Survived the first week of 2022. I am grateful that the kids transited to their new schools rather smoothly. Tired yes but who won’t be as they need to wake up earlier again, and getting used to new environment, routines and friends isn’t the most relaxing thing to do.
My stock portfolio has anything but a smooth start. The proposed merger of MCT and MNACT causes the Mapletree family of Reits to drop. Upcoming interest rate hikes continue to exert pressure on the Reits and US tech counters. iFAST announced an acquisition of UK-incorporated BFC bank which wasn’t quite well received by the market, causing its price to drop by 4% after it lifted the trading halt. The cumulative effect causes my portfolio to drop by more than 5% in just 4 trading days of 2022.
Our mind is an interesting matter. Studies have shown that human cares more about loss than gain. So a 5% loss does induce more feeling than a 5% gain. And interesting this feeling feels more intense when I see that my portfolio is having a year to date loss of 5%, as compared to seeing my portfolio gain dropped from 33% to 28% last year. This obviously does not make sense logically since the drop is more or less the same in absolute amount but that’s how I feel about it.
Awareness of such emotions is important in investing. Knowing that our amygdala will feel these emotions first, we can choose not to response to them immediately. Instead, we can just take note of the emotions and take a pause. Then, we can activate our frontal loop to deal with the information objectively.
It does not feel great to see the redness in my portfolio for the past 4 days, especially when the sum involves is more than half a year of expenses. What makes it feels worse is SPY is only down 1.9% and ES3 is still in the green! After feeling what I need to feel, time to calm down and let my cognitive brain handles the situation. With my portfolio down more than 5% from its all time high of 0%, it is time to activate the opportunity fund again.
What did I buy?
While I do not like the proposed merger of MCT and MNACT, the drop by almost 10% from its halt price of $2 appears to be an opportunity to me. At about 5% yield and chance of upside if the outcome of the deal turns out to be better than expected, I added some at $1.82 to my current stake. Depending on how things turn out, I might adjust my stake further along the year.
On the US side, with the impending rate hike, I would like to stay invested with companies that would not be too affected by the interest rate hike and possibly continue to thrive in the next three years. Using Morningstar website, I started to look at the cash and debt level and their free cash flow over the past three years since December and finally completed the exercise a few days ago.
From the exercise, most of the 38 companies in my portfolio should do alright. They either have positive free cash flow or a strong balance sheet that will allow them to continue to fund their growth for many years. Among them, I picked up the following companies that attracted my attention.
Curiousity Stream is one that I am most uncomfortable, as based on its current cash level it would probably need to raise fund in another year or two. I will also be on a look out on Lemonade and Teladoc coming quarters’ financial too. As for Mercadolibre and Netflix, I believe they are able to manage their expansion and become free cash flow positive when necessary but it is still l quite unnerving to see their debt level.
On the other end, the companies that are highlighted in green look like they have the financial muscle to continue to thrive even with the rate hike. As such, I initiated a position in RBLX, and added to TEAM, INMD, MSFT, SMLR, and VEEV. I did not add to ANET and ISRG as relatively, they occupy a larger position in my portfolio. As for ZS, I had added to it quite regularly last year and for ZM, I am still awaiting for more clarity on their next move.
To fund the purchase, I fully divested CURI, reduced my stake in MELI and NFLX, and injected some capital. With that, I should be done until the upcoming quarter of results. Oh, that is provided my portfolio does not go 12% under before that!