Buy & Hold

I been holding the current 9 stocks since 2016. While there were some stocks that I have bought and sold off, most were done during 2016. There were hardly any position taken after 2017 so we can assume my portfolio as the aggregate of the 9 stocks and also it can be considered it as a buy & hold strategy with the holding period of 3.5 years.

Stocks.cafe provides the daily data of the portfolio time-weighted returns vs the STI ETF or ES3 which can be downloaded to Excel. I have plotted 2 graphs, the top is the my portfolio TII (in green) vs STI ETF (in Blue); the bottom is the difference between the 2 top lines.

The top graph first. The STI, since 2016, has moved within a window of -10% to +32%. The 2016 was quite flat; 2017 was a good year up 20%; 2018 was poor down -7%; and 2019 YTD is up 9%. The first point I want to make is if you are trying to trade during these 3.5 years which quite a lot of world events had happened. Well, you can try to hop in Feb 2016, enjoy the 2 years ride and get off in Mar 2018 and wait patiently for 9 months and get in back again around Dec 2018. Sounds simple but many will know it is not easy. When to get in, when to get out, how long to wait during in and out periods? There are just too many variables and moving parts to make sense of.

My portfolio has actually performed better in every year. In 2016, it was up 13%; 2017 up 40%; 2018 flat; and 2019 YTD is up 13%. In total, my portfolio returns 81% vs STI 25%. Can observe that the green line moves in tandem with the blue line, but the difference is that my portfolio doesn’t dropped as much but managed to recover at a faster rate. So there is a positive divergence which is shown in the bottom graph (in Orange), which is the 2nd point I want to bring up. It shows the orange line is almost a straight line with positive slope after Jan 2017. This shows that with a buy & hold strategy, I can still consistently beat the index. I didn’t try to time getting in and out, nor watch the FED decision on interest rate, nor consult charts. But I am not saying those methods don’t worked, what I am saying they are not within my circle of competency and will not work for me. I studied the businesses in-depth, paid close attention to their quarterly earnings and just ignore the rest.

My 3rd point is that last key to success is patience. On a daily basis, my portfolio “only” beats the STI 52.7% of the time. This means in 100 days, my portfolio fared worse than the STI in about 47 of those days. That doesn’t sound like world beating performance. It is just a slight edge but over a long term it will all add up, so being patience is important. I don’t see results over 1 or 2 months.

The last point is that there is a misconception that this is a passive buy, forget-it and keep forever strategy, which is not true. It may looks passive as there is little buying or selling, but there is still active work involved in analysing businesses reading and gaining knowledge. If a business fundamental has deteriorated, then the right approach is to allocate the capital to the better opportunities.

In summary, I just want to share that buy & hold with sound value investing framework in place is a strategy that works for me and I believe it can produce superior returns over the long term.

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34 comments
NinjaStars

While we are on the topic of buy-and-hold, I think this article would be interesting for proponents of long term investors of high quality companies (by extension, including their management).

https://www.safalniveshak.com/buy-and-hold...

vincentwong10

Nice, intelligent buy and hold is the way to go~

onlybuyneversell

I would say that it is harder to find good compounders that can last for long term. Nothing is perpetual. Therefore my goal has always been to buy and hold something that has somewhat favorable outlook that's worth $1 or more for 75 cents. Even if I am wrong in the outlook or it turns out to be mediocre company, I wouldn't lose much money. But my approach is only able to beat STI a little but never outperform much in comparison to you or the other IN veteran investors like TTI or DW.

Got to learn and improve somemore. :(

NinjaStars

Reply to @Dividend_Warrior : That's why I pay more attention to Operating Cash Flow. I want to know how much CASH the business generates.... If not sukak sukak book the revenue but no receive cash, inflate gao gao!

I think before anyone buy stocks, they should invest in themselves, in basic financial literacy of financial statements.

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theintelligentinvestor

I agree that buy & hold over long term may not work all the time. Still needed are good stock selection skill and continuous investment appraisal of your companies.

For example this is a company that I started investing back in early 2016, the financials looked very promising with PE 4, P/FCF 4.3, PB 0.8, ROE 19%, Net Income Margin 26% etc. Everything looked good, with their 22.5% stake in the Gaobeidian project which has potential to be a big project to develop a special economic zone. There was bonus share given out in July 2017 but I viewed it as negative as it was nothing more than to boost the stock price. I don't like when management do such things. Anyway, the market liked it and stock price went from 55 cents to $1 by July 2017, but then it started dropping and today trading at 40 cents.

I sold off in batches and everything by Jan 2018, made a profit of $35k or +76% gain. Briefly, the two main reasons were the financials started to deteriorate in 2017 and first 2Q of 2018; and the constant delay for the Gaobeidian which was expected to start in mid 2017. If I have hold until today, it will be -25% in the red. The company is KSH and I am not in any way trying to boast or talk down this company. KSH is still strong financially, things can still turn around and improve for them. I just want to share the thought process that I went through. The point is that we must always evaluate & challenge our initial judgement on why we selected the business and also compare with other opportunities.

Pizzaprata

Reply to @theintelligentinvestor : Good move. I am now stuck at this counter with almost 30% loss. I was relying on the Gaobeidian launch but the project kept on delaying. Now the housing market is so bad in China they cannot launch. Looks like I have wait long long. Worst, their construction margin which used to be one of the best in Sg has dropped significantly.

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DecipherMoney

hi TII,

need your advice on sth.

I've been holding st eng since 2016 and current p&l based on sgx cafe excluding div is at 55% in the money.

company growth is minimal and div doesn't grow. I'm a buy and hold kinda investor too and I personally feel that it's over valued.

what would your advice be? given that I'm pretty heavy on cash now. current cash holdings excluding emergency fund is roughly at 60% of my portfolio.

DecipherMoney

Reply to @DecipherMoney : I've finally sold off ST Engineering. what a ride it has been for the past 3 years!

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Dividend_Warrior

Earning badges since 2016 :)
Every fear-inducing event = 1 badge

Bluechipfan

Yes buy and hold with continous assessment of the portfolio. This should work well especially with bluechip reits.

I know many of us like to trade, me occasionally too. However, I think SGX market is not too ideal for trading. On this note, I recall a few days back came across a posting here in IN, the poster mentioned something to the effect that his portfolio as reflected in IN showed out sized gain as compare to his real portfolio. Someone then responed that IN could be calculating the portfolio since the position opened and didn't take into account the 'In' and 'out' of the positions.

Just go to show again that time in the market beat timing the market. I think SGX market is not meant for trading and rather, it is good for long term investment on fundamentally sounds and strong stocks/reits. Thanks for the valuable sharing, as always!

theintelligentinvestor

Reply to @Bluechipfan : You're welcome!

I tracked my P&L separately and compared with Stocks.cafe numbers. And I don't see the bigger figures as the poster had mentioned. In fact, they track quite closely for me.

Opportunist

Time in the market > Timing the market

ThumbTackInvestor

Reply to @Opportunist : not that TTI disagrees but...
u try telling that to the Jap who invested in a Topix ETF in the late 1980s...
Its been exactly 30yrs n they are... at best, 50% DOWN.

30yrs is it enuff time in the market?

They index hor.
Sufficiently diversified.

NoeticInvestor

One of the most liked portfolio in stockscafe. Great write up and insight. Agree with you, we have to ignore market noises and stay vested.
Nicolas Darvas did better when he was away from Wall Street.

theintelligentinvestor

Reply to @NoeticInvestor : Thanks! you are doing well too!

marcusong020

Plant a seed and wait for it to grow

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