As the Lunar New Year approaches, we’ve continued with our tradition of picking 10 stocks for our virtual global portfolio outside Singapore. The Edge Singapore’s virtual global portfolio was incepted on Jan 24, 2020, with 10 stock picks. Our returns for 2020 were 98.1%, outperforming all benchmarks. The 2021 portfolio of 10 stocks returned 13.1% while the latest 2022 portfolio’s returns were –9.8%. In both 2021 and 2022, the portfolio still outperformed several comparable benchmarks. Overall, since inception, our global virtual portfolio is ahead of every comparable benchmark by a comfortable margin, as illustrated in Chart 1.
The Edge Singapore’s virtual global portfolio was created to inform and educate investors on the know-how of investing, particularly fundamental-based investing. It is of utmost importance to note that stock picks are not a direct call to buy the companies. Instead, it should be used as part of a framework to guide investors in making investment-related decisions based on their individual investor risk profiles and objectives, which we have reiterated throughout most of our Financially Savvy articles.
Our portfolio’s investment strategy is centred around value investing. In simple terms, we identify and invest in companies that are trading below their intrinsic value. This intrinsic value is our subjective valuation of the company, based on fundamental indicators and analysis. The idea behind the subjective valuation of companies follows the concept that not all companies have the same nature, and that the business must be understood before attempting to value it.
For this year’s portfolio, we’ve used some lessons from the previous selection of stocks for our general portfolio strategy. As with almost every stock that was fundamentally sound and not risky plays, a significant dip in share price not caused by structural reasons has almost always seen the stock’s price recover. This applies to benchmarks as well, as the benchmarks that perform the best have almost always had a low base effect from a poor showing in the previous period, relative to others.
But before anything else, any company selected must be fundamentally sound, with the minimum being cash flow-profitable. This time around, all the 10 companies are fundamentally sound, and not comprised of risky plays such as turnarounds. The initial list of companies we selected was filtered for underperforming respective benchmarks over the past year. Subsequently, we subjectively valued these companies and picked those we think are trading substantially below their intrinsic value.
See also: More upside for Indian equities despite rich valuations
There has been much data and evidence on long-term investing and how it is profitable. Long-term investing does not imply holding a stock for decades. One of the most important tenets of value investing is that stocks are meant to be bought or accumutated until their price is the same as their intrinsic value, and sold if the price exceeds the intrinsic value. The Edge Singapore’s virtual global portfolio follows and will continue to follow these values and principles moving forward.
The Edge Singapore’s 2023 portfolio will be constructed the same way as the 2022 portfolio, where the 10 stocks are allocated equally, wherever possible. The 2022 portfolio was fully liquidated on Jan 13 and the 2023 portfolio’s start date will be on Jan 30, which is the day this issue is published. After accounting for all returns and cash, the portfolio will begin with US$202,154 ($266,980). The 2023 portfolio will not account for transaction costs and exchange rate fluctuations in tracking the performance, as per the previous portfolios. Dividends and capital changes to the stocks will be accounted for in tracking the performance of the portfolio.
We will have the flexibility to buy, sell, add or reduce stocks in the 2023 portfolio based on our discretion, which we will explain and justify before making changes. Readers can also follow the trackable virtual portfolio on EdgeInvest if they wish to utilise the information from our latest stock picks and portfolio changes for their own investment research, and also for the sake of transparency.
Our 2023 virtual portfolio will feature 10 stocks, two of which are from the previous year’s portfolio. These two stocks are Avantor and CrowdStrike because we believe these two companies have much value to offer relative to what the market currently prices these companies at. The remaining eight stocks are sector and geographically diverse; and more importantly, check all the boxes of fundamentally good companies with good prospects that are undervalued, based on our view.
Table 1 illustrates the list of 10 stocks for our 2023 portfolio — Happy investing!
See also:
- Aristocrat Leisure: Gaming giant with many moats
- Avantor: Integrated biopharma vanguard
- CrowdStrike Holdings: Keeping the faith
- Denso Corp: Fast and steady
- JD Logistics: Behind every click to buy
- NCSoft Corp: Lucrative business with longevity and liquidity
- Sunny Optical Technology Group: A clear buy at current prices
- Teleperformance: Growing at above-industry average
- The Walt Disney Co: The Magic Kingdom is still Marvel-lous
- Uber Technologies: Ride-hailing pioneer is attractive
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.
Photo Credit: Bloomberg
Data for Charts & Tables were sourced from Bloomberg; Stock returns include capital adjustments and dividends, and excludes currency exchange fluctuations.
