Heartland Boy 1Q2022 Investment Portfolio Update

3 months ago when I reviewed my stock performance for Year 2021, I ended with a note that I was quietly confident my portfolio was well-positioned to take advantage of the spiralling prices in commodities and runaway inflation. Not only did these themes pan out in the first quarter but they also accelerated with Russia’s invasion of Ukraine. Of course, I readily admit how fortuitous I have been that my portfolio is able to benefit from this black swan event.

However, the first quarter of 2022 was not just about the Russian-Ukraine war. The Hong Kong technology sector rout also dominated headlines alongside Fed raising interest rates for the first time since 2018. In between, cryptocurrency also sank with Bitcoin breaching the USD40K mark. Given all these macro events running the risk of overwhelming my investment mind, I decided to do an interim update as blogging forces me to take stock and reflect in a calm manner.

1Q 2022 Investment Performance

As aforementioned, my stock portfolio was deliberately structured to capture the inflationary effects of both soft and hard commodities going into 2022. I have positions in Geo Energy, Wilmar, Bumitama, Uni-Asia and Yangzijiang which provide such exposure by being direct proxies to coal, food grains, palm oil, ship chartering and ship building respectively. As a result, I am pleased to close off 1Q2022 with a positive performance in the low teens. This outperforms the US S&P 500 and mirrors quite closely to STI index.

Finally, my portfolio was buoyed by the performance of Riverstone, which outperformed its bigger peers such as Top Glove. Because of its better operating performance and high dividend payout ratio, its share price had returned >40% YTD. It is my biggest position at 20% of my portfolio, so it really gave a nice lift to the overall 1Q2022 performance.

Actions Taken in 1Q 2022

While I was satisfied with the initial positioning of my portfolio, I was not exactly resting on my laurels during this period either. As shown in Diagram 1, I took several actions especially when the market was dangling irresistible offers of Chinese technology stocks.

A) Tech Sector Massacre

Mindful that I already have an existing position on Chinese tech stocks via the Lion-OCBC Securities Hang Seng Tech ETF, I took small positions in blue chips such as Tencent and Alibaba. If you thought that I had caught them right at the bottom on 15 March, the answer is NO. I don’t have a crystal ball that allows me to time the market. I actually bought just before that fateful crash and rode through it with “diamond hands”. It is indeed quite depressing to witness a 30% crash within a week of buying a stock. Thankfully, their share prices recovered very quickly from the crash. Nevertheless, I am hurting from SEA Limited as my average price was just above US$200. Clearly, I have a long way to go before breaking even on it.

This pretty much summed up the performance of my technology stocks in 1Q 2022. It was dismal and the only saving grace was that this sector occupies only 15% of my overall portfolio. Therefore, the performance of Riverstone alone was sufficient to offset the disappointment in this entire sector and this once again reiterate the importance of sizing.

B) Gaining more exposure to commodities

This week, I sold Yangzijiang as I had wanted to recycle capital into another opportunity which I thought could potentially bring me more upside. That stock is REX International, an upstream oil explorer and producer. At the start of the year, REX Int tracked the price of crude oil very closely but a disparity had emerged recently as shown in Diagram 2.

If you refer to Diagram 2, the share price of Rex should be where the star is, i.e. roughly around $0.44 cents if this correlation holds. I thought this divergence from the correlation represented a good opportunity for me to buy a net-cash, profitable oil producer at only 35 cents. It had also recently announced a formal dividend policy and I see this as a positive sign that management and board are both shareholder-friendly. Overall, this investment represents yet another exposure to runaway inflation by being a direct proxy to soaring oil prices.

When cryptocurrency sank to its lows in late January, I continued to DCA into Ethereum. I also took an extremely speculative position in Loopring. To underscore how noob I am in the world of cryptocurrency, I spent some time figuring out how to buy Luna on various platforms such as Crypto.com and Gemini. When I eventually figured it out after a few days, the coin had soared significantly, and I hesitated. I am now paying the price for not doing my homework earlier!

C) Stocks on my watchlist

As active investment is just a hobby and not an occupation, I find that I have increasingly less and less time to perform deep dives on specific stocks. Nonetheless, these counters have caught my eye recently – Shopify, Netflix, Oriental Watch, Sino Harbour Holdings, Singapore Medical Group, and Japfa. They look interesting on the surface because it appears that their share prices have been unduly punished and look undervalued. However, I would need to spend more time to understand their fundamentals before acting on my investment thesis.

Conclusion of Stock Performance Update 1Q 2022

1Q2022 without doubt represents one of the most tumultuous periods (March 2020 would also come close) ever since I started investing. For those who are behind, continue to stay patient and invested in the market. For those who are ahead, it may not be a bad idea to liquidate some of your investments to secure your profit given how VUCA the investment outlook is.

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SIGN UP FOR INVESTMENT QUADRANT 2023

Good news as the 2023 edition of Investment Quadrant, now renamed as Alpha Quadrant, will be opened for registration from 26 June to 16 July 2023. Register using this link (scroll to the middle of the page to click enroll now) as an early bird to get S$100 discount off the usual course fee of S$697.

The first run of Investment Quadrant (my review here) takes place on the weekend of 8 Jul (Saturday) and 9th, 16th Jul 2023 (Sunday) from 1pm to 7pm. Registration is on a first come first serve basis, so you might want to act fast. But if you are unable to make it for ALL the runs in July, the next one would unfortunately be in 2024!

*Note that this article contains referral links that goes to maintain the sustainability of this blog.