Monday, June 29, 2020

SillyInc 1H review

2020 1H is really a roller coaster ride. In march, the market drops more than 5% consecutive for days. The plan to purchase companies as they fall 20% became 25% to 30%, and towards the end of march become a wait and see move.

There are several questionable coporate actions, the purpose of the piece is to crystallize the thinking process through writing, and please forgive me if I sound incoherence.

1) Moments of freezing in action
But all accounts, Singpost, Hong Kong Land, Capitaland has hit 30% threhold of fall. Yet, I freeze. I have not mentioned Hong Kong counters like 0517 cosco and GA pack. While it is understandable to focus the firepower in the local market where there is high degree of familarity, there is no reason why I let a 30% fall go, and I did nothing.

Reflection: When the market plunge, it is really difficult to keep my nerve. Had I hit all the counters my cash would have gone to 15 - 20 % of portfolio. At the moment where market hits a new low every day, it is rather difficult to keep my steels to continue accumulating. Although there are back up funds that could boost my cash level, I would rather not use it.

When I am holding 15 counters, it is not possible to average down in 3 tranches for all counters. So my orginal plan of buying when counters goes down 25% to 30% is mathematically flawed as I do not have that cash holding.

2) Selling to rebalance or selling in anticipation of further fall
Several counters recovered enough, I remember selling some of FR and CSE at slightly below average price. (Take Loss) The reasoning is if the market fall further, I can take have the ammo to average down or buy other counters

Reflection: I am wondering such trading or buying in and selling out is really what I have in mind. Before this Covid, my reason to sell is simply, my thesis has changed. When Covid hits, my idea is my counters should not go into heavy losses and they should continue to be profitable. It is fine if the entry price is horrible for a few years, becasue if they continue to be profitable, they is no risk of them going under, and I can wait for the sun to be out again to harvest capital gains.

Hence, selling when the price is higher than the lowest entry price to lock in "profits" seem contradictory to my buy and hold plan. This dilemna also came about due to point number 1. If I cannot accumulate all further, this trading action seemingly is the solution to the lack of money to average down. So is this rebalancing of counters that have fired off the third rounds going to be a more permanent feature in my bear investing plan?

It seems that I do have this risk off mindset at the back of my head, as I also reduce my stake in Ascendas Reit, and sold off Pan United when they are profitable to increase cash. The reasons for the above selling is Ascendas Reit is a rather large holding after I participated in their rights, and Pan United growth will not materialized in 2020, and depending on how they resolved their manpower issue, 2021 is also in doubt. Given the low dividend yield, I felt i have better alternatives elsewhere.

So is there any other way to resolve this dilemna so that I could be more decisive in my buy - sell actions? If the buy sell actions are reasonable risk management actions in a volatile market, are the triggers based on sound thinking or gut feel? It seems more like gut feel at the moment.

Perhaps, like business analysis, the amount of cash, and the triggers of buy and sell should also depends on the macro enviroments and the possible impact on the companies' earnings. If I think Bread is going to continue to be staple, COVID or not, TRADE WAR or not, maybe my threshold for holding should be higher.

HKland seems a bit more complicated, because it has to deal with the impact of Covid, and also China Security laws. Also, the level of entry and threshold to take before entry should also depends on the supposedly risk rewards profile. Selling to rebalance, so take into account of the above too.

3) Breaking the 3 rounds rule
Besides Silverlake axis, SCI is a counter that i keep accumulating. I just felt that the price is not justified based on the restructing that it can embarked on (Not talking about the demerger), and the possibility of the Indian Market and UK market turning.

SCI turn out well, SAL did not. So why did I break the rule. It is fine breaking the rules, by the circumstances should be clear. The rule or excuse I gave myself is not more than 15% of portfolio. I would think SCI is rather fine and it is still just 10%, I think SAL is really a over indulgent.

Another reason is I believed such price is rock bottom price. But is there science in rock bottom price beyond 20% of peak, historically for blue chips??

When do we accumulate till we hit portfolio limit, and when do we do 3 rounds AV. Down. For the 2 counters, the price drop beyond the third buy but I believe the drop is not justified. Is there another criteria I could use?

4) Selling off counters that were bought for "growth"

These are counters that are so so in their dividends,but I first bought them because I see growth potential in their overseas expansion (koufu) or the sector recovery (Pan United for Construction) Given that growth will hardly materialize in 2020 and perhaps 2021, it makes me wonder if I should keep them? I have already exited Pan United, and the next in line will be Koufu and Raffles Medical.

So, what should be the percentage of growth stocks as compared to yield? Perhaps if market is "normal", some "growth" counters is appropriate.

Final thoughts:

Inherently if Diversification is going to really effective, it should be 5%, which would mean an average of 20 counters, having the money to buy 3 tranches of the 20 counters is no small sum.

What works out to be a great plan in the head, does throw up a few spanners when we act upon it. There are no answers, but having questions at the back of the mind, is a good awareness exercise. Hope I have an answer soon.


8 comments:

  1. how do you suggest to tackle problem 1? i too froze in the face of falling markets when covid+oil crisis initially struck

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    1. Hi hi Steven, hahaha we are both not made of steel. I guess only 2 things.

      1) A big war chest or cash flow that u know is not easily depletable. (I dun have it)

      2) Ample research and conviction.

      But I am still reasonably happy now. I still have a bigger portfolio as compared to pre covid, guess there is no maximising of profits or loss?

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  2. 1) A good way to deal with plunging markets is to buy a diversified index funds which largest holdings are fundamnetally strong and not too exposed to any one company. If you can determine stocks are mispriced as a whole you can just let diversification run its course.


    A tranche / dollar cost average approach by rotating through counters on a monthly might be worth a look if you are willing to forego false optimsation through perfect hindsight.

    2) I do not think growth or value can be quantified by PE ratios. The best performing stock last year is Dominos which is not considered a growth stock by its industry. The same goes for Microsoft which is a dead stock until the ouster of Steve Balmer.





    ReplyDelete
    Replies
    1. Yes, INTJ, there is a period of time where I look at ETF, and some from US that is alerted by M, who post it in my comment.

      But in the end, I just pass... I almost want to sell out my HK stocks..

      Lucky I didn't

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  3. Hi SI,

    If I may share 4 Chinese characters:

    稍安勿燥 :)

    We can't accurately pick the bottom. Even if we set at 50% decline, how can we be sure it won't slide further till 80%?

    Your decision to offload some counters, be it lock in profit or minimise loss, if it is done after thinking through and not based on impulse, then what is needed is just reflecting on the decision. No regrets. Our decision making is always based on incomplete info and even if apply sound principles, it can still turn out bad when luck is not on our side. If it is 大势所趋,we have to accept it and adapt.

    I got out of CSE Global making some coffee money as I was not pleased with my entry price at 35cts. Didn't get a better entry price after selling so I switched to load up on ISOTeam. Would I know which will turn out to be a better investment? I won't until I have hindsight. I'm still keeping my remaining gun powder dry and saving up to grow my warchest. I believe there would be a Round 2 blood bath and I will load up (including CSE) and wait for 5 years (hopefully shorter) for the harvest.

    Conviction comes from being able to stomach some wrong decisions and staying the course.

    Jia you jia you! During your school holidays, can probably get SMOL out to lim kopi together. :)

    ReplyDelete
    Replies
    1. Hi hi EY, that is a great idea. Hopefully when PSLE is over, COVID measure are further relaxed and the situation is REALLY under control.

      Would really like to meet more bloggers out there for a good chat

      Delete
  4. Hey SI,

    Don’t worry, you are not the only one. Me too.

    When the market dived in late March so dramatically, I only deployed a portion of it on STI ETF and some other stocks. Could have been much more…..

    I also made a lot of stupid decisions, like taking profits on my paper gold and bitcoin at the wrong time (at their March low), as I am trying to keep even more ammo on cash to take advantage of the ANTICIPATED BIG DECLINE after March. It never come! It really caused me so much of $ otherwise I would have profited.

    During the free-fall in March, it is so fast and any sane mind investor will not deploy “All-In”. Those who did, are gambling on it. It can be suicidal if it further free-fall down and then you have "heart attack" and need cash for medical fees! Haha. just kidding... hypothetical only.

    Now that it is over, I think even if we never catch the 30-40%, we catch the 15-20% decline, it is still fine. Most stocks in SG are still down now say 20%, so I think it is still ok to accumulate. No regrets!

    But the biggest takeaway for me is to start to have the change in mindset to look at US and HK markets, which I think is more lucrative if you pick the right growth stocks. SG is really for stable dividend stocks.

    Just my thoughts.

    ReplyDelete
    Replies
    1. Hi Rolf,

      Haha thanks for being so honest. U are already "veteran" level, so I can be more forgiving of myself. Lol.

      I recently started venturing out of Singapore to HK and bought 2 counters highlighted by B and STE. My radar is really small now. But I buying to understand if there is knink I should know. So far the dividends payment to Singapore acc from HKex is seamless.

      Might start looking for actively at HK too. US I look at the various etf before, especially staple consumers goods highlighted by M

      But point 1 is a problem. Cash. When I buy, I want to have some money to be able to accumulate, so I dun think I can be trigger happy

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