Standing pat, staying put

In reality, no one can call the market top or bottom with absolute certainty. At most, one can turn bullish or bearish. Investors are often clouded by short-term sentiments which significantly affect their investing habit and also contribute to the fact that a majority of investors lose money in the stock market, even during bull runs. Market shocks are much more impactful when there are multiple factors at play. For example, the ongoing pandemic coupled with the war between Russia and Ukraine, plus inflationary pressures, have all combined to incite stronger market sentiments, leading to more profound fear and greed cycles. How should investors approach the stock market then?

Benjamin Graham, the father of value investing, once said, “In the short run, the stock market is a voting machine, in the long run, it is a weighing machine”. This saying holds water because the stock market, as data and statistics show, is profitable over the long run. To be an intelligent and savvy investor, one should attempt to look at the fundamentals of the company as opposed to the share price alone when choosing stocks. If there is a shock or major macroeconomic change in the market, say a pandemic or interest rate hike, the investor should attempt to gauge the impact on the individual business or stock, as opposed to succumbing to shortterm market sentiments.

The most notable difference between short-term investing and long-term investing is that investors buy and sell stocks only when there is a significant change in fundamentals for the latter. Timing the market is a concept that only works for those who are extremely lucky, and over the long run, it is almost impossible to be lucky the majority of the time. Hence, strategies such as averaging down help with fundamental-based long-term investors. The point of this argument is not to shun short-term investing but to make investors aware of the risks involved in short-term investing. Hence, investors should be aware of the risks involved in any type of investment before actually committing to it.

The Edge Singapore’s 2022 global portfolio featured 10 stocks that were extensively and thoroughly filtered to suit varying investor profiles, distinguished by the level of risk. To recap, our virtual portfolio of 10 stocks was incepted on Jan 24, 2020, with $100,000. Our 2022 virtual portfolio started on Feb 7 with US$224,115 ($311,008). Similar to our previous portfolios, we will not account for transaction costs and exchange rate fluctuations in tracking the performance of our portfolio. Dividends and capital changes to the stocks, on the other hand, will be accounted for in tracking the performance of the portfolio.

See also: F1 stocks: Who’s on pole?

Chart 1 shows the individual performance of each of the stocks for the 2022 portfolio, while Chart 2 shows the overall performance of the portfolio against other benchmarks. Table 1 shows the holdings of the portfolio as at June 17. Chart 3 shows the performance for the global portfolio since inception against other benchmarks.

See also: Germany refutes report that it will stop additional aid to Ukraine

Accounting for capital changes and dividends, our 2022 portfolio lost 11.8% in the four-month period from Feb 7 to June 17, with eight losers in the portfolio. The top performer was Ohsho Food Service Corp with 12.0% returns, while the worst performer was Magna International with a 28.6% loss. Despite having a larger exposure to US stocks, our portfolio managed to outperform all US stock market benchmarks but lagged behind most Asian stock market benchmarks, except Hang Seng. However, looking at the bigger picture, our global portfolio is well ahead of every benchmark, outperforming the best benchmark by more than five times, with 97.6% returns since inception (two years and five months).

We plan to retain the current holdings in our portfolio for the time being, as the investment thesis for each of the stocks remains intact, or the case for it is stronger. As we cannot add capital to the portfolio per the portfolio mandate, averaging down is not an option, hence we are staying fully invested. We will review the portfolio again in the next few months.

Also, similar to previous instalments, we will buy, sell, add or reduce the holdings in the 2022 portfolio based on our discretion. Some stocks are generally riskier and might have their target prices achieved or stock investment thesis changed, which would warrant a transaction in the portfolio. Readers can access our trackable virtual portfolio (https://www.theedgesingapore.com/edgeinvest/portfolio/TES) if they wish to mirror our stock picks and portfolio, which will be published in issues whenever there are changes to the portfolio mix.

Disclaimer: This is a virtual portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy or sell stocks, including the stocks mentioned herein. This portfolio does not take into account the investor’s financial situation, investment objectives, investment horizon, risk profile, risk tolerance and preferences. Any personal investments should be done at the investor’s own discretion and/or after consulting licensed investment professionals, at their own risk.

Here are the 10 stocks in our current portfolio:

• Airbus SE: Pent-up travel demand outweighed by fears of slowdown
• Avantor: Key play for investors seeking value and biotechnology exposure
• Bumi Armada: Strong cash flow plus further exposure to commodities upcycle
• China Construction Bank: Steady dividend play constructive to one’s portfolio
• CrowdStrike Holdings: Leading niche player in the growing cloud security market
• Magna International: Look beyond current cost pressures for longer-term potential
• NAVER Corp: Well poised to lift longer-term potential further
• Ohsho Food Service Corp: Food chain with the edge in a competitive and stagnant market
• Tianneng Power International: Right industry, right products and right markets
• Waste Management: Set to expand by meeting essential, growing demand