February 2018 Portfolio Update

Dear Readers

The end of Chinese New Year marks the conclusion of February 2018 and with it, a month of turbulence.

In the midst of all the chaos, market forecasters, market journalists, security analysts, economists and commentators have been flooding the internet with their views of whether the equity markets are heading for a correction or a bear market and how higher American inflation and bond yields are adversely affecting equity markets.

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While I believe that the market has had a good run and it is due for a pullback, I didn’t react much to those opinions; merely reading them as a form of leisure. I’m steadfast that no one could consistently predict, with absolute certainty, the future direction of the market. In fact, my position, with regard to my portfolio, was to ignore all of those views and to adhere to my long term plan by staying invested [See: Rationally irrational].

So, did doing nothing bear fruit?

Had I reacted to the market selldown, by selling off my shareholdings, I would have only realised a 24% portfolio gain (the lowest portfolio gain during the selldown) and also missed the market rebound that subsequently followed the market selldown. Because I did nothing, my portfolio rebounded, as the market rebounded, and is now back at a gain of 33.8%. And, all of that happened within a span of a month.

Of course it is easier for one to reflect on all of this in hindsight. Would one have acted differently, say if the market selldown protracted, to reveal a bear market? This is exactly why investing is truly a test of grit and mental endurance, rather than just analytic skills; to adhere to a predetermined investment plan, even in the face of adversities. Those without resolve would quickly steer away from that predetermined investment plan, with devastating consequences. However, those with resolve, would have stuck though to their plans, and on top of that, bought more quality stocks, at steep discounts. That is how, successful investors such as Warren Buffet, Charlie Munger, Peter Lynch and Joel Greenblatt, would have acted.

Now, a breakdown of my portfolio:

COUNTER COMPOSITION (%) AVERAGE PRICE LAST PRICE GAIN/LOST (%)
3A 5.99 1.18 1.08 (8.35)
AIRASIA 33.27 2.80 4.35 55.45
CIMB 23.66 5.77 7.27 25.90
DNEX-WD 6.64 0.23 0.175 (24.33)
EKOVEST 12.26 1.16 1.00 (14.10)
EVERGREEN 5.59 0.84 0.535 (32.44)
MALAKOF 2.69 0.91 0.92 0.22
SIME 5.50 2.80 2.69 (4.16)

I’ve taken a small bet on Malakoff notwithstanding that things there are a little rough at the moment. Its earnings are expected to be depressed in the future, its flagship asset, Tanjung Bin Energy power plant, is still without operational hiccups, and more importantly, the failure of its management to secure assets to boost its power generation capabilities is of no help to its already declining earnings. However, on the positive note, dividend yield may be higher because of its depressed share prices and high dividend payout. Further, Malakoff’s management are taking some steps towards expanding its power generation capabilities in the renewable energy segment.

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January 2018 Portfolio Report

Dear Readers

At the beginning of this month, I was reading a book by Tony Robbins, titled Unshakeable, for a second time. I was drawn to his investment approach that investors, not speculators, should remain invested, at all times, regardless of any bullish or bearish undertone in the stock market. Simply put, any form of market timing, is abandoned. Tony observes that after every market setback, the market picks itself up and makes a complete turnaround; exceeding its own performance, even before the setback.

To put things into perspective, during the period between mid-September 2017 and mid-December 2017, the KLCI was retreating. It was gradually dropping from 1790 points to 1713 points. During that time, many investors experienced a substantial drop or stagnation in the value of their portfolio.

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What I feel about the KLCI, right now. Credit: Kennedy Space Centre

Eventually, the market flipped in the opposite direction and set sail (imagine where the sail was actually a rocket booster) towards and beyond the 1800-point psychological resistance. Now, KLCI is sitting comfortably above 1850 points.

If you had cashed out when KLCI was in retreat (for fear of losing), you would have not been able to profit from KLCI’s advancement, later on. On the other hand, if you had the grit to overcome the anxiety and the fear of loss, you would have given yourself a pat in the back and some change in your pocket.

If there was only one lesson which I could take home from the book, that lesson would be that the stock market has an enduring legacy of breaking hopes and dreams of investors because you are your own worst enemy. You buy when stocks are at record high (for fear of missing out) and sell when they are low (for fear of losing) where in fact you should buy when the prices are low, and sell when the prices are high. I know, I know, easier said that done.

Hopefully some good pointers, albeit obvious, from Tony would lend some courage to you:

  1. You will never be able to consistently predict the ups and downs of the market.
  2. The stock market will rise over time because the economy expands with population growth, and with it, productivity and efficiency will increase due to the advancement of technology.
  3. A bear market will always be followed by a bull market.
  4. It is better to stay invested, at all times, then to be at the sidelines.
  5. Diversify your investments.

Even if you do not have the slightest idea on how to pick stocks, but had stuck to the above rules and invested in all of the 30 blue chip stocks, so as to mimic the performance of KLCI, and had held them for the entirety of 2017, as the KLCI rose from 1636 points to 1796 points, you would have made a sweet 9.7% gain. And had you continued holding your blue chip basket, you would have made a gain of 13%, at the time of writing. Of course those gains are hypothetical because the index does not move in exact tandem with the underlying stocks, but you get what I mean.

So if you hadn’t gotten a trading account, register one now. I recommend giving Rakuten Trade or Hong Leong Investment Bank a go; both have reasonably low brokerage fees and good customer service.

Remember, your inaction is the only thing that is putting your future at risk. Start now! Your future self will thank you.

As for my portfolio:

COUNTER COMPOSITION (%) AVERAGE PRICE LAST PRICE GAIN/LOST (%)
3A 5.65 1.18 1.02 (13.45)
AIRASIA 32.79 2.80 4.29 53.32
CIMB 22.96 5.77 7.06 22.26
DNEX-WD 7.77 0.23 0.20 (11.36)
EKOVEST 12.62 1.16 1.03 (11.52)
EVERGREEN 5.08 0.84 0.60 (28.54)
SIME 6.04 2.80 2.96 5.46

I’ve added SIME to the portfolio is a means of diversification. SIME has a broad reach into the automotive industry, heavy machinery industry, healthcare and logistics (without the sluggish plantation and property divisions). One counter, offering so much diversification, is much appreciated. Overall, the portfolio’s total gain is at 35.40%. That means it has gained 13.50% since the last update.

Links

If you would like to see the progression of my portfolio, check out my previous months’ portfolio update HERE.

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