Investment Portfolio Update: Review of 2019
Updated: Mar 25, 2020
Disclaimer: The information listed below are strictly my personal opinions. It does not constitute as investment advice. Please do your own due diligence.
Time passes so quickly and here we are welcoming a new year. I will just skip right ahead and do an annual portfolio review. My portfolio has been rather green as many global events have begun to slowly unwind itself. As a result, confidence has been restored among investors, allowing the market to rally once more.
I decided to add another premium REIT, CapitaLand Commercial Trust (C61U) at $1.95 per share. My entry price is roughly 10% from its 52 week low with Price to Book Value (P/BV) at 1.09 which I feel it is fairly valued. It has possible upside of >15% based on its 52 week high. Presently, it is yielding at about 5% which is not bad.
Using XIRR (Extended Internal Rate of Return), I tabulated my portfolio total annual returns to be 21.58%! Not bad of a start for me :). This XIRR is something I learnt from investing blogs to evaluate total portfolio returns which includes realized/unrealized gains/losses, dividends etc. Hopefully, my returns can continue to grow consistently and more in the coming years.
My plan for year 2020
I was too cautious this year in buying good companies, thinking that cheap may get cheaper. Instead, they were all good entry prices ergo incurring opportunity cost. One example was BABA, it dropped from $160+ to $119 and now it has risen to $215. That is a 80% gain that I missed out on. So a lesson learnt here, next time I will just buy some and DCA (Dollar Cost Averaging) rather than trying to time it.
Since recession did not happen this year, Singapore avoided one as well, we have to be careful with what we invest into. I have prepared a list of criteria before I consider investing:
Low debt level: Current ratio of >2 and Debt/Equity of <0.5
Consistent growth in revenue and free cash flow YOY
Why these criteria? Here is an analogy..
Let's imagine that businesses are actually squirrels and recession is like winter. During winter, plants will die and food sources will greatly diminish. Naturally, these furry little shits will know that it is going to be tough finding food so they will stockpile on food. Those which didn't will just die a hungry and icy death.
So how do these squirrels know how much to stockpile? Would they know if it is enough? No, squirrels know nothing. For all you know, climate could have changed, resulting in a much longer winter. Hence, the squirrels who stock up the most will live to see spring.
It is the same for businesses. Even before recession hits, people will fear losing their jobs. This fear will lead to them keeping their wallets tightly closed. When consumer spending reduces, businesses will be affected. Since, nobody knows how long the recession will last so the ones with most money will survive. Thus, the term "cash is king".
Anyway, Happy New Year! Hope 2020 will be a better year for everyone.