Fidelity released its fourth annual survey on millionaires Fidelity Millionaire Outlook. The results made for interesting if unsurprising reading. Some key findings:
1. the outlook of millionaire households is the most optimistic since 2006. Given the intervening economic events it would be very surprising if the survey had produced any other result;
2. four out of ten millionaires do not feel wealthy. Again, this should not surprise anyone. In most developed economies, being a marginal millionaire does not make you wealthy enough that your standard of living cannot be adversely affected by rising taxation on incomes, rising property taxes, rising inflation and the potential for economic adversity to impact your business, your job and your investments. Add in the common perception that wealth is relative (usually to others) and the very substantial incremental costs of expanding living costs if you want to move "up market", and it is easy to understand why having USD1-2 million does not make you feel wealthy;
3. four out of ten millionaires are concerned about maintaining their lifestyle in retirement. Given the comments made in #2 above, this is understandable;
4. the average age of the millionaires surveyed was 56. For most of us, it takes time to accumulate wealth.
Fidelity's survey reinforces some of my long held beliefs:
A. preventing lifestyle expansion is essential. If you want to (i) retire early and (ii) feel comfortably off, living well below your means is critical - relying on rising income and/or investments to get you there will not work as often as people would like to believe. The more you spend the more you need and the greater the risk of being trapped into working for ever;
B. comparatives matter. If you want to feel wealthier, learn to enjoy a less expensive lifestyle. Move to a less affluent neighbourhood, hang out with less affluent people and keep reminding yourself that 99% of the world's population gets by with a lot less.
Thursday, March 17, 2011
Wednesday, March 16, 2011
K Wah purchased
This morning I added property developer and investor K Wah (HK:173) to the private portfolio. My average purchase price was HK$3.25 per share.
K Wah is essentially an asset play, selling at a very deep discount to its NAV while, at the same time, offering a reasonable 3.4% trailing dividend yield. The balance sheet is acceptable, with about 34% gearing as at the most recent interim balance date. My expectation is that monetisation of some of the company's assets through the sale of completed developments will translate into a reduced discount to NAV.
K Wah is essentially an asset play, selling at a very deep discount to its NAV while, at the same time, offering a reasonable 3.4% trailing dividend yield. The balance sheet is acceptable, with about 34% gearing as at the most recent interim balance date. My expectation is that monetisation of some of the company's assets through the sale of completed developments will translate into a reduced discount to NAV.
Monday, March 14, 2011
Xtep purchased
This afternoon I added mid-cap sports wear retailer Xtep (HK:1368) to the private portfolio, paying an average of HK$4.94 per share (including transaction costs).
Xtep's share price had fallen along with the market generally and in reaction to issues at other participants in the sector to the point where the stock represents (IMHO) good value even if the company does not fully meet growth expectations and excellent value if it does. Specifically, the company offers a trailing dividend yield of 4.4% and PE of 14. Operating cash flow is strong by most measures and, crucially, significantly higher than expansion related capex. Earnings and dividends are expected to improve in the current and next financial years as the company expands its network of outlets and as overhead expenses shrink as a percentage of total expenses. Concerns over rising labour costs are (again, IMHO) likely to be more than offset by workers' increased income resulting in increased consumer spending.
The balance sheet is also solid with no debt and RMB2.4 billion in cash and equivalents as at the most recent interim balance date (30 June, 2010).
As an aside, once I got past the large number of gloss pictures, the annual and interim reports were very well written - giving a clear picture of the company's position and strategy with a nearly complete absence of the vague and unspecific or irrelevant statements that clutter so many corporate reports.
Xtep's share price had fallen along with the market generally and in reaction to issues at other participants in the sector to the point where the stock represents (IMHO) good value even if the company does not fully meet growth expectations and excellent value if it does. Specifically, the company offers a trailing dividend yield of 4.4% and PE of 14. Operating cash flow is strong by most measures and, crucially, significantly higher than expansion related capex. Earnings and dividends are expected to improve in the current and next financial years as the company expands its network of outlets and as overhead expenses shrink as a percentage of total expenses. Concerns over rising labour costs are (again, IMHO) likely to be more than offset by workers' increased income resulting in increased consumer spending.
The balance sheet is also solid with no debt and RMB2.4 billion in cash and equivalents as at the most recent interim balance date (30 June, 2010).
As an aside, once I got past the large number of gloss pictures, the annual and interim reports were very well written - giving a clear picture of the company's position and strategy with a nearly complete absence of the vague and unspecific or irrelevant statements that clutter so many corporate reports.
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