Our Top 10 Global portfolio has tripled over the past five years, beating the Nasdaq and STI
There is an investing saying that goes: “Time in the market beats timing the market.” This saying implies that passive investing is likely to be superior to active investing over the longer future. A good example would be how benchmark indices such as the S&P 500 and the Straits Times Index (STI) have gained positively over the past five years, as shown in Chart 1.
Beating the market through active investing does not just require skill; luck and discipline also play important roles. For stocks that are undervalued, assuming investors put in the effort to understand businesses that they plan to invest in along with conducting analysis on them (which collectively refers to the investor’s skill), they could still be unlucky in the sense that a better purchase and sales price could have been transacted.
Further, most investors have this propensity to be greedy when markets are on the way up and be seized by fear when the cycle turns. As they succumb to market noise, be it in bull or bear markets, it could be damaging to an individual’s portfolio. These are a few lessons that we have learned psychologically over the past five years for our Top 10 Global portfolio.
The Edge Singapore’s global portfolio of 10 stocks was incepted on Jan 24, 2020, with a minimum yearly update to the portfolio and 10 stocks. These initial 10 stocks were equally allocated to a US$100,000 virtual portfolio.
See also: Nintendo shares plunge on tariff fears, foreign investor retreat
Five years after inception, as of Jan 22, we are happy to report that we have tripled our initial portfolio value. Given that our portfolio is virtual, it does not account for transaction costs and exchange rate fluctuations in tracking the performance. Dividends and capital changes to individual stocks are accounted for in tracking the performance of the portfolio and the benchmark indices.
For the five-year period, our portfolio returned 201.3%. Comparatively, the best-performing benchmark index was the Nasdaq, which returned 123.9%, with the STI gaining 45.3% over the same period. The worst-performing index over this period was the Hang Seng, which lost 15.5%. Chart 1 illustrates the performance of all comparable benchmark indices over this five-year period.
Having a low base effect can also help with doing well in the stock market. Another lesson that we’ve learnt over the past five years is that investing in underperforming or negatively performing markets for the year can likely boost returns for the current period. There are likely to be more undervalued stocks in the market, possibly affected by the fear cycle and by market-related sentiment as opposed to idiosyncratic headwinds. A good example would be the Hang Seng index. Although it was one of the top performers for last year, it was also one of the worst performers over the five-year period.
See also: European defence stocks jump with military spending set to rise
Doing well in investing isn’t just about picking the right stocks but also about allocating strategically both geographically and in terms of industry and sector. Chart 2 shows the top five-performing individual stocks over the five-year period, while Chart 3 shows the five worst stocks. Something that we would like to point out is that, theoretically, an individual can only lose 100% of their investment in a stock (it is much less, assuming a company winds up and has a positive net asset value).
Still, the potential gain on a stock is theoretically unlimited, too. Realistically, doubling one’s money, which reflects an asymmetric payout, is not something unsurmountable. The lesson here is that we shouldn’t dwell on stocks that are no longer undervalued and held for sentiment purposes, and still expect better days to come. As the market changes, the valuations of companies fluctuate and we should be disciplined in adjusting our portfolio of stocks. If this is not possible, then individuals are likely better off investing passively through benchmark indices if doing well in the stock market is a priority.
For 2024, our global portfolio returned 18.4%, doing fairly well in absolute terms and decently against all benchmarks. Comparatively, over the same period, one of the top-performing index was the STI, which gained 25.0% — thanks to the three local banks whose combined weightage helped lift the local benchmark to near record levels. The top performing index was the Nasdaq, and in third was the Hang Seng, which returned 25.9% and 24.0% respectively. Only the Kospi lost 3.2% for the year. Chart 4 illustrates the performance of all comparable benchmark indices for 2024 over a one-year period.
The top-performing stock in our 2024 portfolio was London-listed Playtech, a UK-based gambling software development company. Throughout the year, this counter gained 60.4%, led by consistently strong financial performance and the sales of some of its business units, which would entitle shareholders to a special dividend. At the other extreme, Nasdaq-listed Mondelèz International was our worst performer, down 21.8%. The consumer goods company sells under brands such as Cadbury, Ritz and Toblerone. Unfortunately, record cocoa prices — a key ingredient for chocolate — continue to be a headwind for Mondelèz, negatively affecting profits and the outlook for the business. Persistent analyst downgrades over the year have also adversely affected the company’s share price, although we think Mondelèz is cheap at current prices over the future. Chart 5 illustrates the performance of individual stocks in our 2024 portfolio.
To stay ahead of Singapore and the region’s corporate and economic trends, click here for Latest Section
For the latest 2025 portfolio, our list of 10 stocks will be more active in the sense of larger allocation to smaller cap stocks and different geographical regions, unlike many global portfolios that are heavily skewed to the US, drawn by the depth and breadth of the world’s largest financial market and one bestowed with gushing terms such as “US exceptionalism”.
In our previous instalments, we have had more than one stock allocated to the same geographical region, mainly the US and China/ Hong Kong, and also a comparatively larger allocation to larger cap stocks. We are still proponents of value investing, where we analyse and pick companies that are undervalued, or in other words, trading below a price that is fair.
The portfolio this year is no doubt much riskier than previous lists over the five years and is much more geographically diversified, and would aid investors looking to diversify on a geographic basis at the portfolio-level.
Table 1 shows the list of stocks for 2025, in line with our yearly Lunar New Year tradition of recommending a portfolio of 10 stocks.
To reiterate, The Edge Singapore’s 2025 Global portfolio will be constructed similarly to the 2024 portfolio, where 10 stocks are allocated equally, wherever possible. The 2024 portfolio will be fully liquidated on Jan 30 using closing prices and the 2025 portfolio’s start date will be on Jan 31, which is the day this issue is published online, also using closing prices. The 2025 portfolio will not account for transaction costs and exchange rate fluctuations in tracking the performance, just like previous instalments. Dividends and capital changes to the stocks will be accounted for in tracking the performance of the portfolio. We will publish the actual virtual figures for the portfolio details in the upcoming Issue 1175.
Happy investing in the Year of the Snake and we wish our readers a successful investing year ahead.
Read the full cover story:
- 7C Solarparken: Solar energy player enjoying tremendous growth
- AB Hotel Co: Well-positioned Japanese hotel chain operator
- Alten: Tech consultancy to big MNCs building a steady international presence
- ANTA Sports Products: Multi-brand sports equipment market leader trading at cheap valuations
- Audinate Group: Sound growth prospects while building a strong moat
- Brembo: Braking specialist hits the right Formula for asphalt-melting growth
- Evolution: Betting on steady growth in new markets with M&A
- Knights Group Holdings: Consultancy delivering strong and consistent profitability
- Vici Properties: The leading REIT of Sin City rolls on
- Zhejiang Huahai Pharmaceutical Co: Well-established player trading at attractive valuations
Disclaimer: This article is for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy or sell stocks, including the stocks mentioned herein. This article does not take into account an investor’s particular financial situation, investment objectives, investment horizon, risk profile, risk tolerance and preferences. Any personal investments should be done at the investor's own discretion and/or after consulting licensed investment professionals, at their own risk.
