Little thoughts at the sea of coronavirus-led bear waves

It has been long time since I posted something. Indeed it has been long time since I look into investing again. I have done my portfolio building in 2018, endured a scary period of dropping; decided to look away and focus on building my active income, i.e. my career in 2019 where some stocks recovered, i.e. AEM (from below $1 to above $2), and some stocks busted, i.e. AMAL. I have done no transaction in 2019, even though I checked my holdings price from time to time.

Year 2020 is the year of COVID-19. Since the beginning of January, I have been closely monitoring the situation of WuHan and China, so is the price of AEM. As its price increased to above $2 and market sentiment was so good in early February, I decided to sold them all, out of precaution of virus spread, and fear of the same scary drop happened back in 2018. Since it has gone up so much that it became half of my portfolio value, it is not something I would like to risk on the downside.

After divesting AEM, I have 50% cash and 50% stocks. From hindsight this is the luckiest decision that I have made. But I didn't foresee the virus spread in other countries especially Europe & US to be so bad, that it triggered the quickest bear market in few weeks.

Based on what I have learnt in 2018, I didn't buy straight away when it dropped. I only started nibbled some stocks this week: EC World REIT, Yue Xiu Transport (HKEX), Siemens (Germany) and West China Cement (HKEX), while divested Venture. So now I am 25% cash and 75% stocks.

I believe current valuation is cheap enough to nibbled some. Yes, the virus spread is worrying, the economy is definitely going into recession next one or two quarters, some companies are going out of busines, but aren't all these mostly priced in? Some stocks have crumbled to multi-year low, some stocks near to net-net level, some S-REITS fell below more than 20% of NTA, even our star jewels the three banks.

No one knows how bad the virus spread would become, so there are high chances of another bear wave. So my strategy is to inject the next batch of cash should this happen. I am not releasing my newly added stocks, as I think they are cheap bargains. Some of my 2018 holdings were bad one, but the price is already so beated down and didn't rebound much for me to cash out and reallocate to other opportunities, I am still hesitant to release them.

And why not wait until the dust settles and buy? It might be too late. A lot of fund managers are already hoarding more cash due to their reduced portfolio. And then this massive liquidity injected by unlimited QE. Once there is a sign of turning point in the virus containment, the stock market will move first, ahead of economy. There are no chance these funds would not rush to buy assets that they deemed underpriced, or even distressed.

If, and if there is an ultimate bear wave, where another round of liquidity-crunch driven massive sell-off, I will open my warchest. Until the next wave, or next next wave, it will be a busy period for me, since I have to re dedicated my time into studying into different stocks, look for different bargains; from different places.

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