Sifu icon8888 made very impressive gains on 3 stocks from beginning of this year until 17/08/2016. But why his portfolio only gain 36% during this period. I was curious and I have thought of few possible reasons why.
|His cost RM0.90|
He said he sailang/sleep body/show hand on AirAsia. This year AirAsia gain 141%, his 40% of his portfolio is invested in AirAsia, he would have made at least 56.4%.
If 5% is in JHM and 5% in TGUAN-WA, that will add a total of 11.75% to the 56.4%, total 68.15%, assuming other stocks just break-even.
There are few things that I need to clarify before I write further on the possible reasons.
1)Wish to thank Sifu Icon on his sharing. I personally benefited from from JHM (RM0.70++, still holding), TGUAN (RM3.00+, still holding), OPENSYS (RM0.27, still holding).
2)I believe he did not pump, promote and dump.
3)Past few years I was not reading i3 articles because most of them are about PAST history, talking about ROI, profit margin, etc, analyse here and there without talking concrete about the FUTURE. Early this year, I read one of his articles, and this is what I’m looking for, i.e. CONCRETE FUTURE PROSPECT. He said he will not be able to accurately forecast the figures, but he smells money. As long as the prospect is there, is good enough, because even the company management also can’t forecast the sales accurately.
4) I don’t follow him blindly. He sold JHM at RM1.28, but I bought more at that price. Investors have their own objectives. He enjoys his MFLOUR, AFFIN and BORNOIL. I enjoy my own FIBON and KESM.
5)I did not say his return is low, but because of AirAsia, TGUAN-WA and JHM, I am just curious and think of what are the possible reasons. Myself is only 20% at this point of time. 36% is no joke, very good return and almost double of mine.
6)I am not a teacher, I’m here to learn and share. Thanks to all sifu here who have shared, Mr Koay, paperplane2016, VenFx, ICON, just to name a few.
This article is full of assumptions and DEFINITELY is NOT true in terms of figures. But what I’m trying to share is in “general”. The reason I’m using ICON’s figures because that triggered me to wonder why.
Possible Reasons Why Achieving Lower Return:
1)High Share Margin Interest Rate
Some charge as high as 9% to 10% p.a., some as low as 4.5%.
If our share margin has high interest rate, it will impact our return significantly if we have utilized the margin.
Another alternative is to refinance the house (super dangerous). Assuming we have a house fully paid, and if the refinance rate is low, we can consider. House worth RM500,000, refinance RM300,000 and use RM150k to RM200k to invest. RM200k to standby. Share Margin has margin call but this RM200k has no margin call. REMEMBER to pay the installment if not may end up no house to stay. Super dangerous if don’t know how to manage. Have to consult financial adviser.
The interest is super high. You may see is low, but we must understand what method is being used? Simple Interest? Monthly Rate (after compounded for one year will be very high)? Personally I’m not in favour of personal loan due to super high interest rate.
3)Too Much Idle Cash in the portfolio
Although Sifu Icon bought and hold many stocks, recently he still whacked Tropicana, CIMB, MBSB?, Opensys?, Affin, DKSH, BORNOIL, etc?
How many % of cash will be better? No answer. You see few years ago ICAP was holding so much cash and missed out many opportunities.
If someone knows when the market is down or up, that guy should be trading in Futures Market; with just 5% margin you can buy 100% worth of stock.
It all depends. Some have very low cash because they have future income (from salary/business) coming in to top-up. A retire may want to hold higher cash.
4)Too many stocks
Although ICON may hit home-run in few stocks, too many stocks may cause the portfolio not having the super high return.
AirAsia, MFlour, Gadang, Tropicana, Puncak? MKH?, CIMB, MBSB, Affin, DKSH, BORNOIL, Cresbuilder, JHM, TGuan-wa, etc. He may be holding 100 stocks?
5)Too many Deadwoods
It could be throughout the years, certain stocks we are not willing to let go. It can be star performers previously or heavy loss making stocks. I have this problem of letting go, so I will leave some (super small, at least I am still holding) and then I will the heart to sell. I tell myself I still have it, so if it goes up, heart not so pain. The super small amount will not have any major impact on the overall portfolio.
6)Imbalance of stock allocation
It could be some performing stocks we buy lower value, but non-performing stocks we buy higher more.
7)Different Way of Computation
Different people use different way of computation
-Some never include their cash. As and when lack of cash, they will just top-up. This will swell the return/negative return.
-Some never include unrealized gain/loss.
-Some don’t know how to compute because they inject/withdrawal from their fund.
-Some rely on broker system figure which may not be accurate, eg rights issue, brokerage/charges, takeover offer, ICULS redemption, share transfer, may not be accurately captured on the cost.
-Some didn’t include dividend received because very tedious to keep track
-Some just pluck figure from the sky.
Therefore, ICON 36% may be computed using his own way and not the same way as ours.
8)We may keep selling when the stocks are on the way up and not enjoying the full gain.
9)ICON is just being humble on the figure. Maybe is 36% X 2.
I will not know why, but just curious on the possible reasons.
Once again, thanks all that have contributed.