I sold my Nvidia and Activision Blizzard stock last night, They were up 28% and 7% respectively, and I decided that it was a good time to take some profit off the table. This brings up my cash by USD $60,000.
Sold Nvidia as I was getting more sceptical of people buying graphics cards during this time, even if they are staying home more. Business investment in their data centres may go down too. Activision Blizzard’s gaming business may do well in during the quarantines, but I’m losing confidence in their ability to make good games and retain fans.
I dislike selling, as my luck is that the stock will zoom up right afterwards. But there has been a big rally in the last 3 days, and there is a good chance of more volatility ahead.
While I booked a 5% – 6% gain in USD, I probably won’t convert it back to SGD, and keep the funds in USD. I lose on the exchange, and the high USD is likely to persist for a while.
New Investment Ideas
I’m looking to go into more defensive sectors to weather the recession. Here are my ideas.
- Johnson & Johnson. Sells consumer staples and medical devices. Good dividend yield of 3%.
- Walmart. With more people cooking and eating in, grocery spending is going to go up. Someone is benefiting from the toilet paper frenzy, might as well get a cut of that.
- Microsoft. Cloud computing and team-based apps should see a lot more demand.
Growing Passive Income
I’m also looking at some mutual funds which are posting attractive yields, in particular Allianz Income and Growth. It has yields of around 9% – 10%. This is a bit risky as their holdings consist of quite a bit of high yield bonds, which are in trouble now. But I think its reasonable risk.
I’ll apply a little leverage, as an interest rate of less than 2% is a no brainer. I can choose the amount I borrow, such that I would need a drop of 30% or more for a margin to be triggered. Just adding 20% of borrowing should be able to increase my yields to double digits.
I’m also mindful that I don’t buy any borderline investment grade bonds i.e. BBB. With companies depleting cash, we will see credit downgrades across the board. Once bonds drop below investment grade, many funds can’t hold them anymore and have to sell.
There won’t be much things to drive the market higher with the stimulus passed. The stimulus will take some time to work, and it will take up to 3 weeks for American families to receive their $1,000 + cheques. It won’t be enough either, and job losses in the USA will continue to accelerate. Tough times in the next weeks ahead.