Hi All,
In these markets, it is quite hard to maintain your cool as you are repeatedly having your hard earned capital values decimated. My objective is to create some accountability with respect to sticking to the plan.
YTD the portfolio is down 17% (before today and today is not good especially with the small caps), stock holdings battered saved by allocation to cash and zero allocation to basic materials which is higher than normal (in large part because of stock values falling off a cliff).
Violent moves:
While not investing in 2008, I was following the markets. The moves lately are violent (in case you haven't noticed). I put this increased volatility due to increased leverage (a consequence of central bank actions) and a sudden withdrawal of said leverage. Indeed the huge moves in currencies suggest and certain technical indicators like the currency basis seem to indicate some carry unwinds.
At the same time, there is rush for cash and withdrawal of credit as funds adjust their leverage for the increased volatility.
Such largely automated decisions impact the markets and therefore us. The technical functioning of the market is not withing my control and therefore I need to consider each holding independently of the markets.
Virus Impacts:
I have had a look through my portfolio with a critical eye on cash generation and debt.
For those that are higher risk / more speculative, I was pleased to note that debt was low and supported by operating cash flow. Where there was high levels of debt, this was invariably in the mega cap high dividend stocks. With hindsight, I would have sold all of these but I think it is too late.
I will do nothing for now, monitoring credit ratings. I am comforted by the fact that by virtue of their size, their debt will almost certainly become as big a problem for their lenders as it would be for themselves, which assists in forbearance.
Carnival was a particularly ill timed purchase and should have been sold had I not been a bit deer in headlights. I bought because of demographic trends, cash generation, market leadership and best balance sheet in sector. Unless coronavirus causes a permanent change in cruise take up, I think the shares offer compelling value to medium term investors.
Oil impacts:
I hold RDSB - enough said!!! I added recently. My reasoning is as follows - the price of an oil barrell is approaching the…
