It’s been 6 months since my last blog post. I managed to set aside some time to review my portfolio again, as I do every month, and as do, to blog and share how I was doing amidst this turbulent and uncertain environment that we are living in.
I have so much pent up thoughts but I never managed to cough them out in words. I just survived my very first stock market crash this year, and although I should have been excited about my portfolio going down 10 – 20% per year, and seeing all the greens becoming double-digit reds, I wasn’t actually really so. Not in a bad way, but in a “I kinda expected it” way, you know. 2019 was the year where all the stocks were breaking their records of 52 weeks highs, and who would have guessed that in July, the same thing is happening despite everything that has happened.
I had a little bit of understanding about where things were going before the crash, and I guess the timely COVID-19 had just made matters drastically worse than necessary. My previous company was in a cyclical industry, and there were already signs of cost-cutting being implemented to make up for their quarterly earning reports.
My heart goes out to whoever who has been furloughed or affected someway by what has happened, but it was inevitable, and the only thing we can do as individuals is to be prepared for what is to come.
And being prepared doesn’t mean that it’s only for this year, or this event, but basically anything that you can’t predict. Just like how you should have some cash on the sidelines, waiting to be deployed.
I had a stash of funds in the SSB and I withdrew all of it to deploy into the market. In March and April 2020, I was aggressive, and I pushed >30% of my current portfolio value into the stock market. I was also experiencing first hand when they say that the stock market is driven by greed and fear.
I also understand now how long term “safe” blue-chip dividend stocks that everyone relies on during thriving economic times can no longer be “safe”. A great example would be ComfortDelgro, that has released a net-loss as guidance in the recent month. This dividend stock was giving out around 5% due to its beaten down price prior to the crash, and the stock market gave it and its investors a more painful lesson by beating the stock price down another 50% after the crash. CDG is selling now at $1.47 per share, down 37% from my original average price of $2.33.
Because of this, I have also begun to appreciate the economics of how things change during recession times. The spending habits of people will change, and thus, this affects businesses directly. When I think about it, 99% of it is really just common sense, but sometimes, we are so blind to see the answers just right in front of us.
So if you invest in cyclical stocks, such as the airlines and tourism-related stocks, you gotta have a strong heart. Because, how do you put a valuation to a company that has negative earnings? It is not easy to have the conviction to say that you will invest in a company with net-loss that might persist on for the next few years until the economy recovers fully, but if you manage to choose the right one, you could reap what you sow handsomely, or, prettily.
In order to save myself some heart ache, I have made 2 changes to my portfolio in exchange for a better peace of mind.
Invest in companies with strong balance sheets
As of writing, I currently have 7 companies, out of a total of 13, in my portfolio that are in net cash position. Either long term debt does not exist on their balance sheet, or it does but has enough cash on hand to pay all their debt. That’s pretty much >50% of my portfolio having almost 0% chance of going bankrupt.
Invest in companies that are “recession proof”
I would like to point out that this was a mere coincidence that I happened to have 2 of such stocks who are doing resiliently well, and if not, better during this COVID 19 situation. These 2 stocks are namely Kraft Heinz and British American Tobacco.
Both belong to quite huge market caps and the way I expect them to generate profits will be somewhat different as to how I would with the smaller caps.
Now okay, what about the other stocks who are still generating decent profits during this time period? Are they considered recession proof? I would consider some yes, to a certain extent, because of our needs now.
A good example that I have in my portfolio with decreased earnings but still very profitable is Valuetronics. These belong to the contract manufacturing sector, which in my opinion, will hardly be affected at all if they have a diverse range of customers serving different industries. Valuetronics did announce a reduction in dividends this year, but they still maintain highly profitable and I have also more than doubled my investment in them. They also belong to one of the 7 “great balance sheet” companies.
So overall, where is my portfolio at now?
Time-weighted returns: -15.27%
I am very red this year, due to the fact that I have placed quite a big position in CCL. The stock price is far from recovery, which is why my portfolio has been pulled down because of it. Ultimately, we still have 6 more months to know how I finally did overall. Maybe more updates on my expenses for the first half of 2020. We’ll see. 🙂
Till then. And thanks for reading.
Miss Niao. xoxo.