The Straits Times Index (SGX: ^STI) ended two weeks ago at around 2,520 points.
That’s the same level the index has been since, well, the beginning of April.
While Singapore’s broad market index has not changed much, the underlying businesses are adjusting to the new reality imposed by COVID-19.
The impact has been uneven, to say the least.
Many stocks, both large and small, remain down in the doldrums.
Against this dire backdrop, we are pleased with how our Smart Dividend Portfolio is doing so far.
As of last Friday, the portfolio is showing a gain of 6.5%, despite the STI falling over 20% since we started buying our 15 stocks.
Given our gain, it is tempting to declare victory and move on.
But it would be a mistake to do so.
In August, we did a full review of all the companies in the dividend portfolio.
Our purpose was simple: while markets have recovered from their March lows, the underlying businesses behind the stocks are changing rapidly.
Thriving or flailing
I don’t have to tell you how hard the aviation and tourism industry has been impacted.
The current prognosis is dire.
The International Air Transportation Association (IATA) is now expecting global air travel to be down 55% in 2020, down from its April estimate of 46%.
In fact, the industry body does not see industry recovering to pre-COVID levels until 2024.
Whether or not the timeline to recovery will be adjusted again in the future is anyone’s guess.
The fact is, no one knows for sure on how the pandemic will change consumer behaviour over the long term.
There are visible trends appearing, of course.
We are experiencing them in our daily lives.
Most of us are still working from home.
That’s what we see, but it has second-level impacts too.
By staying home, we are using less public transport. And because we are commuting less frequently, we are likely to eat at a nearby location as well.
With the time saved from commuting, some of us have turned to cooking and baking at home. That means more shopping at your local grocery shops.
Staying at home also means that we are not travelling overseas.
That holiday money saved can be put to use elsewhere, whether it is for investing, or a new personal endeavour that you have been wanting to do.
If these behaviours solidify into long term trends, there could be third-level impacts.
Working from home has resulted in a boom in demand for home furniture and personal computing as people spend more time in their own confines.
That could influence how homes are chosen in the future.
Location may matter less than before when you are working remotely.
Designs for personal electronic devices may change. Supply chains may shift as the home computing experience is reimagined.
New needs will emerge.
With food delivery becoming the norm, the way food is packaged may change in the future. The delivery of a high-end dining experience at home is still being conceptualised.
We could go on, dreaming out many other scenarios and their knock-on implications.
But the further we go, the more we will be speculating.
What we know and we don’t know
The value of a stock depends on what will happen in the future.
But the future is unknowable.
Especially with a pandemic still around us.
But there are things that we know have happened.
Most companies have reported their results.
By reviewing what happened, we can find out how the business fared during the Circuit Breaker period. That’s what we have done at The Smart Dividend Portfolio.
We have also gone a step further, ranking the stocks that we have the highest conviction, followed by less conviction and least conviction.
We recommend that you do the same for your own portfolio of stocks.
While we have our own views on how things will turn out, we don’t want to be complacent.
We are keenly aware that the sustainability of these trends and developments cannot be predicted accurately ahead of time.
Again, no one knows how the pandemic and its associated impact will play out over the long term.
But it doesn’t mean that we are a helpless ship adrift on uncertain waters.
We have our own strategy on how to size our stock positions accordingly.
And as new developments emerge, we will be making more decisions in the future to add to our positions, sell our stocks, or hold until we have better insight.
Want to know what stocks we like for our portfolio? See for yourself now. Simply CLICK HERE to scoop up a FREE copy of our special report. As a bonus, we also highlight 6 blue chips stocks trading at a 10-year low. But you will want to hurry – this free report is available for a brief time only.
Disclosure: Chin Hui Leong does not own shares in any of the companies mentioned.