Lately, I studied the latest stock portfolio built and managed by iCapital.biz Bhd, a closed-end fund listed on Bursa Malaysia. A closed-end fund is like a unit trust fund where its units are tradable on the stock exchange. On 19 October 2021, it has the following portfolio:

Notes: 

1. The details such as its stocks, number of shares, cost, and its cost/share were obtained from iCapital.biz Bhd’s Annual Report 2021 (Refer Page 53). 

2. The current stock prices are based on the closing prices on 18 October 2021.

3. The latest 12-month dividends per share (DPS) for each stock refers to DPS in the 12-month period from 19 October 2020 to 18 October 2021. 


From above, I would like to list down 5 main findings that I had gathered from a study on the portfolio and share some lessons on investing along the way. 


#1: It’s a Mixed-Bag Portfolio 

Overall, iCapital.biz Bhd has invested RM 218.6 million into 17 stocks and 1 ICPS and of which, its portfolio was in a capital gains position of 37.9% and it yielded 1.15% in dividends over the last 12 months. I had looked at the portfolio closely and I discovered the following: 


1. It has 8 stocks that are in capital gains position. Most of its capital growth are contributed by 2 key stocks namely, Padini and Sam Engineering. 

2. It has 8 stocks that are now in capital loss position. Most of its capital loss for iCapital.biz Bhd are from Boustead Holdings and Parkson. 

3. It has 3 stocks that are now enjoying above 5% in dividend yields a year. They include Padini, Tong Herr and Wellcall. Notably, they contributed capital growth to iCapital.biz Bhd. 

4. It has 6 stocks that do not pay dividends to iCapital.biz Bhd. 4 of the stocks in the portfolio are now in the capital loss position. These stocks include Boustead Holdings, Salutica, Parkson, and Bioalpha. 


#2: The Secret to Obtaining a 10-Bagger 

iCapital.biz Bhd has one 10-bagger in its portfolio, which is Padini. 

It had invested RM 4.9 million to acquire its 17 million shares which is valued at RM 54.4 million as of 18 October 2021. Its actual returns would be much higher than 10-folds for iCapital.biz Bhd has received 10+ years worth of dividends. So, the question is, ‘What is the secret to obtaining a 10-Bagger in your portfolio?’ 

I believe the answers are as follow: 


1. iCapital.biz Bhd had held onto this stock for more than 10 years. 

2. The stock must deliver consistent growth in earnings for the past 10 years. Of course, the exception is for 2020 as Padini could not run its retail outlets due to MCO.

#3: The Common Ground for Capital Gain Stocks 

Other than Padini, iCapital.biz Bhd attained capital gains on these stocks: 


a. AirAsia Group Bhd. 
b. Apex Healthcare Bhd. 
c. HPMT Holdings Bhd. 
d. Kelington Group Bhd. 
e. Sam Engineering & Equipment (M) Bhd. 
f. Tong Herr Resources Bhd. 
g. Wellcall Holdings Bhd. 


From them, 7 of these stocks are profitable and paid dividends, except AirAsia. Hence, investors who invest in stocks that are profitable and pay dividends shall increase their odds of achieving capital gains.


#4: Why iCapital.biz Bhd has 8 Stocks in Capital Loss Position? 

The 8 stocks that iCapital.biz Bhd own which are in capital loss position are: 


a. APM Automotive Holdings Bhd. 
b. Bioalpha Holdings Bhd. 
c. Boustead Holdings Bhd. 
d. MKH Bhd. 
e. Oceancash Pacific Bhd. 
f. Parkson Holdings Bhd. 
g. Salutica Bhd. 
h. Suria Capital Holdings Bhd. 


There are three common traits for the 8 stocks. First, they have reported a drop in earnings. Second, they reported a string of losses. Third, 4 out of 8 stocks did not pay dividends. Thus, I learned that if investors wish to reduce their chances of incurring capital losses, the stocks they should avoid investing are stocks that have a drop in earnings, a string of losses, and do not pay dividends.


#5: Investing is Most Intelligent When it is Most Business-Like

This is a quote from Benjamin Graham and I noticed that the quote is printed in the Annual Report 2021 of iCapital.biz Bhd. 

I agree with this quote and as such, if I inherit this stock portfolio, I will first find out which of the 17 stocks are businesses that I like to keep and which are ones that I would like to dispose of in the stock market. 

I would want to keep businesses which are increasingly profitable and pay good dividends. I do not see the point in owning businesses which are experiencing a fall in earnings or a string of losses. 

From above, it is obvious that iCapital.biz Bhd have been successful if they have invested in stocks that are profitable and are paying dividends (Refer Point 3). It had incurred capital losses if they bought stocks which are not profitable or had suffered a profit decline or did not pay any dividends (Refer Point 4). 

Thus, its success and failure can be identified through these simple patterns. 

So, if I inherit this stock portfolio, why not channel stocks that did not work into stocks that are increasingly profitable and pay dividends to enhance the results, the returns, and the overall performances of this stock portfolio? 

After all, what is the point of keeping businesses that don’t work? 


Conclusion: 

After studying iCapital.biz Bhd’s stock portfolio, it reinforced my own belief that investing is simple if we keep to its simplicity. Once again, I had found a handful useful patterns that we can apply when we build our own stock portfolios: 


Common Patterns for Stocks that Are in Capital Gains Position: 

a. Increasingly Profitable. 
b. Pay Dividends Consistently. 


Common Patterns for Stocks that Are in Capital Loss Position: 

a. Incurred Losses. 
b. Declining Earnings. 
c. Do Not Pay Dividends. 


So, that is it for this write-up! 

Here, I strongly encourage you to study the stock portfolio by iCapital.biz Bhd in great detail for educational purposes. 

If you have any questions / feedback, please post them to ian@kclau.com

Stay tuned for my latest next week. 



Ian Tai
Ian Tai

Financial Content Machine. Dividend Investor. Produced 500+ Financial Articles featured in KCLau.com in Malaysia and the Fifth Person, Value Invest Asia, and Small Cap Asia in Singapore. Regular Host and Presenter of a Weekly Financial Webinar with KCLau.com. Co-Founded DividendVault.com, an online membership site that empowers retail investors to build a stock portfolio that pays rising dividends year after year in Malaysia and Singapore.

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