Decumulate To Accumulate

Readers of the blog would have remembered that we have identified the step-down age in the not-so-far-and-yet-not-so-near future. One of the things that we had done is adjusting our portfolio asset allocation, which I had mentioned here. I also shared in the post of which are the funds that we are basing on for our projection on top of our periodic contributions, like education savings and endowment plans since their end dates were known.

Picture generated by Meta AI

For our end of year 2024 Bedokian Portfolio value, it has surpassed its set target by around 34%, and in fact the number has also exceeded the 2026 year-end target. As mentioned in this post, the growth was attributed to last year’s bull run and the injection of two liquidated investment-linked insurance plans (ILPs), the latter of which were not part of our planned funding (aka “known windfall”). To add, after the July 2024 post was written, I had liquidated another ILP, further boosting the portfolio size.

Insurance products such as ILPs, endowment and life plans that have a surrender value form part of our Portfolio Multiverse, and in our opinion the portfolio was one of the “overlooked” ones; we knew it existed, making periodic contributions to it, and not monitoring it. Yet, if you noticed from the actions above, we are (sort of) decumulating our insurance portfolio to accumulate our Bedokian Portfolio.

However, insurance plans, especially ILPs and life ones, likely come with additional components and riders to cover events such as disability and critical illness. While liquidating these plans, it is important that the corresponding coverages are met before doing so, hence it is advisable to consult with your financial advisor(s) (which we did) before making any decisions. An individual’s/family’s insurance and protection amount and needs are different from one another.

Related post:

Your Financial Portfolio Is Bigger Than You Think 

Disclaimer

Paragon REIT: It Has Been A Great Journey

Yesterday it was announced that Paragon REIT would be taken private, subjected to approval by minority unitholders in an extraordinary general meeting (EGM) to be held sometime in April 2025. The offer price is SGD 0.98 per unit, which is around 1.07 times of the REIT’s net asset value (NAV), and along with it, (possibly) the final distribution of SGD 0.0233 per unit.

Paragon REIT malls (screenshot from Paragon REIT's media/analyst briefing slides)

While there were four reasons stated in the announcement (page 5 of the media/analyst briefing slides, link under Reference) for the privatisation, I see two main rationales, namely:

• The low trading liquidity and analyst coverage had somewhat stunted the growth of the REIT, and

• Privatisation would take the risks off from unitholders of an upcoming asset enhancement initiative of Paragon shopping mall, considered the crown jewel of the entire REIT portfolio (at 72% of its value), for it remain competitive.

The Bedokian’s Take

Our Bedokian Portfolio has held Paragon REIT since it listed (back then as SPH REIT) in July 2013, and we had further incorporated the REIT in our CPF portfolio sometime before the onset of COVID19. Over the years we had gone in at different tranches, at one point as high as SGD 1.07. Currently the average prices of the REIT in the Bedokian Portfolio and CPF portfolio stood at SGD 1.02 and SGD 0.88, respectively.

I had espoused Paragon REIT several times in my blogposts, due to its low gearing and the strength of location of its two local malls (Paragon and Clementi Mall), which is a good mix as one is located within the Orchard shopping belt and the other in the heartlands, thus having a sort of retail diversification.

Though I have a penchant of investing in smaller retail REITs due to them being niche and with growth potential (like our other investment in Lendlease Global Commercial Trust), the main minus point is them being dwarfed by the larger REITs, especially in recent years where there were a couple of major mergers, namely the Capitaland and Mapletree family of REITs. Hence this privatisation should come as not much of a surprise.

For the offer, I opined that it would likely go through, given the REIT traded near or at its NAV for the past five years, and the additional 7% would provide an incentive for those who entered during this period. For us, we would accept whatever the outcome of the EGM is.

Until then, and depending on the result of the EGM, it has been a great journey with Paragon REIT.

Disclosure

The Bedokian is vested in Paragon REIT and Lendlease Global Commercial Trust.

 

Reference

Media/Analyst Briefing. Proposed Privatisation of Paragon REIT. 11 Feb 2025. https://paragonreit.listedcompany.com/newsroom/20250211_073825_SK6U_035NUIV7JXSG06FM.3.pdf

 

Disclaimer

Market (Over)Reactions

Just a few days ago, Alphabet reported earnings per share (EPS) of USD 2.15 against the estimated USD 2.13, but its revenue failed at USD 96.47 billion against the expected USD 96.67 billion, a shortfall of just -0.21%. Yet, the market punished Alphabet harshly, making it drop almost 9% from around USD 206 to USD 188 overnight (and currently it went lower than that). 

Picture generated by Meta AI

Following this, the media jumped on the bandwagon to add oil to the fire, using negative words and phrases such as “weaker-than-expected”, “revenue miss”, “disappoints”, etc. Reading such headlines naturally fuel the “flight in fear” instinct in us humans, and I would expect some investors to do the figurative “run for the hills”.

However, looking deep into its books, there are some positives coming out from the numbers, like increasing free cash flow AND capital expenditure for the last 3 fiscal years. Placing these figures next to their increasing revenue over the same period, which grew from USD 282.836 billion to USD 350.018 billion, the short conclusion would be that it is still a money-making machine.

Yes, there are some comments on the prospects of Alphabet and the accompanying challenges, like the stiff competition of its businesses and artificial intelligence (AI) models, which may cause them to lose market share and leadership. If this happens, it would not be overnight, but rather gradually over at least a few years, and during then one can see the “writing on the wall”. Recently Alphabet, along with other technology firms, are investing heavily into AI, and this may prove to be a game changer for their business prospects.

The Alphabet earnings situation shared some similarities to Salesforce; back in May 2024, despite a higher-than-expected EPS, a revenue miss of -0.44% brought a price drop from USD 27x to USD 21x. Fast forward today, the share price had increased more than 50% to around USD 33x.

So, what is the takeaway from here? If a fundamentally sound company’s share price had gone down due to short term fears or bad-but-not-so-bad past results, it is time to consider entering it.

Disclosure

The Bedokian is vested in Alphabet (Google).

Disclaimer

Apple’s Q1 2025 Earnings And Everything AI

Apple reported record-breaking financial results for its fiscal Q1 2025, which ended on December 28, 2024. The company achieved all-time highs in both revenue and earnings per share[1][2].

 

Picture generated by Meta AI

Key highlights:

1. Revenue: $124.30 billion, up 4% year-over-year[1][3]

2. Earnings per share: $2.40, up 10% year-over-year[1][2]

3. Net income: $36.33 billion, an increase of 7.1% from the previous year[4][7]

 

## Segment Performance

- iPhone revenue: $69.14 billion, down 0.8% (missed estimates)[4]

- Mac revenue: $8.99 billion, up 15.5%[4]

- iPad revenue: $8.09 billion, up 15.2%[4]

- Wearables, Home, and Accessories revenue: $11.75 billion, down 1.7%[4]

- Services revenue: $26.34 billion, up 13.9% (all-time record)[4][7]

 

## Regional Performance

Apple achieved all-time revenue records across multiple regions, including the Americas, Europe, Japan, and Asia Pacific[2]. However, Greater China revenue declined by 11% year-over-year[2].

 

## Company Statements

CEO Tim Cook highlighted the quarter as Apple's best December performance in history, emphasizing the success of their product lineup and the potential of Apple Intelligence[1][3]. CFO Kevan Parekh noted that strong operating margins drove EPS to a new all-time record[3].

 

## Outlook

Apple anticipates "low to mid single-digit" year-over-year revenue growth for the March quarter[4]. The company continues to face challenges in China and competition in the AI space[7].

Despite the overall positive results, Apple's shares fell about 1.5% in extended trading following the release[7], reflecting some investor concerns about iPhone sales and competition in the AI market.

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Besides the content written between the “===” line, everything above (except for the picture, which was done by Meta AI) and below (the citations) were generated using an artificial intelligence (AI) tool, namely the AI search engine Perplexity AI (perplexity.ai), by typing in the input  “please provide a summary report for apple’s recent earnings”.

The summary was done within seconds; Perplexity AI scoured the internet and came up with a coherent report as requested. Imagine the time saved using this tool instead of manually looking for information sources and coming out with a report (or blog post). No wonder so many students were relying on it and other AI applications like Open AI and Deepseek for their assignments and research.

Still, no matter how powerful these AI tools, for now some human work and judgement are required when carrying out analysis on the markets, economy and securities. AI is good for assisting in decision making, but it still cannot tell the future on how things will flow, unless it is powerful enough to create a common singularity in the future through a form of self-fulfilling prophecy. 

====================

Citations:

[1] https://9to5mac.com/2025/01/30/apple-reports-record-q1-2025-earnings-with-124-30-billion-in-revenue/

[2] https://www.gurufocus.com/news/2675839/apple-inc-aapl-q1-2025-earnings-call-highlights-record-revenue-and-eps-amidst-global-challenges

[3] https://www.apple.com/sg/newsroom/2025/01/apple-reports-first-quarter-results/

[4] https://www.moomoo.com/community/feed/apple-earnings-review-record-breaking-results-despite-weak-iphone-and-113921889206682

[5] https://www.reddit.com/r/apple/comments/1idy9vf/apple_reports_record_q1_2025_earnings_with_12430/

[6] https://www.apple.com/newsroom/2025/01/apple-reports-first-quarter-results/

[7] https://www.investopedia.com/apple-earnings-q1-fy-2025-8782696

[8] https://www.forbes.com/sites/dereksaul/2025/01/30/apple-earnings-preview-record-results-expected-with-china-ai-concerns-in-focus/

[9] https://www.cnbc.com/2025/01/30/apple-aapl-q1-earnings-2025.html

[10] https://www.cnbc.com/2025/01/30/apples-gross-margin-hits-record-as-services-business-keeps-growing.html

[11] https://investor.apple.com/stock-price/default.aspx

[12] https://www.perplexity.ai/finance/AAPL

The Rationale Of The Asset Classes: The Bedokian Portfolio 300th Post Special

I was asked a few times on the asset classes in the Bedokian Portfolio, specifically on why I had included them. In fact, I had mentioned the rationale in my eBook, which I will reproduce here¹:

“Both equities and REITs provide dividends, with the former having higher potential capital growth; Bonds give a stabilising effect when equities and/or REITs are weakening, while still earning coupon payouts; Commodities, though it is a non-yielding asset class, give the necessary softening of the overall portfolio from volatility; Cash, though acting as a pool of liquidity, could still be an interest-bearing instrument.”

 

Picture generated by Meta AI

For the past decade, we had seen the “Sunday” and “Monday” moments for each of the asset classes; equities lead the charge most of the time, save for the COVID and accelerating interest rate periods in 2020 and 2023-2024 respectively; REITs were the darlings for dividend investors, until COVID and high interest rates pressed them down; bonds were riding high during COVID as a flight to safety; commodities in general were muted until the post-COVID geopolitical uncertainties kicked in; cash languished until high rates spurred interest in treasury bills and fixed deposits.

 

The basis for all these is due to the different behaviours of each asset class under different economic conditions; in other words, they have different correlations with one another. If you had read the previous paragraph, not all of them had a bad time together, nor a good time together, too. In this way, our Bedokian Portfolios do not suffer the high swings of down and up experienced by an individual asset class, because if one or some asset classes plummet, the others would somehow “hard carry” up for the team.

 

Thus, the above example serves as an important lesson on diversification; the act of not putting all of one’s eggs into a basket. Though the gains may not be as much as placing all into one asset class (especially equities), but at least the risks and losses can be mitigated via diversifying. 

 

1 – The Bedokian Portfolio (2^nd Ed), p71

“Even Monkeys Do Fall From Trees”

When I took up a Japanese language course during my younger days, our teacher taught us a proverb that goes like this:

猿も木から落ちる (saru mo kikara ochiru)

This roughly translates as:

“Even monkeys do fall from trees”

The proverb describes that monkeys, who are adept in climbing trees, do fall down sometimes. Applying in the real world, it means no matter how skilled an individual is, he/she would fail at some of the time.

Picture generated by Meta AI

I had brought this up after reading about Allan Lichtman, who together with a Russian geophysicist, developed a 13-point checklist in predicting the next United States (U.S.) president, known as “The Keys to the White House”. Applied throughout history from 1860 to 2020, out of 41 elections, the checklist predicted 38 correctly; that is an astounding 92.7% accuracy. Since the prediction tool was created in 1981, it came true nine out of ten times up till 2020.

Due to its high degree of accuracy, Lichtman was interviewed many times by the media on the 2024 election, and he stated constantly that the Democrats were going to win the presidency. Alas, this time marked the fourth failure of his prediction, which, however, made things worse with some brickbats being hurled at him. The effects of recency bias, prevalence of social media and the divisive U.S. political climate attributed to his criticism.

Bringing this to the investment front, there are many stories (known and minor) of famous investors and fund managers making the wrong calls. Warren Buffett admitted that he, too, made investment mistakes, such as buying ConocoPhillips when oil prices were at a high, and not buying Amazon and Google, to name a few¹. Long Term Capital Management, a hedge fund founded in 1994 with renowned traders and economists helming it, failed just four years later due to its use of leverage, the Asian Financial Crisis of 1997 and the Russian financial crisis of 1998². In a more recent case, Bill Ackman of hedge fund firm Pershing Square Capital Management sold Netflix at a loss in Apr 2022³, only to become a wonderful growth stock after recovering from 2023 onwards.

These instances can be considered as afterthoughts, or hindsight bias as some may put it, but this is not the important point.

The takeaway from this post is that, no matter how good a person is in his/her calls for a certain outcome, there is a high probability of things not panning out as it would. Whether the potential results were calculated based on hard facts and data, there will be a curveball being thrown in and mess up everything; in other words, the unknown-unknown factors come in and derail the whole works. While it is good to hear from these greats and geniuses, one has to know that they are still human after all (or monkeys concerning tree climbing).

Disclosure:

The Bedokian is invested in Google.

Related post:

Respect, Not Idolize

Disclaimer

1 – Woods, Laura. Warren Buffett’s failures: 15 investing mistakes he regrets. 15 Dec 2017. https://www.cnbc.com/2017/12/15/warren-buffetts-failures-15-investing-mistakes-he-regrets.html (accessed 20 Jan 2025)

2 – Hayes, Adam. What Was Long-Term Capital Management (LTCM) and What Happened? Investopedia. 19 Dec 2023. https://www.investopedia.com/terms/l/longtermcapital.asp (accessed 20 Jan 2025)

3 – Herbst-Bayliss, Svea. Ackman gives up on Netflix, taking $400 million loss as shares tumble. Reuters. 21 Apr 2022. https://www.reuters.com/technology/ackmans-pershing-square-sells-netflix-investments-2022-04-20/ (accessed 20 Jan 2025)

Going Nuclear

With the advent of artificial intelligence (AI) and its related uses, potential and current, ranging from natural language processing to pictorial generation (like the one used for this post), processing power overall is increasing exponentially, and with it, the need for more energy consumption. The majority of the Magnificent 7 companies, true to their description, were planning to invest in data centres, lots of them, to fuel their AI applications and projects, literally and figuratively. 

On the literal sense, to feed the power guzzler required of AI generation, and the current trend of weaning away from traditional fossil fuels, nuclear is the next best way to go. The large technological companies are positioning themselves for this old-new power source, either by reviving old plants, positioning their data centres near existing ones, or developing breakthrough nuclear tech (i.e., fusion), or a combination of the choices.

Picture generated by Meta AI

Investment Opportunities

With an estimated annual growth of 27.67% between 2025 and 2030, the global AI market size is expected to grow to almost USD 830 billion by the end of the said period¹. Barring the factor of improved power efficiency within the AI hardware and software themselves, this meant a huge boost in nuclear energy and whatever that is associated with it.

There are a few investment opportunities stemming from here, ranging from investing in the raw material that powers nuclear fission energy itself, that is uranium, along with the mining companies, to operators of nuclear power plants and their suppliers. For retail investors, there are a few ways to get exposure to nuclear counters (not radiation) such as via exchange traded funds (ETFs). In the U.S. markets, there are a few ETFs that one can get a toehold on, such as Global X Uranium ETF (NYSEARCA: URA) which has a majority of mining companies and producers in its holdings, or VanEck Uranium and Nuclear ETF (NYSEARCA: NLR) that has power companies that utilises nuclear energy. Or, if one is confident enough to do stock picking, conduct fundamental analysis into the individual companies that make up the mentioned ETFs and buy into them directly.

Investing into nuclear energy is an example of what is known as thematic investing. For AI investing, there are other sectors and themes that one can go into, such as data centre real estate investment trusts, the Magnificent 7 stocks themselves and the “shovels and barrels” that push the AI revolution (Nvidia anyone?). A thorough understanding of one’s investment philosophy, principles and methodology is needed before considering of whether these counters are useful for his/her portfolio.

Disclosure

The Bedokian is invested in Nvidia, and not invested in URA and NLR.

Related post:

Eh Aye…

Disclaimer

1 – Artificial Intelligence – Worldwide Market Size. Statista. Mar 2024. https://www.statista.com/outlook/tmo/artificial-intelligence/worldwide#market-size (accessed 18 Jan 2025)