Saturday, February 1, 2020

Likely buying opportunities: Coronavirus

It looks like we may finally be getting the catalyst to start a correction or recession, the moment value investors have been long waiting for. This will offer an opportunity to purchase more shares at low prices. China was already hit with trade taxes with the US, and had been slowing down due to it. And now paired with the Coronavirus, the hit to the second largest economy will be impactful. Factories are closing down and citizens are being asked to not go to work or work from home. Stores are also closed such as Starbucks and Apple for example. This will have ramifications globally if it extends for a long period of time, as revenue is basically stopped.

We have cases of temporary blips in market valuation from pandemics like SARS or Ebola, with corrections around 20-25%. However, nobody knows if the Coronavirus will be far more severe. Currently the number of cases for Coronavirus is already exceeding that of SARS, but today we have much better technology to combat these viruses.

In terms of buying, I have not pulled the trigger. I think in the month of February, my cash pile will start to approach $30,000 USD. My plan will not be to deploy it all at once and try to time the bottom. I will add as the market drops or stays depressed. For example if we get to -10% off S&P highs I will start deploying a bit. And -15 to -20% I will deploy more. 

Going forward, I plan to invest heavily into a few names that I feel are winner type companies. I have already built a portfolio over $800,000 USD in a diversified set of dividend aristocrats and consistent dividend payers. I think it's getting too diversified, to the point that it hinders performance. That is the nature of diversification, it dilutes the good ideas with the average ideas. However, I am not saying in any way I am not happy with the portfolio, it has done its job very well and is very conservative.

I think all my positions are great holdings, but only a few are truly outstanding companies. Going forward, since I am still young, I will focus more on growth and dividend growth, and less on the dividend income. I have found that the companies that yield higher but raise dividends more slowly are hindering growth opportunities for my portfolio. And since I am not 30 years old yet (almost), I want to start prioritizing some growth since I have already finished building much of my portfolio's foundations. I want to start picking some companies with high growth which will in the future after many years become the new set of dividend aristocrats, and by then their yields should be high and growth lower.

Watchlist (my high growth selection):
Technology 
 - ADP: Automatic Data Processing
 - MSFT: Microsoft

Financials
 - MA: Mastercard
 - V: Visa

Discretionary
 - ROST: Ross Stores

Healthcare
 - SYK: Stryker
 - TMO: Thermo Fisher Scientific

Staples
 - MKC: McCormick
 - CHD: Church and Dwight