Quarterly Portfolio Review (First of 2020)

The corona virus has upended lives and many a portfolio.  My portfolio has been bleeding for the past few weeks, and on the last day of March, the XIRR for the entire portfolio was -13.87%.  Details for the various portions of the portfolio as at 31 March:

XIRR (First Quarter, 2020)

SG NON-REITS: -13.67

SG REITS: -7.61

USA/CHINA: -14.53

CORONA: -84.73

It was painful to see the value of my investment sink from a 6-figure sum to a 5-figure amount.  Even so, I continued to pump my monthly salary, whatever I had left after meeting personal and family expenses, into the market.

Nobody knows when the market will turn around.  Nobody knows when the market will bottom out.  20/20, as the saying goes, only exists in hindsight.  Rain or shine, I intend to sit tight, stay invested, and ride this storm out.  In the meantime, I continue to collect dividends.

Dividends Collected (First Quarter, 2020)

SGD: $448.03

HKD: $251.50 (S$46.11)

USD: $228.08 (S$326.31)

Total: S$820.45

$820.45 is not a lot of money, just about enough to pay for my breakfast and lunch every day for 90 days.  I don’t withdraw the dividends for spending because I don’t need to.  I let the dividends grow to a sum sufficient for me to buy more lots of the stocks in my portfolio.  This will be a long-term strategy to compound my wealth.

The next 3 quarters this year will very likely see dividend earnings greatly reduced (already SPH REIT has cut dividend payout by 77% compared to the previous quarter). The world is undergoing a recession, and reduced, deferred or suspended dividend payouts are expected. 

The coronavirus has indeed put many dividends under the microscope, and companies have to cut or suspend dividends in a move to implement cost cutting, and protect their profit levels and balance sheets.  I want the companies I’ve invested in to survive through this crisis, rather than to demonstrate to investors their ability to maintain payouts.  If companies are still able to distribute dividends during this period, then all well and good.  If not, it’s fine as well.  Survival is paramount.

Under current circumstances, preserving the company’s operations and financial stability should take precedence over maintaining dividend payments.  Companies need to conserve cash now so that they have opportunities to ramp up operations and grow their businesses again once the last cell of the virus is wiped off from the face of the earth.  

To put things in perspective and by way of comparison, “… during the 2008 financial crisis and recession, 40 S&P 500 companies cut their dividends and 22 announced suspensions, according to S&P Dow Jones Indices. The following year cuts rose to 68, and there were 10 suspensions. However, 151 companies, or 30% of the S&P 500, did notch dividend increases that year as the economy emerged from recession and the stock market began its (recently ended) bull run.”*

Hopefully, when the virus crisis is over, when global economy recovers, dividend payouts will return to its pre-covid-19 levels.

The way I look at it, valuations for most companies have dropped.  The Singapore economy is not getting better, not any time soon.  Mr Lee has said in a speech that this crisis will last till the end of the year.  Mr Lawrence Wong also said the same.  Mr Heng has got the third round of covid-19 support measures in the form of the new “Solidarity Budget” under way.  The government does not utilise the reserves unless absolutely necessary. So, this virus crisis is indeed very serious and the government is dipping into the reserves to help pull Singapore through this crisis.

All these announcements and actions show that a recovery of the Singapore economy is nowhere near.  So I’m thinking, stocks will get cheaper in the months ahead as economic fundamentals worsen and investors feel more pessimistic.  I’ll keep buying during this prolonged sales period. I’m not convinced by the ‘cash is king’ mantra even for a time like this.  

The key during a crisis is to be (a) insulated from the forces that require selling and (b) positioned to be a buyer instead. To satisfy those criteria, an investor needs the following things: staunch reliance on value, little or no use of leverage, long-term capital and a strong stomach. Patient opportunism, buttressed by a contrarian attitude and a strong balance sheet, can yield amazing profits during meltdowns.

Howard Marks, The Most Important Thing Illuminated, p. 99

Lately, I’ve been avoiding social media that are investment related.  Basically I just want to cut out the noise.  I don’t want to go down a rabbit trail on a stock that someone had just gone rah-rah over.  I don’t want to feel bad because someone got a stock at a lower price than I did.  I don’t want to be distracted by conjectures on whether the bottom has been reached or the market is on a rebound. 

Studying past bear markets offers all of us an opportunity to learn. We can learn from what caused them as well as what worked and didn’t work in our responses to them. But it is also important to understand that no two bear markets are the same. We all tend to think that what happened in past bear markets, especially the most recent ones, will repeat itself, and that tendency can sometimes get us in trouble. So as you see all the comparisons to past bear markets you will see in the coming weeks and months, keep in mind that no two bear markets are the same, and we shouldn’t expect history to repeat itself exactly.  For long-term investors, staying the course during bear markets has consistently been a good decision, but predicting how they will play out is likely a losing game That is perhaps the most important lesson from past bear markets.

Jack Forehand, Validea Capital

I have my own plan and I’m going to stick to it: buy some when the price is right, buy more when the price dips further.

Whatever free time I’ve got, I devoted most of my time to my side gig and reading.

Yes, I have a side gig … well, had.  I’m a choral accompanist.  But alas, not anymore since social distancing measures were implemented across the island.  We were preparing for an Easter program, and I was so looking forward to presenting Faure’s Cantique de Jean Racine, Op. 11. I absolutely love this elegant choral miniature.  With some expat members leaving for their passport countries, this small group of singers was disbanded.    

What books have I read this quarter?

1. The Most Important Thing Illuminated. Howard Marks: This is a must-read after Graham’s The Intelligent Investor.

2. Think, Act, and Invest like Warren Buffett: Larry Swedroe

3. Last Man Standing: David Baldacci

4. The Christmas Train: David Baldacci

Tomorrow is the start of the Circuit Breaker. It’s going to be interesting having everyone at home. Prends soin de toi

* https://www.barrons.com/articles/dividend-cuts-are-inevitable-but-they-wont-necessarily-be-across-the-board-51584615602