Quarterly portfolio review after last snapshot in November 2008
The Stable
Diamond Trust ↓
KCB ↓
Safaricom ↓
Scangroup ↓
Stanbic (Uganda) ↓
Changes
– Best performer: Diamond Trust -8%
– Worst performer Stanbic – 33%, Safaricom -23%
– In: none
– Out: none, but sold a little KCB in January
Events & Outlook
– Performance: Portfolio is down 20% in the last three months while the NSE Index is down 25%
– Did not buy KQ and Kengen as expected, but that should happen in the next few weeks as prices continue to drop
– Sat out the Co-OP IPO and made just one trade in three months (sold some KCB in January). Are brokers generating enough income to stay afloat? I hope they don’t try and introduce new charges levied on dormant investor accounts
– Money markets: Got started in money markets by signing up with a CBA Unit Trust
– Bond markets: The Government of Kenya has lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~600)
– Investor awareness: The CDSC started sending out monthly statements by e-mail to investors, cutting out the postal service, and alerting investors each time shares are bought/sold using their account.
Guess you’ve not participated in T-bill/bonds yet. But what do you think of the infrastructure bond. Is there a possibility of GoK rescheduling the it mid way if it proves difficult to honor?
Bankelele, I think your portfolio is quite well selected (even without knowing the actual concentrations in each counter). I am however a little surprised you have not bought more as the decline happened. Should we just hold off?
Ka-Investor – there is very little to nil probability of GOK ‘default on domestic debt’. They are more likely to ‘inflate the debt off’ if the overall load becomes too heavy to bear.
Considering that Kenyans banks are ‘unaffected’ by the current global crisis, I wonder how they will fare when a financial crisis brews in Kenya.
That said, I dumped my financial stocks on 31st Dec for a loss but the latest stimulus/bailout crisis gave me a re-entry opportunity 2 weeks ago but I think financials are dead until a new regulatory framework is in place.
Happy investing in 2009.
Bankelele,
I am very glad you did this post. I have been wondering whether to get back into the market or not. (and when to)
For me the biggest factor is that I do have a mortgage at 15% so from my basic calculation is that unless an investment will give me 20% it does not seem a good idea. My ‘logic’ on 20% returns is:
15% to cover my interest losses for mortgage 5% to cover brokers fees when buying and when selling
I do not want to miss a good opportunity to buy stocks at affordable prices. Any ideas Bankelele? Anyone?
MA
Bought: Access Kenya, Euro, Google, Physical Gold, Research in Motion, Safaricom
Sold: Apple, KQ
I have bought some more of Sasini and Mumias as their prices have continued to decline.
I have been putting my discretionary income in the stock market for long investment.
I currently have:
Mumias
AccessKenya
Sasini
KCB
NBK
Safcom
and BBK
I still have confident in these counters.
Is this reduction in portfolio or losses? After the Nyaga audit I’ve removed my float.
Empower-Mumias?
Hey Banks, first many thank for the update. Is it prudent to go for the CBA Unit Trust, when their fund is managed by Old Mutual Assest Managers and not go straight to OMAM? This is because I believe OMAM also have a similar UT product (Money Market Fund)
ka-investor: not done a government bond yet, I’d probably want to start with a corporate one, like the next Barclays tranche
– GoK would never default, they’d print money right? But Russia did a decade ago with unforeseen consequences for western investors
Ssembonge: good point, all the listed banks should do ok even KCB (Triton hit), Stanchart (no growth) Equity (new ventures). Hope all goes well; Kenya can’t afford to bail out any banks now
MA: I really cant say what to buy, when to buy – the reason I post these, is so that I can explain what I’m doing and its’ up to you to decide
Rafiki: very diversified in many markets I see
MainaT: this is reduction in ‘portfolio value’ based on current prices versus last November. And I have no float, but the CDSC alerts come though quite quickly by e-mail so I’d see any rogue trades
Banks, thanks for your post. I have been yearning for such posts because it gives me Ideas where to put my money. I would like to have the CDSC statements through email. Banks or anybody, do you mind showing me how to register for such or something?
Hmmm..
Has anyone noticed that the ARM share is riding this market downturn rather well?
Been watching it for almost a year now and there seems to be very little volatility. Not much losses there (if any). Anyone got a clue as to why?
I wonder if there are other hardcore stocks riding the bear like a wild bronco?
WARNING:
THE ABOVE COMMENT IS JUST A PERSONAL OBSERVATION AND IS NOT, I REPEAT, IS NOT AN ENDORSEMENT / RECOMMENDATION. DO YOUR OWN RESEARCH.
@Anon 7.03pm
1. There are no guaranteed returns
2. your 15% interest is on reducing balance. Say your mortgage balance is 2M. If you wanna knock off interest costs, you need to invest an amount similar to your balance and get an annual profit equivalent to your annual interest payments (i.e. the Amount).
This is almost impossible at the moment – unless you are an astute business person with a very good idea and adequate capital.
Now for the depressing news (sorry):
The above shows how Mortgage company turn you into their virtual slave.
You are a GUARANTEED investment for them. All they offered you is a “feeling of security” (roof over your head) -and for that they get 15% easy ROI.
In reality, they probably own more than 80% of your house even after 10 years. Meaning they own you. Even if you, by some stroke of genious, recover 15% annual interest on your mortgage – what is the net effect on your overall net worth (Assets – Liabilities)?
Your 15% returns only make you feel good psychologically.
If the value of the house goes down, their ownership portion goes up (your debt burden increases). As long as there’s someone who can buy your house if you fail to pay, they can’t lose.
Search this blog for an earlier debate on Mortgages. Hope I dont restart it.
Maishinski, at the rate at which property appreciates in Nairobi, 15% is a small premium to pay in mortgage interest.
@ Bankelele
Thanks for posting what your are doing. In the interest of similar disclosure 🙂
Previous buys and sales
Bought Kengen @ IPO sold at 26.75
Bought Stanbic UG @ IPO sold at 240 UGX
Bought Mumias @ 54 sold at 12 after the 3 way split.
Bought uchumi @ 15 – company under receivership
No significant shares currently held.
@Maishinski
Thanks for reference to previous debates.(sept.4th and sept 8th) I had not read that.
You are right about mortgage being an expense and I had checked my amortization tables and
knew the only way the 15 year mortgage can be a good investment is if it is payable in 5 years.(almost took in a paying roommate to make this possible)
While I have currently paid 4 years in 15 months I NEED (pyschologically) 🙂 to pay another 6 years worth before I can get back into shares & other investments (land)
virtual slave to morgage company & employer – not exactly – it actually inspired working harder 🙂
@Ssembonge
I believe 15 year mortgages still have to be paid in 5 years to avoid losing money.
Anon, Don’t banks in Kenya front load the interest payments?
If you consider the time value of money and the appreciation of the property, it doenst make financial sense to pay-off your mortgage early.
I just hard this discussion with my missus, and we figured out that we are better off deploying capital elsewhere rather than in making extra principle payments. What’s more, your primary home should not be treated as an investment and if it were, do you really want to put your eggs in one basket.
Can you take a tax deduction on your mortgage interest in Kenya?
Mortgage vs rent. It is a tough choice BUT it depends on many other factors.
Interest Rates: Check the mortgage docs. Chances are they are NOT fixed over the life of the loan i.e. if interest rates rise so do your borrowing rates.
Inflation: As long as inflation (price rise of properties) exceeds the interest rate then you are in the money. In the USA, there is deflation thus people with mortgages are paying much more!
Purchase price: You have to buy at the right price – no idea what is the right price – otherwise you are screwed. A good comparison is if your total mortgage payment is close to sustainable rent for a similar property then you are in the money.
Maintenance: Always have a maintenance fund. In Kenya, new houses look decrepit in 5 yrs coz people do NOT maintain the houses. Except in some trendy areas or ‘mzungu’ areas, houses lose their lustre. A pity.
Inspector danger, send an email to cdsckenya@cdsckenya.com with your CDSC detail and they’ll arrange
CT- not true if you have a variable interest rate mortage…
Anon with mortgage. Another idea. Try and source cheaper finance (interest rates) elsewhere payoff the whole mortgage early and pay the new loan more comfortably…
Thank you all for all the comments.
@Ssembonge – you do get mortgage relief in Kenya – up to 150,000 but to qualify the mortgage must be from a ‘financial institution’ – my mortgage provider is not a financial insitution so I do not qualify
@CT – on maintenance – the estate is managed strictly for now which is great. I do hope that lasts for long.
@MainaT – cheaper interest rates is a great idea but I do not want to deal with Banks for now. I stand to be corrected but I believe they tend to have extra charges and are ruthless on default & repossession.
@bankelele – Thank you for a great forum
thanks Maina for the information. Banks, thanks for letting us use your blog to exchange information.
@Anon,
5 years? Hmm… that’s different. I can tell you know how mortgages work and, from your comments, I can discern that your decision was deliberate and well thought out.
Some people can save and buy in cash – but they take mortgages to get “indirect services” e.g. the mortgage company has a risk management department which will ensure that the title deed is legitimate – so by taking a mortgage, you actually indirectly hire a trustworthy risk consultant – who has a stake in your success!
Sort of like the guy who to a $2 loan and gave his Merc as collateral – then the bank hired a watchie at $1000 to look after the merc while he was on safari.
🙂
Hmm.. who else gives mortgages – if not financial institutions? Cooperatives?
Ssembonge: House prices go down. You are in US, you should know that. Plus it’s well known that Kenyan real estate is arbitrarily priced and that there’s a bubble thats about to burst.
Since the mortgage company’s ownership portion increases when property values fall, it makes more sense to clear your mortgage ASAP.
In this instance – i think Anon has made some financially smart moves.
I sold everything when things got thick. Now I’m stockpiling at bargain prices and timing the recovery.
@Maishinski: The cement companies will always be more stable than other, and I think it’s because of the shareholding structure. Few shareholders without long-term interest.
Any of you investing in REIT?
There are two companies that I know offering them right now; one is quite affordable and the other has offerings periodically.
I have opted not to buy any shares this year nor sell the ones that I am holding.
@Mainat–I still think I made a good choice with Mumias–it is currently undervalued.
@Banks–thanks for a lively discussion.