Saturday, October 1, 2022

My portfolio turns RED

My defense have been breached. I want to write a blog to reflect on a few questions.

1) Could I have sold more earlier? 

2) When to buy more? 

Let's look at the recent actions. My rules governing selling is not price sensitive, as oppose to what many investors and traders use. I ask myself if there is a risk of earning deterioration, and if the odds is high, sell. 

Hence I sold CSE, whose management mentioned about cost overrun eating into margin, and with inflation, I hardly think things can get better easier even with a bigger order book. The price didn't reflect my pessimism, it fells generally with the magnitude of market retreat.

I also reduce Hotung, as I thought the high interest rate environment with make tech VC business more trying, and they have already had 2 years of good growth, and hence is staring at a high base historically 

I reduce Geely 175 HK, since I wanted to keep my HK portfolio smaller than Singapore, and after accumulating on weakness, i got a chance after China declare it wants to support EV industry to offload with profits. I still have half of the shares, but the fall in this counter has been drastic, things could have been worse if I have not cash out 

These sell actions only generated about 5 percent more cash. 

And some of it, I recycled and bought into YZJ Financial and Wilmar, so the net cash increase is slightly less tha 3 percent. 

Compared to TONG portfolio from the edge newspaper, who decidedly trimmed half of it portfolio, my actions seem to be going nowhere. 

Now, why couldnt I sell more. Are there possible deterioration of earnings that I failed to see? 

Inflation, restricted to my limited knowledge, affect margins for almost every company, except perhaps commodity companies (but apparently this is true only for energy but not agriculture, if u look at the price performance of companies.) 

So, so I sell most of my counters? Or should I continue to look at company specific impact, and hold on to those companies since I have no idea what will be a good rentry price. 

The fear of missing out of a good rentry price for good blue chip companies seems to be the reason why I hesitate to sell companies like ST engineering, HK land, Keppel etc, as I scope them up during pandemic panic. I am not sure if such price will come by again. If u ask me if I can sell first and buy back later, I am.not sure what is the "spread" to take advantage of. I did tell myself to buy back DBS after I sold it at 37 yo get back at 20 percent discount, but when it went to sub 30 for a while, I did nothing, and the chance is pased.

Let's assume I should have done it, and I should sell most of my counters now, I am not sure if they will fall another 20 percent, it seems like "gambling" that a Inflation triggered recession will wipe another 20 percent off when prices have already corrected. I think HK counters is really too late to sell, as they have already dropped close to 40 percent from their peak. 

I also shuddered to think that developers/reits who survived 2 years of pandemic crowd control measures who do worse in a recession. 

It seems that at this point of time, the answer is I could not have sold more unless I changed my rules for selling. 

The HK market is a surprise, as I did miss selling the construction companies when the developers are delevaraging and their property market went into doldrum. Beyond that, is school fees paid to understand the business better, what raw material course to look out for, and what regulation to stay clear.

For the second qn, my rule is accumulation when prices fell by 20 percent in a "normal" market and 25 - 30 percent in volatile market. 

It definitely is the latter now, I did went and scope up plenty of HK counters recently. Ping An, ICBC, Alibaba, China Resources 

Even in Singapore, I intiate position on CICT and adds on to SATS. 

I will keep to the rule, and buy anytime when I think the odds of future earning growth is high. (need not be the next quarter) 

Conclusion

There is no denying that I have limited knowledge of how the companies are run and the industries that they are in. 

But the silver lining is that I have not broken any self-written rules for investing. 

I am not sure how I should measure my performance, but I am definitely not losing sleep yet. 

Maybe one of the selling rule could be 2 years of record growth? Any lack of catalyst or first sight of red flag should be enough to activate a sell some call, so I could have perhaps lock in more profits. 

If I followed this rule, I would not be able to sell earlier, but I could have sold Lung Kee, CSCP, lonking etc 

I think the most important rule to review should be I should have a different set of rules for HK portfolio. Since the movement in this market is perhaps 2 to 3 times not volatile. I should take a more active trading mindset with overseas counters

8 comments:

  1. At such times where the macro is all different from history, we cannot simply rely on rules. We need to adapt more and be more flexible.

    ReplyDelete
    Replies
    1. I guess, another word for rules can be "approach" and it wouldn't sound so rigid. Flexibility is useful until traders become long term investors

      Delete
  2. Hi SI

    Seems like your article has in a way answered your own thoughts with words on " Sell, Selling, Sold."

    ReplyDelete
    Replies
    1. Hi STI, indeed, that is the whole purpose of writing. Hoping to clarifies my thoughts as I put my words into writing.

      Good to have some new "rules" or approaches I can test out with. Long time no read, hope u are doing well. Take care

      Delete
  3. Hi SI,

    Why do you think YZJ Financial and Wilmar are better investment than Hotung, CSE and Geely at the current price?

    I think you are selling something that you are more familiar with (prob because of market turbulent or price is dropping- before you come up with some good reasons) to get into something you are not familiar with (prob because YZJ/Wilmar price had fallen, you dont have a stake in them(not a loss position) and probably also influenced by some bloggers and commentaries in forum).

    You may be right in the end. My commentary is just for your thinking only:)

    ReplyDelete
    Replies
    1. Hi Anon,

      All the counters go through the same analysis before I buy. The historical earning records, the industry outlook, valuation numbers etc. I dun actually read the forum and investment bloggers anymore, except for a few like SMOL, Rolf, etc.

      I dun think you are interested in the nitty gritty of those counters, so i shall not bored you of the reasons to buy and sell

      Delete
  4. Hi SI, I sense a bit of unhappiness on your reply. Sorry for my comments. Really means good and no offence. Sorry about that. Have a good day ahead.

    ReplyDelete
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