My top 3 stock buys in 2020 (and worst)!

After last week’s article on global macro – which was pretty heavy, I figured let’s do something lighter and more fun this week.

Quite a few of you have asked me about my portfolio returns this year.

So let’s do exactly that.

In this article, I will share my top 3 stock buys in 2020, and the 3 worst ones.

Portfolio Strategy in 2020

My portfolio strategy in 2020 was not a complex one. 

I’ve been sharing my moves very publicly on Financial Horse via the weekly articles.

Essentially:

• I started selling stocks in end Feb when it was clear the global COVID situation would escalate
• I started buying stocks in end March after the massive sell off and unlimited liquidity commitment from Feds
• I’ve been buying stocks consistently every month since end March
• I started slowing the pace of purchases in early Nov around the election period

BTW – We just launched a massive Christmas Promotion for all investing courses. 

If you’re stuck in Singapore in December, why not learn to invest? 2021 will not be straightforward for markets – likely with lots of opportunities for investors!

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My Portfolio Returns in 2020

In 2020, my overall portfolio achieved a 20+% return.

I deployed substantial amounts of cash into the markets this year, to the extent where almost 1/3 of my current portfolio was purchased in 2020 alone.

That’s also indicative of how much cash I had sitting on the sidelines heading into 2020, because I believed something big was about to happen in global macro. 

Never expected it to be a pandemic though.

Full portfolio breakdown is available on Patron for those who are keen.

Returns for all asset classes in 2020

The S&P500 returned 14% this year, so viewed this way my portfolio handily outperformed the S&P500.

BUT – I don’t think year to date numbers are a good comparison, because that ignores the path that stocks took. There was a massive decline in the March – April period that active investors would have capitalized on.

So I don’t think the year to date numbers are very useful benchmarks.

What’s interesting though, is how strong Treasuries (TLT) and Gold (GLD) did this year. 19% and 16% returns respectively. 

You could have just held a 50-50 TLT/GLD portfolio this year and made 18% returns. Crazy stuff.

My Top 3 Stock Buys in 2020

I generally don’t like focusing on my wins because I find very little learning there.

Success has many mothers, but failure has one.

So I always find there is more learning to be had in studying failures than success. 

So let’s touch quickly on the successes in 2020, and spend more time on the failures.

Advanced Micro Devices – NASDAQ: AMD (80% Profit)

The arrow above shows where I bought AMD, and I’m sitting on a nice 80% gain as we speak.

Semiconductors had a monster of a year and Micron was another big winner for me as well (50% returns).

But within Semiconductors, AMD was just a standout performer.

Their Ryzen 5 and Big Navi were absolutely beasts in terms of performance, and the slipups from Intel were pure icing on the cake.

The 90% gain for 6 months of work was fantastic, but I think AMD is cheap even after the massive rally. The world is powered by silicon these days, and whoever can make the best chips will get the best margins.

Again, you don’t learn that much from a success, so I won’t dwell on it.

Mapletree Commercial Trust – MCT (45% profit)

Mapletree Commercial Trust is one of my favourite S-REITs of all time.

When it went back to the 1.4 range during the April circuit breaker news, I just took the opportunity to load up.

Didn’t know how the future would play out – but the opportunity to pick up Vivocity and Mapletree Business City at such prices was too good to pass up.

Interestingly, the April circuit breaker turned out to be the bottom for MCT, whereas for many other REITs the March liquidity crunch was the bottom.

It’s about a 40-50% gain for me now, but even at current price I still think it’s a good buy. Short term rentals will stay weak, but an era of low interest rates is going to work wonders for real estate. 

I would take the opportunity to load up on high quality real estate.

Gold – GLD (20% profit)

In terms of percentage returns, gold was quite unremarkable at 20%.

But I had a huge gold position in my portfolio heading into 2020, to the point where it almost forms 15% of my liquid net worth. 

So the 20% return might look unremarkable, but in terms of absolute returns this was massive for me – because I hold so much of my wealth in gold.

I was long gold in Jan 2020 because I believed we were entering the later stages of the long-term debt cycle, and that the next phase would involve depreciation of fiat currency.

I didn’t know how or when, but I knew that having protection via gold would made a lot of sense for diversification. 

And that bet paid off well this year.

But again – I think the real action for gold has barely even started. The coming years are going to see crazy moves in the fiat, interest rate and FX world. Which will be good for assets like gold or Bitcoin which have supply independent of central bank actions. 

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Top 3 Stock Regrets in 2020

And now, let’s move on to the juicy stuff.

My biggest investing regrets in 2020.

Almost everything went up in 2020 if you bought it at the right time, so the biggest regrets for me are not money that I lost – It’s opportunity cost.

It’s money that I didn’t make, rather than money that I lost.

Cloudflare – NET (NYSE) – Missed out on a 4.5 bagger

The chart above shows the tragedy that was Cloudflare for me.

I bought the stock in late Feb at about $17. I sold it in May at about $30 for almost a 100% profit. 

Not too bad for 3 months of work right?

Boy… was I wrong.

As we speak, Cloudflare trades at $77, a full 4.5x higher than my buy in price.

Definitely kicking myself on this one. 

I remember writing and writing back in April on how the conditions were ripe for a dot com style scenario like 1999 – where you have easy liquidity from the Feds, the world’s money flowing into US because of a global recession, and all flowing into one hot sector that supposedly can pull off miracles. 

Exactly the same dynamic as 1999.

In hindsight, that call turned out to be absolutely right and small cap tech stocks are partying like it’s 1999 now.

BUT – I failed to connect the dots myself and I sold Cloudflare for a measly 100% profit, when it could have been 350%.

Very similar dynamics played out for the other tech names – Shopify, Amazon, JD, Tencent, Meituan etc.

Definitely kicking myself for not going bigger into these names in April.

Bitcoin – Should have loaded up at $6,000

I’m pretty bullish on Bitcoin.

Reasons are very similar to that of gold – I think governments will try to depreciate fiat currency, and any store of value that doesn’t have its supply tied to central bank actions will benefit. This includes gold, real estate and of course bitcoin.

Bitcoin traded as low as $6000 during the March liquidity crisis.

I remember thinking about loading up then, but I chickened out and bought a bunch of boring REITs and Banks instead.

The same REITs/Banks are now on a 50-60% profit now.

Bitcoin? A 200% profit.

Definitely kicking myself for not pulling the trigger.

TLT (or Eurodollar futures) 

This last one was probably my worst mistake.

I spent most of 2019 talking about how interest rates were going to zero in the next crisis.

In fact, in the FH Course, I even talked about how Eurodollar futures were a great way to do a leveraged bet on this (Eurodollar futures basically track the cost of USD borrowings outside the US). There’s a full article in the FH Course on this topic.

But then… I never actually got around to placing the bet.

Life got in the way, and I got too greedy trying to time it just right (this is a bet that you lose small amounts every month, until you get it right and get a massive payout), and I never made it.

Then of course March 2020 happened and interest rates went from 2.5% to 0% in 2 weeks, and effectively the entire trade was over.

In hindsight, once I knew that COVID would get out of control (and I wrote a bunch of articles on this in Feb), it would have been the perfect time to place this bet.

But in reality, the speed of the Fed rate cuts caught me by surprise. They’ve never gone this far this fast in history – it always takes months. This time around the Fed took out the entire 2008 playbook and more in 3 weeks.

But that’s hindsight though. 

Realistically, I should have just made the trade in early 2019, and kept increasing it as 2019 played out.

Lessons learned?

History never plays out the exact same way, so it’s pointless to fixate on these mistakes and wonder what could have been.

2021 is going to be another big year for investing, with a ton of opportunities to make money again.

So let’s try to focus on what I learned from my 3 top successes and mistakes this year.

1. Don’t play it too safe – markets move very quick these days

It was a pretty safe year for me.

In March, I was sitting on a pretty big cash pile so the declines never really troubled me.

All it meant was that I could buy more great stocks at great prices.

The regret of course, was not taking more risk – not deploying cash faster into the market once value started to emerge, and the Fed backstop was in place.

We always talk about how technology has raised the clock speed of every industry, and we forget that the same thing applies to investing.

What took 2 – 3 weeks to play out in the past, now takes 2 – 3 days. The entire world has sped up because of how internet has revolutionized information access, and the stock market is no different.

Everything just moves really quick these days. 

Not just in business, but also stocks.

2. Make the trade

There were trades like Bitcoin, TLT, Eurodollar futures that I was very sure of, and had a fantastic risk-reward profile. 

It was risking a small amount of money, for a high probability outcome with a large payoff.

In short, they were the perfect macro trades.

BUT I got too greedy, and I tried to wait for the perfect time to execute them.

You can’t time these trades down to the wire. As long as your cash position allows for it, just go in, and keep increasing it as more information comes to light.

3. Didn’t bet big enough on high conviction trades

Then there were trades like MCT, AMD, DBS etc that I was very sure of, and I actually made.

For those, I could have upped the size of the trade even more, and make even bigger profits.

This one’s probably clouded a bit by hindsight though, because if stocks went the other way I would be happy I hadn’t gone in so big. 

It reminds me of a story from Stanley Druckenmiller.

It was 1992 and Stanley was betting against the British Pound. He had a $1.5 billion pound short on the GBP.

He explained his idea to George Soros.

George thought that Stanley was absolutely mad. 

If Stanley was right, this was going to be the trade of the century, and he couldn’t believe his protégé was only betting $1.5 billion on it.

And so the next morning, he asked Stanley to increase the bet from $1.5 billion to $10 billion. 

And of course, the rest is history.

The Bank of England broke the peg, and George Soros pocketed a cool $7 billion in profit.

None of us are George Soros of course, but we could still learn a thing or two from this story:

When the odds are in your favour, don’t be afraid to bet big.

2021 will be a big year again

I’ve mentioned before that I think the next few years will be the golden years in macro investing, and I stand by that call.

We have an uncertain COVID recovery, massive debt overhang, rising populism, the greatest recession since WWII, and the fourth industrial revolution. All taking place at the same time as we approach the end of this long term debt cycle, with interest rates locked at 0.

So I just think 2021 is going to be a massive year for investors.

Whatever mistakes you made this year, or whatever successes you reaped, that’s all in the past now.

No point dwelling on them.

2021 is a new year, and all scores are going to be reset.

Game on!

I would love to hear from you though. What was your biggest stock investment success / mistake this year!

BTW – We just launched a massive Christmas Promotion for all investing courses. 

If you’re stuck in Singapore in December, why not learn to invest? 2021 will not be straightforward for markets – likely with lots of opportunities for investors!

Check it out here!