This isn’t so much of an analysis I feel. it is very clear cut. 2 transportation counters that wasn’t doing very well.
Fundamentals and Economic Moats
SMRT provides the rail transportation that majority of Singaporeans rides on while SATS focus on servicing the regional airports and food catering.
They are very defensive in that they deal with perishable services that has to be undertaken to maintain subsistence.
Decision to buy and sell
SATS (Click to enlarge)
SMRT (Click to enlarge)
- Should you have been vested in these counters from the lows at the start of this rally, your decision might be to ride out the horse throwing you off this bull market. Whatever profits made might go back to zero but you will be able to collect more.
- On the other hand, nothing beats earning your dividends early. Watching your capital shrink to zero and then go negative after 2 years is not a good idea as well.
The right decision I feel is probably:
- basing on the moving averages, take half or one third of the investment and profits off the table when it moves below the 200 day moving average.
- should the trend turns back up above the 200 day moving average, you get a re-entry point. Not much opportunity loss there and the move could be just as ferocious.
- have a x% drawdown from each current value of your portfolio. if it goes below this x%, offload the losers and those that would not do so well.
- in every investment horizon there are bulls and bears and they move in cycles. long term investing is a bet on sustainability of the companies you invest in as well as a punt on the macro-economic conditions being splendid going forward
- preserving psychological capital is sometimes as important as preserving your cash holdings.
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Monday 7th of February 2011
I doubt it will be much of a defender against a huge correction Willy.
Sunday 6th of February 2011
Very informative post.. I am considering SMRT as on of my defender stock.