TTI Portfolio Review – 25th May 2017 + An Interesting VRX Story

With the strong performance of STI ETF so far this year, I wanted to do a quick review to see where I stand vs the index this year.

Since the last update in March 2017, SG TTI has narrowed the gap from STI ETF, but as yet, is still underperforming STI ETF. The passive index is proving to be a real winner so far this year.

545) SG TTI May 2017.jpg

Based on XIRR, STI ETF has thus far, including dividends, returned a massive annualized return of 38.98%

544) STI ETF may 2017.jpg

I can’t help but think that if someone had at the end of 2016, decide to go passive and liquidated everything and threw it into STI ETF…….

Anyway, SG TTI didn’t do too shabbily either:

Portfolio Performance

SG TTI generated an XIRR annualized return of 22.71% since the start of 2017.

Total AUM grew from $943,815.80 at the start of 2017, to $1,049,753.47 at the end of Q1, and grew further to $1,120,243.40 as of 25/05/2017.

This means that the AUM gained $70,489.93 thus far in Q2 alone, of which, $22,065.83 came from a capital infusion. 

Total dividends collected thus far is $10,800, all of which came from BBR Holdings.

Dividends declared, but uncollected as yet, include $4,000 from Geo Energy, $300+ or so from Wells Fargo, $6,300 from Dutech Holdings and $600 from Boustead Singapore.

As it stands, it’d be a real feat to beat the index this year. Tough, but not impossible.

The problem with XIRR is that it extrapolates the previous results and thus, exaggerates the difference in a comparison. I don’t think STI ETF can continue to grow at such a rate for the rest of the year.

But SG TTI can.

Hahaha. I’m an optimist.


On a separate note, I have an interesting story to tell.

Some time ago, I was debating on SeekingAlpha with another investor in Valeant Pharmaceuticals.

She’s American, and had a completely ridiculously outsized position in Valeant. She had >90% of her net worth and whatever was in her 401k vested in Valeant. (I am guessing 401k is = to our CPF)

And since she vested, Valeant tanked something like 80% or something along those lines.

Now, I’m vested as well, but I found her supposed research to be very disturbing. Her sole substantiation for investing in Valeant, was simply looking at very technical stuff like the % of shares sold short, who are the institutional investors holding and selling at each quarter, how many options are outstanding and what type of options they are etc.

She had minimal knowledge of the company’s drugs, pipeline, financials, prospects, regulatory restrictions etc.

And I debated with her saying that it’s suicidal to have 90% of what you have in a single company, much less something as uncertain as Valeant. Now, it’s logical that if you have 90% of what you own in a single idea, the idea better be a damn ironclad certain one. Like if you make a bet with someone that you’d still have 2 hands tomorrow morning.

Something like that.

Anything short of those kinda odds, it’s suicidal. Yet, the said lady persisted, with the only “research” being a bunch of data about… well, basically what everyone else is doing. Although, I’d have to admit, she was pretty much damn thorough in trying to dig out the various short positions, and how the positions have changed, and who are the ones who have flip flopped each time.

She was like a Valeant news centre.

She was the 1st to know if a negative analyst report came out, and she had a ton of opinion about what the options activity was indicating. I applaud her effort, yet they were meaningless to me. She would’ve made more of a contribution if she went to the pharmacy and bought a Bausch&Lomb product.

The most shocking thing to me isn’t even that 90% position sizing of hers.

The most shocking thing is, other vested shareholders who were on the VRX board,  were genuinely very interested in her “research”, and what she had to say. They were basically taking comfort, in the midst of a tanking share price, in what she had to say about who’s selling, how it’s going to look better cos the big funds are going to come in etc.

And through all that, I kept saying that I’m really disappointed that a fellow long, had no further insight other than what the options activity are indicating. I mean, if you’re going to the battlefield, you wanna look left and look right and see capable soldiers fighting alongside you isn’t it?

To put things in context, the backdrop for this is a very scary environment. The share price was literally in free fall, and at 1 point, it fell >20% for 4 consecutive days! Imagine that.

I can understand many shareholders were scared. I’d admit to being concerned too. Of course I was. I’m human too. It didn’t make sense to me, and I kept going back to my FA. These things can really test your resolve.

So the other scared shareholders, were all looking for comfort. Looking for affirmation. And interestingly, they found it in this lady who’s only research is…. I won’t even call it TA. It’s not TA. It’s just hmmm, I’m finding it hard to describe it. It’s just looking at what everyone else is doing? If I can put it that way.

But she sure sounded damn confident.

I was amazed at how someone can be confident in predicting the future based on the activities of the masses, and AT THE SAME TIME, the masses are getting comfort from the confidence of this lady who’s predicting the future based on their own activities.

LOL! Amazing huh.

It’s mind boggling but just think about it. It’s come full circle.

Here comes the twist… wait for it…..

She cracked on the 14th March 2017.

That’s the day Bill Ackman sold out all his positions in Valeant. The said individual really panicked. The appearance of strength and resoluteness, and resolve in her “research”, totally vaporized in a single day.

Nothing much changed for the company on the 14th March 2017. All that happened, was that a substantial shareholder left. Joe Papa (the CEO) went to work, went home at night, it was probably an uneventful day for him.

Yet, the said investor’s entire basis for her 90% net worth position crumbled.

I know that cos I received this in my inbox:

546) Wen and VRX.jpg

My 1st thoughts?

“WHOA!”

If ANY of your investment is affecting the big things like “work”, “relationship” and “become a mother”, GET THE HELL OUT.

Seriously.

And I knew she wasn’t joking cos she had earlier gave more details about the relationship and work part.

Anyway, again, I’d remind that to put things in context, the environment was a very very very tough one for VRX shareholders. And since she had 90%….

And even though I was REALLY REALLY REALLY tempted to go along the “I told you so” route in my reply, I eventually decided that I shan’t be an arsehole cos karma bites.

So I bit my tongue, and came up with as gentlemanly and as comforting a reply as I could:

547) TTI reply to wen.jpg

It’s really interesting to me how in the toughest and darkest periods, people can take comfort from a total stranger, literally halfway around the globe, and share intimate details.

548) Wen VRX.jpg

Bear in mind that I am a VRX shareholder, so admittedly, I was feeling kinda shitty too as well.

Obviously, not quite as much as her though.

Fortunately for both of us, I’m proven right and FY17Q1 proved to be a hint of a turnaround for VRX. The share price has risen 53% since the release of FY17Q1, although it has dipped slightly of late.

So… what’s the take home message in all this? For myself at least, there’s only 1 experience I’ve gained from this exchange:

Don’t invest based on what anyone else says. Most people, don’t know better than me, cos most people, haven’t done more work than I have.

Confidence, that’s not backed by hard work and comprehensive data, is just like the summer Aussie fly: It disappears when it rains.

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13 comments

  1. Haha, that’s a cool story. She’s definitely one of the most prolific VRX commenters on SA (look at her name!). Too bad she hasn’t taken your advice and she’s still at it with her “analysis” and frequent postings of where the share price is at.

    In a local context, I’m sure many retail punters here make buy/sell decisions based on what they read on online forums. I wish they’d realise they could be played very easily with a concerted effort to move prices simply by influencing online opinion.

    Like

    1. ah well, I shan’t criticize. Cos tbh, sometimes it is useful to know who’s buying what and what’s the short interest is like. It’s just that putting 90% on such flimsy data is maddness.

      I dunno how many retail punters would make investment decisions so simply. I would think that in the local scene, the retail investors are a bit more savvy. They’d still read stuff online, but that stuff would have to convince them of the merits of the position. It’d be silly to just read and follow. Those who do that are at the bottom rung of the pyramid, last to know, first to die.

      TTI

      Like

  2. Have been following this counter and views from Professor Damodaran. Tracked and seen his valuations on VRX. (He bought from $33 and double down later at $14) Did some background questioning with people who use Bausch and Lomb. Didn’t see anything wrong with the brand image. Was seriously considering purchasing it but did not, using this more of a case study for my future decisions.

    I think this woman is lucky to have you advise her. She would probably have made the worse decision in her life if she sold her entire stake following Ackman blindly. Thank you for the share and kudos. I think do believe in karma too but do note that she will have to thank you for an eternity for the advise you gave.

    I wish you the best of luck in your investments, will continue to track your blog for insights.

    Warmest regards,
    Duskerdawn

    Like

    1. Hi Duskerdawn,
      Thanks for your comments. Yes, VRX is really interesting. Even the supposed godfather of valuation, Prof Damodaran, and other esteemed guys like Bill Miller, BA etc were made to look like fools. At least for now.
      I think the lady was really lucky she didn’t divest, I could tell she was ready to cave in. In which case, it’d be a classic textbook example of “buy high, sell low” and of fear dictating investment decisions.
      The share price has recovered by more than 50% since then, and she’s back to looking at the activities and minute by minute jumping around of the share price. Last I read, she increased her position back to 90%+.
      For the record, I didn’t get any thanks from her. LOL! Not that I am complaining, just saying since you mentioned. It wouldn’t add a single % point to my ROI anyway!

      Thanks for reading!
      Cheers
      TTI

      Like

  3. Hi TTI,
    Thanks for sharing such great story and as reminder of the important of “diversification” for us as well …. I’m a “kia su and kia shi ” person , will not buying any stock more than 10% in my portfolio ….ummm… with such, even with a “multibagger ” stock in my portfolio , it doesn’t change much on on overall ROI ,,, :) Good or Bad ??
    Cheers !!

    Like

    1. Hi STE
      I guess you’re at the stage where wealth preservation is more important right?
      You don’t wanna rock the boat, or risk killing the golden goose.
      Let it continue to lay golden eggs, auto-run mode.
      You can’t taste the golden goose meat, but hey, having golden eggs everyday is good enough… LOL
      Cheers
      TTI

      Like

  4. Hi,

    Thanks for sharing these. I always read your post and found them really helpful.

    I was thinking that is there any better way to beat STI ETF performance?

    As not all STI component stocks are having stable performance, could we beat STI ETF by just create a “Lean STI ETF”? by took out all the components stocks with bad or disappointed performance or from industry with low profit margin such as agriculture, could we generate a better return than STI ETF?

    Just a pure personal theory and still studying on that..

    Anyway Huat ah ((:

    Allen

    Like

    1. Hi Allen
      Ah I get what you’re talking about.
      What you’re essentially doing then, is to create another passive ETF, but stripping away parts of the original ETF that you deem to be “poorer”.
      But we don’t know what’s poorer
      And stuff like agriculture stocks etc may be deemed poorer, but they may get a huge upturn in a commodity boom and your “lean STI ETF” would then miss out on the big gains.
      So in short, at the end of the day, it still boils down to assessing and determining at any 1 point, what is “good” or “bad”, and what’s “bad” at this point in time so as to warrant exclusion from your “lean STI ETF”.
      In other words, it’d still involve an active component. And active component still involves your effort and judgement etc.

      Cheers
      TTI

      Like

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