To The Moon

Firstly, I would like to thank @TigerEvents for this amazing event to encourage me to review my portfolio performance, which i would otherwise be too lazy to do it on my own! I read many Tiger authors' porfolio review and was very inspired by their motivating reflections!

A lot has happened in 2022

Just as the world emerged from the Covid pandemic to the path of recovery, the war between Russia and Ukraine broke out in February which led to a sharp increase in energy and commodity prices. This resulted the US Fed to hike interest rate to 425 - 450bps, causing a sharp correction for interest-sensitive stocks such as Tech and REITs as investors became uncomfortable with their growth outlook in a rising interest rate and inflationary environment.

To matter worse, geopolitical conflict between US and China heightened and China's relentless strict Covid policies added more fuel to the sell-down.

Sadly, Sir Bahamut's portfolio underperformed STI

G3B, a NikkoAM STI ETF, delivered 8.7% YTD, while my portfolio return YTD is almost flat. Haiz. My portfolio was heavily weighted in REITs and Tech stocks (particularly in semiconductors), both sectors which are heavily punished when Fed is relentlessly hiking the interest rate to engineer a recession. In particular, the semiconductor sector is currently facing a bloated inventory situation and inventory digestion is expected to be completed only in 2H23 before we see growth again. In contrast, the S&P 500 returned -18% and Nasdaq 100 return -30%, so does that mean Sir Bahamut outperformed the US market? Haha.

Old economy SG stocks offset my losses

Thankfully, my portfolio also has a significant weight in old economy stocks from the Singapore market. My top winner is actually Keppel Corp which returned 51.6%! Thanks to increase in oil prices and the upcoming spin-off of Keppel O&M to SCM, Keppel delivered significant dividend and capital gain to shareholder this year. 

My three local SG bank stocks also delivered good double-digit return, as they benefited from the NIM expansion due to the rising interest rate. Singapore economy itself is relatively stable and not much NPL at the moment. This is why portfolio diversification is very important, otherwise the entire portfolio will be affected by one systematic shock.

A few privatisations also contributed great returns

Among the stocks in my portfolio, there were some lucky privatisations as well. $Razer(01337)$ was privatised by their founder Tan Min-Liang and other investors in May 2022, delivering a 45% return based on the price I invested. $Mapletree North China Commercial Trust(MTGCF)$ was also acquired by sister REIT MCT and delivered signficant returns to me. On hindsight, I would have been negatively impacted if these privatisaions did not occur, based on the extremely bearish sentiments of the Hong Kong market this year.

Early divestment lock in gains

In June 2022, the market is already speculating a significant interest rate hike, and Sir Bahamut took the chance to divest and lock in some capital gain for some of REITS and property holdings. At one time, Parkway Life REIT was trading at sub 4% yield (even lower than CPF SA rate!) and I know this is unsustainable once interest rate rises. I also sold off a portion of my tech holdings such as Apple, Crowdstrike and Cloudflare which made some money. BUT I also cut-loss for some tech holdings such as BARK (used to be a darling SPAC stock in 2020), GDS (China DC player), Peloton and Tencent Music. The losses are quite signficaint: around 30-50% loss as I was stubborn to cut loss earlier in 2021 even though I begin to notice a change in fundamentals. Painful lesson.

Bad trades contributed to big losses

When the market rebounded in early July-August, I thought the downcylce was over and made new investments in REITs and Techs again! Bad mistake. Actually, its very difficult to time the market and I actually encourage new investors to space out your dollar-cost averaging if you want to build a position. My mistake was that I was eager to catch the uptrend and rebuild my equity position as I sold off a lot of stocks earlier in May-June 2022 in anticipation of the trend reversal, so i made quite lumpy positions across a few trades. Well, guess what? August CPI data is a lot worse than expected and Fed doubled-down on its hawkish stance, and the selldown accelerated from September to November :(

Holding onto losers

Sadly, Sir Bahamut is not spared with cognitive bias and also suffers from loss aversion bias. I do have 1-2 stocks, such as Fastly and Palantir, which I was pretty doubtful of their future outlook but the share prices have dropped almost 60-70% I see almost no point to sell now (so long as they have the balance sheet to survive). Please learn from my mistake and learn to cut loss if your investment thesis turned sour.

Game Plan for 2023

For 2023, Sir Bahamut will remain selective in various sectors:

• Semiconductor: Semis will likely face another correction in 2023, but I do believe in the long-term growth of this sector. Chips are the building block of the digital economy and enablers of advanced technological innovation.
• Cybersecurity: Cybersecurity becomes increasingly critical for businesses, governments, and individuals alike, as the increasing reliance on technology and the internet has made us more vulnerable to cyber attacks. A good portion of the recent Russia-Ukraine war is actually fought in the cyber space as well. As cybersecurity is an evolving field, with new threats and technologies emerging constantly, I am sure the runway for cybersecurity sector is a long one.
• China Tech companies: With the various reopening annoucement from the Chinese government, investors are becoming bullish on China Tech again. I feel certain companies' valuation is still very undervalued, but its probably fair due to the many risks related to China. Please give yourself ample of margin of safety before investing in any China Tech companies.

With that, I conclude the sharing of my 2022 investment review and outlook! Thank you for reading my long boring post :) As usual, I will post and share regular insights, thoughts or industry updates with all my Tiger friends and community!

@TigerEvents could you help me tag the correct topic as I am using TTM to write this article. Thank you!

#2022 Investing Review

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