On... 2018

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The good news is I beat the market in 2018 (ASX200: -6.99%, Me: -2.94% including dividends). The bad news is I am way below my base case target (Target: 10% CAGR).   




In order for me to achieve my base case target, my return next year would need to be circa 25%!  This would be a tall order, especially given the market conditions.




2018 appears to be a bad time to start my investing journey. It is believed that the poor performance of the market this year is driven by the US - China trade war, Quantitative Tightening and interest rate increase by the Federal Reserves, Australian Banking Royal Commission and Brexit among other things. These are some of the macro views but I believe that the market does what it does and these explanations only come after the fact. These issues highlighted by analysts and economists does not come as a surprise and should largely already be priced in by the market.

The best performing stock in my portfolio this year is EVN (Evolution Mining Ltd), +18.14% to date. EVN was the second worst performer at Q3 2018 and rebounded to the top performer by the end of 2018. When the gold price was in a downtrend circa September, it felt like it would just keep falling, especially with the FED expected to raise rates a few more times through to 2020. It definitely felt stupid to hold a gold miner back then. For whatever reason (commonly believed to be safe haven buying due to the increased volatility towards year end), gold prices and the miners started to pick up and performed strongly.  I definitely did not expect this to happen; I just topped up when I thought prices were low and felt that gold/gold miners were oversold.

The worst performing stock in my portfolio this year is MYX (Mayne Pharma Ltd), -39.8% to date. This was a momentum stock and I guess the buying momentum stopped. I still hold this stock and believe that it is oversold, without any bad news. MYX is also considered a defensive stock being in the health care sector and may be a good hedge if there is a slowdown in the global economy.

What about 2019? My crystal ball tells me the market sell down at the end of 2018 may continue into 2019. Some head wind in the horizon are factors such as the continuing US - China trade war, slowing global economy, continuous rate hike by the FED (2 to 3 more expected), hard Brexit and most of all the reduction in liquidity as a result of the Australian Banking Royal Commission. 2019 is also election year and Labor seems to be the winning pick by pundits. A win by Labor is expected to be bad for the markets, with their proposal of the franking credit and negative gearing removal.

What does this mean for my 2019 plans? Although significant headwinds are expected, I am not confident enough at this stage to use macro views to drive my investment strategy. Therefore, I will continue with a bottoms up approach and continue to buy whenever an opportunity presents itself.

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