It’s easy to make predictions on where the economy will go.
But it’s harder to be right.
Since starting my investing journey as a pimply 20 year old, I’ve found it instructive to invest time and effort into assessing major decisions over the year, and to figure out if those decisions played out for good.
Based on those decisions, it becomes easier to think about how to position oneself for the future.
| Stock | Why this | Why not |
|---|---|---|
| UOB Bank | It’s probably the best placed to take advantage of the rising ASEAN middle class Its business banking franchise is capitalising on the ASEAN trade corridor as a proxy to the US China tension |
|
| LHN | Rise in coliving as more people move to Singapore seeking stability and better job opportunities | Coliving might eventually become a poor option compared to cheaper HDB flat rentals |
| Sheng Siong | People need cheaper food. Period. |
A multipolar world calls for ASEAN as a bridge
A week ago, I was listening to the ASEAN Secretary General Dr Kao talk about how ASEAN serves as the only neutral alliance in the world today. That’s why more and more people want to do business within ASEAN.
With the looming trade tensions between China and the US, more companies have moved their manufacturing to ASEAN, using bases like Malaysia and Vietnam to prevent further tensions.
When ASEAN was founded in 1967, it was a US$ 24 billion economy.
Today, ASEAN is the world’s fourth-largest economy with a GDP of US 4.1 trillion, behind only the US, China, and Germany.’
That’s why banks like UOB have invested heavily within the region, most recently buying over the Citibank Thailand franchise.
And it’s why I continue to believe in the long-term strength of stocks that focus on ‘connecting the dots’ within the ASEAN region.
If we look at the UOB franchise, they have continually sought to become top of mind when it comes to the ASEAN region. This comes from both their retail and business banking franchise.
Just look at how they became the official card behind major concerts like Taylor Swift, and later with Ed Sheeran.
Singapore as a bastion of stability in a multipolar world
Information from Singapore’s National Talent and Population Division, has shown that Singapore’s non resident population increased by 5%, sitting at 1.86 million people.
Singapore remains a place where foreigners see good hope to move to. And with all that people moving to Singapore, they need a place to stay. Granted, not everyone will be a high flying career professional, but those that are will pay a premium for a place to stay, compared to residents here that can stay with their parents.
That’s why a stock like LHN has done so well.
It has seen its operating revenues skyrocket, growing 29.2% in just a year.
What’s more important is that it hasn’t even recognised some big revenue streams that are coming in the new year.
For example, it has developed a food processing industrial property that will sell soon.
And it continues to focus strongly on its Coliwoo brand.
What I am concerned about though, is the sustainability of Coliving as a business model. There may come a time when there’s oversupply, and I’m not sure that I can tell what the unique positioning of this brand is.
After all, when you can pay $2.5k to rent a 4 room flat, why would you pay $3.2k per month for Coliwoo?
I still can’t figure that out.
And that’s why I continue to hedge my bet with Coliwoo, not investing with full conviction there.
I just don’t understand why people would choose coliving.
Stocks that help inflationary worries
Of course, not everyone is going to shell out hundreds of dollars for concerts. Uncles and aunties all around will still be concerned with the impact of inflation. My mum recently told me about how the eggs rose from $6.20 to $7.50.
That was useful knowledge, but what was more important was how retailers like Sheng Siong continue to take advantage of this, by being top of mind when people are looking to save money.
Sheng Siong has been a stock that has been beaten down in recent months, despite its outstanding acquisition of the Dairy Farm properties.
In October 2024, they announced the takeover of properties in Toa Payoh, and Jelita, which they will convert to Sheng Siong stores.
I recently walked into their newest store in Bishan, next to Junction 8, with a FairPrice Finest right at the bottommost floor of J8.
It was just amazing to me to see it packed to the brim. You could barely walk. What was more interesting was seeing FairPrice employees there, picking pears for home.
You can tell what they think of the price to quality ratio of FairPrice Finest, if they are shopping at Sheng Siong.
It means that they don’t think it’s much value for money, especially if they are heading to their competition to pick groceries.
All of that bodes well for their eventual share price.
But more than that, I love how humble the management is.
When I met Nigel Lin, Sheng Siong’s Director of Supply Chain, People and Partnerships, I was struck by how soft spoken he was. This was a man who was leading a supermarket with a market cap of $1.2 billion, and yet he took time to humbly show me around his warehouse.
There’s little sign of the hubris that will stop them from pushing for further heights.
What’s more important is their push into China. When I heard them share about how they were doing in China, I was surprised. They had clearly identified it as a key growth market, and were keen to stay there for the long haul. That’s why they found a local to partner with, and didn’t just choose to go it alone. More than that, they have focused on their positioning as a brand that differentiates on 品质价, or:
- Fresh
- Quality produce
- Price
It’s why they haven’t just died a slow death in China, but are actually opening their 6th store.
Select stocks, because it makes you think harder
In the past few years, people have embraced the idea of index fund investing, because it has called for zero-thinking money making.
After all, all you need to do is buy the index fund, and they will automatically rebalance it for you based on where the money is.
That makes sense.
On the surface.
But dig deeper, read its Annual Reports, and you might realise that not thinking, is dangerous.
Especially when you’re putting substantial money behind that decision.
Whilst index funds make sense at first, you might eventually come to a time when you’re betting over and over again on the same companies, and that doesn’t allow you a chance for outperformance.
The big grow bigger, and we all know the natural law of gravity. Regression to mean.
What goes up, will eventually come down.
What will push companies to outperform, when almost everyone is betting on them already?
You might argue that if they don’t do well, they will drop out of the index.
And the index fund chooses the stock that takes its place.
That’s true.
But some of the greatest returns have come from people who are willing to take contrarian bets on the economy.
Not just follow what everyone else is doing.
I urge you to think about your stock selection, because in doing so, you learn more about yourself. How you decide, and how you learn to let go of bad decisions.
There’s no better way to learn than through the volatility of the stock market.