The Edge Singapore

We beat the market!

A half-time review of our top 10 global stock picks

- ALL STORIES BY THIVEYEN KATHIRRASA­N thiveyen.kathirrasa­n@bizedge.com

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. 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 pages 7 to 11 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.

 ??  ?? One of our top picks is Electronic Arts (EA) which achieved a 15.9% return in six months and outperform­ed the Dow Jones, S&P 500 and MSCI US benchmarks
One of our top picks is Electronic Arts (EA) which achieved a 15.9% return in six months and outperform­ed the Dow Jones, S&P 500 and MSCI US benchmarks
 ?? BLOOMBERG ?? How did your stock portfolio perform? Most global indices like the Nikkei 225, Dow Jones, Hang Seng and STI are down an average of more than 10%.
BLOOMBERG How did your stock portfolio perform? Most global indices like the Nikkei 225, Dow Jones, Hang Seng and STI are down an average of more than 10%.

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