In the recent years since I started investing, I have managed to gain quite a fair bit on the return of my equity portfolio from the assistance of a running bull market.
Even though this was partially achieved through hundreds of hours of thorough monitoring and research into companies which I think are worth investing, the last thing I wanted to see is to think my strategies are formidable and can outlast any market correction or recession. Not true.
A complete investor is one who is not only able to research on undervalued companies through analysing the different gargantuan metrics in the financial statements but who is also able to handle proper asset allocation as and when is required. In such cases, shifting towards the different percentage asset allocation at different times will serve to adapt the changing needs of the environment.
Patience will become a very important attributes of a successful investor because for most of the times it makes one look like a fool being in cash position yielding return that loses out to inflation over time. On the other hand, an investor can look to building a cash position as an option that they can use to take advantage of the market during a market correction. Cash by itself is a position and it can become a trumpet card used to an investor advantage when the right moment comes along.
One of my goals for this year is to build up sufficient cash position given that market valuations are stretched and finding an undervalued company to invest becomes increasingly difficult. I will talk more about the general market valuation conditions in my next post which can give us an overall indication of where the market is at right now. Even though I do not generally like to focus too much on the general macro-economic situations around the world, it is difficult to ignore the correlation because finding undervalued companies to invest are becoming increasingly difficult these days which signifies some sort of market conditions that are overvalued to a certain sense.
Following my previous portfolio updates for the month of February, I have now divested all my holdings in MGCCT and Neratel at a market price of $1.03 and $0.76 respectively, representing an overall gains (including dividends received) of 42% and 130%.
|Divested MGCCT @ $1.03|
|Divested Nera @ $0.76|
This is a very difficult decision to make because these are companies that has been with me for many years and has the potential to do well in the future. Having said that, I re-evaluate the current position that they are in together with the prevailing valuations and thought that they are somewhat overvalued, if not fairly valued at the least. I also asked myself at this time whether I would be willing to invest in the companies at the current price had I not been vested and the answer is a clear conviction no. Thus, my decision to divest was based on such convictions.
As the markets are getting more expensive over time, I will be evaluating the companies in my portfolio even more on a regular basis. Even though the objective is to focus on fundamentals for the long term, it would be pretty foolish not to consider selling at some point should the market over react by providing opportunities for investors to take profits. It is not a question of whether we will see a market correction at some point in time, but a matter of when. Why not consider selling at the same conviction of when you are buying?
What about you? How are you playing the current market conditions?