So, the stock market year 2020 starts tomorrow, after an amazing year of growth, but this year is full of question marks.
The year starts contradictorily; Trump seems to actually be making some deal with the Chinese, but at the same time, fear & greed is red at 93, when a year ago at this time, it was somewhere under twenty.
What does your game plan for the year look like? Are we going all in with maximum leverage, or are we taking profits from the Santa Claus rally and waiting?
My thought process is as follows:
January will start with a heavy stock weighting, focusing on small domestic companies that I could imagine being on the menu for eager investment savings accounts (OST-tilien). During January – sooner or later, depending on how it starts – I’ll significantly reduce stock exposure, leaving only those I see as long-term guaranteed growers and shifting funds towards cash. I expect a correction during Q1 and a good buying opportunity, aiming to capitalize on potential market overreactions but not making long-term investments.
This is the current plan. I fully realize that everything can change in an instant and it’s not worth clinging to anything, but I’m keeping a tight rein, with stop-losses active, and shifting from the net-fishing of 2019 to precision ice-fishing with short jolts.
Fear & greed don’t correlate very well with the S&P, except for the bottoms (FG bottoming → SP500 rise) but it’s worth following, we haven’t been this high in over two years.
A slightly more cautious approach than usual… No leverage used and a little cash on hand. In addition, gold accounts for about 8% of the entire portfolio.
I’m trying to focus on companies that I could imagine adding to and holding through even a bit stormier times.
Regarding OST, I haven’t thought about what I would do yet.
As for the investment savings account (OST), the plan is also clear. I’ll acquire potential foreign non-dividend growth companies and so-called lottery tickets, with the aim of capitalizing on, for example, the significant volatility of small Swedish biomedical companies, where daily fluctuations can easily be tens of percent.
My index weighting used to be >90%, but at the end of the year, I cashed out some of my index funds, and now, from the start of the year, I plan to make carefully considered long-term stock picks. The kind you can just hold through the storms and surges. Maybe throw in a couple of “lottery tickets” too.
Perhaps after the market opens today, a little observation to see what starts to happen. Then gradually make my moves.
My plans don’t change much. I still try to accumulate and primarily own high-quality companies with a competitive advantage*. If a portfolio company turns out not to meet my criteria, I kick it out of the portfolio quite quickly. Taking profits can also be allowed in certain situations. I try to maintain a lot of caution, playing what you might call defensive, but then again, I’ve been careful for at least 2 years now. I try to keep/have kept my cash balance around ~20%, and for me, that’s a good amount that keeps some room for maneuver. I just have a relatively small portfolio, so when I make a few purchases with a sum that’s worth buying, that cash balance quickly dwindles so I don’t follow my cash position to the exact percentage.
I’m really bad and somewhat lazy at anticipating market movements, and it feels like if I’m more passive than active in following and anticipating markets, my investments seem to go better (avoiding unnecessary tinkering). Even now, I thought the December slump would repeat, but history was no guarantee of the future. It’s enough for me to know superficially where things are going. Generally, if it looks like the markets are really bullish, I at least try to be aware of it and don’t start buying in the hope of not missing out. Then, if the sentiment is really bearish and prices are falling, that’s when one should dare to buy. This can be really difficult, even for me, as a reminder of last year’s dip. But stock picking can be done under any sentiment! These are just my own thoughts that I feel are good for me. Everyone makes their own plans =-).
*I mainly look for companies with a competitive advantage. Of course, one could question whether, for example, Titanium or Vincit really have any competitive advantages, but I am aware of this, and the stocks are weighted in my portfolio accordingly, as I see best.
I could increase my cash position, but on the other hand, I want to fully enjoy the dividend treats. I’m expecting some kind of correction by February at the latest. Macro figures can, of course, always produce positive surprises, but if slow growth continues or weakens, I’ll probably perform a “Sell in May” action by raising my cash position to 50%. Well, this is actually just one scenario of what I might do. I strive for flexibility, surfing the market waves
Mostly the same idea as what @anon38833097 commented above. The goal is to concentrate holdings in companies that have a sustainable competitive advantage. I also aim to get rid of a few loose ends that are still hanging in the portfolio. I plan to increase cash weight and prepare for the next correction.
I believe the rally will continue, but if a situation arises where most fears have dissipated and the rally continues, I will lighten my equity weighting by 10-20%. I need to constantly assess my own level of euphoria; it might be slightly elevated already. Leverage has now moved close to zero (below 2%).
Plans for stocks (i.e., wishes​):
Kamux is the largest; if the story progresses, I might even add more.
Financial sector (low P/E ratios): These have a relatively large weighting (perhaps 30%). I believe the threat of very rapid disruption will diminish, and required returns will decrease (due to low interest rates). P/E ratios could even increase by 20% through share price gains. Will lighten at some point.
Index (world excl. USA): I don’t know what to do. Maybe I’ll gradually get rid of it.
Emerging markets (PYN+IS3N): I’ll keep them.
Russia interests me, but maybe 3% in Gazprom is enough.
Talenom: Perhaps I should lighten up due to valuation, but I probably won’t as long as things are progressing.
UPM: A small reduction is possible when the 10-year mark is reached at the end of January.
Real estate (Citycon, O, Tanger): Relatively small weighting, but I’ll keep them. I’ll lighten up a bit if valuations rise.
Interested in investing in: Eezy, Remedy… Need to research more thoroughly. I sold the Fodelia shares I got from the offering, but when the new online store opens, I’ll test it and reconsider based on my experiences.
I got a slightly weak feeling about the forum favorite Relais based on the extensive report, but perhaps I should re-examine it.
Oh, and gold: if fears disappear, I’ll buy physical gold, maybe 5% of the portfolio. Perhaps even earlier.
These markets are a pure joke. It reminds me of 20 years ago when bulls were queuing on street corners for stocks.
Apparently, before the share savings account, it wasn’t profitable to invest in anything, but only now, at tens of percentage points more expensive
E. This further strengthens my belief that I’ll gradually increase my cash position and stop using even the little leverage I have. Slowly, because especially small companies are being bought at any price.
That Nokia is a big question mark. 5G seems to be similar to Wifi in terms of radio network. With Wifi, we can achieve the same data speeds, and what’s more, calls made via mobile phones are transferred through Wifi to the LTE network using VoLTE technology. So, this 5G might turn out to be a disappointment for mobile network providers. Let’s hope I’m wrong.
If Nordea had Sampo’s P/E, it would be a €10 stock. Then, among smaller companies, Remedy is currently priced at a P/E of 15 according to Aston’s forecasts, and it seems cheap.
Are buyers also on the move on the Stockholm stock exchange when the index is soaring 2%? Compared to that, buyers haven’t even gotten home from work yet to start their purchases.
The point is quite good, but aren’t there other things driving today’s share price increase besides opened equity savings accounts? For example, the prospects of trade war relief?
Secondly, if investors are, for example, more willing to take company risk etc., because the return possibilities are bigger due to tax consequences, isn’t it logical that they are willing to pay a higher price? The factual tax advantage of the equity savings account is of course a controversial issue, but at an ideological level, couldn’t it be said that share price increases can be at a permanent level - as given by the tax authorities, so to speak?
Right, but everyone else is stupid etc… And apart from a few companies, there haven’t been any completely insane flights here.
P.s this is written a bit tongue-in-cheek, just generally perhaps also to break down investors’ attitudes towards markets and other investors. It might also come from my beloved business school, where at least they are so much smarter
Sold in the Santa Claus rally. Now I regret it a bit as everything seems to be going up could have left Nokia and Wärtsilä in the portfolio, for example. The plan for this year is to reduce trading and keep a large cash weighting. It might be that the temptation to stay out of the buying side is great if there are small dips. A quote from Investopedia on market cycles https://www.investopedia.com/trading/market-cycles-key-maximum-returns/#2-mark-up-phase:
As this phase begins to come to an end, the late majority jump in and market volumes begin to increase substantially. At this point, the greater fool theory prevails. Valuations climb well beyond historic norms, and logic and reason take a back seat to greed. While the late majority are getting in, the smart money and insiders are unloading.
But as prices begin to level off, or as the rise slows down, those laggards who have been sitting on the sidelines see this as a buying opportunity and jump in en masse. Prices make one last parabolic move, known in technical analysis as a selling climax when the largest gains in the shortest periods often happen. But the cycle is nearing the top. Sentiment moves from neutral to bullish to downright euphoric during this phase.
Yes, these rises are starting to make me wonder, there hasn’t been any groundbreaking news for the company in my portfolio, and the portfolio is green day after day. I have to say that the Q4 reports and financial statements are going to be very interesting. Companies will have to present strong numbers to reach an agreement with the market!
And my own moves are still being considered, but I will increase the amount of cash a bit and not buy at the same pace in the beginning of the year as I did at the end of the year.
so I don’t follow my cash position to the exact percentage.
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For example, the prospects of trade war relief?
And apart from a few companies, there haven’t been any completely insane flights here.