I’m going to do an early update to the portfolio for the month of March as it is the start of the school holiday next week and our family will be going for a cruise trip round-about to spend the week.
This has been a torrid horrible month for most of equity investors as the war between Russia and Ukraine escalates and send the market plunging down lower. This reminds me back in March 2020 during the low of Covid when my portfolio plunged by as much as 30-40% month on month before recovering the following month soon after that. I believe we are no different and the only difference is we do not know when the recovery will takes place (just like most other events in the market where this is an unknown).
The tech stocks were one of the sectors which were impacted the most – given either by their lofty valuation prior to that or simply just a risk-off environment where everyone wants to be “out” first before re-entering when things are more stable. The Chinese tech stocks were not spared either and together with the Russian and some of matured European markets were one of the worst performers so far this month.
My own portfolio was not spared either – the portfolio dropped ~ 24% from around $511k in previous month to a low of $388k this month. It’s unfortunate that it’s a bit of a reset and unable to make its new high for this month but I’ve decided to remain vested throughout this period as things will recover as they always are. It may need some time to get there but with the capital addition I am able to buy more each month, it’ll provide a nice entry point to start the longer term on the right notes.
This month, I’ve made a couple of changes to the portfolio and I understand some of the decisions may seem weird because these have become realized losses but here are my reasons.
Going into the war which impacted global markets worldwide, the sell-off were not limited to specific companies but all throughout most companies in general (with the exceptions of energy, oil and gold of course). As opportunities are abound relative and resources are limited, I decided to divest off my non-core holdings to make the switch.
These 4 companies were all divested at a massive lost % wise but limited damage on an absolute dollar terms. JD Log was divested at a loss of 8% since it was divested in the early part of the war while Huya and the two education companies were divested at a loss of 61%, 48% and 41% respectively. In the absolute dollar terms, it is probably ~$20k in total for the loss.
These were companies which fundamentally were very cheap right now (and if I had more resources on hand I probably would have kept them on) but may take a longer time to recover (in general for most of the overhang surrounding Chinese companies).
The funds go into Twilio which I bought at the early part of the war and hence was caught by the global market sell-off and Sea Ltd (which I wrote about on another article). Sea investment was actually sitting pretty good right now as it is only slightly underwater right now and I had managed to earn a decent amount from the short position I took last month.
I’ve been wanting to diversify my positions outside of my core Chinese tech positions for a while but have not found an opportunity time to do so as valuations are still aloft last year. Had I diversify my position last year, I would be staring probably at a similar loss to my Chinese positions.
What Should You Do Right Now?
I am not going to lie – these are unsettling moments right now.
There are no corrections or bear markets that are easy to swallow – let alone an unprecedented few years we have with Covid and then war in the span of two years.
I know this feeling because I felt the same too back in 2008, 2011, 2015, 2020 and right now in 2022. These are not your proudest moment in terms of how you are feeling towards your declining networth and portfolio but as most things are, this shall pass too someday and you will look back on this as another tough moment that you’ve gone through in the stock market.
If there is one thing we as fellow investors could be mindful of – it would perhaps be nice to be more sensitive when commenting to another investors who are down at the moment. Things may look rosier and better if you are holding more cash at the moment but it has its own disadvantage when the table turns on the other side. Plus, from my experience, it is never easy even for someone with plenty of resources to allocate cash when fear is at the extreme and the world seems like it is going to end.
If there are things that we can count our blessings on – we should be grateful that we are discussing about first world issue rather than having to battle for lives for survival for most of the part where the war is happening right now. We can still live our own lives, be with our family, eat and sleep well, and go vacation with our families.
If you are in this privilege positions where you have benefited from the stock market due to war, or you think you are grateful enough to have kept most of your funds in cash at the moment, do donate to this Ukraine humanitarian cause through Red Cross where you will able to help millions of people there who are affected. This donation is not eligible for your tax deduction as it is made for an overseas cause.
I’ve personally donated a small sum myself (trust me, I am running out of resource and I could have bought a couple more shares with the money if I want to) and trust that every dollar counts and helps,
Meanwhile, stay strong mentally and feel free to write me a message through my email if you are feeling concerned. I’ll see you guys after I am back from my cruise the following week after.
Hi Brian,
Thank you for your sharing. I guess what made you truly outstanding as an investor is that you are donating to those in need of help despite suffering investment losses. This itself is truly commendable and admirable. Don’t worry about the losses. You will live to fight another day.
Regards,
Gerald
https://sgwealthbuilder.com
Hi Gerald
Thanks for your kind words. It’s just a small gesture, pray it can end soon so people can live back to their normal lives.
Hi Brian, donations to Ukraine thru red cross are non tax deductible, as mentioned on their website.
Hi Song Ling
Thanks for the highlight! I’ll change it in my article.
Extreme fear. This is a good time to start nibbling at stocks. For US stocks that is. Chinese tech stocks looks to be starting at the abyss.
Hi Song Ling, it is definitely a good start to look around if you have under-utilized spare cash around.
Doesn seem like we are out of the woods yet for chinese tech giants. Seem like more selling and giving up from the investors as most of them have gave back all the returns back to 2017
Hi Ayden
Indeed that’s what is happening right now.
Kudos to you for donating.
Contrary to what certain individuals have mentioned, i appreciate the transistion over the years. Investing is always a journey, as long as you have a thesis, and sound logic, i say give it a shot.
Even the great Warren Buffet mentioned one of his biggest regret is not investing in tech earlier.
Best,
JW
Hi JW
It does look bad right now isn’t it? Haha, but let’s see how it goes further down the road.
I think once they can past this stage right now, they’ll be in a much stronger structure and place to come.
Hey Brian,
Thanks for sharing your portfolio updates. Just wondering at which price point would you consider averaging down on BABA? The stock is currently free falling.
Hopefully, we’ll all pull through this unsettling time.
Thanks
Regards,
KS
Hi Kenny
China is currently hit with a perfect storm right now with Covid back and they are shutting down production again. Together with delisting news, this makes for a perfect storm. Many of the stocks are currently undergoing capitulation so there are no bottom in sight. At the very least if you want to enter, you can wait for an intraday pull back green candle, followed by another green candle the following day to ensure the capitulation is done and dusted for this round.
Hi Brian,
I am very much in the same shoes as you. I all-in my family assets into china tech, KWEB and had leveraged position on them. The leverage is keeping me up at night but unfortunately the ETF has fallen so low that I can’t sell either.
Best,
Kai
Hi Kai
It is a tough pill to swallow especially with leverage at play, do be careful and focus on reducing those leverage ratio, these are probably the only ones to worry right now.
Hi Brian,
Thank you for sharing. Best thing to do is to just enjoy your cruise and not look at the stock markets as it will affect your mood which will rub off on the family. I know it does for me and my wife is complaining about me complaining!
Hi Darryl
Thank for the reminder. It is probably the best thing to do since these are circumstances that are out of our control right now. Enjoy yourself too with your family.
Warren Buffett doesn’t go “all-in” into one particular sector (say China Tech). He is too prudent for that. People like to harp about Charlie Munger’s investment in Alibaba. From what I read he only has about 70 mil in Alibaba -small change as far as he is concerned. It’s like some of us putting a very small % of our portfolio in crypto and hope for rapid upsides.
I’m not suggesting one to just simply invest in solid dividend (boring) paying stocks – although I know many people who do and sleep very well by just investing in these stocks. It’s wise to invest in some growth stocks (China or otherwise) but maybe don’t go all-in? Just saying.
My reply to JW on his point on the Great Warren Buffet.
you guys need to wake up.
Hi, I saw you have used leverage? The leverage is approximate 60% of your total portfolio based on this recent update. I am new to leverage, like to know at what point will the lenders come in to take action? Thanks
Hi Chee
The margin requirement depends on whether you are using CFD, balance transfer, equity loan or any other products. It also depends on each individual stocks that you are buying and it may be adjusted up or down depending on market conditions.
Thanks for sharing Brian.
Like you, it’s unsettling for me as I do have Baba, tencent and baidu which have dropped around 50-60% for me.
Worse, after the 16 march where all 3 shares suddenly rose 25% , I just did a sell calls on all 3 at a price I thought it was quite unlikely to hit and wham, had to cover my short calls adding to a greater loss as I didn’t want to sell the shares. In the end, I gave up as the spreads were so wide and hence they are very very in the money and I think I will just let them be called away while leaving the rest which I was able to close.
My reflection. China market is erratic not volatile. I remembered last year the Chinese government spoke in words to support the market, quite similar to on 16 march. But frankly, those were just words but no action . Regulations Seems to be very fast and I wonder whether they are well thought through. I guess some would say this is a sign of capitulation when investors are at their most dismay .
Sign. Still have some China shares . Will hold on to them while minimising my China exposure through those called away.
Thanks for sharing .Brian and most importantly , life is bigger than money once we have sufficient. Enjoy your time with your family and not get affected by the market. Easy to say !
Hi Stephen
Apologies for the late reply as I was just back from the cruise.
Indeed, I agree that the China council could have delivered the message better as not to create the overall flight or panic from the market. China market has been known to be volatile and erratic in the past, and this time it follows the same erraticness as the previous regulatory crackdown on corruption.
I am sorry to hear that you made a hit with your covered calls. It is unprecedented times where volatility is at the maximum last week so adding in more volatility with options would put further pressure from both sides.
Hi Brian,
May i know your average price for tencent and alibaba?
Hi Gerald
My average is about $150 for Baba and $460 for Tencent.