What’s next? The Grind….

I try to pen down some of my thoughts on a monthly basis. With the on-going Covid-19 induced recession and many companies which have recently released their half yearly financial report, there are many items to mull about.

Singapore reported its first case of Covid-19 case in 23 Jan 2020, and we are now coming to the end of Aug 2020. On hindsight, I can safely say I have fully under-estimated the extend of the Covid-19 outbreak and its impact to the global economy.

Nevertheless, it does help by having a diversified portfolio. In general, my Singapore & US portfolios are doing well, with many in the green. In contrast, my HK portfolio is still underwater. Among the better performers are from 2 separate spectrum. On one hand, I have the tech stocks doing well (such as Mastercard & Alphabet), while on the other hand, there is the safe defensive yield plays outperforming (such as Parkwaylife Reit & Ascendas Reit), and not forgetting International Housewares Retail (basically retailing of essential housewares products).

Recent transactions for the month of July / Aug include:

1) Purchased HSBC, Pinduoduo, Parkwaylife Reit, Mapletree Logistic Trust & Lam Soon;

2) Sold entire Colex holding.

My thought now is where can I place my money in. Or just hold on and build up the warchest.

On one hand, you have the tech stocks which are reporting stellar earnings (of the big US Techs FAANG, I reckon only Alphabet has an earning call which is not within analysts’ expectations) – but I think too much attention has been paid to them, and prices are a bit high for my liking. Still it is worth to have a portion of my portfolio in mega tech (now less than 2% of the overall portfolio value).

• US big tech dominates stock market after monster rally, leaving investors on edge (read here)

Beyond the mega Techs, there seem to be a trend in 2020, in making capital gains by buying loss making (or hardly profitable) tech companies: Shopify, Nikola, Nio, Zoom, Pinduoduo, Tesla (negative profit if we strip away the $428 million from regulatory credits).

My tiny dip into Pinduoduo is probably an itch I need to scratch, and one of the very few stock whereby I am looking at its narrative more than the numbers. I find that its e-commerce model much different from the more established e-commerce giants like Alibaba, JD, Ebay or Amazon. In addition, it managed to hitch hiked onto WeChat with Tencent being a major investor, makes it harder for would be competitors.

Still I would much rather stay with the more established mega techs (HK or US listed). I have my fair share of fails where I dip into speculative tech stocks believing into the narrative (Creative being one of them).

• Creative sinks into the red with US$9.1m H2 loss (read here)

Moving on… On the other hand, you have the other sectors, which are underperforming: Reits/Property counters, Consumer Staples, Utilities, Financial companies/banks. The so called old industry stocks. That is where the majority of my portfolio lies (dividend cash cows).

The trend towards tech is not surprising given that the pandemic induced social distancing & stay-at-home work arrangement. However, my feel is that it is overdone. Many I feel are situational plays. A parallel thought comes to mind when I think of the sudden price crash in glove stocks when a vaccine is announced. Nevertheless, I do feel that for some mega techs they are not really that overpriced, and when the pandemic is over, they will grow stronger.

Source: StockRover.com

I do agree with the narratives of many of the smaller tech stocks… but people are willing to stretch to decades and raised valuations to levels way ahead. On the other hand, traditional value stocks are punished, and many are not willing to see what’s beyond 1 or 2 yrs.

2 extremes.

The recent rally in US tech stocks kind of pushed me towards safe boring Sg dividend Reits & building up more on my warchest.

 

So here I am grinding my teeth, twirling my hair, thumb sucking, staring at the wall waiting for the paint to dry :p

Around me, within my small social circle, I can already feel the change in the wind (so to speak).

1) Retrenchment / Pay freeze and pay cut:

– A relative (in her mid 40s) getting retrenched early during the Circuit Breaker period (and has yet to find a new job yet).

– A work friend of mine and my uni mate in the past, from another company (who used to be involved in the same project as me) got retrenched. She gave birth not long ago (probably a year or 2).

– And yes, pay freeze (and no promotion) for everyone in the company. Other companies as well (from those whom I meet at work) – Pay freeze. Pay cut for those higher in the ranks. Guess next will be more pay cuts down the rank.

– On a side note (and brighter note), my wife (a civil servant) got promoted and had a pay rise this year.

2) Workplace (New work culture)

– My colleagues and I have been working remotely from home since the start of the Circuit Breaker, and recent news seem to point that this might become a permanent situation. Eg. Our company will reducing the office space and hence reducing the no. of permanent desks. In place, there will be more ‘hot desks and lockers’.

It will lower the overhead rental expenses and with the leases renewal coming up, bosses are also questioning when will the things go back to the past or will the new normal stay.

Personally, as for my company, it is hard to say as to what will happen by year end. Management has been dropping hints of financial difficulties ahead. It is always good to keep a lookout for new opportunities and find chances to learn and move on.

– From what I read and heard (being not from the finance sector), many banks are holding off retrenchment this year. Next year will be a different story.

3) Losses

Being in the construction industry, and being in a project which involved many many small stakeholders / sub-contractors… We are starting to hear news of losses from many small players and even the main contractor (into to the tens of millions).

The main contractor has been requesting for many rounds of financial help (ex-gratia) from the developer.

4) Recurring Passive income affected

– Well, if you are a long term dividend stock investor, you would have felt the impact this year. Many companies are either withholding payouts, slashing payouts or letting you have the option to subscribe to scrip (in lieu of cash dividend).

– My parents own an investment condo. Recently, the tenant (tenanted to a company for its employee) has decided to cancel the 2 year lease abruptly after 6 mths (as the occupant / employee is leaving Singapore).

So with all the above, it makes the most difficult part in investing even harder. The most difficut part in stock investing is always the waiting.

Back in 2017, when I decided to sell most of my stocks, I heaved a sigh of relief, and also a ominous thought of what might come next (I recalled I sighed again).

A sigh of relief – Holding stocks is not without its worries (and it is not for everyone). The volatility of stock prices and the constant onslaught of news whereby things change quickly – could mean huge changes to the portfolio value on a monthly, weekly or even daily basis (esp. when a huge chunk of your savings are in stocks). Hence, by exiting, I sort of left that behind…. In addition, back then, when I left, I had 2 beliefs. One is that I felt that in general, the markets were fairly valued (or overpriced) and that there were no major crisis then. I couldn’t see more upsides, not in terms of stock prices, but rather how companies will grow or if there will be more fiscal or Fed economic stimulus.

 

A ominous thought of what might come next – Yes, back to the last sentence. When I choose to leave while things are rosy, it will also mean that I will be back when shits happen.

To invest in a crisis (and stay invested). Or to put it simply, I wait, so as to wait again (waiting for the crash, invest and stay invested). That was the ominous thought (and still is). That is harder said then done (and to stay invested through the recession and through the ever increasing bad news). However, since that is my belief (for the reason why I left and why I got back again), it is something that is inevitable.

As of today, if I do not consider the worst performing stock (which is Golden Agri – forced to hold for many many years) – the overall portfolio performance is at a slight gain.

Almost all my stocks in my Singapore Portfolio is in green (excluding Golden Agri & SATs). Even Ascott Residence Trust turned green (on and off – borderline). And I managed to sold off Colex at a profit (after its recent massive dividend announcement). Colex has been underwater since end 2018.

All the stocks in US Portfolio is in green (typically the 3 tech stocks – Mastercard, Alphabet & Pinduoduo).

The single stock (Heineken) in my Malaysia portfolio is still in losses.

Most of the stocks in the Hong Kong portfolio are still in losses, with the exception of International Housewares Retail (with its good run up in recent weeks). I consider HK Land and Dairy Farm as stocks in the HK portfolio. I probably bought them (eg. stocks in the HK portfolio) too early (eg. late last year). Nevertheless, they are contributing dividends on a monthly basis. Even with the losses, I see better performance with IH Retail and CK Asset (earnings wise and stock price performance).

Nevertheless, for this year, the growth in my dividend income has been phenomenon (even with the payout reduction) relatively speaking, since I have opted to invest during this crisis year. Hopefully, the payout next year will be even better… just keep waiting.

The worst is staying out of the market totally, and not having a stand. So is this a good time to be invested? The million dollar question.

For me, it is just inevitable.