What to do when your portfolio is fully valued

[vader1671]

Hi all,

I have an interesting problem this new year. I'm taking a look at my portfolio and doing a full evaluation. I've reached a state where I have some spare cash that I really want to move into investments but none of the shares in my portfolio are stuff I'd buy in now. Most of the counters I have performed well but due to their good performances, I consider them pretty well valued.

So my conundrum is this,

1) I can look for new undervalued stocks to purchase with my monies, but I don't want to expand my portfolio any further. I'm pretty familiar with the stocks in my portfolio and don't think I have the capacity to follow a few more.

2) I can put money into my existing fully valued stocks and not get as good growth as I'd like.

3) I just shove everything into a cash fund and wait for my portfolio to become undervalued again (half of me hopes it won't since it'll be a paper loss)

I know that investment theory would suggest that I do 1). Since all my stocks are fully valued, I should sell it all and look for more undervalued stocks but I don't think I can expend the effort and I don't think the companies that I own have suddenly turned into horrible losers.

What would you do?

[wj888]

I am holding around 20+% cash and not intending to use it until there is a significant correction.
Don't buy if there's nothing to buy. Don't be rushed into buying whenever you have money.

[FFNow]

Patience is a virtue in investing. We have to be patient for our stocks to rise in value and also patient for the market to present us undervalued stocks.

Personally, in ur case, I would monitor my portfolio closely and if the fundamentals of the company turn for the worst or the market gets super overheated (market P/E in the 20s and above. average P/E ~15), I would like to divest.

[donutte]

I would recommend that you just do nothing and wait for the opportunity to present itself.

[cif5000]

Most of the counters I have performed well but due to their good performances, I consider them pretty well valued.

Just curious...what about those that didn't perform as well? What did you do to them?

[vader1671]

Most of the counters I have performed well but due to their good performances, I consider them pretty well valued.

Just curious...what about those that didn't perform as well? What did you do to them?

Thanks for the question.

I did another valuation for them. I divested most of them and took the paper loss and the lessons that went along with them. For most of them, the stocks that I bought into had a significant shift in management philosophy which I didn't like (and the market didn't like either) such as piling on debt for what seemed like a silly capex exercise or divesting good assets for no discernible reason.

I kept the stocks for one or two whose story I still wanted to follow, but I'm going to ditch them once they go south.

I bought even more into one stock which I really liked but I still quite a bit of cash on hand.

[FFNow]

Care to share what counters u own?

[newborn1000]

Fully valued now does not mean that price will not improve...........it can improve and still be fully valued & vice versa (price can fall yet still be fully valued)........its a dynamic target

I think vader1671 should consider whether he/she has earned enough......

[redcorolla95]

Some rough guidelines: the great Ben Graham suggests being only about 25-75% invested, Bogle (of Vanguard investing fame) suggests having bonds / cash as much as your age, i.e. if you're 35 years old you should be 35% in bonds / cash.

Even if they're 'fully valued', if you have a sufficiently long time horizon like 30 years, a return of 6-8% pa still beats cash / bonds. Another way to think about this is that stocks will be roughly 'undervalued' and 'overvalued' about half the time, so when they're 'fairly valued' the thing to do is to 'hold'.

Unfortunately, the ways to get out of the conundrum are simple but not easy: to expand the opportunity set by working harder and looking at more companies - and hope our value-buddies will give us some ideas. (It's like saying the secret to good health is eat more vegetables, exercise & sleep more - easy to say quite hard to do).

[vader1671]

Care to share what counters u own?

I own quite a few Blue Chips, most of them bought during 2008/2009 when they were ridiculously undervalued but have climbed steadily.

Capitaland
CapitaCommercial Trust
SMRT
Singpost
Suntec REIT
UOB KH
Challenger
MTQ Corp
SIA Engg

I just sold a few stocks
KS Energy (finally gave up waiting on the group's turn around plan. Their consolidation seems to be taking forever. Fundamentals cratered during the recession and never recovered. 3Q results weren't very good either)

K-REIT (Was a good stock, but their divestment of what seems to be 2 solid assets to buy 33% into that new Marina Financial Building doesn't look very good. Plus, I already own Suntec which also owns 33%.)

I'm holding onto a few but ready to let them go anytime
Rickmers (50% discount to NAV and they finally seemed to have gotten their act together. But the ridiculous amount of debt worries me a lot)

Global Investment (Very good dividends and I bought this stock when it was a penny stock, so I'm keeping it for a while)