Portfolio Update

I haven’t been updating in my blog for some time. There are just too many things going on at the moment. Both in the markets and at work.

To say that the market this month is volatile is a big understatement. Work-wise, I was working from home for the past week. Next week will be back at the office. Still, it was a hectic week.

I think the COVID 19 outbreak is beginning to turn out to be more serious than what I have initially thought. It is now a pandemic and many countries are in lockdown.

There was a mini-rally over the past couple of days and many are questioning if we have just witnessed the bottom of the crash or if it is a dead cat bounce. For me, that really is not the right question to ask. I know I will never know until the whole crisis is over.

There are many questions online about whether if it is the right time or shall I say the best time to invest.

Countless discussion in Facebook posts, Telegram groups, Investing Note posts, Blog posts etc…. At some stage, there is no point discussing or being an online warrior, just invest.  Oh yeah, second-level thinking is important, but beyond that (third-level, fourth-level, etc), I think I would be over-thinking.

However, is this the RIGHT question to ask in the first place?

To this, I think Howard Marks puts it succinctly, “Oaktree explicitly rejects the notion of waiting for the bottom. We buy when we can access value cheap. Given the price drops and selling we’ve seen so far, I believe this a good time to invest, although of course it may prove to have been not the best time.”

• Covid-19 crisis proves there is no ‘magic potion’ in investment: Howard Marks (read here)

I think the Irrelevant Investor puts it simply as this: “Looking through this, one thing is crystal clear to me. It doesn’t matter when you buy, only that you buy.”

• When Is the Right Time to Buy Stocks? (read here)

We will never know if it is the best time to invest. However, I do believe like Howard Marks, that over the long term, this is a good time to invest. Sure, things may get much worse before it gets better. Every crisis is the same. When we talk about the rising yield, due to the falling stock price, people will say that earnings and dividend payout will drop in the near future and yield will drop…. isn’t that the same in all the other crashes…end 2018, GFC, etc? In hindsight, even if you buy too early, and have set aside some money that you need for emergencies, in the long term, it will be alright.

I am not reviewing the companies based on their cash flow this year or even the next. I am imaging a situation when things get back to normal. When? I do not know.

Actually, that is not hard to do that now eg. to imagine when things get back to normal. For instance, when MRT trains are packed again, when we go back to the office to work, when children have schools every weekday and enrichment classes are open every week, when airport terminals are full of people and people go for holidays and hotels are packed, when supermarket shelves are packed and there is no panic buying, when there is no social distancing measures, no countries in lockdown mode.

That is NORMAL.

What we have now is NOT NORMAL. Just by going back to normal, companies’ cash flow will increase (some from 0% to +++++%).

If you ask me to imagine how the economy would be much better last year or early this year and how much higher the US markets can go. I find that harder. Sure we have the US-China Trade war… but we are also in the longest bull market ever (and Tesla stock price going ballistic). It is harder to imagine.

Currently, to imagine normal going forward is much easier (it’s a no brainer).

“You look at a company, you figure out what it could make in a normal environment and you figure out what that company would be worth to a strategic buyer, once its problems are largely resolved and once the capitalization has been restructured. Then you think about how that value will be divided up among the various classes of claimants and you figure out what a piece of a claim is worth and you see if you can buy it for less. And if you can make those judgements on the basis of conservative assumptions and still end up with good room for profit, then that’s a source of margin for error.” Howard Marks

However, I do believe in having a cash cushion and to break up the buying in portions. And I really really believe that I can’t time the bottom for nuts!

• What If You Buy Stocks Too Early During a Market Crash? (read here)

Personally, for me, this crisis has been a long time coming. For the past couple of years, I have been looking at low single-digit yields in bonds & money market funds. And I have been dipping into the market. Hence, it really does not make sense to be doing blog posts nowadays, as my portfolio proportions kept changing.

Basically, I have been “shopping” for stocks.

Below show the proportion of stocks vs war chest proportion. The dividend stocks proportion has increased to 54%. It is still a sea of red FYI.

I have a simple strategy to create a dividend stock portfolio first. I like to think I get paid while waiting…hahahaha…

And strong growth stocks almost never ever or seldom goes to fair or below value.

And if have read my previous posts, I created a Hong Kong centric one last year in view of the HK market crash due to the Hong Kong riots. Now with the worldwide market crash (literally the fastest crash ever), I have expanded my Singapore stock portfolio and started a mini Malaysia stock portfolio (just one stock at the moment).

I have also started a growth US stock portfolio (just one stock at the moment).

In case the above font size is too small, I have listed the stocks below.

Long story short:

Other than Colex and Golden Agri, sometime late last year I started with the HK centric portfolio. Many banks, property counters / REITs (commercial & retail & hospitality), consumer staples, aviation and transport stocks were beaten down.

Then beginning of this year, we start to see China-related stocks get beaten down due to the Coronavirus outbreak. Basically, we start with the same sectors being hit again. With cities in China undergoing a lockdown, Singapore is affected. In early Feb 2020, the Singapore Ministry of Health stepped up their risk assessment from DORSCON Yellow to DORSCON Orange. Inevitably the Singapore market is affected (again same sectors start being hit again.. dragging down others not directly hit). Which led to me dipping into aviation, hospitality & retail-related stocks in the Singapore market (eg. Sats, Ascotts Residence Trust, MCT).

Now within a few short months, the whole world is having a pandemic & many countries locked down (including Malaysia), stock markets everywhere are crashing. And we start seeing defensive stocks getting beaten down (eg. DBS, ST engineering, Ascendas Reit….SGX not as much).

Not to mention the wild swings in the US markets. I do not think the FAANGs or BAT stocks are exactly cheap or fair value now… but they sure were a lot cheaper than what they were at a few months ago. Many heavyweight stocks are.

And the global economy just went into a recession. Singapore will be in a deep recession

• IMF head says global economy now in recession (read here)
• Singapore: A deep recession (read here)

The amount I invested in each stock is not big. It is a way of setting up the portfolios (and trying to set up a system to get dividend income almost monthly). I guess the next stage is to slowly add to each of the position, and get some strong growth stocks if markets continue downwards.

Basically, I see the dividend portfolios (consisting of Singapore Portfolio, Hong Kong Portfolio & Malaysia Portfolio) as cash cows. The projected dividend for this year for me should increase by a lot (however, I won’t be surprised if some of these companies cut their dividend for 2020). I am not really into growth stocks at this stage, but given the US market crash, many fundamentally strong growth stocks are looking very attractive.

I think the portfolios are called dividend portfolios (not capital gain portfolios) for a reason. And I try not to focus too much on the unrealised loss. I invest (not speculate for short term price gains), hoping that these stocks will provide me with long term recurring income.

For some of these stocks, I have been eyeing them for years, and have even written about them. I have dreamt about owning them for years but always felt that they are too expensive. The crisis (don’t know how long it will last) provided me with an excuse to purchase some of them. And I like to think quite a few of them are quality companies or REITs holding quality properties.

Timing-wise I reckon I could have done better. However, in retrospect, if I was to live through the scenario again, I would have made the same decision. My decision to start a small HK centric portfolio late last year would probably be the same if I am to go through it again. Knowing that valuations in the US were high at that time.

In hindsight, looking at the sea of red in my HK centric portfolio, it might have been better to invest now as compared to then, but I would have made the same decision then if I am to relive it. In HK’s case, it is not just one Black Swan, it is like a triple Black Swan event eg. HK Riot, COVID 19 and the Oil crisis

Hence the need for a cash cushion because I may be wrong again, and it allows me to continue buying.

Others on my watch list include Parkwaylife Reit, Nestle and Mastercard, and some others… still mulling. Who knows maybe I have already missed the boat.

 

“What we do now echoes in eternity” Marcus Aurelius