AHHH IT’S REWIND TIME

2021 is definitely a bad year. I lost 19.5% of my portfolio this year, with only cryptocurrencies in the green. If I had invested all my money in the S&P500 in January, I would have made 26.9% this year, which means I would have 50% more money than I have now.

I went through all my winners and losers, and write down all the lessons and mistakes I have learnt, hopefully 19.5% is the biggest loss I will ever have. One thing I am most grateful for is that I made all these blunders when I am 22, instead of 44 when I should have a much higher net worth and a lower risk tolerance.

Since I didn’t do a recap for 2020, below are all the things the market taught me from September 2020 till the end of 2021.

Open Positions

Ethereum (+59%, 6% of portfolio)

I had my biggest gain of 2021 in a cryptocurrency, who would have thought. I wouldn’t be surprised if the NFT bubble pops and crashes ETH. Crypto is still a non-productive asset.

Apple (+48%, 1.5% of portfolio)

My biggest winner in 2021 - a single share of $AAPL.

The strong get stronger.

Public Bank (+36%, 4% of portfolio)

The first stock I ever bought. Should’ve taken the advantage of the spike after the bonus issue where the price was at RM4.70 for no reason. I knew the stock was overpriced but didn’t sell because I wanted to hold on to my first stock.

Bonus issue or stock split doesn’t make a difference in the value of the business. Don’t be overly attached to a stock.

Bitcoin (+21%, 8% of portfolio)

Don’t try to time the market.

Tenaga Nasional (+0.5%, 12% of portfolio)

I bought the stock because of the monopoly by Tenaga. Got a few rounds of dividends but they couldn’t make up the drop in share price. At one point I was over-exposed to the stock but now sold off 25%.

Don’t buy a company that is not growing. Check for special dividend and dividend payout ratio.

Alibaba (-30%, 15% of portfolio)

I bought all the way down from $240 to $125. I still have a pretty high conviction, let’s see how it plays out! I see this as my first true test as a value investor.

Don’t clone blindly. Identify what changes the fundamental and what is just noise.

Clover Health (-61%, 6% of portfolio)

A stock that r/wallstreetbets was speculating for a short squeeze, or a gamma squeeze, whatever it is. It crashed when the management announced a new share offering at a really low price without an explanation, which is a huge red flag. I still believe the company has a good growth prospect but I certainly bought in too early.

NO MORE FOMO! Buy only profitable companies.

Closed Positions

Revenue (+40%)

I bought when the stock had a P/E ratio of 70, which is in hindsight too high considering the growth shown by the company. At one point I was up almost 100% but it didn’t make an impact because I bought too little. The CEO said a lot about making an ecosystem, digital banking, overseas expansion, etc but no real progress so far (might be because of Covid-19). I sold the stock because I was holding too little of it, might be buying back if it drops to its fair value.

Beware of management that gives too many promises.

ARBB (+4%)

The company is in a growing industry with a P/E ratio of only 3. Sold after the Serba Dinamik saga as the company has the exact same problem - high receivables.

Sometimes a company has a low valuation for a reason.

Hong Seng (-2%)

After seeing the news about the company’s plan to manufacture gloves, I bought the stock in anticipation of the stock going up like other glove stocks, without doing any further research. I sold off when the price didn’t go anywhere after a few months. However, the stock had 7x at its peak in 2021.

You can’t hold a stock without strong conviction.

Teledoc (-2%)

Followed Cathie Wood who kept buying the dip, without doing proper valuation. The price dropped another 35% after I sold.

Buy after a company had proved their business model.

Bursa Malaysia (-12%)

I bought it because I expected the daily trading value to be around 3B which is higher than pre-pandemic. Sold when the market cooled off quickly (ADV of ~2B) after the announcement of increased trading cost.

Always have a margin of safety.

Cypark (-24%)

High debt company. Sold after it announced private placement.

Vivocom (-45%)

My first huge loss in the stock market. Blindly trusting the confidence of a Facebook page Mr Bursa, and hoping to get some quick profit, I bought right at the top and kept buying the ‘dip’. I didn’t even know what the company does. The stock has down another 60% after I sold.

There is no easy money. If something is too good to be true, it’s not.

Kpower (-51%)

The company seemed to be transitioning into great industries, namely renewable energy and logistic. However, it crashed along with Serba Dinamik as they share the same director. I bought the dip after making the judgement that it has independent management and no real connection with Serba Dinamik, which turned out to be a bad decision. It has dropped another 40% after I sold my last positions.

Never buy a company just because of a high profile CEO

Serba Dinamik (-52%)

This is definitely my biggest lesson in 2021. Even though I was a self-proclaimed value investor since the beginning, the unfortunate case of Serba Dinamik was what got me into digging into a company’s financials and doing serious valuation.

When I was getting started in the stock market, I thought I found a gem that was trading at a low P/E ratio with high growth. However, the EPS actually didn’t increase much as they kept issuing new shares over the years through private placement. I felt strange when the company kept venturing into new businesses (e-commerce, IT, space exploration) but failed to do anything about it.

Sold after the company got exposed for accounting fraud, where it’s suspected that some of the receivables were made up, and the stock price suffered limit down (30% decline) for 2 days straight. Glad I made the right call by selling at a huge loss, the stock is now suspended from trading.

Beware of dilution.
No company should raise funds to give dividends.
Avoid companies with high receivables.
Free cash flow is the money made, not net earnings. In a good company, the two should align.
Diworsification is a real thing.
Sell company that involves in an accounting scandal immediately. You can always buy back when the issue is resolved.