2024 year end reflection

A phenomenal year in reflection. Everything rallied mostly. Below is a list of some stuff I owned. Superbly happy with how the growth portfolio did this year (top performers Tesla, Amazon, Shopify), worst performers there are (Unity, C3AI and Alibaba)

Even traditional value / dividend stocks did well with my diversified endowus portfolio up 20% since inception. DBS rose +42% as well.

The biggest drag for my portfolio is United Hampshire US REIT -6%ytd, but I am confident that this thesis will work out considering that Blackstone buyout of ROIC for USD4b valued a larger business at 1.73x P/BV, 3.5% dividend yield, though UH reit is about 1/3 the size of ROIC. ROIC being East Coast assets, UH REIT being West Coast assets. 

+170% upside sounds exciting? (I added to my position recently and MCB real estate recently emerged with a 5% stake…activist activity incoming?). Who knows but as a decent yielding company about 8%, you get paid while you wait.

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Market discipline is needed today, today we are somewhere in the middle of the cycle with the equity markets having run ahead before the Fed cuts even begun. Optimism and animal spirits are strong for a Trump administration and I think it’s wise to turn slightly defensive.

So for 2025, going beyond the general rebalancing for equity, bonds and cash position…one may consider  raising your cash or short duration bond position to at least 20-30%. Prudence and defensiveness is needed to survive and thrive but there should not be a major recession around the corner (though inflation may return and cause a selloff fear again - potentially a buy the dip opportunity as seen on 18-20 Dec)

Fresh funds and potential reallocation going forward will largely be in things I own or am looking at below including:

1. US bond funds yielding 6-8% (PIMCO GIS Income)

2. Selective growth shares (Mercadolibre, Airbnb)

3. Spinoffs (FedEx, DuPont and Unilever ice cream anyone?)

4. Turnarounds (LVMH, Alibaba, United Hampshire US REIT)

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US stocks 

Tesla +206%

Amazon +155%

Shopify +141%

OTIS +111%

Brookfield asset management +81%

Hims and Hers +79%

Adyen +52%

Airbnb +40%

Paycom +14%

Snowflake +2%

Mercadolibre -3%

Elastic -21%

Alibaba -48%

C3.AI -56%

Unity Software -71%

Endowus portfolio +20% 

(34% S&P500, 31% US bonds, 25% msci world, 10% Msci EM index)

YTD returns

DBS +42%

United Hampshire US reit -6%

What stays the same

After reading 3/4 through of Morgan housel’s new book. It tells of many things that have not changed since the start of time. In a similar vein, we observe it all today in financial markets.

Boom and bust of crypto

- Crypto being the poster boy, saw multiple boom and busts. With euphoria creeping in as btc ETFs get approved, one truly wonders what an interesting experiment it turns out to be.

- With the halving event in Apr 2024. Would it continue to climb? Or has market priced in everything.

The only thing more certain than knowing something is not knowing what will happen.

After all, with market timing - you need to guess what will happen, when it will happen and how the markets will react. Good luck - Terry Smith.

How little we know

- Anyone who bashes any subject without at least trying to understand runs the risk of “missing out”.

- In the next vein, can you afford to “miss out”?

- Knowledge gathering is critical, often we do not fully understand anything entirely. So there lies the limits of our competency. 

- Then we put it in the Yes, No or Too hard buckets.

Certainty 

- Nobody can time the market. But in certain aspects, you get a sense of the market top and bottoms through

1. Experience and valuations 

2. Observation of credit and lending cycles

3. Sentiments (Bullish or bearish)

And then you have to be practical to understand if the model and framework works when you bring it from one place to another.

So the craziest example would be a bet on China right now.

1. Valuations at a 4 year low (lower than Covid)

2. Revenue and earnings largely flat, ready to pick up (improving earnings outlook)

3. Lenders are easing on liquidity, lending to property companies tepidly but surely.

4. Sentiments are bad (FDI outflows, locals not buying)

So certainly no case right now. But recovery will come fast and swift, so a certain small allocation would work out. 5-10% is prudent.

Sure thing or risky thing

Would you rather earn 

3% from FD

3.8% from T bills

4.5% from corporate bonds

5 - 15% from REITs 

10 - 20% from growth stocks

100% from crypto

The risk spectrum and probabilities of returns differ for each of the above from a sure thing (FD & t bills) to a gamble (crypto). Prudent investors know that each have to find their own sleep number, this adjust with family circumstances, age, careers, networth etc.

And that’s it. Some things never change.