February 2021 Report - Bye bye Profit

My Reaction to Long term Bond yield spiking to 1.6%  (Btw, RIP Ng Man Tat)

February started off strong, after ending January slightly underwater, the S&P500 index climbed higher and higher inching closer to 4000 level. before correcting and going back down to the 50 Moving Average Support. 

The appointed culprit this time? The sudden spike in Long term bond Yield up to 1.6%. So the story goes that money might be moving back in bond resulting in drop in stock prices as can be seen in the last few days of February trading days (see those 2 big red candles). So should you listen to the news? Those analyst suddenly coming out in droves saying "OH NO! BIG MONEY IS MOVING OUT OF STOCK MARKET! SELL SELL! MONEY ROTATION!"

Remember one of the rules I was taught? DO NOT LISTEN TO NEWS! I saw the countless news articles on this Spiking of bond yields and radio talking about how this is causing the stock market to drop. I got excited because I know the market is going to overreact and throngs of retail traders are going to dump their position thereby driving down prices. Remember, In the short term, market can be irrational. I am not saying you should ignore facts, but don't blindly follow, assess your own portfolio and look deeper.

So what did I do when Market correct? As usual, I did THIS . Look for great undervalued company and buy them, so I did went on a bit of shopping spree. Picked up more ICLN, FXI, ASHR ETF, added more position into MSFT AMZN, PEP, and TSM (FINALLY YOU DROP! waited for so long, which honestly still a bit expensive at >125, but it is near MA50 Support so i took a nibble). 

But what if the market drop even further you ask?! That may happens nobody can predict in market movement in the short term. That's why you don't go all out on a first date, you have to strategise and ration your effort. In case she start losing interest, you still have something up your sleeve to impress her. Wait what was I talking about, I mean, in case the price drop further, you buy even more at good levels of support.

Some might wonder why didn't I sell those Tech stocks who were taking serious beating the past week. Answer is, because based on my analysis, the tech stock I hold ( AMZN, FB , MSFT) are still within fair value, and if it drops more, I will just buy even more.

Another reason why I am confident that the market will still rebound despite the rising Bond yield? Look at that number! 1.6% Bond yield and people are panicking? Seriously? You cannot even beat the average inflation based on such yield, so what makes you think big money is going to put a large sum of money for 1.6% return when the stock market gives a much better return? (If you are one of those donkeys who got excited with Singapore Banks 1+% interest p.a. then I got nothing to say.)

Well don't take my word for it, go read Warren Buffet Annual letter where he said this:

"Bonds are not the place to be these days. Can you believe that the income recently available from a 10-year U.S. Treasury bond – the yield was 0.93% at yearend – had fallen 94% from the 15.8% yield available in September 1981"

So how did I do this month? 

February 2021 Performance

I was on Track to getting double digit return this month, before correction in the final week of February brought it all crashing down. 😢 I closed February barely positive at +0.80% vs S&P500 +2.61%

 

Value Stocks (-1.11% vs +2.61%)

My Value was doing fine up to middle of the month before taking a very bad beating towards the end of the month as Big Tech started retreating. And because my value stocks are focused on Tech stocks, the drop was quite substantial. Cyclical sectors like Banks, financial, energy, industrial are starting to catch up. So as a savvy investor it is good to diversify your portfolio to enjoy stable returns. This month my other previous low performer such as CME, BAC, MMM are contributing to this month's gain helping to cushion the loss from my Tech stocks.

  

Options 2 (+10.17% vs +2.61%)

As mentioned Last Month I have decided to abandon my short term trades and focus more on options. This has worked pretty well so far contributing decent returns from my favourite option strategy at the moment, Bull Put Spread.

 

Options (+3.60% vs +2.61%)

My main options account was actually doing fine, but I took a rather speculative Options spread on PLTR which didn't turn out too well and ended up dragging me down. Hence the wide  difference with Options 2 acct. Still have few months till expiry and will see how this play out in the coming weeks.

 2021 YTD Performance

I was doing great being up +20% YTD sometime in mid Feb, and then it all came crashing down losing almost all of my gain in February. Why didn't I sell back in mid Feb? Easy to say now, but again there is no telling where the market will be in the short term, and trying to time the market consistently is near impossible. I make it a point to always stay invested. "Time in the market always beat trying to time the market." And as long as I remain invested in great company at great prices, temporary drop in prices are just opportunity to buy even more. 

When people try to time the market and miss the rally 

Sure it sucks to see red and watch all the floating profits disappear, but that is just part and parcel of investing in stock market, Market move in waves. In short, survive the red days and make more money on green days. 

Words of wisdom from my shifu

Remember Ferry is not a licenced financial advisor and he still cannot convince his wife to invest, so do you your own due diligence! Provided data are purely based on historical records and may not guarantee future results. Follow me at your own Risk!