2018 Review II

This is the second part of 2018 review

4) Performance

My stock portfolio has -11.9% in 2018, which underperformed STI index (-7%). The reasons are noted in the earlier post, which is due to buying low quality stocks and not holding more cash when market is very optimistic.

Looking at my $1 invested in 2004 to 2018, my average return of the $1 in 2004 is 14.4%. However, on internal rate of return (IRR) basis (i.e. accounting for cash additions to portfolio at different time points), the IRR is 11.3% for 2005-2018.

I expect my IRR to drop in the future, as I am holding more Reits which is more stable but gives lower returns.

5) Portfolio Breakdown

Currently, I have 23 stocks. 26% are in Reits/trust, 23% in property stocks (exclude Reits/trust), 23% in China Banks and the rest in Others.

The Reits/trust are held for stability’s sake. I have bought more property stocks in recent months, as the property counters such as HK Land, City Dev and Hang Lung Property are trading at low price-to-book ratios. On China banks, I think that they are trading at low valuation and hence they are kept in my portfolio.

6) Outlook and plans

I think the market may get lower in 2019.

Currently, I am 55% stocks and 45% non-stocks. If STI fall to 2,900, I will increase my stocks percentage to 60%+. If STI falls to 2,700-2,750, I will increase my stock percentage to 65%+.

2018 Review I

This will be first part of 2018 review.

1) Cutting away low quality stocks

I have been selling off low quality stocks such as the following:
- AusGroup: has high debt
- Geo Energy: I think it lack a moat and takes on unneccessary debt

This is to get back cash, so as to re-deploy to more stable or better stocks

2) Buying low quality stocks at the market peak

AusGroup and Geo Energy were bought at the start of the year, when the market is booming. I think the purchases stem from the following reasons:
- my want to deploy the cash from Cogent privatisation
- my unwillingness to hold cash
- my lowering of standard amid the market peak/optimism.

In future, I should strive to hold more cash and be less willing to buy stocks when market is optimistic, especially when the market has been rising for 2 years.

3) Be willing to be not fully invested when market is very optimistic

I knew that the market was very optimistic during late Jan, as the prices of my stocks were rising almost everyday and the market has been rising for past 2 years in 2016 and 2017.

In future, when similar market conditions arise, I should be more wary and start to hold more cash. This will help to soften the market downturn subsequently.