I recently started reading Howard Marks’ “The Most Important Thing: Uncommon Sense for the Thoughtful Investor.” While I appreciate the valuable lessons on risk management, I haven’t enjoyed the reading experience as much as I expected. The book, based on a compilation of his past memos, felt a bit repetitive and disjointed.
However, one memo title resonated with me: “You can’t Predict. You can Prepare.”
Today marks the beginning of 2025, and if you haven’t already encountered any market predictions for the year, brace yourself – they’re about to flood in this week. But as any seasoned investor knows, most of these predictions will likely prove inaccurate.
Similarly, I don’t and can’t predict how the market will perform this year. As a bottom-up investor, my focus is on the underlying fundamentals of businesses, not short-term price movements. I aim to make sound investment decisions over a longer time horizon, ideally three years or more.
That said, even assessing how businesses will perform involves a degree of prediction. And I acknowledge that my own assessments are likely to be flawed. Therefore, the key to preparing for these potential errors lies in adjusting my portfolio allocation and position sizes to a level that I’m comfortable with.
With that broader context in mind, let’s now zoom in and explore my outlook for how individual sectors and companies will perform in the year ahead.
Disclaimer: The following paragraphs contain my personal opinions and should not be considered financial advice.
Let’s begin with the counters in the Singapore market. I will follow up on the US counters in the next post.
With the exception of iFAST Corporation (SGX: AIY), my primary investment objective is income generation. This doesn’t imply I’m disregarding capital appreciation. However, the focus is on their ability to sustain dividend payments, which I believe will ultimately contribute to long-term share price appreciation.
Despite the lowered interest rates, I remain confident that Singapore’s three major banks, DBS Group (SGX: D05), OCBC Ltd (SGX: O39), and United Overseas Bank Ltd (SGX: U11), will continue to perform well this year.
Base on the current trajectory, I anticipate a slight increase in dividends for these banks in the coming year, with the possibility of a special dividend from UOB to commemorate their 90th anniversary.
Assuming the analysis of the impact of rate cut on my Singapore REITs holdings is correct, then Frasers Centrepoint Trust (SGX: J69U) and ParkwayLife REIT (SGX: C2PU) should be able to maintain their distributions per unit (DPU) for 2025.
However, Mapletree Industrial Trust (SGX: ME8U), Mapletree Logistics Trust‘s (SGX: M44U), and Mapletree Pan Asia Commercial Trust (SGX: N2IU) may experience a higher average borrowing cost as they renew their old hedges which were issued at lower interest rates.
That said, I think the impact is manageable, and as long as they can keep the occupancy and rental reversion up, DPU should not decline too much.
The other major segment of my portfolio is the manufacturing sector, which consists of AEM Holdings (SGX: AWX), UMS Integration (Ltd) (SGX: 55D), Micro-Mechanics Ltd (SGX: 5DD) and Venture Corporation Limited (SGX: V03).
As written in a previous post, I am positioning my portfolio for a recovery in the semiconductor related sector. Base on the latest quarterly results reported in November, there are signs of turnaround, and I anticipate better outlook and stronger numbers by the second half of the year.
Both HRnetGroup Ltd (SGX: CHZ) and The Hour Glass Limited (SGX: AGS) are facing headwinds in the current economics conditions. And I think the headwinds may persist for a while. However, both have remained profitable and their strong balance sheets should afford them to maintain their dividends as they weather the current storm.
Finally, iFAST is likely to continue to exceed its own guidance, and once iFAST Global Bank (iGB) becomes profitable this year, it should be re-rated by the market. Read this post for why I think iGB would succeed.
In summary, barring any black swan events, I am cautiously optimistic about the developments of the companies in my SG portfolio. Provided their potentials are realised, my SG portfolio could resume outperforming SPDR Straits Times Index ETF (SGX: ES3) this year.
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