Time to buy what you wish for…

There is this person whom I knew from work, and I meet him almost weekly.

I remember during the first few weeks of the market downtrend (that was when DBS was still hovering at more than $20+), he told me that he traded in his car for a new car. He told me that when there is a crisis, the rich would spend, not save. That should be around Feb 2020.

• Asian tycoons hunt for cheap assets after market rout (read here)

His previous car (Asian brand) was not very old and suits his needs just fine, but the new car is more powerful and is considered a continental car. The car salesman told him, he was selling at the base cost to meet his marketing quota. And I reckon my friend got a steal for it. However, I also figured that the car salesman sensed that bad times are on the horizon and he had to unload the cars on hand.

By the way, he sold his old car at a ~$1k profit (unbelievable). Only in times of crisis, a ‘depreciating’ asset can change to an  ‘appreciating’ asset. I remembered the last time I heard that it was during the 2008-2009 GFC.

To quote the article below “I know it’s super expensive to own a car in Singapore and it’s really not worth it. But it’s just so much fun to drive around,” said Lin.

• Why I bought a car in Singapore: What every first-time car buyer should know (read here)

Well, shortly after this, the market started tanking. And I remembered telling him that I have started buying stocks. Well, I did not say how much, just stated that I was buying. He mentioned that I bought too soon and should wait for a vaccine to be created. Nevertheless, I personally felt that since valuations are fair and for many stocks, they are at the cheapest valuation since (for many years), it was a good time to buy. And buy I did. Almost on a daily basis.

The last time I talked to him (think it was March 2020)… when DBS fell to below $18+, my friend said he kind of regretted buying the car (looking at DBS stock price). I can imagine that he hardly drove it for long (less than a month perhaps) and the smell of a new car is still fresh in his car. Geez, that must be the fastest I know of anyone who regretted buying a car.

I think we were all surprised by the speed and ferocity of the stock market crash.

• Howard Marks says it’s time to stop playing defense: ‘We’re buying today when we find good value’  (read here)

These days I am seeing more advertisements on cars (with some fire sales) in the Facebook posts. With the current ‘circuit breaker’ measures in Singapore, sale of vehicles is not considered an essential service, and it has been suspended. Guess the car salesman was correct in his forecast.

“But with April tenders now suspended, motor dealers said uncertainty looms.

One asked: “There are a lot of unanswered question that we are still seeking from LTA, like what happens to the April quota – whether it will be combined with May’s, or be distributed evenly over remaining months of the year.”

• Coronavirus: April COE bidding suspended but questions remain (read here)
• Coronavirus advice: is now a good time to get a deal on a new car? (read here)

Well, I have always been more into stocks than cars.

I have no idea how things would pan out in the near future. However, I hope I have made the right choice. For some of the stocks in my portfolio, with the recent mini-rally, they are starting to turn ‘green’ eg. show unrealised profits (rather than unrealised losses).

Other than starting a Hong Kong-centric portfolio first (due to the HK riots last year). Personally, for me, I have broken my buying strategy into a few parts. The first few parts I have elaborated before. By the way, I find HK stocks much more volatile than Singapore stocks in general.

 

Part 1: Basically, the first few sectors to be affected are the aviation, tourism/transport, hospitality and retail sectors. This applies to the HK riot crisis as well as the COVID-19 outbreak crisis (here in Singapore). I personally feel that they will also probably be the ones that will take the longest to recover. Their dire situations seem edged deeply into many people’s mind. And to be fair, many are under financial difficulties and require financial bail-out by the government (eg. SIA).

I reckon after the COVID-19 crisis, people will take time to get accustomed to the idea of taking flights, cruises, holidays, frequent events jam-packed with people (like concerts or soccer matches, etc). Many countries are still grappling with how they will unwind the lockdown subsequently.

Well, I could be wrong (bad at timing anyway)….and the stock market can be irrational in the short term especially when it comes to timing.

The valuations of these aviation, tourism/transport, hospitality and retail sectors stocks are often the first to be affected (trend down). Hence, in my portfolio, I would start to accumulate some of these (eg. SATS, Ascott Residence Trust & Mapletree Commercial Trust). I will buy in drips using my war-chest (on top of the DCA) when they are trending down.

I did not know how things would pan out then. I was surprised when the situation worsened and many other indirectly affected companies saw their stock prices tank. The panic buying in super-markets, the division of work teams (to work from home on alternate weeks) in our company and the video conference meetings.

 

Part 2: So that came part two of the buying strategy: To start to accumulate solid companies (eg. DBS, Ascendas Reit, Parkwaylife Reit, ST Engineering, Heineken Malaysia Bhd).

There are quite a number of these stocks which I have been eyeing for years, but valuations were often way too high. Hence, I seldom consider them even when doing the regular monthly DCA. Only in times of crisis (like now), would I consider these stocks.

To be fair, many of these stocks appear immune to the crisis, eg. Vicom, SGX, Riverstone (to name a few).

It seems to be that every time the PM addressed the nation, the stock market dropped sharply (esp. before the address itself). I remember queuing up at our neighbourhood Sheng Siong supermarket, and making stock buy orders and checking stock prices. People are dumping stocks and buying food. And here I am picking up stocks from motivated sellers … stocks that many are dumping.

Sounds counter-intuitive … and mentally hard to do.

The first two parts are basically to add on to my dividend portfolio, which also consists of my HK-centric portfolio.

The reason for that is I primarily view stocks as assets that ‘pays’ me. eg. via their dividend. I look towards companies that can sustain their dividend over the long term and hopefully those that can grow their dividend. So yes, some of them do have relatively low yield (not in the double-digit % given the current market). Not to speculate for capital gains (well, if there are – it is a bonus).

• “Buy a stock the way you would buy a house. Understand and like it such that you’d be content to own it in the absence of any market.” Warren Buffett

The current yield for my overall portfolio is 4.98%. It is not terribly high. However, I am happy with that.

Well, one reason is I have another bunch of stocks that have little or new dividend yields. And that brings me to Part 3.

 

Part 3: With the dividend portfolio more or less structured. I started looking for Growth stocks. I always feel that their stock price fluctuations can be relatively high. They can go up really fast and also crash down really fast… Esp. when it comes to the US markets. And I also feel that they are riskier since I often have problem valuating them. And there is really no dividend (so to speak) to fall back on in the long term.

Many fundamentally strong growth stocks are listed in the US & HK stock markets (sorry, Singapore). I tend to look at these markets more when sniffing out growth stocks. Many have wide economic moats, have strong network effect and user stickiness, good economies of scales, and basically operates in monopolies, duopolies, and oligopolies.

At the moment there are only 2 in my portfolio (Alphabet Inc Class A & Mastercard I ORD).

 

In the short term, this COVID-19 is creating a lot of disruption to our lives and the stock markets. It is also making tracking of projected dividend payout near impossible. The projected dividend payout amount in Stockscafe has been fluctuating. Companies are starting to cut dividend payout (eg. HSBC), and while others have deferred the AGM and dividend announcement in view of the ‘Circuit breaker’ measures in Singapore (eg. DBS & ST Engineering).

Nevertheless, I know for sure, the dividend this year for me will be a personal best as I have increased my allocation in stocks.

By thinking about dividend payouts, one is sort of forced to think long term. Look, a 3% to 5% increment annually is not going alter my net worth drastically. The list of stocks in my portfolio is gonna stay stagnant most of the time. And since the focus is going to be on passive dividend income, a more direct and important chart is the dividend payout chart over the months. Nevertheless, the War-Chest vs Stocks percentage is critical as well.

At the moment, I have approx. 22% war-chest left.

 

Not sure how it will pan out in the future. I do not rule out another crisis in the making.

A crisis tends to expose the flaws in the system and I am sure the global financial system is far from perfect. We are going to witness a global recession, high unemployment, high liquidations and bankruptcies, etc.

“What started as a health crisis is morphing into an economic, financial and debt crisis. Emerging market economies – including many in Singapore’s neighbourhood – are especially vulnerable, given their high dollar-denominated debts and dependence on commodity exports and tourism.”

• Beware the lure of bear market rallies (read here)

Nevertheless, this post serves as a record. I do feel that now is a great time to buy what one wishes for (be it car or stocks) though. And if I am to relive the past few months again, I would probably do the same thing.

Perhaps now, more than ever… two words…Spend Wisely.

In a year (or two), I can look back at this post and decide if I have made the right call. Perhaps the money would be better spent on something else (like a car)…hahahaha