The year 2020 has been difficult for pretty much everyone, and most people would welcome 2021 with the hope of some relief and less tumult. This post is intended as a look back on 2020 from an investment perspective, and to list some broad plans for 2021.
SGD Portfolio in 2020
I was not very active on this front, with probably only a single-digit count of transactions for the whole year. The main buzz (see posts from May 2020) were on Singapore Airlines' rights issue, arising from my desire to thoroughly understand the offering in order to correct any misconceptions that my family members and friends may have had. I personally have only a very minor position in Singapore Airlines, so I wasn't massively impacted and in late November I took advantage of a sudden resurgence to trim my position at the favourable price of 4.65, realising some paper losses but deciding that the long-term prospects for the airline are still fairly gloomy.
I wish that I had been more ambitious in creating/adding to positions in Singapore banks (referring to DBS, OCBC, UOB) as there was a brief period where they were looking very undervalued and I was a little too hesitant to pull the trigger.
Other than that, I begun to effect a regular contribution to my Endowus and Stashaway accounts, and will touch on that later.
USD Portfolio in 2020
Earlier this month, I was looking at the Nasdaq and realised that if I had simply purchased the index, I would be looking at over 40% gains for the year. Who would have known a year ago that tech counters would benefit so greatly from working-from-home, and that the market would continue its feverish ascent after a significant pullback in March?
As my own portfolio has a fairly heavy tech slant, I managed to finish the year with significant upside of around 32%, shy of the Nasdaq but ahead of major indices such as the S&P or the Vanguard Total World. Making use of the excellent custom reports feature of Interactive Brokers, I was also able to learn that my portfolio had a Sharpe return of above 1.1, which is decent.
As a long-only, unleveraged portfolio, this has been a year of good returns. That said, some of the gains were offset by weakening of USD against SGD, though I am not overly concerned in the near-term.
The key drivers were semicon-related, with AMD, MU, and MRVL being big contributors to the positive return. AMD especially has made significant headway against Intel, but Apple threw its hat in the ring with their new M1 silicon which, from all accounts, appears to be a total game-changer. Given that TSMC is fabricating for both AMD and Apple, it feels like an attractive play, but I was unable to find a suitable price at which to enter a position.
I was fortunate to have very limited exposure to US airlines, although I watched with dismay as RLH (mentioned in my November 2019 post as a possible M&A prospect) sank from 3.60 at the start of the year to a low of 1.24 in March 2020. While luxury and business hotels (think Marriott, Hilton etc.) struggled, I felt that there was a case for the economy and mid-range segment due to the continued movement of personnel to temporary accommodation (e.g. medical workers who were being relocated to US states in dire need of more manpower). As RLH Corp (formerly Red Lion Hotels) was in that segment, I was prepared to hold on and even considered adding to my position. Admittedly, it was unnerving to see the price free-fall below 2.00, and even though a good recover was made in June 2020, the stock slowly slipped below again in October, before recovering again in the last two months of the year. As it turned out, my November 2019 post was not at all wrong, and an acquisition offer was just made at $3.50 per share by Sonesta on the second last day of the year. While the offer represents a healthy premium over the last-done price, I can't help but feel that it may have been too soon as I was hoping for a longer runway for recovery before a takeover offer was accepted. We'll see how the deal turns out (my hunch is that it will clear), and if it succeeds then this will be the first M&A I've called having previously exited too early on both Panera Bread and Sodastream. [I'm still mildly surprised that Square has not been acquired, though at current valuations I now see this as a very distant possibility. A crazy 200+% return in 2020 and I kick myself for having exited on that position.]
What's ahead for 2021?
Having had minimal opportunity to spend money this year, I managed to save up a fair bit of extra cash. I intend to progressively funnel this into Endowus (sign up using my referral link) or Stashaway via monthly contributions, and am targeting to keep a much smaller amount of cash as emergency funds, being mindful that leaving too much cash in the bank at near-zero interest rates is a terrible idea. Endowus has been especially appealing because it offers a way to invest CPF funds, and because of this I no longer view CPF OA -> CPF SA one-way transfers as an attractive option for younger adults. To illustrate, the 1-year TWR of my Endowus CPF 100% equities portfolio was in the region of 9%, and this is pretty much where I hoped it would be. For those of us with a long investment horizon, CPF OA/SA returns of 2.5% or 4% may not be optimal depending on one's overall risk appetite and overall portfolio allocation.
SGD stocks continue to be quite unappealing for me, and I doubt this will change in 2021, especially since REITs - the only thing I would actively like to add to my portfolio at this time - continue to look expensive. I should also look at unwinding from some of the poor-performing counters (looking at you, SIAEC) and rotate this into Endowus or Stashaway, probably after trimming my low-yielding cash.
On the USD portfolio, I think 2020 has demonstrated that my current approach works well, and I will not deviate too much from the tech-heavy playbook. Am feeling good about Apple's latest M1-based products, in particular, and will also keep an eye out for other 5G players. I have never been very well-versed with the bio-tech/pharma sector and the upcoming year could be an opportunity to establish some positions on those. In terms of a post-vaccine recovery play, I am still not too confident for hotels, as I foresee leisure travel to still remain weak, but I think there could be a case for airlines.
