Mid-Year Review of 2020 Stock Holdings

As we reach the mid-point for 2020, I took a pause to look back and see how far off I have fared since 6 months ago when I did my Review of 2019 Stock Holdings. It was the first major downturn since I started investing. The first few months were “bad months” due to COVID-19.

One of the lessons I learnt is to move out of related stocks that were deeply affected by the crisis and hold cash while re-entering them at a lower low — counters like hospitality, airlines and REITs dived deeply. This was easier said than done, especially when you were once holding on to stocks which were fundamentally strong. However, one has to plug into reality and its circumstances — less tourists, less customers, less office workers able to return back to office during the lockdown means no travel-related revenue, no sales and defaults or discounts in rental.

However, this crisis represented an awesome opportunity in general — good stocks were out for cheap for bargain hunters. Also, there were stocks inversely gained traction: while people stayed home, online shopping surged, teleconferencing frequency rose and medical supplies or Personal Protection Equipment rose in demand.

July 2020

Dec 2019

Current portfolio value. The portfolio is modestly valued at SGD$54,856.24. The XIRR is at a negative 45.94% for 2020. Appalled results, however our investment horizon is a long-term one, we recognised that there will be ups and downs. The key is to continue investing even in the dumps instead of selling when there is no better use of redeploying the funds. We are keeping a eye on the more attractive counters, as we continue plowing $4000 monthly into our investible funds.

Dividends earned for 2020. For 2020, current annual dividends stand at SGD$845.04 which is fully reinvested. It may be substantially lower with HSBC Holdings (0005.hk) cancelling the fourth interim dividend for 2019 and halting all interim dividends for 2020 till a firmer decision comes in during 4th interim amid the economic uncertainty surrounding the coronavirus pandemic.

July 2020

Dec 2019

Current holdings. As of now, I am 42.8% vested in Banks, 22.4% into REITS, 19.2% into airline and 12.4% into industrial conglomerates. Between SGX and HKEX, about 44-56.

Plans for 2020. Opportunities are still rampant in the international market, though not at the lowest of the low now. However, there is still uncertainty if the worst is over or that a second wave might sweep it back down. Not until a vaccine is discovered and declared a success could be pave a way towards heightened optimism.

I used to get quite emotional and stressed when faced with a major draw-down. This was coming from the angle when I was trading FOREX for a short while in my younger days. However, I continue to maintain a macro view of things — this builds confidence in me that long-term and consistent investing works if you also take into consideration what people can live with or live without when lives go back to normal, hopefully in the near future.

Have you reviewed your mid-year investment performance for 2020?

Fly-by-night traders, a downward spiral in wealth creation

Low to zero commission fees, buy/sell at the click of a button, easy access to trading platforms, all major markets inclusive — a win-win situation for consumers and service providers, don’t you think? COVID-19 had in recent months cause a total or partial lock-down in many cities or even countries, resulting in boredom for many people coped up in the confines of their four walls.

And what do people do to cope with boredom? They turned to whatever entertainment they could find on the internet. Forget Netflix, online gaming or even pornography — “Investment” happened to be one of the activities that people turn to, and this has created a new breed of fresh “investors”/speculators/traders (whatever we call it) as compared to pre-COVID days.

Source: qz.com Data: Nasdaq

Another group of people who had entered the fray are those who have lost their jobs as a result of the pandemic. It is worrying that all of a sudden, we see a larger number who have themselves self-declared as full-time traders or self-sufficing with whatever funds they had in reserve. And I daresay, this funds may not be funds which they can afford to lose in this current climate.

How the retail trading boom is shaking up the US stock market (Jun 23 2020, Quartz)

…. millions of new retail traders. Brokerages Charles Schwab, Interactive Brokers, and TD Ameritrade added more than 1 million new accounts in the first quarter, a 4% increase from the previous period. A year ago that increase was about 1%. Robinhood, a popular brokerage app, said last month that it has added 3 million customer accounts this year, bringing its total to more than 13 million…

The rise in retail investors is evidenced by the number of new accounts created and daily average trades by the different trading platforms. It is comforting to see that more people are stepping up to take a greater interest in investing, but only to a certain extent. Reading the daily news however, quickly drain that positiveness.

Worrying headlines include:

Retail Traders Flout Legal Logic by Buying Up Bankrupt Stocks (Jun 9 2020, Bloomberg)

• Hertz, which climbed 95% since it filed bankruptcy on May 22
• J.C. Penney, up 167% since May 15
• Whiting Petroleum, up 835% since April 1
• Pier 1 Imports Inc. more than doubled in the last two trading sessions, though it’s still down 97% since filing for bankruptcy on Feb. 17
• Chesapeake Energy Corp. jumped 182% on Jun 8
• GNC Holdings Inc. rose 106% on Jun 8

This brings me the thoughts that sometimes, markets are irrational because people are irrational. It is not uncommon for stocks who have taken a deep dive to experience some kind of rebound, but to put good money on stocks like these make me shrugged. Retail “investors” do not realise that the big names they are buying into may not get anything back in bankruptcy court processes.

Singapore Retail Investors Use Cheap Cash to Load Up on Stocks (Apr 5 2020, Bloomberg)

Record low interest rates are tempting some retail investors in Singapore to load up on debt to buy shares, just as the coronavirus outbreak creates the most volatile markets since the global financial crisis. There are also some suggestions retail investors may be using their homes as collateral to borrow money.

Earlier this year, 31-year-old insurance agent got advances on three separate credit cards to the tune of S$150,000 ($105,000). With the money, he opened a share-financing account at a local bank and pledged the lot as collateral. He was granted leverage of around 3.5 times, a S$500,000 kitty he’s plowing into the stock market.

Some of the shares he bought include Oversea-Chinese Banking Corp., which slumped 21% last quarter, Singapore Telecommunications Ltd., down 25%, and Mapletree Industrial Trust, which declined 6.5%.

Between the beginning of April versus today, Oversea-Chinese Banking Corp., is up 6.9%, Singapore Telecommunications Ltd., down 4.3%, and Mapletree Industrial Trust, which rise 35%. It is a bet that could have went either way, but for now, the said investor is safely sitting on some gains. At the same time, interest is still piling up on the borrowed cash. Leverage is indeed a double-edged sword.

Other worrying observations include:

Blind Herd mentality

In the past decade or earlier, information on trading and sharing of trade ideas was scarce as compared to today. However, over-dependence and overloading of hearsay on social media platforms is creating a different dimension on the term “herd mentality”.

Source: Yahoo Finance, Genius Brands International, Inc. (GNUS)

Genius Brands International, Inc. is a content and brand management company that creates and licenses multimedia content for toddlers to tweens worldwide. At one point, the stock price leaped from $4+ to $11+ in a day. People were buying into the hot stock with the intention to make a quick profit. It is not unusual that many were caught in the fray and ended up with shares of higher price then intended. Though it is still too early to conclude, the same people ended up being “bagholders” for now. The other consequence is that people are not cutting their losses early, but continue averaging down on the stock, which I termed it as revenge buying.

Trading the Unknown-unknowns

Another issue I witnessed were people who were trading instruments which they did not have high level of understanding on leveraged derivatives such FOREX, options and futures. Remember the 20-Year-Old that died by suicide after seeing A $730,000 negative balance on his Robinhood account?

Left unchecked, there could be many other poor souls lurking in the darkness on their own, like the one above. I hear their cries and empathise with them but at the same time, excruciating hard to sympathise. Easy money might have been the lure, but would it not be better off to carry out due diligence or even study into where you place your hard-earned money too? People can spend quite a bit of time on the simplest things — fixed deposits interest rates across the banks, maximising cashback or miles etc. but dump their life savings into trading.

Trading without basic understanding of investment terms

It is important to comprehend some of the corporate actions undertaken by companies when they happen. Let’s take the example of a stock split or reverse split. A stock split increases the number of shares in a company without a dilution. A stock split causes the market price of individual shares to decrease but no change in the total market capitalization of the company. Contrary, a reverse split does the opposite by consolidating the number of existing shares of stock into fewer, proportionally more valuable, shares. The market price of individual shares thus increases, all else remain status quo.

I have witnessed people getting excited over sharp rises in prices pre-market and getting ready to “lock in their profits” upon market open or diving into depression on the plunge in prices.

I personally don’t trade. By chancing upon human behaviour and learning from others, it is definitely more fruitful and cheaper an experience than committing it first-hand. While the current markets presents opportunities for speculative trades, my own thoughts lean towards investment over a longer horizon of years. With more Singaporeans becoming increasingly financial literate, I believe there are many others who share the same thoughts with me.

Double whammy on retirement plans: No dividends distributed and capital loss on paper

I thought it would be interesting to revisit an actual investment case example that was published in February 2017 and critic on whether it would work today. Everyone loves an inspirational story, will the following work or kill your retirement plans for you today?

This article appeared in the Hong Kong Economic Journal on Feb. 22 2017

Investing about HK$19,000 every month in the same stock for 11 years

A 33-year-old taxi driver in Hong Kong decided to retire in 2017 after 11 years in amassing 40,000 HSBC shares. He started since 22, DCA-ing every dollar saved to buy shares in HSBC Holdings (0005.HK).

He started buying the shares when it was trading at around HK$150 a share and continued sticking to his commitment even when the stock plunged at one point to HK$33.

As of January 2017, he was able to accumulate 40,000 shares, with a market value of around HK$2.6 million. Back then, it means he could receive an annual dividend payment of HK$160,000 (or HK$13,000 per month), based on the bank’s latest full-year dividend payout of 51 US cents.

He deems his simple lifestyle (sleeping, sports and video games are his favorite pastimes) is enough for the dividend income from his HSBC shares to sustain him for the rest of his life.

FIRE movement only began gaining traction in perhaps recent years. As compared to his peers, Taxi-uncle was astute to create his alternate stream of income when he was young.

Dollar Cost Averaging (DCA) isn’t easy all the time, especially when the price dived 5 times under at one point in history. While it can’t be faulted for the average investor — it is indeed a sound strategy when applied to investment in good companies which are undervalued due to circumstances not of their own fault — What is more concerning is being highly vested into single stocks or as we shall know, even seemingly strong, stable and big companies. The equivalent of HSBC Holdings for us in the local context is the Big 3 — DBS, UOB and OCBC banks. Are they perpetually safe? Think Wirecard and Luckin Coffee collapse in 2020. Never say never.

Taxi-uncle took a bet and seemingly succeeded in 2017.

Fast forward to year 2020, where he is now 36 years old:

At market close on 26 Jun 2020, his 40,000 shares would have had a market value of around HK$1.5 million (HK$36.70 per share).

On 31 March 2020, HSBC announced it was cancelling the fourth interim dividend for 2019 amid the economic uncertainty surrounding the coronavirus pandemic, and would not be paying the first three interim dividends for 2020.

HSBC Holdings, based in London but generate much of their revenue in Asia, was among six lenders requested by the Prudential Regulation Authority (PRA), a regulatory arm of the Bank of England to suspend their dividends as part of a coordinated response.

Assuming that the taxi uncle is already retired and living on his one and single stock, he is facing a double whammy situation today. No dividends distributed till further notice for 2020 means no income for this year. Coupled with a market downturn and paper loss of HK$1.6 million, it does not make sense for him to liquidate some holdings to live by, in a scenario where it is conducive to invest more and not less.

The “saving grace” is that taxi-uncle is young. At a young age of 36 years old, going back to the workforce in the meantime is not hard. I can’t say the same for those who have retired or close to retirement when faced in the same scenario. Sad to say, there are indeed older generation who are highly vested in HSBC Holdings — seen as a high-yielding and stable dividend stock throughout generation — yet unable to seek recourse and have to look out for alternate income means for the rest of the year.

The other “saving grace” is that while the fourth interim dividend for 2019 is cancelled, the other three interim dividends for 2020 are just withheld, but not cancelled, yet. Investors are waiting for end-2020 for the call by the banks then. There are examples of many other stocks which would not be declaring a dividend for 2020, can you survive without this source of income?

Key take-aways:

The Good
1. Taxi-uncle started investing pretty early in life, investing much of what he saved rather spend it unnecessary in life pleasures.
2. He continued DCA-ing a fixed amount into his investment, regardless of market ups and downs.
3. Adapting to a simple lifestyle since starting work or practising delayed gratification.

The Not-so-ideal
1. Highly concentrated portfolio (of one stock), practically no diversification.
2. No alternate source of income, with dividends from one stock forming the single and main source.
3. Not reviewing or balancing stock portfolio.

P.S. I have a stake in HSBC Holdings myself, probably 3x lesser than Taxi-uncle. Wait he is only 1 year older than me, so that makes me an Uncle too.

Original Story in mandarin below:

CPF Balances Update – June 2020

It is the end of June with all mandatory contributions in for the month.

OA to SA transfer for the month of June is also completed. SA balance currently stands at $107,057.49, slightly more than half of 2020 FRS or 59.1% of the journey.

In the current climate, it is better to have more cash on hand, though not for spending but for possible investment into stocks with higher potential for a better yield or capital gain. As such, there are 3 key takeaways for myself:

  1. Housing loan monthly installment is fully paid-up with CPF OA funds. This was versus transferring all to SA just a few months back for 4% p.a. interest.
  2. Hold off monthly contribution or RSTU to my SA to keep cash on hand.
  3. SA is still receiving the monthly contribution from employer and partially from OA to SA transfer (after taking into account housing loan monthly commitment)

The same goes for my child SA, so there is a slight deviation these few months to take advantage of opportunities in the equities market.

Regular Savings Plan Update – Jun 2020

Welcome back to Phase 2 of post-circuit breaker and after 2 months of cold storage, I am back again. Somehow people have the misconception that Working From Home equates to having more free time on hand. Well in a way, time never gets wasted. It just gets channeled into some other activities. For me, this has included a stronger bonding with my daughter, who basically faced me almost 24 hours a day — from the time she awakes to the time she turns in for the night.

So for my readers who had been following, my regular savings plan for my child had been relatively simple — just 2 stocks. But I would have to re-examine and improve on the choice along the way.

Philips POEMS ShareBuildersPlan, as I had just experienced, do not allow exercising of Rights, under this liner “Other Corporate actions (except right issue)” costs $10. This meant that the SIA (C6L) rights issue for my daughter’s current holdings, a combination of raising SGD 8.8 billion in new ordinary shares and mandatory convertible bonds (MCB), were automatically sold at the start of trading day without sales commission. Good and bad for some, I would lean it more towards the good in her case.

DescriptionTotal Amount (SGD)
Adj for Net Sales of SIA R 967 @S$1.04447$1,004.21
Adj for Net Sales of SIA MCB R 1902 @S$0.00781$9.49

Monthly Allocation for 19 June 2020 as follows , with a $1,587.20 (including our monthly $500 investment and sales proceeds from SIA rights issue and OCBC dividends) investment amount

CounterQuantityPriceInvestment Amount
OCBC Bank (O39)173$9.175$1587.20

Average Price of existing Portfolio counters

CounterTotal SharesAvg Price
OCBC Bank (O39)439$10.2974
SIA (C6L)645$8.6553