Just a week ago, my mum in law told me she is going to sell her loss making SIA (bought at $14) to buy OCBC. M reaction is: huh? Why?
Her answer: OCBC won't collapse, just take dividends, her another daughter buying, because the price has fallen so much.
My reply: OCBC has fallen because market think they are paying too much for wing hang. If the deal fail, the price might rebound, but if the deal goes through, there might be further weakness, it's like buying big -small, although interest rate rising is generally a good thing for strong local banks, but the property sector is cooling and property loans might not grow as strongly. I say there are other options if not collapsing and dividends are your only 2 considerations. If u want a kick from capital growth, then I have no comments about OCBC.
She think for a while, call her daughter and told her about what I said, her daughter reply: already bought, weakness is only short term.
I told her in the long run, it might be the case, but if u just want to feed on dividends, u might be just paying yourself dividends like what happen when SIA declare dividends of $1 sometime back. She ask me, what to buy?
I said Singpost, SPH, SAT and SGX all give better dividends and is in the category of very unlikely to collapse.
Then she continue:"u ask me to sold sing post". I said "sold with good profits, is different. There is doubts about their expansion plan then, on hindsight, it is now showing better chances of succeeding, anyway your sale price is still higher than current price, u loss nothing from buying back."
Then the question again, what to buy? I told her those companies I mention are fairly valued, there is no margin of safety from any market shock, why not wait for a correction?
She said when market correct, she will
Be too scared to buy, then market run again, waste time. She just want dividend. How about buying all 4 counters? How much to buy huh?
I said whoa wait wait, u need to have money and ammo to av. Down, lets not over commit. If u must buy now, just buy 1 and buy small.
She ask which one?
I said singpost.
She said ok. How much to buy? I say, er ... How much u intent to buy? Assume U spread out to buy all 4 counters, just spend 1/8 of your money la. U want to be careful, just use 1/12.
She said ok. She proceed to buy 10 lots of singpost, then think, aiya just get 20 la. I says relax la, u retired Liao, market is always there la.
Today she look at the price, hmm fallen by 2 cents, can get more? I say, if fall further, maybe yes.
I told her based on my calculation, there is some Mos if singpost goes to 1.10. She says I wait long long...
Actually a bit disappoint she never ask why I choose singpost over others. So I continue: singpost is the only one among the 4 that has the lowest payout ratio in terms of FCF. It is always below 70% with the exception of 1 year, where they pay more than what they earned. I know SPH and the rest are paying close to 90% of FCF or earnings
For years. There is no buffer if earnings suffered. In terms of growth, singpost diversification into logistic and e-commerce is still without a verdict and with T4 and T5, SAT Seem a better bet, just as we can bet on SGX recovering from the low trading vol that is way below average. Then I remembered a bird in hand is better than 2 birds in the bushes. SPH my MIL already has it, and she had them cheap, at below $4 for donkey years.
She look at me, nodding away, although I doubts she understand. So anyway, another reason I can think of is, if sgx, singpost, and SATs all fall 5% tomorrow, which will I get? My answer is singpost. If all fall 10%? I will get SGX. Why? I dun know, I want my port to have less cyclicals and rely less on trusts and reits