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Our global portfolio beat the market

Thiveyen Kathirrasan
Thiveyen Kathirrasan • 4 min read
Our global portfolio beat the market
When buying stocks, investors should disregard sentiments of the day — whether buoyed by central banks and the US Federal Reserve’s “quantitative easing to infinity” or buffeted by doom and gloom news of surging infections, job losses or company closures.
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Fret not, The Edge Singapore’s 10 global stocks from Issue 917 has headed off the ill effects of Covid-19 to gain 20.5% at the halfway mark.

SINGAPORE (June 26): The ultimate black swan, a global pandemic, has upended markets with a volatility not experienced for more than a decade. To stop the spread of Covid-19, certain sectors — travel, tourism, retail, airlines, hospitality — were almost shut down, triggering a global recession. In contrast, sectors like data centres, technology, IT, biotech and pharmaceuticals are leading the market recovery. It is not that the “recovery” sectors have fundamentally done particularly well. Like politics, perception and sentiments play an important part in the stock market — until financial results are announced, of course.

Interestingly, despite a looming recession, to date, the S&P 500 has recovered 38.5% from its March 23 low of 2,237.4 points, and the Straits Times Index is up 17.7% from its low of 2,238.5 points which was also attained on the same date.

When buying stocks, investors should disregard sentiments of the day — whether buoyed by central banks and the US Federal Reserve’s “quantitative easing to infinity” or buffeted by doom and gloom news of surging infections, job losses or company closures — and instead consider company fundamentals such as balance sheet strength, cash flow and liquidity.

Specifically, regardless of the industry a company is in, it is important to study companies individually and assess the impact the pandemic has on the business while considering its fundamentals before investing.

The Edge Singapore’s top 10 global stock picks outside Singapore (Issue 917, Jan 27) comprised 10 stocks, listed on different exchanges and from a variety of industries. A word about the exchanges — it is easy and relatively cheap for Singapore-based investors to buy and sell stocks on the US exchanges and the Hong Kong Exchange. It gets a bit more expensive buying and selling stocks on the ASX, where Harvey Norman is listed. Similarly, buying and selling stocks on the London (Kier Group) and Tokyo Stock Exchanges (San Holdings) cost a bit more. However, our portfolio is not a trading portfolio but a value investing portfolio, where we envisage our profits will render immaterial the costs of buying and selling the stocks.

These stocks were collectively chosen to cater to investors with a range of profiles, from yield seekers to value investors. The allocation of stocks within individual portfolios should reflect the profile of the investor — with more stocks allocated to the dominant trait of the investor. To the average investor, however, a balanced portfolio of these 10 stocks would suffice — and will be used to compare against global benchmarks.

The balanced portfolio comprises 10% allocation for each of the 10 recommended stocks. The benchmarks chosen include the national or regional benchmark of the countries in which the recommended stocks are listed, which are Australia, Europe, Hong Kong, Japan, United Kingdom and United States. The Singapore and World benchmarks are included as well for additional comparison. The start date is Jan 24, which is the date the stock recommendations were first released online, while the end date is June 19. For a fair comparison, all benchmarks and stock returns include capital adjustments and dividends.

Chart 1 shows the performance of the portfolio of our 10 stock picks against global benchmarks while Chart 2 shows the performance of the 10 individual stocks. Despite every benchmark losing value in the past six months, our portfolio of stocks ended up making a strong 20.5% positive return over the same period. See both charts below.

Individually, six stocks posted positive returns ranging from 9.6% to 109.5%, while the other four losers had returns ranging from –0.3% to –18.8%. The top gainer was Hainan Meilan International Airport while the worst performer was Harvey Norman. (See below for the discussion on the performance of each individual stock, along with updates on their business and valuations)

The top 10 stock picks for the year would be retained for comparison purposes, as mentioned in Issue 917’s article. However, we will also separately recommend new investing ideas over the next six months, focusing on undervalued stocks with strong fundamentals.

See our 10 stock picks below:

Highlights

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