Reconstituting the Portfolio in the midst of Covid-19 Crisis

The stock market crash of 2020 began on Monday, March 9.  Now two weeks on, how is this investor doing?

Pretty much alright, I guess.  The portfolio has plunged some 20% but with a long horizon in mind, there is nothing very much to fret about for now.  The recovery might come in 6 months, or a year or even 2 years, but the portfolio will be here to take advantage of the recovery.

I took this opportunity to review my portfolio.  I think this stock market crisis period is a good time to do so, to kind of reconstitute, reconfigure everything:

1. Do I have poor-performing counters in my portfolio?

2. Are there some dead weights that I need to cut?  

3. Has the current stock market crash revealed the mistakes that I’ve made in stock selection?  

4. Are there good counters that I missed that I should add now to my portfolio given their depressed prices?

5. Is there anything that I can do to fix my current portfolio so that I can benefit tremendously when the market recovers?

Honestly, I should have done this exercise before the market started to crash.  It was a mistake that I acknowledge now to myself … take profit, remove non-performing and risky counters, rebalance, whatever, I really should have reviewed my portfolio earlier.

There again, nobody really knew then on March 9 what was going to happen and what the present is like today.  So time to suck it up, do a review, and plod on.

Anyway, here’s my humble revamped portfolio:

There are 5 parts to my portfolio:

1. The Forever Portfolio, which consists only of SG stocks

2. The USA Portfolio

3. The China/HK Portfolio

4. Corona Portfolio

5. The Demoted Portfolio

[those highlighted in yellow are counters that I do not possess now, but look forward to buying during this period; those highlighted in blue are counters that I now possess but wish to dispose of as soon as their prices recover].

Forever, USA & CHINA/HK portfolios

Why did I choose these counters for my Forever portfolio?  In general, they are:

1. Dividend plays.

2. Big/mid Cap, good moat/defensive (DBS, Vicom, Netlink NBN etc)

3. Cash rich (Fuyu, Valuetronics, etc)

4. Excellent management (Mapletree, Capitaland, etc)

To diversify, I chose one to a few from each different categories: financial services, consumer services, IT/data/telecom, engineering/industrials, healthcare, retail reits, industrial/logistics reits, and commercial reits.

Inclusive of the counters from my US and China/HK portfolio, it does look like I have a lot of reits.  Why, I like reits … for these reasons:

1. Easy to understand business model … rental income, rental period, quality and mix of tenants, gearing, interest rate, oversupply problems, etc

2. Usually possesses good return potential (5-7% dividend yield), as well as growth.

3. Offers pretty stable quarterly income as quarter-to-quarter profits of well-managed reits do not fluctuate much.

4. The hallmark of a true-blue Singaporean is a love for properties and rentals (ok, I’m being a little farcical here, LOL), and I’m as Singaporean as it comes.

I intend to have reits occupy no more than 60% of the total portfolio value. 

So, non-reit counters will be 5% each; reit counters will be 4% each (total counters 23).  As I get more confident with investing and more familiar with each of these counters, I will trim the portfolio down to 20, and then eventually 15.

Corona Portfolio

These counters were bought mainly to capture capital gain upon the Covid-19 crisis abating.  There is a good chance of me averaging down on these counters since many of their prices have fallen even more following the current market crash.   Nevertheless, I give priority to those existing and selected counters in my Forever portfolio.

Demoted Portfolio

There are altogether 9 counters that I wish to eliminate from my current portfolio.  All of them are pretty decent stocks and offer dividend yields above 5% (except China Life).  However, they are not as solid as those in my current Forever portfolio selection (for example, ParkwayLife vs First).   In addition, it will take a lot of time to monitor more than 30 stocks in a portfolio, so a reduction is necessary.  They have to go to make way for those newly selected ones.  I guess I have less love for them than those highlighted in my Forever portfolio.

The really bad one in this demoted portfolio is definitely Eagle Hospitality Trust.  That it is still in my portfolio is one big mistake of mine.  Bummer.  I did not set a stop-loss order on it.  Eagle HTrust right now has very questionable fundamentals (reducing revenue, weak balance sheet, low interest coverage, etc), and a very bad reputation.  Nobody in the right frame of mind, I think, will touch this stock, not even with a 10-foot pole.  Oh well, I still have it and the only consolation is it only occupies 0.98% of my current portfolio size.

I will continue to hold on to these demoted stocks and wait for price recovery.  In the meantime, I just collect dividends on them.

It does look like a global recession is on its way, if it is not already here.* In view of that, there will be more depressed prices of my favourite stocks to look forward to.

Stay the course! Press on!

“Stay the course. No matter what happens, stick to your program.”

John Bogle

____________________

In March, using remaining salary from last month, I bought more DBS shares at $18.17. Not quite as bottom as $17++, but no one can catch the bottom. So I’m happy with what I paid. The next target price for DBS: $15/16.

* https://edition.cnn.com/2020/03/17/economy/global-recession/index.html

Published by thepecunia

Just an ordinary guy investing his money with the hope of better providing for his and his wife's retirement.

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