Tuesday, September 5, 2017

Random thoughts: Defensive stocks?

What come to your mind?

Names or numbers?

In the past, perhaps 1-2 years ago, you might name telcos, healthcare/ heathcare reit?

The 3 telecoms are suffering from investors' anxiety without real confontation from TPG. Having another player at the table has lead to some analysts to shout which company might be merged. Is Singapore market too small for a 4th Telco? Only time will tell, but if u tell someone on the street now that M1/ starhub is defensive, but for the dividends and its cash flow, I am
Not sure if u get the same reactions from 2 years ago. Note that I dun think they are bad investment, I am vested in M1. I am questioning defensive.

Healthcare is evergreen with the aging population in Singapore and command lofty valuation for a long time. (Anything above 30 is lofty in my opinion, if growth doesn't pan out) I think many think of health stocks as growth stocks instead of defensive stocks. It might have a slightly defensive business but it might not have a defensible market price. I got confused sometimes, but I have not touch healthcare stocks yet because the valuation made its defensive business somewhat indefensivable. Again, not to say it is not a good investment, if with poor sentiments you found a company that is falling and falling with its growth prospect still possibly intact. I am not telling which is in my radar. 

Wide-moat businesses used to refer to those with a commanding monopoly or market share. I would think that Telcos with the 4th Telcos is still a oligopoly, with data market set to become even bigger, but it's scaring the shit out of investors. I wonder aloud why comfortDelgro investors, like what BT columnist pointed out, are thinking it will fare better? I agree with columnist, it is going from market share leader with a few small fries to also perfect competition of car rental. Unless regulation increase the barrier of competition, even if the tie up with uber is successful, rental still has some room to fall. Renting a car is $60-80 when done privately, still a big 30-50% cheaper than what comfort is charging cabbies, and I have friends that drive grab or uber, that like it as a filler option, earning extras and managing their commitment , even with a relief hirer, a conventional taxi driver is like a full-time job. The competition is not just on price alone. 

How about SPH, SGX and Singpost which has a local monopoly yet to be broken? The defense of a monopoly moat is broken. I dun want to be a broken recorder on disruptive technology. Again, I am watching the above companies, they might not be poor investment. 

Is there really something defensive? How about Gold? I hold gold for a while, it seems like a good hedge for Tensions.

I would think 2 things are defensive. 1) Cash but zero returns.

2) Growth, and dividends paying companies. Companies that increase dividends sustainably is the best defense. Doesn't mean the price won't drop but u can sleep knowing that market will have to pay for that cash flow going back to investor hands. But the caveat is always make sure that the price you bought is defensible too. 

I would think leveraged instructments with sustainable yield of 7% is fair and attractive value. Anything better is a bonus or that you misjudge the "growth" that is - defense buffer.

As for net cash company that is still growing, I would think anything above 5% yield is attractive.

This is just sillyinvestor agar agar thinking, you can calculate all the % of growth and the DCF etc. 

But with market showing so much character ignoring Kim, think he is hopping mad if he has shorted the markets thinking his blasts will trigger a lasting sell-off. 

What is defensible to u?

Or perhaps you think of defensive like defensive actions and mind? 

But we must not kid ourselves lei. Let me test u. "Nimble" a term make famous by AK. It's a defensive tactic, test water. Water hot, run. Fighter another day.

If u have 20k,(e-book teaching people how to invest with first 20K)  how much u invest is consider nimble?? 1% 5% or 10%

Answer? 

Please la. 20K  how to nimble? 

Lol. If u say 1-2 % is nimble. U got 200-400 to play. The commission buy and sell will wipe 10-20% of your return le.

That is not to say we should not invest if we only have 20K. But we should call it as it is. We "hoot" to learn how to market works and pray.

LOL

16 comments:

  1. Quote : "What is defensible to u?"

    "Defensive" stocks are available during market crashes. Still the same as in 18XX to 19XX.

    It is no trick at all to be right on the market. You always find lots of early bulls in bull markets and early bears in bear markets. - Jesse Livermore (1877 to 1940)

    ReplyDelete
    Replies
    1. Hi CW,

      U go for defensible price first. Lol

      Delete
  2. Well, even a dumb investor who puts $20K into a global stock ETF at the top of the market in Oct 2007 will have more money today.

    Question is whether he can survive & sit still from 2008 to 2012?

    Another dumb person who puts into 60:40 global stocks & bonds, and rebalances annually will have done even better.

    ReplyDelete
    Replies
    1. Hi Anon,

      That person is dumb in 2009-2010, but smart in 2017.

      That person if he does DCA and is happy because he knows what he is doing is highly intellectigent

      That same person throw 20k and forget is rich.

      That person who put 20k in 2007 and come out better in 2017 does not exists

      Delete
  3. Sillyinvestor,

    England comprehension and semantics? How not to bite?


    What is a defensive stock?

    According to Investpedia:

    A defensive stock is a stock that provides a CONSTANT dividend and STABLE earnings regardless of the state of the overall stock market.

    Because of the constant demand for their products, defensive stocks tend to remain stable during the various phases of the business cycle. (Which in simple england means non-cyclicals. My england power or what!?)


    Now, are healthcare and telcos non-cyclicals? Hmm...

    ReplyDelete
    Replies
    1. Telco provide constant dividends for years until the 4th come and spoilt the market. Their earnings also more or less stable ... until ...

      As books say, market clash u still need to make phone call and use internet Ma.

      But well... defensive as a definition by textbooks will cover "Telco" or utilities .... sometime also media ...

      First time u join the fun in a "investment" post

      Delete
    2. Sillyinvestor,

      Its a trick question ;)

      I can't find any stocks in SGX with the name "Telco"; but I can find Singtel, M1, and Starhub.

      Are ALL of them defensive "telcos"?

      Evidently not all of them are affected the same by the 4th entrant ;)


      Its like throwing words around like "Blue Chips" ;)

      What?

      This is an investment post?

      I thought its about england comprehension and semantics!

      ;)


      Delete
    3. Lol!! Ok

      You are right then. It's a Comprehension with investment theme.

      Delete
  4. 2 Words: Consumer Staples

    Defensive stocks:
    XLP -- $23 at pre-GFC peak Sep 2008, now about $54; dropped -22% during 2008-2009.

    Offensive stocks:
    ITA -- $65 at pre-GFC peak Oct 2007, now about $169; dropped -60% during 2007-2009.

    Generic world stocks:
    ACWI -- started only in Apr 2008 - reached pre-GFC high of $45 in May 2008; dropped -56% from 2008-2009; now about $67.

    Dumb investors who sit tight can do OK. But must invest in right stuff. STI still haven't recover to pre-GFC high.

    ReplyDelete
    Replies
    1. Anon,

      Guess you are the same anon.

      That person is possibly one of the rare breed around in terms of 3M le. Defintely I 望尘莫及, no fight.

      That is active investing and prospecting at its height. Convinction calls, etc, all qualities I wanted.

      All the companies are not local companies. Perhaps for the benefits of the readers, u are share a thing or two about the criteria u used for the "offensive" and "defensive"

      Delete
    2. Those 3 are all large simple ETFs ... no need brains to invest :)
      You can just google them.

      "Defensive" are your Consumer Staples, like P&G, J&J, Coke, Pepsi, Budweiser, Constellation Brands, Altria, Philip Morris, McDonalds, Yum Brands, Colgate-Palmolive, etc etc.

      The "Offensive" is just for fun --- it's actually ETF of Aerospace & Defense companies. Those that make jet fighters, tanks, guns, ships, missiles, submarines, electronics, satellites, guidance systems, bombs, nuclear weapons, etc. They do well when economic cycles are in strong growth.

      Consumer staples & Defense capitalize on humankind's need for survival & basic instincts. Hence, as a group, these are evergreen businesses. Of course at individual level, some companies will fail, become obsolete, or bought over. All this is good creative destruction, as capital gets re-allocated to those that are most productive & relevant.

      ACWI is basically just mirroring companies on the MSCI All Countries World Index. You're investing into the human race. You can't get more simpler & purer than this.

      Just dump in & focus on your job, or other active income earning activities.

      If want to apply active investing strategies on ETFs also can --- potentially can earn more than just dump in & wait.

      But most people will lose more over 10-20 years with active investing because of fear & emotions.

      Delete
    3. Thanks Anon,

      US market, always interested but never dare take the plunge. Although I had an acc link up US market. Maybe it's really time to let go of those packages.

      Thanks for the alert.

      Delete
    4. interesting ETFs, never heard of these...
      since these are US domicled. arent we subjected to the withholding tax (WT)?
      no comments on the first two.
      but the last one - ACWI. why not just the IWDA or world index equivilent? any particular perference for ACWI over others?

      Delete
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