What to do in 2021 and beyond?

So much had changed and so much has stay the same.

Recently, I met up with a fellow full time investor to share our investment research when he commented that the market look toppish and asked for my strategy for the year. The answer is that we will continue to buy a lot of companies for we continue to find good value even during this time.

“Remember, there’s always a bull market somewhere!”

-Jim Cramer

Ok, we admit, Jim Cramer is not exactly the best example for everything looks like a rapid buy/sell decision to him. But the fact remains that there is always unloved and wrongly priced companies either in a bull or bear market.

The only issue is the conviction to buy, to hold, and possibly buy more when the market goes against or for you.

This is the first time we are writing about forecasting as a whole, so do not pelt us if we get everything wrong for who says forecasting is simple had not tried forecasting at all. (replace forecast with investment and this is how we feel)

I started investing in 1997 when the Asian Financial Crisis happened and my investing education began. I had never lost a lot of money during that time but had the fortune to see a currency crisis blowing up right at my doorstep.

Soros’s macro strategy was the rage then, for everyone is looking at his currency move to blow up Thailand, Indonesia, South Korea, Malaysia, then Hong Kong. Business news around the regions read like a CIA plot to destabilise government. The problem with Soros strategy is that it could never be replicated unless I had his brain, gut and back and I cannot execute the trade with a thousand dollars in my bank account.

After the blow up in 1997, the tech bubble started to rise in the United States till 2000. I am busy with studies and was watching the market from afar. Still suffering from the emotional impact from the 1997 crisis, I did not partake in any of the dotcom boom.

An old article on WSJ could be easily be the same article we will be reading in 1-2 years time.

Investors today find themselves having to unlearn some of the powerful strategies that were the most popular in the late 1990s. Since the middle of March, survival in the stock market has meant no longer investing like a 22-year-old and learning again to act like your grandfather.

- WSJ article (After Tech Bubble Bursts, Value Investing Returns)

Swap the 1990 to 2020 and we have a nice sentence for the next WSJ article. Maybe the strategy of buying on the dip is a new phenomenal. Not quite…

One of the most successful strategies until recently also was one of the easiest: Buy on the dips. Remember the pounding that stocks took during the Russian debt crisis in the summer of 1998? The Dow Jones Industrial Average tanked 19% to 7539, while the Nasdaq fell 26% to 1499. Anyone who put more money into the market then made a bundle, as stocks recovered their losses within months and kept climbing.

- WSJ article (After Tech Bubble Bursts, Value Investing Returns)

Again, swap the Russian debt crisis to COVID and 1998 for 2020 and we have the same result.

Consider also the fate of the so-called momentum stocks -- companies that posted gains based mainly on their popularity. Like some celebrities, they were famous for being famous, even though many were losing money.

- WSJ article (After Tech Bubble Bursts, Value Investing Returns)

We are here again buying the famous for being famous…

The lesson of the dotcom bust stayed with me for I saw the amazing rise of many value stocks right right after the bust. It may have been that time when I started to act like a value investor.

When the dotcom bust happen, a lot of the technology stocks continue to tread lower despite continuing to post good revenue growth and profit. The narrative had shifted and being adverse to risk is the position to be in.

In March, when the tech bubble was at its most inflated, big tech stocks (those in the Standard & Poor's 500-stock index) traded on average at a breathtaking 83 times their earnings for the previous 12 months, says Birinyi Associates in Westport, Conn. (Some of fastest-growing tech stocks traded at hundreds of times their earnings.) Utility stocks traded at a mere nine times past earnings. In the eight months since then, the tech stocks' P/E ratio has been halved to below 40; the utilities' has more than doubled to 23.

- WSJ article (After Tech Bubble Bursts, Value Investing Returns)

The dotcom bubble and today condition looks remarkably similar.

We once again missed the upside of the tech bubble and we could only meekly blame the 1997 Asian Financial Crisis for that. As for what is going to happen in the future, we are quite sure that it will look exactly like how it look in 2001.

The narrative of safety investing will reign once more for the stability of earnings, a lack of growth prospect will trump the narrative of yesterday of rapid growth and losses.

We are continuing to pick up shares around the world. As long as it is cheap and we can understand the business it is a go. Coupled with the fact that we had incorporated special situation into our investing process, we think we will end up just fine in 2022 and beyond.

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