Sold Alibaba For 51% Gain.

This morning, I sold half of my investment in Alibaba for a 51% capital gain.

It has been a long time since I last did any trading and this was a pretty nice one.

A 51% gain in less than 2 months was not something I was expecting.

However, this is what Mr. Market does.

We get surprises, pleasant ones and also nasty ones.

It is like opening a box of chocolates, someone said.

All we can do is to identify what we think are good entries and the rest is up to Mr. Market.

No one really knows what Mr. Market is going to do in the next few weeks, months or years.

I thought the downside was pretty limited.

I thought the numbers looked decent.

I got in when the chart said there was some long term support.

And I left the rest to Mr. Market.

If the price had gone lower, I had a plan as to where to buy more.

If the price should move higher, I had a plan on where to sell.

Alibaba wasn't a large investment for me and it has become a smaller investment now.

As it doesn't pay a meaningful dividend, the way to get more cash flow out of this is to trade.

This reminds me of the time when I was trading the Hang Seng Tech ETF and I think some of you might remember that.

So, what is my plan for Alibaba now?

My eventual target price for Alibaba is still HK$160 per share or so.

I talked about this before and in case you missed it, see:

Why sell now?

The rapid move higher in price does not seem sustainable to me and there is a chance we could see a pullback.

A pullback to HK$100 per share is possible.

A nice round number is an intuitive support level.

The SDR equivalent would be $3.40 per unit.

I could get in again then.

In case Mr. Market turns very pessimistic again, we could see price retracing all the way to the 200 days moving average once more.

This was at HK$80.00 but has moved higher and is now at HK$87.00 or so.

Naturally, with prices higher, this moving average is rising and we could see HK$90.00 soon.

That is just 10% lower than HK$100.

So, buying some at HK$100 looks OK to me and if price should sink another 10%, I might buy more as the uptrend would still be intact.

Anyway, just a short update.

If AK can do it, so can you!

DBS Share Price To Stay Higher For Longer.

I have said for many months that interest rates are likely to stay higher for longer.

Higher for longer interest rates are good for not only savers but also investors in DBS, OCBC and UOB.

In their latest results, DBS said that they expect net interest income to come in slightly higher this year due to this.

This is a change from expectation for net interest income to stay flat or weaken, year on year, as the Fed cuts interest rates.

The Fed is now expected to keep interest rate on hold and might only cut towards the end of 2025.

The number of rate cuts this year expected by Mr. Market has gone from 5 to only 2 now.

This bodes well for DBS, OCBC and UOB.

Coupled with strong growth in their wealth management business and income from fees, we could see earnings surprising to the upside.

DBS has already announced a higher final dividend of 60c per share which is about 10% higher than the 54c per share a year ago.

They are also going to introduce a 15c per share per quarter payout over the next two years.

This is a return of capital to shareholders as the bank has plenty of excess capital.

This brings the payout per quarter to 75c per share.

Mr. Market really likes this and has sent the share price of the bank higher and it is quite possible that it is going to stay higher for longer, just like interest rates.

So, people ask me when am I selling my investment in DBS?

I have said before that 2x book value was something I was looking at.

However, with the recent development, this has to change.

With an additional payout of 15c per quarter per share which increases the dividend by 25%, I would be giving up a lot in terms of passive income by selling now.

As I expect the share price to stay higher for longer, all else being equal, it could be a long wait before I get to buy again at a lower price.

While waiting, the NAV of DBS would continue to climb higher.

Some might say that a gradual return of capital over the next two years means that DBS' NAV would be impacted.

However, I would highlight that it is only 15c per share per quarter which would be more than covered by retained earnings which means the NAV of DBS would still be growing.

Just some back of the envelope calculation.

60c DPS from a 50% payout.

60c per share retained earnings.

15c per share capital reduction.

The bank is still growing by 45c per share per quarter.

This means that using NAV as a guide to sell, the target price to sell would only move higher over time.

Given the current situation, the share price has more room to move higher.

JP Morgan is now trading at 2.3x book value.

Could we see DBS trading at 2.3x book value too?

I expect UOB and OCBC to surprise to the upside to, barring unforeseen circumstances.

Investing in DBS, OCBC and UOB, increasing the size of said investments and staying invested has been most rewarding.

If AK can talk to himself, so can you.

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