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).
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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>
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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 !!
Thanks once again and I appreciate your candid admission regarding your investment style and missing out on the tech fueled rallyReplyDelete
I must admit that my style matches yours! However I was lucky enough to take a minuscule bite of AAPL FB GOOG MSFT in April. However they account for only 1-2% of my portfolio!
I have been consistently buying the beaten down banks in SG, HK and bought quite a bit of US stocks including the banking majors
Am still down though overall but from the peak only
The biggest paper losses have been the SG stocks and REITS, UK and China banks and telecoms and most painfully the U.K. oil majors
Dividends have also taken a massive hit
However I will continue to steadily deploy my war chest and pick what I deem will go up
Ready for the long haul...!
Thanks for the comments and Congrats! for your investment in some of the Tech Giant..Yah, i think the "old economy" or value stocks like Bank/ Oil Major or even property would have to "wait" for economy activities to pick up so that it may reflect in their stock price.
Yup !! deploying some fund to tech or growth stocks for long haul and future trend...as the world is changing and we will need to adapt to these changes as well..." change is the only constant " ... :D
Just look at how the " Dow Jones Index evolve....
Thanks STE for your sharing. I am also learning how to allocate some of my funds into Growth Investing instead of a purely Dividend Income portfolio. The investment thesis for technology stock is more challenging as it is tough to determine the valuations of the business as it depends on continuous growth of the business and the company management ability to execute etc....Well it is quite fun to learn as one venture into the arena of growth Investing in the new economy and lots more new knowledge to acquire beyond Banks, Reits, Infrastructure and the old economy:)ReplyDelete
Thanks for the comments , Yup... valuation for tech companies is much harder/difficult as compared to traditional way of doing valuation like PE/PB/DY etc... is more on "growth story" and technology advantage it has for certain companies.
Is also about future technology where their future and success is full of uncertainty ..
Yah... much to learn... but never too old to learn. :D
I was in tech industry all my career, 25 years. Most of the US tech giants were my customers. Funny thing is I never own any tech shares except those shares given FOC by the company. I sold them as I get the scripts (those days) and owns nothing. Started using Salesforce.com in 2006 (in the US) when few heard of cloud computing but did not invest in it. I find tech stocks too volatile and cyclical to sleep well even as an "insider". My predicting skill is really bad and I am still in my old school days. But who knows, this may be another super big bubble like 2000?
Thanks for the comment, Yup... tech stock is too volatile and may give us "big surprise " from time to time. It could be good or bad news , like case of Wirecard , used to be a "star " for most of tech savvy investor and a DAX index component ...it can just collapsed , price can just collapsed from EUR 90+ to now only 86 cents.... is really too volatile for some conservative investor. But of course there is always a success story like Amazon ,Alibaba ,Tencent, Apple etc....
Yah... nobody knows, it could be a big bubble which may end soon or a big bull run for another decade ...we will need to do our own judgement and allocate our limited fund between these "value and growth" , base on our risk and circumstances. Of course , using ETF could be a good option to avoid "single stock" risk like "Wirecard" but like you said, when whole dotcom market collapse in 2000s , TECH ETF can't spare the drop as well...
Again, thanks for the info .. :D