We are one week into 2018 and most of us would have set our New Year’s resolutions for the new year! And it’s important to do that for investment as well, so that we know what are some of the rules guiding us in the year ahead.
2017 have been a rather uncertain year, and it’s also my very first full investing year (since I started in March 2016). I would have to say that I truly learnt a lot from my friends over at IN and from reflecting upon all my investing decisions throughout 2017.
A Quick Reflection of 2017
2017 was an exciting yet frustrating investing year for me as I started 1st Quarter of the year by hitting a multibagger. And then things went rather slowly for me as the next few stocks that I picked took rather long before showing any forms of gains. Most of them were range bound, and prices hover around my purchase price.
Some lessons I learnt in 2017 includes:
1) Buy towards the end of the week to avoid being trapped by traders.
2) No matter how good a stock is, it is vulnerable to the macroeconomic conditions. There were several times where the global markets was on a downtrend due to macroeconomic instability (like North Korea shooting missiles into the water etc). Those times were the true tests of emotional discipline to stick to your investment plan as all the stocks that I am holding can start recording losses as big as 5 – 10% in a few days to weeks.
3) Always buy stocks with the abilities to catch the industry’s tailwind. In 2017, semiconductor stocks were very much in play and many stocks in this industry recorded at least 50% increase in share price. I guess what many investors’ meaning of “a rising tide lifts all boats” was pretty clear last year. Some semiconductor companies who have weaker fundamentals did not rise as much but still were able to clock in a decent share price appreciation due to positive industry sentiments.
Those were the 3 big lessons I take away from 2017 and sadly to say my own portfolio didn’t outperform that of the STI but I will definitely give it another shot this year!
Now looking on to 2018!!
I am looking forward to an even more exciting year ahead as I am rather big on three themes in 2018. Mainly the O&G, construction and property industry. By applying Lesson 3 that I learnt in 2017, I will be parking more funds to catch the positive industry sentiments by investing in good qualities stocks in those industries.
I shall share a little more on why I feel these 3 industries should outperformed the rest in 2018. For O&G, the industry was hardest hit in late 2015 as oil prices started crashing until it hit about US$20-30 per barrel which is too low for many O&G companies to make a decent profit. These caused the industry to consolidate as many smaller companies went bankrupt or were bought out (like Ezra, Ezion etc) This was because many companies took on huge loans to run the company when the prices of oil were very high and when the oil prices crash they weren’t able to finance their debt as their main source of revenue is heavily affected. Now in 2018, oil prices have gradually been recovering and are now sitting near US$60 per barrel. As with all economic cycles, the period after consolidation is the time most O&G companies that were stronger will tend to survive and ride the next uptrend. (Survival of the fittest haha)
Thus I am looking at strong O&G companies with low debts to ride on the potential uptick in the O&G sector.
As for construction and property, its more for local play. Construction sector have been the weakest link in Singapore GDP as it continues to post negative growth in 2017. The construction sector is a labour intensive industry that have not been disrupted by technology. The government have been encouraging the use of technology in the sector to raise productivity in order to lower costs. However, it has not been working as the initial costs of taking up new technology is high and having more competition from foreign construction firms has led many local construction firms to not make the switch. However, the government intends to support the industry by bringing forward more construction activities. With major developments, like the T5 and MRT lines yet to be build this should inject some activity into the constructions sector this year.
Also, there have been a spate of enbloc activities carried out by property developers in Singapore. This should help to boost the construction activities in Singapore too as the acquired buildings will have to be demolished and rebuild.
With private home prices rebounding slightly in 2017, developers are rushing in to stock up their land banks in hope to be able to build new properties to catch the uptrend in private property prices. This represents an opportune time to invest in construction related stocks with support from both the public and private sector this year. Property developers that have many new private property launches this year may benefit from stronger demand due to a possible rebound in private property prices to cash in on their developments.
these are the areas where I should be parking most of my funds in hoping that a rising tide can lift all boats. My search for undervalued companies in these industries continues and hopefully I will be able to catch some of them before they fly! 🙂