Markets worldwide had investors cringing in just a space of a week. At the start of this year, STI went from 3430 to as high as 3609 points on Jan 24. Bulls were cheering, optimistic that markets will go higher due to the strong economic indicators. Personally, I do not believe the economy and the stock market is correlated. Neither does it has to be for my approach to investing to work.
Towards the end of January, I decided to move a huge portion of my cash holdings to Singapore Savings Bonds. It wasn't because the returns were attractive. Bonds can't protect you from inflation. There wasn't any great ideas in the stock market. Screened results off 52-weeks low and low price-to-cashflow stocks were relatively unchanged week to week. I decided to sell off certain stocks that I wasn't strongly confident of, such as Duty Free International, Figtree and Comfortdelgro. For Comfortdelgro, the run up in price was an excellent opportunity to correct my valuation mistake. I also took profit on Chuan Hup which returned me well above 40%. Chuan Hup is largely cheap based on a sum-of-the-parts approach. However, some of the parts were not cheap themselves. I would say it was on the high end of fair value.
My timing to sell these stocks were fortuitous as the markets turned.
On the 2nd of Feb, all hell broke loose over at the states, and investors in Asia had a weekend of worry before collectively selling off on Monday. STI open at 3414, went down as low as 3353 and closed at 3406. I would say the bears gained complete control the next day, wrestling the index down to 3383 despite it going above the previous close at 3460 at one point. Ironically, speculators in the inverse ETFs were burnt big time when the American market recovered a fair bit. Lesson learnt: shorting stocks is not only a game of valuation but also of timing. It is too difficult and best avoided.
Through it all, my little portfolio of small stocks was not spared. Index returns were as high as 6.09% this year, but now it is at -0.27. My portfolio was tamed from 10.16% to 3.91%. The decline is largely inline with the market.
Portfolio went down as much as 5% during the first day of the correction. It was quite frightening. I would be lying if I write that I did not think of selling certain stocks. But I refused to give in to the ridiculous spread. Some of my holdings were neither too expensive to consider selling, and neither is the price too cheap to average down. I decided to hold. I also took the opportunity to buy stocks in the Hong Kong market. The prices weren't attractive so I did not put in too much capital. But I have faith in them, and will buy more if the prices decline.
This blog is not meant to be a self-serving one... so I have some opinions to share on the days ahead.
At times like this, one has to be honest with yourself. The market is no mere Goliath so it takes courage to go against it. If you do have any positions bought on merely hope, it is time to take the conservative side and liquidate. You have to be quite certain of your valuation.
Hold on to stocks that are still on the cheap side. Do not be too depressed if your profitable positions were sold down-- my mates and I were not duly worried as we are quite certain that this isn't a failure of judgement. Likewise, I am not in a hurry to average down on stocks that are down a handful of percentages. I am not in this game to reap quick returns off hopes that the market will rebound quickly. A 10-15% decline is a good chance to average down, but not 5%.
All in all, God bless those souls who defer their judgement to the market. Stick to the way you invest. Do not switch your strategy just because your returns are inferior to others. Markets are seasonal-- certain styles of investing are more effective in some years. Just concentrate on not making too many mistakes and you will do decently.
Towards the end of January, I decided to move a huge portion of my cash holdings to Singapore Savings Bonds. It wasn't because the returns were attractive. Bonds can't protect you from inflation. There wasn't any great ideas in the stock market. Screened results off 52-weeks low and low price-to-cashflow stocks were relatively unchanged week to week. I decided to sell off certain stocks that I wasn't strongly confident of, such as Duty Free International, Figtree and Comfortdelgro. For Comfortdelgro, the run up in price was an excellent opportunity to correct my valuation mistake. I also took profit on Chuan Hup which returned me well above 40%. Chuan Hup is largely cheap based on a sum-of-the-parts approach. However, some of the parts were not cheap themselves. I would say it was on the high end of fair value.
My timing to sell these stocks were fortuitous as the markets turned.
On the 2nd of Feb, all hell broke loose over at the states, and investors in Asia had a weekend of worry before collectively selling off on Monday. STI open at 3414, went down as low as 3353 and closed at 3406. I would say the bears gained complete control the next day, wrestling the index down to 3383 despite it going above the previous close at 3460 at one point. Ironically, speculators in the inverse ETFs were burnt big time when the American market recovered a fair bit. Lesson learnt: shorting stocks is not only a game of valuation but also of timing. It is too difficult and best avoided.
Through it all, my little portfolio of small stocks was not spared. Index returns were as high as 6.09% this year, but now it is at -0.27. My portfolio was tamed from 10.16% to 3.91%. The decline is largely inline with the market.
Portfolio went down as much as 5% during the first day of the correction. It was quite frightening. I would be lying if I write that I did not think of selling certain stocks. But I refused to give in to the ridiculous spread. Some of my holdings were neither too expensive to consider selling, and neither is the price too cheap to average down. I decided to hold. I also took the opportunity to buy stocks in the Hong Kong market. The prices weren't attractive so I did not put in too much capital. But I have faith in them, and will buy more if the prices decline.
This blog is not meant to be a self-serving one... so I have some opinions to share on the days ahead.
At times like this, one has to be honest with yourself. The market is no mere Goliath so it takes courage to go against it. If you do have any positions bought on merely hope, it is time to take the conservative side and liquidate. You have to be quite certain of your valuation.
Hold on to stocks that are still on the cheap side. Do not be too depressed if your profitable positions were sold down-- my mates and I were not duly worried as we are quite certain that this isn't a failure of judgement. Likewise, I am not in a hurry to average down on stocks that are down a handful of percentages. I am not in this game to reap quick returns off hopes that the market will rebound quickly. A 10-15% decline is a good chance to average down, but not 5%.
All in all, God bless those souls who defer their judgement to the market. Stick to the way you invest. Do not switch your strategy just because your returns are inferior to others. Markets are seasonal-- certain styles of investing are more effective in some years. Just concentrate on not making too many mistakes and you will do decently.
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