Looking back on the past year, 2018 has been a rough year of sorts. My speculation in cryptocurrencies did not end well, where we saw Bitcoin and Ethereum peaking early this year followed by a crash soon after. I have cut my losses, which I estimate to be around 88%. This represents the greatest loss I have ever made monetarily. Though it still is a large loss, my overall portfolio is not devastated as I limited my purchase only to an amount I was comfortable with. Stock markets in Asia were also roiled by many events, mainly the uncertainty caused by the US – China trade spat, along with economic worries stemming from rising interest rates. My investments in Chinese tech stocks also took a beating, with my options strategy losing money as well. Nevertheless, as the amount of money allocated to US stocks and options trading is big but not as significant as my Singapore portfolio, I can still recover from this. I have decided that options trading or options investing as some call it, is not for me as my temperament is not suited for such a strategy at the current moment.
My local portfolio (2017 – 2018) was not spared either, with my overall stock portfolio dropping -16.68% compared to the STI Index’s return of -7.57%. This resulted in an underperformance of 9.11%.
On 5/9/18, I sold my stake in Cityneon at $1.15, giving me a gain of 6.25%. I decided to sell Cityneon as I was not confident that tourists would pay a high price for their attractions, coupled with low reviews online and their high gearing. Nevertheless, Cityneon would continue to climb soon after due to an offer by its majority shareholders at $1.30 a share. On 19/9/18, I also sold out of Sunpower Group at $0.56, giving me a loss of 7.3%. I was starting to get nervous about the validity of its financials, along with the complicated convertible bonds that it had. On 10/12/18 and 11/12/18, I sold off my stake in China Sunsine at $1.28 and $1.29, giving me a tiny profit of 0.33%. China Sunsine was my second largest holding after AEM. Similar to Sunpower Group, I was starting to get uncomfortable with the legitimacy of its financials and management. The stock remains largely undervalued but I prefer to err on the side of caution. Despite the poor trades mentioned above, my continued bets into AEM and ill-timed investment into APAC Realty were the main contributors of the lousy performance. Due to my previous purchases of AEM at much higher prices, my original profits were eroded. I still managed to come out green as my initial stake was purchased at a fraction of what it is trading today. On 21/12/18, I sold off my stake in AEM at $0.835, giving me an overall gain of 25.43%. This has been my largest profit till date, and would have been much more if I had just held onto my original investment from the start. I sold off because I did not fully understand its business and was uncomfortable with its lack of visibility in sales orders. Moreover, management’s original belief that the company was at the start of a multi-year ramp up of its products turned out to be quite inaccurate. For APAC Realty, I bought into it just before the new property measures saw its stock hammered by the market. I can only attribute this to misfortune as such events are not predictable, but there are definitely lessons which I can learn from this trade. On the other hand, Best World International continued to soar after my sale, which would have been a multi-bagger if I had held onto it. Not that I am rueing my loss, but I realized that my temperament was moving away from companies which I am unable to ascertain its business operations, to companies which I can safely say are doing well. My investment into Cromwell Reit was also pretty ill-timed, just before it issued rights for an acquisition. The rights issue also didn’t turn out the way I envisioned it to, where I listened to my broker’s advice to take up less rights to avoid high commission costs in the event where the rights are not given. It turned out that there were many investors on InvestingNote who claimed that they were able to secure large amounts of rights with a smaller base of shares than me. Currently, this position is sitting at a significant loss, but since this is a position which I intend to sit and hold for the long term, I will wait for the dividends to work its reduce my average holding cost. It seems like 2018 was a year where I made many mistakes in my trades, but there remain a few bright spots. I managed to get out of Memtech and Sunpower Group at a small loss before its stock crashed for the same reason I got out of China Sunsine – my discomfort in the legitimacy of its financials and management.
The biggest lesson for me this year would be a greater discovery of my temperament and investing style. I find myself slowing moving away from high growth companies to more stable, dividend plays with a large margin of safety imbued in its share price. I missed out on investing in Jardine C&C when it was hovering around $27, as I waited for its price to move to $26 – when I had earlier told myself to buy in when it went below $30. It’s a classic example of fear and penny pinching at play, when one does not garner enough courage to act upon his analysis for fear of being wrong – in which the price continues its downtrend. Another example was AirAsia, where I missed out on pulling the trigger when the price went near RM2. It subsequently bounced back up to RM3 towards the end of the year. The last example was Cromwell Reit where I waited patiently for the price to hit Euro 0.41 only to be stopped out by my buy limit. By the time approval was granted, the price had recovered back to Euro 0.44.
Although 2018 has been a lousy year for my portfolio, there is always something to take away. Some are new lessons, some are old which needs constant reminding:
- Stick to strong and stable companies which I understand and am comfortable with.
This means that I will have a limited pool of opportunities to invest in as my circle of competence is not big. This would also mean that I will have to concentrate more on less positions. I guess a saying from Warren Buffet would encapsulate this better – ‘I don’t look to jump over 7-foot bars: I look around for 1-foot bars that I can step over.’
- Margin of Safety, margin of safety, margin of safety.
Nothing else needs to be said regarding this point.
- The stock market is irrational and is a sum of the opinions and feelings of all market participants.
I have seen stocks which have delivered earnings growth only to be dismissed by the market, and stocks which were once popular being dissed and isolated now.
- Never, ever trust analysts.
There was a report on AEM by one analyst whom I remember was also the one who analysed Overseas Education; both reports made a 360 degrees change in a matter of months. I admit analysts are only human, but my faith in them is really weak at the moment.
- Do not hope too much in the market.
Seneca mentioned that hope is intertwined with fear. When you hope much, there is also much fear. For 2019, I do not intend to set any targets on my net worth or returns but to just focus on the process of investing well. The market is simply too volatile and irrational for one to forecast one’s financials based on it.
- Do not envy the performance of others.
Our temperaments are all different, thus naturally the strategies and accrued performances would also be different. Decision-making processes will also usually differ. Stick to what I am comfortable with.
- Think of an investment decision in a mindset of years rather than months.
This way of thinking does not mean that I do not sell off my investments quick if an opportunity presents itself. However, by doing so, it causes me to really think whether:
- The stock has a sustainable competitive advantage
- I’m comfortable holding it for the long term
- I need the stock in my portfolio, ie. It prevents me from investing into too many counters.
Apart from my finances, there have also been a few big events in my life in 2018. Some are fleeting moments of pride and glory, some, moments which will forever be etched in your heart.
- Reaching a milestone in my career.
When I first joined this line, I knew I was not going to stay long here as there were some goals I wanted to accomplish here which was on my bucket list. I had set out three goals for myself then. Along the way, one of it changed. With the accomplishment of one goal in 2017 and one more this year, there’s still one remaining milestone which I have yet to reach before I move on to another industry.
- The birth of my niece.
My niece is probably the cutest baby I have ever met till date. Witnessing her growing up makes me appreciate the sacrifices my parents made in bringing me up. Truly, as my mum said, you will only know the feeling of being a parent when you are actually one.
- The passing of my aunt.
The death of my aunt this year is the event that had the most impact on me mentally. It was the first time I witnessed the passing of someone so dear to me. I will probably never forget her swollen hands, her quickly depreciating breathing rate, the constant struggle to open her eyes, and how I touched her hair before helping to carry her body to the hearse. Being an observant introvert, there are qualities which I noticed in my relatives since young. Some are good, some are bad. Hopefully I managed to learn from the good ones. My aunt’s greatest quality was her generosity. She never failed to make sure that my brothers and I had enough, or rather, made sure that we had more than enough for our travels and birthdays. She also remembered to buy us souvenirs from abroad whenever she went travelling, which was rather often. Granted, she was very well to do financially, as she and her husband did well in business. Her passing further ingrained in me a few things:
- We cannot take money to our graves. All our possessions will be gone one day.
- Seek the Lord’s teaching in numbering my days. No one knows when one’s time is due. One can only live uprightly and live in the present to the best we can.
- Prioritise my health over career and money. Health is the greatest wealth.Treasure our loved ones.
- Spend more quality time with them and to treat them better.
That about sums up my year in 2018. Much learnt, much lost, much gained. Guess that’s what makes life an experience like no other. I’m a grateful and blessed man.