Recently, many stock markets have went through a series of wild rides. In particular, I have witnessed US stock market triggered circuit breakers for 3 times within 2 weeks in early March 2020. Both COVID-19 global epidemic and the sudden downfall of oil price have surely sparked great fear which sends many stock indices downhill.
When most of my growth stocks' previous gains got wiped out, I start to feel uncomfortable. After spending some time to think it through, below is the summary of what I did for this month.
1) Re-deployment of capital from growth stocks to Put Warrants
I decided to sell off all my growth stocks due to two reasons.
Firstly, it was because the falling share price has defeated the purpose of me to continue holding them. Surely, the share price of growth stocks with solid fundamentals will eventually recover and rise even higher, but I am not so confident if such recovery can be done fast. I can't afford to waste my time to wait for years just for the share price to recover back. I should have slowly take profit in tranches when the growth stocks went above 50% gain before this bear market strikes in.
Secondly, I needed capital to increase my position in Put Warrants because at that time I felt that the COVID-19 outbreak is getting serious. On top of that, when the OPEC meeting in March 2020 ended in a not so good way, it sends crude oil price downhill sharply, causing massive and fearful selldown in stock market. This means I need to take advantage of that pessimism by adding in more Put Warrant position fast. Since my growth stocks' share price was beaten badly, I might as well redeploy my capital to buy more put warrants.
I am glad that I made that decision earlier, because as the HSI index falls, my first batch of Put Warrant became profitable. Then I slowly redeployed the capital to buy second and the subsequent third batch of Put Warrants. Although the third batch of Put Warrants are not so profitable, at least I managed to earn more than 100% of these redeployed capital to cover all my previous losses and generate additional cash for reinvestment.
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2) Conviction to hold dividend stocks with solid fundamentals
When the stock market was in crisis, I found many dividend stocks with good fundamentals somewhat become unusually attractive. So I sold off all growth stocks while continue holding good fundamental dividend stocks. Since I sold off all my Put Warrants to lock in profit not long ago, I have slowly bought in more good fundamental dividend stocks with unusually attractive dividend yield.
This week is quite a confusing week to me because after the Fed announces unlimited Quantative Easing program, all STI, KLCI, HSI and US indices reported gains with full gap up today, despite both the COVID-19 global epidemic is still barely under control and the oil price is still in strong downtrend. I will need to see how these indices behave this week. If stock market overall starts to show optimism by the end of this week, I may need to initiate Call Warrant positions early next week. We shall see.
