I will confess.
I don’t have a huge stock portfolio. Nor do I go around sitting, stroking my beard, and thinking about stocks.
If you want a guru that can show you crazy results, you won’t find them here.
But I will speak from the many losses I’ve made, and I will tell you where I’m putting my money in 2023.
I’m all of 27 years old, and fell in love with stocks after buying my first one as a 20-year-old.
Once again, a disclaimer:
This doesn’t constitute as investment advice, and you should do your own due diligence before you buy anything.
You will make mistakes
I remember the first time I saw First REIT drop its price from $1, to $0.20.
My heart sank.
But despite this, I didn’t have the balls to sell it.
You might think,
Sell? Are you crazy? Shouldn’t I be waiting for the price to rebound?
No, you shouldn’t.
And you must act after you know you’ve made a mistake
In Lee Freeman-Shor’s The Art of Execution, he found that the best investors were those who made an active decision when the stock had fell by 20 to 33% to:
If you think about it, those are the three main actions you can do everyday, any day, when the stock market presents you with a price.
But often, our own internal biases stop us from executing on these decisions. Instead, we choose to take a ‘wait and see’ approach, and end up losing because of our inaction. We tell ourselves things like,
the price will eventually rise, I will just need to wait.
I should be patient. This is just a short term blip.
To this, I would say,
if your investment thesis still held, why are you not adding more?
Then you might tell me,
I don’t have the additional capital to add more.
And that should be the only time where you are allowed not to make a move.
As an investor, knowing your investing style is key.
I will say here that my main investing style is what’s advocated by Charlie Munger, the billionaire partner of Warren Buffett.
He calls it ‘sit on your ass’ investing.
I call it ‘do nothing’ investing.
But if you were the kind of investor who opens the trading app everyday, trading in and out of positions, this might not be for you.
Now, let’s look at what you shouldn’t do before you look at what you should.
Exit poor positions
The past year over 2022 has seen some pretty scary times in the markets.
One of the biggest declines have been in tech darlings.
Here in Singapore, where there aren’t as many tech stocks listed, you might be more familiar with technology manufacturers like Venture Corporation.
Take this time to review your positions, and see if there are ones that need exiting.
Quality REITS look like a good buy now
In particular, a sector that has looked really good are REITs.
As you would know, the REITs market is extremely developed in Singapore. You’re basically a landlord.
But it’s not just about buying REITs, but buying the right ones.
Here, we’re seeing some good ones in terms of
- Quality sponsors
- Quality assets
- Quality earnings
- Cheap, meaning value for money, with low price/yield ratios
Back to the lesson on First REIT.
Digging into the books of First REIT, I later found that it was a REIT that had a huge amount of debt in its hands, which resulted in it being unable to deal with the sudden onset of the pandemic.
At the risk of being wrong, I’m going to take the liberty to write about the positions that I’m opening.
Because I believe it helps to be accountable for what I’m doing, and to take a more considered approach to what I’m buying.
Frasers Logistics and Commercial Trust
Here, one REIT that we are opening a position in is Frasers Logistics and Commercial Trust.
They have built on two key trends – the rise of e-commerce and supply chain security to build up their logistics properties.
But as Howard Marks, the author of The Most Important Thing, once shared, investing is relative. It’s about choosing options based on the other things in the market.
You have other REITs you could choose from. Why Frasers Logistics and Commercial Trust (FCLT)?
I can tell you why I’m choosing it.
Firstly, because I think their market capitalisation size of $4.5 billion allows them to be picked up by institutional investors.
Having invested in small and micro caps over the past 7 years, I quickly saw that small caps would need a long time before being picked up by institutional investors, who could start driving up the price.
Go for quality consumer cyclicals
Add The Hour Glass for its long term luxury play
As a shareholder of The Hour Glass since 2018, I’ve attended their Annual General Meeting twice. Each time I attend, I gain a masterclass in running a business.
They have been around since 1979, a 42-year record of operational excellence that bodes well.
But two things I heard from them during their AGM stood out for me.
Firstly, that more people were beginning to look at luxury watches as a store of value. Mind you, we are not talking about the $300 Casio G Shock you have on your watch.
You are talking about a $2 million Patek Phillipe.
And these aren’t watches that you can just walk into the shop to buy. These are watches that you have to be invited to buy.
For luxury watches like that, demand far outstrips supply. Watchmakers only make one or two pieces.
When you have such substantial demand, and you’re unable to meet them, you’re in a place where you will definitely win.
Just look at how their profits have grown.
Secondly, there was an increasingly younger segment of their population.
Our average client is now about 30% younger than before the pandemic.
Henry Tay, Executive Chairman of The Hour Glass, 31 May 2022, in his Letter to Shareholders in 2022
You may wonder who buys watches today, when there are your smartwatches? Well. You have your answer.
Why do watches matter?
Because it’s a luxury good, that shows just how rich you are. That’s why the Nike shirt you wear doesn’t have the familiar swoosh on the inside. It’s on the outside.
We want to show people the brands we wear, to cultivate the image we have.
That’s why Hour Glass is still a strong buy for us in 2023.
Investing in Singapore, is about investing in your country
Many people have asked me why I invest in Singapore, when there are better opportunities abroad.
Sure, there are.
But putting my money behind some of the best Singaporean companies I’ve seen is about believing that these Singaporean companies could be the best in the world. It’s about having an annual FaceTime with some of the best CEOs in Singapore, and learning from them about how to build a company.
You might not want that, especially when you’re chasing after returns.
But as a shareholder, I would encourage you.
Look at not just what you are buying, but who you’re buying.
When I meet some of these CEOs, see them poke fun at themselves, enjoy tea and coffee and cake in the conference rooms with them, I’ve learnt a lot.
Much more than I could from a book.
Try these companies first. I don’t think you’d be disappointed.