Wednesday, June 28, 2017

[SGX Portfolio] Goodbye CDLHT!

B's recent post on CDL reminded me that I have CDL H Trust in my portfolio!

I bought CDLHT back in Dec 2015, when it was trading at $1.28 against it's book value of $1.593. It was at a discount to NAV of a whooping 20%, along with spitting out dividends of 7.2%.

If memory serves me well, back then the sentiment for all hospitality REITs were that they were crap. Nobody wanted them and suddenly everyone knew what is RevPAR and how it is dropping and it means doom and gloom for the tourism industry. I happily picked up said crap and just chugged along, collecting dividends on the way.

Last night CDLHT was trading at $1.68, but after the news which B wrote about, price dropped and I decided to sell at $1.63. That's still a nice solid $0.35 capital gains there, which translates to 27.3% capital gains.

On top of that, CDLHT has also paid out $0.1537 worth of dividends to me over the time that I held that, which means the dividends collected adds another 12%.

Adding those two together, I'm looking at gains of about ~38% after taking into account the transaction fees. That works out to be ~25% annualized.

Valuations of CDLHT are no longer attractive to me. Book value has actually dropped since 2015 and the stock is now trading at a slight premium. Yields have also been compressed to just 6% which is on the low end for REITs.

CDLHT is definitely not insanely overpriced like some REITs *cough cough 60% premium over NAV, 4.5% yield cough cough*, but I don't particularly have a lot of faith and conviction in the management to maintain and grow such a premium. To be fair, half of the equation is dependent entirely on investor's sentiment (which is out of their control), while the other half is the management's value creation (which they can only do so much).

That being said though, I don't like the valuations on a lot of REITs. Not just CDLHT in particular. And because I don't like those valuations, I am not a buyer, I am a seller. That's why I am more than happy to hand over the bags to the next person who believes in the CDLHT story.

I think this is a clear cut case of a easy value investing opportunity that played out as expected - spotting an undervalued opportunity, waiting for it to reach intrinsic values and then to sell it.

However, value investing is not really that simple and I think this post by Chin Wai really covers the thought process behind value investing extremely well. I myself am holding onto stocks which I have thought were great value buys at the point of purchase, but are now instead my biggest losses.

Question: If it is at intrinsic values, why don't I just hold it instead? It's like getting a good deal on something you'd already want, right?

Answer: I think intrinsic values will go down as the rest of the markets go down as well.

When valuations become more palatable, I'll go back in again. And don't worry, they will become more palatable. You don't have to jump into every boat. You just need to jump in a few and make sure those are the good ones. Don't let the fear of missing out blind you to the risks that you might be taking (either through sheer ignorance or gigantic risk-taking balls).

Anyway, I've far too little time and energy to try and squeeze blood from a rock. Opportunities are quickly disappearing and I'm just gonna sit on the sidelines and wait for an opportunity to present itself, rather than to force myself to imagine one and take unnecessary risks.

On a related note, the crypto markets are way more fun, interesting and rewarding. With the entire crypto market down 20%+ from it's peak, I'm actually up 6%. I guess I'm doing pretty well for myself over in the wild wild west.

1 comment:

  1. i think what you meant is to be opportunistic and time when the volatility is higher and the risk is lower.

    the intrinsic value does change, however the price fall might not mean the intrinsic value is affected. that is how i see things.

    you should share more about your crypto market system. we enjoy reading that a lot.

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