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Here’s My Investment Outlook for 2021 (Is It A Year of Recovery?)

by Chris Lee Susanto 

29 December 2020

My Investment Results for 2020

2020 has been another great year for my portfolio.

My portfolio is up around 81.24% in 2020 compared to the S&P 500 total return of about 18.4%.

My CAGR since I started investing is around 35.13% (since 1 March 2015, as of end 2020), vs. the S&P 500’s of about 12.97%.

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2021 for me will continue to be a year to simply “do what makes sense”.

With that in mind, I am very grateful for 2020 – despite the setback of COVID-19 for our livelihood. I grew in many areas, including my education business, a little bit on the printing business, but more importantly, on the investment side of things.

This year will be a year of being disciplined with my health and also my relationship which I aim to bring to the next level – when that is completed, naturally, I think my business and investments will do well too.

Here’s A Quick Summary of What I Learned in 2020:

1) We will never know when exactly a stock will shoot up or reach that inflection point we have been waiting for.

All we can do is position ourselves in stocks that we find of value – be it growth, turnaround, or cyclical companies.

2) After we buy a particular stock, it may go down further, which is okay as long as we are eventually right in our thesis for the company, we will make a profit.

Stocks do not go on a straight line up.

Truly, having a long-term time horizon is one of the key competitive advantages any investor could ever have.

Remember, we are owning a stake in a business, so we should act like a business owner – not a stock trader.

3) Have faith in humanity. We have been through WW1, and WW2 – and yet, the stock market has risen over time.

See the chart below:

re-thinkwealth value investing blog

Source: Morningstar

If we stick with buying a quality income-producing asset or companies that can stand the test of time, we will likely do okay.

4) Stick with quality.

Be it growth stocks, value stocks, or turnaround stocks, it is always better to stick with solid companies run by capable management.

That is one of the ways to avoid a value trap.

5) Options, if used correctly, can be a business-like way to invest profitably in the market.

In general, LEAPs, selling puts and calls, can be useful in some scenarios and dangerous in other scenarios.

We have to increase our understanding of the company well enough to be able to use the right stocks or options strategy – gambling is doing something we do not understand.

6) The decision not to sell is a decision in itself.

Whether we buy, hold, or sell, each of those decisions has consequences.

Having a clear thesis and strategy of why we buy them in the first place and understanding the type of company it is, could help aid us in our buying or selling decision.

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Remember, most of the time, the big money is in holding and sitting on our asses – not in the buying and selling.

How Will 2021 Turn Out For Investors?

1) Vaccinations

2021 will likely be a year of tackling the current global pandemic. It is key that we win this battle and if we do, it will be good for the travel, energy, and entertainment sectors.

With Biden’s recent inauguration and his picks to support the US health crisis, it seems like the vaccination effort in the US will likely ramp up and will be more organized – with Dr. Fauci leading the effort.

In Singapore, the government has a strategy to vaccinate everyone (Singaporeans and long-term residents) by 3Q21.

We will also have to see if Biden will keep his promise of vaccinating at least 100 million shots in the arms of the American people in his first 100 days. Which from what we can see so far, it is likely not a problem. And a more ambitious vaccination plan for the Biden administration might be coming too.

Vaccination is the first step to win the COVID-19 battle.

My exposure: Pfizer, Carnival, and Delta Airlines call options.

2) Digital payments

Today, around 80% of the world’s transactions are still in cash. Companies that can have exposure and make money through digital payments will likely do well over the long-run.

My exposure: Facebook venture into payments.

3) E-sports/video games

Video games are now more than just a form of hobby, they are becoming like an entertainment source. This is a huge industry and it is expected to grow even bigger in the future.

My exposure: GameStop potential turnaround play (been long since 2017/2018 period).

4) Online shopping

I think that online shopping is here to stay. People are getting more used to buying things online – and COVID-19 has simply accelerated that trend. Which I think will likely be permanent.

My exposure: Facebook ventures into online shopping on Instagram and Facebook.

5) Cloud

I think that over time, more things are moving towards the cloud. For example, storage, gaming, and many more. This will benefit the companies that are a provider of cloud, like the data centers and the memory suppliers of data centers.

My exposure: Micron as one of its revenue sources is through providing memory for data centers. And GAN, being a leading player in the digital online casino space.

Will The Rally Be Sustainable for 2021?

I think yes because of 2 reasons.

1) Still Large Amounts of Cash on Sidelines & QE + TINA (There is No Alternatives)

There is still a large amount of cash that is unused on the sidelines.

This means that likely the rally still has room to grow as the Fed continues to do QE and as a result, with low-interest rates, there are simply no alternatives that are as attractive as equities in the market.

2) Vaccinations

With vaccinations, we are nearing a new hope that things will go more into normal.

Especially the fact that the vaccines are all very effective.

Hence, this will push the laggards and value stocks that were the loser of 2020 into a better place, hence, we will have a more even rally – that includes not only just the tech sector.

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Will The S&P 500 Be Up Again in 2021?

Based on a CNBC survey, on average, they expect the S&P to be up around 9.5% for the year. Other strategists, like Fundstrat’s Tom Lee, expect a rally more in line with 2020.

I think barring any black swan events, the vaccinations effort throughout the world coupled with TINA, will likely allow the S&P 500 to be up again in 2021.

Of course, the stock market is entirely unpredictable but I have faith in humanity’s ability to recover and emerge stronger.

As long as we stick to being a part owner in a wonderfully managed company bought at sensible prices, I think we will likely do alright.

Disclaimer:

The information provided is for educational and general information purposes only and is not intended to be personalized investment or financial advice. We make no promises as to the accuracy or usefulness of the information we present.

Important: Please read our full disclaimer.

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Chris Lee Susanto

Chris Lee Susanto

Founder of the value investing blog Re-ThinkWealth.com (if you type “value investing blog” in Google, his blog is likely the first one).

Chris is a big proponent of business-like stock investing. He invests in companies where there is value to be found, be it a turnaround, depressed, value, or quality growth company (compounders). He either buys the stock outright or he profits through selling put or selling call options – or buying call options (buying and selling options are especially dangerous for those who do not know how to properly execute it).

Some of the places where Chris has been invited to speak or have added value as a mentor or writer includes Singapore Polytechnic, SMU Institute of Innovation and Entrepreneurship (IIE), Dollars and Sense, The New Savvy, Value Walk Blog, Investment Moats, NUS Tembusu College, NUS Investment Society, CGS-CIMB Singapore and Internationally in Myanmar.

Being a full-time investor himself, Chris knows that he did not beat the S&P 500 return so far (as of the time of this writing) by listening to stock tips. So, when he teaches, he also doesn’t believe in giving stock tips as it is not sustainable for you in the long run. As of the time of this writing, he is still open to new application in his Value Investing Mentorship™ Club. Feel free to also join his free investment telegram channel here.

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