Unit-holders merely sit back and enjoy the journey :)

Managers running the large-cap REITs in the Mapletree, CapitaLand, Ascendas and Frasers Centrepoint families are always hunting for growth opportunities, both organic and inorganic. They are largely competent based on their track records. MCT, MINT, MLT, KDC, FCT, CMT and Suntec REIT had gone on an acquisition spree this year. I gladly participated in their rights issue and preferential offerings. Let REITs do the scaling up and long-term compounding for us (as shown in FCT's track record above). We just tag along for the ride. 

No more fresh buys of REITs for me in 2020. I shall channel the dividend cashflow into non-REIT counters. In fact, I already started this process in 2019 by initiating a huge position in ComfortDelgro and a couple of minor positions in HRnet, F&N, Propnex, UOB and Hong Kong Land.

Happy New Year To All My Lovely Readers!
Dividend Warrior

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