Thoughts for March 2022

Truth be told, I haven’t been thinking about investing or my portfolio for some time now. Ever since my post in Jan 2022, whereby I mentioned that investing is more about being patient than being smart; I kind of just sit back and just watch my portfolio slide (esp. for my Chinese tech stocks). Or maybe it is just unpleasant looking at my portfolio (and am avoiding it) hahaha… Better to spend my time reading news, or binge-watching Netflix movies or Youtube videos.

Actually, it is not that bad (yet), since my growth stocks (Story fund) portfolio is still relatively small compared to my dividend portfolios (although the latter has been slipping as well).

I guess that is the beauty of being a small-time retail investor. I can choose to be inactive for extended periods, and have no pressure to buy or sell.

I initially wanted to build up my war chest however (as usual) life seems to have other plans. Wifey decided to do some renovation to the house, expenses for the children, while minor hiccups like handphone screen cracked; increase in expenditure on meals and transport (as I start to go back to the office more often to work), etc… sort of made it hard for me to accumulate much for my war-chest.

On a side note, after the recent renovation at home, the renovated rooms appear more comfy and nice. Not bad. If I have used the money to buy more Chinese tech stocks….’cough, vomit… cough…blood, cough’…

Work-wise, I am fighting hard on my current new project, so that kind of kept me mentally preoccupied (and rather stressed). In fact, the thought of quitting has crossed my mind numerous times. I have not been sleeping well for the past couple of months. Currently, having a good night’s sleep for me is of utmost importance. Nevertheless, I endeavour to face each hurdle with calm and a positive spirit.

The pandemic, anticipated increase in interest rate, the Ukraine-Russia war, inflation fears (and actual inflation here in Singapore), the continued delisting fears for US-listed Chinese Stocks (by the SEC); regulatory crackdowns in China continued to wreak havoc on my portfolio.

Occasionally I would average down on my Chinese Tech stocks like Alibaba (9988.hk) and Pinduoduo (Pdd) during my monthly DCAs. I last bought more Alibaba shares in Jan 2022 and late Feb 2022. I am well aware I probably would not see any gains in the near future or probably years down the road. So there is really no hurry to average down more.

In recent times I did add a bit to Singapore dividend stocks like ST Engineering. I have not been feeding the SG/HK dividend monster for quite some time. Yes, given the continued downward trend of Alibaba and Pinduoduo stock prices (and even US growth stocks like The Trade Desk, etc), they do look tantalising attractive. However, I would like to balance them out with more quality growth stocks (which are also beaten down but not as much) like Alphabet. Historically even in the worst times, the big tech growth stocks such as Apple, Alphabet, Microsft – seldom cross below 30% drop.

Frankly, I have no idea how long the regulatory crackdown in China and the delisting fear in the US will last.

It reminds me of Peter Lynch’s quote: “It’s Always Darkest Before The Pitch Black”.

The concept of the flight to ‘quality’ (stocks) has been an enduring evergreen theme. Even during these times of fear …(increasing interest rates, inflationary fears, war, pandemic, etc).

a) Raging bull markets (no matter how one sees it, markets are over-valued): Choose the big techs, despite their high valuations, they are still undervalued compared to the speculative tech stocks peers which are not even profitable and generating positive cash flows.

b) Depressed markets during the start of the pandemic: Big techs with their strong moats will ride through the crisis. It is rare for such price drops.

c) Even more depressed markets with rising interest rates, soaring inflation and war: Big techs with pricing power and strong moat will be able to ride through the high-interest rates and soaring inflation with their strong balance sheets (low or zero debt) and will be able to pass on the rising costs to their customers by raising prices… The war has had little impact on the businesses of these big tech companies. Valuations are cheap from a historical standpoint.

Ok, I get the picture. Seriously, when was there ever a bad time to not buy big (US) tech companies .. excluding Meta (sorry Facebook, I am just not into you) …even the regulatory hiccups in the US did not stop them.

However, at the moment I am just holding back, taking tiny bites and still trying to build up my war chest (with one itchy finger hovering over the buy button), and oh yeah, it will be tax season soon. If I had more resources, I would probably add to my holdings.

I am still fully invested. I did sell out of my Ascendas Reit holding and used the cash to purchase Digital Core Reit stocks. Other than that, I did not really sell out of any of my stock holdings.

There is also another sector that I have been reading up on, and that is commodities or more specifically Palm Oil stocks. Malaysia’s benchmark crude palm oil prices have soared 45% so far this year, boosted by a cocktail of labour shortages, export restrictions by top producer Indonesia and disruption to sunflower oil supply from Russia’s invasion of Ukraine.

While the CPO (Crude Palm Oil) price has skyrocketed (palm oil future have reached an all-time high), many Indonesian palm oil stocks (eg. Golden Agri-resources and First Resource) have not really taken off.

This is probably due to the Indonesian palm oil policy whereby palm companies must sell 30% of their planned exports at home, up from 20% (read here). This is in line with the country’s aim to be more self-reliant and to produce more products higher up the value chain.

Indonesia tightens palm oil export curbs in new hit to global supplies (read here)

Regardless of the policies back in Indonesia, reading the recent quarterly earnings reports of the various palm oil companies, one would be aware that many of these companies have reported higher earnings (or are back in the black). With the continued high CPO prices, the coming quarter earnings should be good as well.

I have been a long time holder of Golden Agri-Resources stocks, and it has been underwater for the longest time (more than a decade). Looking through my brokerage account, I first bought Golden Agri-Resources stocks in Dec 2010. Subsequently, it did not go as planned. I kind of just left it there to rot in my portfolio. I was (and still am) reluctant to realise the losses and it is there to remind me never to invest in terrible commodities companies. Commodities stocks (including O&G stocks) are extremely cyclical (with mini-cycles and super decade long supercycles) and notoriously hard to invest in. Companies also have little or no pricing power, no strong or deep business moats and are highly dependent on the fluctuation of commodity prices. Be on the wrong side of it (or give in to FOMO after seeing everyone talking about the profits they made), and you could be like me, holding the losers for many many years. However, if one is on the right side of it…. like I said … supercycle. Another animal altogether.

Given the rally in CPO prices, I am surprised that Golden Agri-resource stocks have not rallied as much. Perhaps it is like a compressed spring waiting to bounce… I do not know.

When CPO prices crashed in 2008 and 2011, everyone naturally expected (Indonesian) palm oil stocks to crash, well… it does not always work the other way round I reckon. After all palm oil is still lumbering under its negative environmental impact image since the early part of 2010s (with the European Union lobbying against it, with Malaysian/Indonesian stating it was to protect their own agri-oil products). It would be interesting if the Ukraine war is prolonged and we shall see how it would impact their perception of palm oil …

EU bans palm oil to protect its own oil seeds, local producers say Malaysia (read here)

Whatever it is, it has been a crazy 2022 so far.

Hang in there.


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About apenquotes

Born in 1976. Married with 2 kids (a boy and a girl). A typical Singaporean living in a 4 room HDB flat. Check out my Facebook Page: https://www.facebook.com/apenquotes.tte.9?ref=bookmarks
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