The recent weeks have somewhat been a roller coaster ride for investors. This is especially true for Chinese tech investors, who had probably seen their stock portfolio continue to nosedive while Nasdaq attempted to make new highs. It was due to regulatory fears dominating the headlines of the mainstream media practically everyday with the intention to spook investors. Just as we thought that it couldn’t get any worse, the property giant Evergrande sent another shockwave to the Chinese market, which further crushed tech stocks although it had no fundamental impact on them.
Fortunately, time heals everything, and things seem to be looking up again with Alibaba closing at $175.8 HKD. However, many investors are predicting that the Chinese internet stocks will have to go through another round of stock decline to form a double bottom before recovering. As for me, I have always been bad at timing the stock market, so dollar cost averaging on Chinese stocks works best for me. Sometimes, I tend to believe that the more people predict something will happen to the stock market, the more likely it won’t happen.
As promised, I will share my profit/loss for my Chinese stocks till the Chinese tech market has made a full recovery.
Starting with Alibaba…
2382.HK (Sunny Optical)
700.HK (Tencent Holdings)
Transition to a 100% Growth Portfolio
A few weeks back, I made up my mind to close all my positions in dividend stocks for good and to go all in on growth companies. It was not an overnight decision. The past few months, I was a bit hesitant to pull the trigger but the strong desire to achieve F.I.R.E by 40 gave me the courage to go for it. Most of my dividend stocks were in REITS which gave stable dividends. At this current stage of my life, dividend income is not a very meaningful supplement to my income and the total returns may not have what it takes to accelerate my path towards financial freedom. By divesting all my REITs, I could take the proceeds to invest in growth stocks that can deliver exponential growth, like the kind of returns I have achieved from tech stocks during Covid 19 season last year.
I had to admit that it was not the best time to sell my REITs because inflationary fears were hitting hard on high yield shares, but at the same time, tech stocks got battered by it as well. So, I am divesting REITs at depressed levels and on the other hand, buying growth stocks at a better valuation than past months. Also, executing sell trades takes up a lot of my mental energy, especially when I had seen dividends effortlessly credited into my bank account. So instead of worrying about losing out on recovery gains, I thought it would be best to act on it before I get busy with work again and drag my feet around it.
On top of that, I planned to have a more concentrated growth portfolio by trimming my growth stocks to keep the total stock counters to about 20-30. My target is to cut down to 40 stocks by this year’s end, and further reduce to 25 stocks by the end of 2022.
Tesla remains one of my highest conviction stocks and I have plans to add more by buying on dips and dollar cost averaging strategy.
There are fears among investors and analysts that the possibility of the launch of Apple Car to compete with Tesla, and the worry that the latter is facing growing competition from traditional automakers as they launched their version of electric vehicles. I think they are clearly missing the point. A commonly overlooked factor which sets Tesla apart from other legacy automakers is its scalability. Elon Musk once said that “It’s relatively easy to make a prototype but extremely difficult to mass manufacture a vehicle reliably at scale. Even for rocket science, it’s probably a factor of 10 harder to design a manufacturing system for a rocket than to design the rocket.”
If you have been closely following Tesla’s progress, you would be familiar with Sandy Munro, a veteran automaker expert. According to him, Tesla is 10 years ahead of competition which is attributed to its production speeds. This creates a feedback loop by collecting customer’s opinions and making the engineering change to improve its vehicles. Till date, I have yet to see any other traditional automaker mass scaling at Tesla’s rate of production.
I started a small position in Tesla shares late last year but as I read up more on the company and listened to interviews by Elon Musk, my conviction began to grow, and I bought more Tesla shares along the way.
Tesla will be reporting earnings tonight, and I am looking forward to see what’s in the cards. For me, any dip is an opportunity to buy.
Despite the recent stock run-up, the crypto exchange platform is still looking cheap even from a value investor’s perspective. In Q2 2021 alone, it posted a $1bil USD in net income. Assuming the net income stays constant for the remaining quarters, its net income alone is $4bil and with a market cap of $64bil, we are looking at a price to earnings ratio (PE) of only 16X for a fast growth company, with operating margins of 40% and much growth catalyst ahead!
Although it has broken the psychological resistance of $300 USD, I may consider initiating a small position and buy the dip if it drops below $300 USD.
I have sold a call option at $24 USD strike price and the shares had closed slightly above it. If it expires in-the-money (ITM) this Friday, I am happy to let go of my shares and will also divest all my remaining OpenDoor shares. The future of iBuying business is bright, and I believe it is out to disrupt the traditional real estate sector. I think its value proposition is helping homeowners to sell their houses fast and easy. Instead of going through the conventional method of selling a house with the home viewing and engaging a lawyer, sellers can quickly complete the property transaction with a cash offer through iBuying platform. It saves the property owner’s time and gets rid of all the hassle of finding a suitable buyer. Next, OpenDoor then does the necessary repairs or renovations and sells it in the open market.
There are many iBuying players listed in the stock exchange, and another two big players are Zillow and RedFin. I chose to invest in OpenDoor because it is a pure play in the iBuying market, and it has been posting strong revenue growth in the past few quarters and still accelerating its growth plans.
Despite my positive outlook on iBuying, I have decided to let it go as an attempt to reduce my total share count, because my conviction level in this company fared lower compared to my other stocks. It’s about opportunity costs and I can use the proceeds to invest in other companies that I believe can generate a higher return. My average price in the company is $21.74 USD and I have been investing since May. So, I am getting an annualized return of about 20% return in a matter of 5 months.
I have received $1k USD worth of IBKR shares for shifting my funds over to the IBKR platform from Standard Chartered. I won’t be updating the fund value in my portfolio but to include it in my cash holdings after I have completely divested all the shares, which can only be sometime nearing 2022 as there is a holding period of one year.
As you can see from the above, I have sold almost all my dividend shares except Mapletree Industrial Trust (MIT), which I am still queuing at $2.77. It was the first REIT I have bought since my army days, and (still) my favourite REIT of all time because of its reputable sponsor and its unbeatable track record of increasing its DPU every quarter without fail since the start of its listing.
Mapletree Logistic Trust (MLT) (SGX:M44U)
After I have sold 3,500 shares of MLT, I have forgotten to divest the remaining odd lots. So, I am stuck with 15 shares. I will be keeping the shares as it doesn’t make sense to sell considering the exorbitant fees for selling plain odd lot shares. I will do an internal write-off and will remove this counter from my stocks.cafe portfolio.
Champion REIT (2778.HK)
I will be keeping this beaten down REIT till it has recovered to a reasonable valuation of at least $5 HKD. Its extremely low valuation is attributed to a series of unfortunate events, starting with Hong Kong Protests followed by Covid-19, Chinese Tech crackdown and Evergrande saga at the same time. When tourists from China start flocking to the streets of Hong Kong again, the REIT should be able to see a meaningful recovery.
Inari Amertron Berhad (KLSE:INARI)
This semiconductor maker company is more of a tech company than a dividend stock. Hence, I will be shifting it to my growth portfolio. It is not the type of revolutionary or generational company, but it’s better than letting my Ringgit idling in the bank earning a meagre interest.
I have transferred my Bitcoin holdings from binance.sg platform to Hodlnaut to earn weekly interest. There is default risk and cyber risk associated with it, and I could potentially lose all my Bitcoin. However, it’s still a good risk to reward ratio considering that Fireblocks, Hodlnaut’s primary custodian, diversifies the crypto holdings into offline cold storage and hot wallets, meaning that the digital assets are never held in the same baskets in the event of a cyber-attack. Moreover, my Bitcoin allocation is only a small percentage relative to my stock portfolio so I am not too worried about it.
Instead of the usual binance.sg to buy Bitcoin and Ethereum monthly, I have switched to Huobi as the fees are more attractive and I could explore other cryptocurrencies as well. Nevertheless, I am keeping my existing Ethereum on Binance.sg platform because the transfer fee is quite costly.