Philosophy, Market, Cash Account and CPF investable Global Stock ETF

Philosophy

I come to realise that if I am buying individual stocks, I should strive to buy the best business and not buy value stocks. 

It is not that value stocks don't work. They work but they need a lot of stock positions to work, as some value stocks may turn out to be duds. If I want to buy value stocks, it is better to buy value stock ETF, so that I will not be overly affected if the value stocks I hold turn out to be dud. 

Market

The US market fell further, after the Sep Fed meeting and people realised that the Fed is serious on raising rates till inflation is tamed.

My buy plan is to buy stock ETF and selected US stocks in tranches, as market decline. Not buying HK stocks, as my stock portfolio is heavily tilted to HK shares

Purchases made recently:

- VWRA (global stock etf) bought at $94.5

- Googl bought at $99

- BKNG (Booking) bought at $1,755

I am also selling non-core position to shore up cash.

Sales made recently

- Occidental Petroleum sold at $63.7. (Slight profit, as I bought at $60)

- Micron sold at $50. Partial sale to reduce stake to acceptable position. (Loss, as I bought at $58).

Cash Account

As I plan to buy US stocks in future, I need US dollars. I converted some cash to USD at Interactive Brokers (IB). IB provides interest rate of 2.58% (BM - 0.5%) for USD cash > $10K. If Fed raise interest rate in future, IB's interest rate should rise accordingly. 

CPF investable Global Stock ETF

Many years ago, when I was in my last year of university, I lament that I cannot use CPF-OA to buy gobal stock etf, which will have lower expense ratio compared to unit trust

Now, times have changed. One can use CPF to buy global stock etf in Fundsupermart or Endowus etc. 

I look around and it seems cheapest to buy Infinity Global Stock Index Class C using CPF-OA at Fundsupermart. Because it does not carry any annual platform fee and its annual management charge is 0.2%. 

If US market fell 40%-50%, it is time for me to use CPF-OA warchest to buy this index fund. 

Started Buying

 Have dipped into my funds to started buying:

1) JPGL -- a multi-factor index fund listed in LSE. I am pondering between JPGL and IFSW (another multi-factor index fund). Decided on JPGL, as its max holding in a single stock is around 0.6% which means that it is more diversified. 

If you look at morningstar on the portfolio characteristics, JPGL scores higher on low-volatility factor, while IFSW scores higher on quality factor. Can't say which factor is better.

2) USSC -- a US value small cap fund listed in LSE. I bought LSE-listed ETF, as they may be domiciled in Ireland and hence I can save on US dividend withholding tax. 

Recent news noted that US small cap value seems to have higher ROE than US small cap growth. Given this, I think that US small cap value is cheap currently.

Sold:

1) Meta, at breakeven prices. Decide to let this go, as I don't really like the FB business

2) Essex Bio-tech. Wanted to sell and then use the proceeds to add on to my position in CNOOC. But CNOOC has run up. I will hold on to the cash then.

On T-bills, have bought

1) 1-year T-bill issued in Jul. It provides 3.1%, which is not a bad yield

Will also be buying the 6 mth T-bill this week. This will means that some of my funds are tied in T-bill till Jan/Feb next year. 

Given that SSB has been capping the amounts in recent months, it is easier to put funds into T-bills instead. 

Half Essex Bio-Tech, thinking on 10 year bond

 I had halved my stake in Essex Bio-Tech today, as it releases a profit warning yesterday night. The decision was also due to possibility of it writing off some of its investment in a drug and my thinking that if I am to buy the stock, I will own half the stake I have.

I thought of buying 10 year Treasury bond, as US seems to be heading for recession and inflation seems to be slowing. However, I am not knowledgeable on bonds. I cannot tell how much I can lose in bonds nor how much I can gain on bonds. Thus I should pass.

I bought SG 6mths T-bill. The auction results is out and the cut-off yield is 2.66%. This is higher than last month's 2.3x%. Now the question comes if I should continue to buy more T-bill or I should hold the cash, so that I can buy stocks if market decline. 

Sold Rex International

Sold Rex International today at 0.255, as it falls below my stop-loss. It was a small position and I had put a mental stop-loss, as I bought it due to high oil prices but I am not very knowledgeable about the company.

In addition, Rex is much smaller than oil majors, which means that it has higher risk.

The sale and loss have reminded me that I should be more reluntant in buying stocks. Whenever I discover a new stock idea and had the impulse to buy, it is better to wait and set a lower buy point. And I should only buy stocks of companies who are of good quality. 

In addition, if I do not have strong conviction in the stock, it is best for me to put a mental stop loss i.e. treat the market price trend as knowing more than me. (Hmm, if I do not have strong conviction, why do I buy the stock in first place? It must be due to greed and over-confidence.)

Updates on Sales and Purchase in June 2022

Just updating my sales and purchases made in June

Have sold the following

- Micron -- sold half of my stake in mid-June to reduce risk of lower prices in downturn. Turns out that this move is correct now, as Micron share price falls after it provides lower guidance

- HRNet -- sold half of my stake in mid-June to raise cash. 

- Prosus -- sold all my stake, after its share price rises, as it is selling Tencent to buy its own stocks. I buy Prosus mainly for its Tencent stake. Took at loss here. But as my Tencent stake is a significant proportion of my portfolio, selling Prosus is a good chance for me to reduce concentration. I am keeping Tencent position for now. (Tencent position is a loss-making position; average buy price is $450)

Bought the following. Most are smallish position, except CNOOC

-- OXY, Rex Intl and CNOOC. They are bought as hedge. Rex Intl was bought at 0.345, so it was a loss making position. CNOOC bought due to its dividend. OXY was a Warren Buffet purchase

--United Hampshire Reit.  Buy mainly due to its high dividend yield and properties mainly in US (USD is getting stronger as interest rate rises). I will skip Euro-based Reits for now, as euro is getting weaker.

-- WBD. It's a recent merger between Warner Bro and Discovery. It has good content (e.g. DC Comics) and good distribution channel from Discovery. Down-side is that it has high debt. Thesis is that it will have cashflow to reduce its debt in next 2-3 years and market will re-rate it, as its balance sheet improves.

-- YFH Financial. Bought at $0.43. It's a value play with price-to-book of 0.4x. Its directors are buying. Downside is that it owns China debt/loans which are opaque. 

Moving forward, I am still waiting for market to go lower, to hit my buy prices of various stocks / ETFs before buying smallish position. My personal view is that this bear market has legs to run. 

Bear Market Average Decline

 Ben Carlsen's blog post has interesting statistics on average S&P decline for recessionary bear market (-39.4%) and non-recessionary bear market (-26.1%). 

Now S&P is just entering bear market territory. 

Gameplan for Downturn

[First post on 21 May 2022, updated on 17 Jun 2022]

Plan for purchase during downturn

1) Index Buying: Additional Stake at 12% lower

    1st Stake: When S27 (S&P 500 ETF) hits $383, use SRS to buy. 

    2nd Stake: Buy when VWRA reaches $85

    3rd Stake: Buy when VWRA reaches $75

Point 1 stopped. I changed strategy to wait for S&P 500 to either (1) wait for 33% YTD drop first or (2) for market to bottom. How to know market has bottomed. One way is to see higher bottom in S&P 500. This approach will miss the market low, but it prevents me from buying too soon and has lower psychological pressure down the road. 

US stocks

2) Google: Additional Stake at 15% lower

    1st Stake: $2,300 - Bought

    2nd Stake: Buy when $2,000

    3rd Stake: Buy when $1,700

3) Interactive Brokers: Additional Stake at 15% lower

    1st Stake: $58 - Bought

    2nd Stake: Buy when $49

    3rd Stake: Buy when $42

4) Meta: Additional Stake at 15% lower

     1st Stake: Buy when $185 -- Bought

     2nd Stake: Buy when $157

     3rd Stake: Buy when $134

Thinking as at 17 Jun 2022

As interest rate and inflation rise, US economy should slow. As Fed interest rate rise and economy showing evidence of slowing, stock prices face more downward pressure and earnings may slow or drop.

I think that the market has not bottomed yet. Of course, I may be wrong.

My current allocation is around 50% stock; 50% non-stocks. So, if market has bottomed, I will enjoy some uplift. If market dive, I have cash to deploy into market.

In the meantime, I will buy SSB (Singapore Saving Bonds) in batches. As one can always redeem the full principle of SSB, its value will not decline like traded bonds, as interest rate rises. 

Others

REITS -- if risk-free interest rate rises to 3.5%-4%, will reits like MIT, MLT retain current prices? I think their share prices are likely to drop more, so that they can offer significant spread between dividend yield and risk-free interest. Will look at these reits when they can offer 6% yield.

O&G -- I bought some CNOOC, (smaller) Rex Intl and Occidental Petroluem. These are bought as hedges for the high inflation. Will know in the future if these purchases are correct or not.

ARA Hosp Trust -- Bought a small position recently. It's a recovery and inflation hedging play. Its share price is around the same as 2021's; there should be more demand for hotel stays in 2022 summer based on reports. In addition, prices for hotel stays should rise as inflation rises.