Live testing: using D/PTB ratio

I had read Show Me The Money book 1 written by Teh Hooi Ling, Business Times writer turned hedge fund manager. In the book, she highlighted the case of selecting the 10th decile of highest paying dividend stocks with respect to price-to-book ratio. More info can be found here: http://www.btinvest.com.sg/markets/stocks/time-to-re-assess-price-to-book-stock-picks.

In this aspect, I will be doing a front testing on this strategy, including all transaction costs, in order to ascertain whether this strategy will yield a positive result against the market STI ETF. I had made 2 modifications. One, to remove all S-chips from the list, which means to exclude all companies who have their main office in China. Two, to only select the top ranking 16 stocks from the list, as the marginal benefit from diversification becomes negligible at 16-18 stocks.

This is the top 16 stocks after ranking them in D/PTB and excluding S-chips.


Company Name
Ticker
Div Yield
P/BV
D/PTB
MFS Technology Ltd
SGX:5BM
 100.0
 0.958
 104.384
Rickmers Maritime
SGX:B1ZU
 16.2
 0.276
 58.696
Transcorp Holdings Limited
SGX:T19
 77.4
 1.52
 50.921
CH Offshore Ltd.
SGX:C13
 43.5
 1.17
 37.179
PNE Industries Ltd
SGX:BDA
 21.8
 0.628
 34.713
Aztech Group Ltd.
SGX:AVZ
 13.5
 0.416
 32.452
Ocean Sky International Limited
SGX:O05
 30.0
 1.06
 28.302
Fabchem China Limited
SGX:BFT
 4.69
 0.167
 28.084
Boustead Projects Limited
SGX:AVM
 34.2
 1.32
 25.909
Pacific Radiance Ltd.
SGX:T8V
 9.84
 0.396
 24.848
Hotung Investment Holdings Limited
SGX:NT1
 8.76
 0.427
 20.515
VibroPower Corporation Limited
SGX:535
 9.68
 0.477
 20.294
Excelpoint Technology Ltd.
SGX:BDF
 10.1
 0.541
 18.669
Willas-Array Electronics (Holdings) Limited
SGX:BDR
 8.34
 0.447
 18.658
Global Investments Limited
SGX:B73
 11.5
 0.62
 18.548
Marco Polo Marine Ltd.
SGX:5LY
 6.83
 0.388
 17.603

All stocks will be equally weighted, and price bought will be using the ask price from Standard Chartered trading account to better reflect the illiquid nature of the stocks. We start off with an initial investment of $10,000 to buy 16 stocks, and this is the breakdown. I try to equally weight them as much as possible.


Company Name
Ticker
Ask price
Lots
Cost
MFS Technology Ltd
SGX:5BM
0.122
51
622.20
Rickmers Maritime
SGX:B1ZU
0.215
30
645
Transcorp Holdings Limited
SGX:T19
0.155
40
620
CH Offshore Ltd.
SGX:C13
0.545
12
654
PNE Industries Ltd
SGX:BDA
0.60
10
600
Aztech Group Ltd.
SGX:AVZ
0.79
8
632
Ocean Sky International Limited
SGX:O05
0.115
54
621
Fabchem China Limited
SGX:BFT
0.21
30
630
Boustead Projects Limited
SGX:AVM
0.755
8
604
Pacific Radiance Ltd.
SGX:T8V
0.31
20
620
Hotung Investment Holdings Limited
SGX:NT1
0.13
48
624
VibroPower Corporation Limited
SGX:535
0.028
223
624.40
Excelpoint Technology Ltd.
SGX:BDF
0.395
16
632
Willas-Array Electronics (Holdings) Limited
SGX:BDR
0.79
8
632
Global Investments Limited
SGX:B73
0.131
47
615.70
Marco Polo Marine Ltd.
SGX:5LY
0.205
30
615

The total cost comes up to $9,991.30, with cash of $8.70. We will look at this portfolio again next year, 15 September 2016. As of now, the STI ETF cost $2.93, which we will be able to be 34 lots which cost a total of $9,962 with remaining cash of $38.
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