As the market continue being battered down, I am getting ready to pounce.
Personally, I don't feel that it will go down to the Great Financial
Crisis (GFC) levels of 2008. Historically, the market retracts 10% once a
year, 20% every 4 years, 30% every decade and 50% few times a century.
We are heading towards 30% correction, and in my opinion things are quite cheap already.
STI are trading at low valuations of 10.5 P/E (historical average 16), something you don't see outside of big crisis.
Still, nothing is for certain and we must thread carefully. We don't
want to use up all our ammunition in case the enemy is much stronger
than expected. From now on, I will also eliminate all speculative buys
(Super, Accordia, Oil & Gas) and focus solely on defensive stocks
(i.e Companies that 99.9% will be around and make money for a long long
time).
There are dozens of companies I want to pick up:
1. Telcos
Singtel, Starhub and M1 have all retracted to 2011 - 2012 levels,
falling by 20 - 30% and giving yields from 5% to 7+%! With the projected
6.9m population, I would just buy all 3 telcos if I could.
Just ask yourself: Do you think your mobile plans will get cheaper or
more expensive 10 years from now? Do you think people will use more or
less data? I think it is obvious it is a "sure win" business. Just
diversify across all of them to avoid any single one of them blowing up,
and you will earn no matter how consumers churn from 1 to another.
2. REITs
Many well-managed and good REITs have corrected more than 20% and now giving yields over 7%.
Personally, I have been following Capital Commercial/Mall Trusts and
Keppel DC REIT (very resilient) closely. If they drop just a bit more I
will really want to pick them up.
3. SGX
A monopoly. Each time anyone buy/sell a stock, this company (only stock
exchange in Singapore) makes money. How can this not be a good buy?!
The price has fallen from $8.8 to $6.8, a 20+% correction, with 4.2% yield now.
This is despite much better results, higher dividends and a solid zero-debt balance sheet.
Looking to fire a bullet once it stabilizes.
4. ST Engineering
I am already holding a good amount, but current valuation are definitely
inexpensive if we look at the historical price. Management have been
doing share buybacks for like forever which limits the downside. The
caveat is the lower earnings guidance by the management, but this is one
company I can feel safe holding forever.
Share has fallen from $3.8 to near $2.8. If it maintains 16 cents
dividends per year, that's over 5.5% yield. I will fire a bullet should
it inches closer to $2.8. (There's 2 dividends payout coming very soon
in April and August)
5. The Banks
All the banks have fallen greatly. DBS from $22 to $15+, OCBC from $11 to below $8. Some have even gone below its NAV!
To me, DBS and OCBC are like the "bluest of the blue chips". DBS is the
lifeblood of Singapore and OCBC is the 'world's safest bank'. And they
are trading at discount to book value!
IMO, they are some of the safest long-term bets you can make at current valuation.
6. Raffles Medical Group
This is the "least safe" stock on the list, but greatest potential with a
wonderful growth story on the back of an aging population.
I always wanted to pick it up, but didn't because I feel it's too
expensive. Despite falling 20% to below $4, it's still valued at over
30P/E. Will be keeping a closer watch.
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Offensive Strategy
As much as I want to, I can't afford individual bullets on all 3 banks and Telcos
as I won't be able to average down. Buying (and averaging down) one of
them exposes me to too much company-specific risk.
After considering, I decided to revert to the most
conservative strategy - Straits Times Index. Singtel + 3 Banks + Keppel
makes up 50% of the STI. They will form the basis of my portfolio.
The STI basically let me pick up the 3 banks + Singtel which I do not yet have in my portfolio. The main advantage is I can fire
bigger and fuller bullets, and most importantly average down without
fear. I intend to launch 1 bullet for every 10 to 15 cents drop in the STI - let the war begin!
Defensive Strategy
To prevent any single collapse from doing too much damage, I will not be
averaging down on individual companies (despite me really wanting to).
Aside from the STI, I will not allow any single holding to take up more than 20% of my equities base.
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Current Troops Strength
Reserve Units: The defenders of my castle, my emergency funds and warchest. It is earning decent risk free interests and I intend
to keep them at max strength. Most importantly, they are what keeps me sleeping peacefully at night, and
I do not intend to deploy them unless some catastrophic event happens.
Ally Units: A separate battalion from the main force. There are about 3 company of troops here which I will use solely to whack the STI.
Regular Forces: I have 3 - 4 company at my command. 1 will be
used against STI next week, with 1 more as backup. The other 2 shall be
reserved for Starhub/ST Engineering/SGX/REIT, depending on how
the situation changes.
Rearguard: About 2 company , but I do not know when they will join back to the main force. I look forward to your return!
Reinforcements: This is coming very soon, and will add a good amount of strength to the Regular Forces.
TO WAR!!! (time to boost my passive income gao gao)
"Do not fire until you see the white of their eyes."
- Battle of Bunker Hill, a
colonial military command given to troops to hold their fire until the
moment when it would have the greatest effect, especially in situations
where their ammunition would be limited.
