Heartland Boy 2020 Stock Performance Review

The time has come for me to perform my stock investment portfolio review. This year, I am pleased to submit a good report card. I used XIRR (consisting of both realised and unrealised gains/loss) to track and measure my stock performance. In fact, it was my best report card after investing for 7 years. My XIRR returns for Year 2020 was 19.0%, comfortably beating the benchmark Straits Times Index as shown in Diagram 1.

After evaluation, I would attribute my out-performance in 2020 to 2 key decisions that I have made:

• Decisive action to sell most of my stocks at a loss once news of Covid-19 arriving in Singapore broke
• Started to deploy my warchest gradually since March

Diagram 2 is a summary of all the equity transactions that I have made in 2020. Profitable transactions are in green font while non-profitable transactions are in red font. Jumbo, UnUsUal, APAC Realty, Boustead Projects and Nordic were sold early and at a loss because I knew that these are not counters that I want to hold going into an economic recession. I wanted to position my portfolio with more blue chips. Therefore, Mapletree Commercial REIT, Prime REIT and Keppel Corp were all examples of me buying at rock-bottom valuations with limited downside.

Going into 2021, my warchest is almost 90% deployed. I am cautiously optimistic that the following counters in my portfolio would deliver the returns that I am expecting.

1. Riverstone

I initiated a position in Riverstone back in February 2020. As its share price increased, I kept adding on the way up. Whenever the share price retraced 10% from its recent high, I would promptly add a small position. I did however make a rookie mistake of cashing out half of them sometime in July. (don’t ask me why) However, I did resume buying again and at higher prices. All these accumulations meant that Riverstone now occupies 44% of my portfolio on a cost basis. Not the typical allocation as it goes against the advice of stock diversification but it underlies my conviction in this stock. This is one pitch that I am swinging hard and going for the home run, an investing lesson that the guru Warren Buffett also advocates.

I bought Riverstone because I like its leadership position in the cleanroom segment. The cleanroom gloves are used in the electric and electronic industry which is experiencing a boom right now. As traditional glove manufacturers serving the cleanroom segment diverted their production towards healthcare gloves, Riverstone chose not to do so. Instead, Riverstone took this opportunity to win new customers and gain more market share in the cleanroom segment. Post Covid-19, Riverstone could potentially turn these customers into regular customers as customers tend to be “stickier” in this segment. As the cleanroom segment contributes higher average selling prices and gross margins, a higher sales volume mix from the cleanroom segment will also translate into higher profits after the pandemic.

Furthermore, there is another person who shares similar optimism and that is the CEO. Given the confirmed orders on hand, he has guided that we can continue to expect blowout quarters to continue at least until 1Q 2022. Putting money where his mouth is, the CEO has been buying Riverstone shares consistently since February 2020, with the highest purchase price at $1.95! We have all heard of the saying that there could be many reasons why insiders sell but there is usually only 1 reason why insiders buy.

2. United Hampshire US REIT

When I initiated a position in United Hampshire US REIT, I was expecting a total return of 20% within a year – 10% in dividend yield and 10% from capital gain. 3 months in, my investment thesis is almost fulfilled. Since listing in March 2002, it has outperformed its IPO forecast. I decided to continue to hold onto this REIT as I think that it will be able to maintain its strong performance in 4Q20. It should be aided by the strong performance in the self-storage sector whereas the retail malls would continue to chug along since it has no direct exposure to the underlying sales. As long as UHREIT continues to deliver and valuations don’t get too frothy, I would continue to remain as a unitholder.

3. Wilmar and Bumitama

I am also bullish on Crude Palm Oil (‘CPO’) going into 2021 and decided to get exposure into this sector via Wilmar and Bumitama. Spot CPO prices rallied to its highest level since 2008 in early December. This should positively influence the earnings of palm oil producers. For instance, Bumitama is a pure upstream palm oil producer that sells palm oil locally to customers such as Wilmar, Sinar Mas, Asian Agri at spot prices.

On the other hand, Wilmar will be issuing a special dividend after successfully listing Yihai Kerry Arawana on the ShenZhen Stock Exchange. This 90% owned subsidiary is trading at pretty insane valuations, having increased almost 400% since IPO. The parent company could continue its upward climb in 2021, especially since its share price had started climbing in late Dec.

Like all commodities, CPO prices may not stay elevated for too long. But while it is still shining, it’s time to make hay.

Conclusion of Stock Performance Review 2020

Having clocked in such a strong performance in 2020, I feel that I have expedited my long-term goal of achieving financial independence before 40. If I continue to maintain my discipline, there is a good chance that I will repeat the good performance of 2020!