A "Waiting" Game

 

Time flies, it has been almost 9 months since we registered the first case of Covid-19 in Singapore on 23 Jan 2020, the start of a chain of events that would lead to unprecedented closures and restrictions of movement. World economy suddenly halts and stop which have also lead to “havoc and chaotic” economy and affecting our life.  The world economy plunged into recession, millions of job losses all over the world and thousands of companies been affected and some would have to file for bankruptcy, for those badly affected by the pandemic like “aviation, hospitality “ and to some extent retail industry.

The World after Covid-19 is unlikely to return to the world that it was before. Many trends already underway in the global economy and changing our life. This is especially true in the accelerating of the digital economy, things like “ distance learning “, work from home (remote working), telemedicine, food deliveries services will become the new “ digital behaviour “ which transform our life and the way we live. This has also contributed to a huge increased in the share price of companies related to such “digital economy” and tech companies like S&P BIG 5  “ AAAFM “ ( Apple/ Amazon/ Alphabet/Facebook/Microsoft), with combine market cap of close to USD 7.5 Trillion now (which is approx 25% of S&P 500's market cap).

<Image credit : WilliamsMarketAnalytic.com>

With few hundreds billions worth of mega IPO like “ Ant Financial Group” in the pipeline, I think we will continue to see the expansion of digital economy post-COVID-19. We have seen the NASDAQ hitting new high continuously and making the news headline from time to time, due to billions of fund and investment pouring into this “hot” sector.

The world stock market has been divided into two, one with Old Economy ( like Bank / Oil major / Industrial / Transportation) and the other with New Digital Economy ( like A.I, IoT, CLOUD Computing, E-commerce and Streaming).

Congratulation !! for those who have invested in Tech sectors for the past two years as you are most probably sitting with double or triple-digit % of return on investment R.O.I.

Investors will continue to funnel the fund into these so-called “hot “ sectors like Tech / Gold or event bit-coin, but just a word of advice / cautious that beware of lofty valuation for some of these companies and also many “scam “ may appear during any kind of bubble.

 

Crime up more than 11% in the first half of 2020, mainly due to the rise in scam cases   <source:Channelnewsasia.com>

<image credit to:ChannelNewsasia.com>

I know under the current economic situation, investors were inclined to any investment scheme that would give us good (exceptional) returns in a short period of time. We may fall into such “get-rich-quick” scam unknowingly, so it is important to check any verify any investment scheme that promises huge return ( like 10-20% a month ).

It is exciting and tempting to listening to friends who have made 10-20% return in any investment in a week or month. Of course, there is such a case ( which is quite rare and exceptional), e.g. if you were lucky enough to buy the stock of “ SalesForce (CRM)” the day before it has been announced to be included into Dow Jones Index ( and a better than expected revenue ), where the share price increased by +25% the day after the announcement.

 

After Dow inclusion news, Salesforce stock soars on reveal of first $5 billion quarter <source:MarketWatch.com>

 

Don’t get me wrong, I am not against the investing in tech sectors but one must be careful about the valuation and avoid the  “get-rich-quick” kind of mentality. Make sure that you understand the business of the company you are investing and it is a “legit” business, this is because any “hot” sector may attract scam-like “scheme “, like the one with “wine “, ‘land parcel”, “bitcoin mining” etc.

I am also a “newbie “ as far as investing in tech sectors is concerned and learning companies or business related to 5G technology, CLOUD computing, EV ( electric car), Chips manufacturer ( Fabless/ Faudry or IDM ) etc.

As you may know, my portfolio is consists of all “old economy” companies and I am trying to allocate some fund to tech ETF to balance it for future growth. Of course, I might be a bit late to this “tech party”, but I think I will need to learn and start from somewhere as the world may be changing and evolving like Dow Jones Index for the past 100 years. We see the company or industry come and go from decade to decade.  But no hurry, not to say by shifting 100% to growth stocks immediately, we can do it slowly by allocating some fund or future dividend to this sector to ensure that it has both value and growth composition in our portfolio.

 

Is Dividend Investing Dead? <source:fool.com>

 

I don’t think so, value or dividend investing still important as it provides “cash flow”  for an investor like me to either re-invest it into current or new companies or just keep it as cash (war-chest) for future investment.

I guess what we need to do is trying do find a balance between “value v.s growth”. I believe that same like economy which moves in a cycle with up and down, the fund also moving into sector rotation from “value to growth” or v.s from time to time.

 

 

A “Waiting” Game

 

I guess most of us may still sitting with a negative return in our portfolio, unless you are the more “skilful” one with some tech stocks in your portfolio. As I said, congrats for those invested in the tech sector for the past two years which I am sure you are sitting with “exceptional/exponential “ kind of R.O.I.

For me, as a value and dividend investor, I would have to wait, wait for good news on vaccines, wait for economy recovery eventually, wait for the border to re-open so that we would be able to travel freely again and of course STI to re-bound back to pre-COVID level ( reverting to mean ).

 

Nobody knows when this may happen but I am sure it will and we will have the good news someday in the future, I am with the group of a more optimistic side that crisis may end soon. :D

But we need to take note that even with the news of a successful vaccine, we will still have an uneven economic recovery, some sectors may take much longer time to recover e.g aviation and hospitality. Furthermore, it will take time for some country to have the whole population being vaccinated, we may see some company continue struggling to survive but some are doing better.

 

Stay Positive and Be Patient !!

 

Cheers !!

 

STE

#STI recovered a little bit from March low from -2SD to -1SD , but still far from mean and pre-Covid level. Recovery mainly from REITs and to some extent Big 3 Banks. Companies like SIA/SATS/ComfortDelgro/Genting/SembCorpInd/ Keppel Corp are among those still very much underwater and hope for recovery from respective industries.

#FTSE REIT Index is recovering well after March, some of the stronger REITs almost back to pre-COVID level. Industrial REIT is the sector which is doing well at this moment while Retail and Office REIT may still need to wait.

# HSI is recovering better than STI as it has Tech stocks (Tencent) and few China-related enterprise as China is recovering better than others from Covid-19 pandemic. With another two tech giant i.e Alibaba and Xiaomi going to be included into HSI, guess the performance will be much better than STI in coming years.

# Nasdaq is on FIRE with Apple hitting USD 2 Trillion kinds of market cap valuation, as above mentioned, the BIG 5 have a combined market cap of more than USD 8.7 Trillion. Since NASDAQ is a cap-weighted index, the more you or fund buy into the index, the more allocation or money will go into these few biggest companies.