Deploying Capital at All Time Highs

Our portfolios are hitting all-time-highs every other day. It’s a great feeling. But with the recent rally in both banks and S-REITs, a new challenge emerges for the long-term investor: where can we put fresh capital to work?

Let's keep our eyes on the prize: Buying good businesses at fair prices that let us sleep well at night while our portfolio makes money for us. 

My Simple Toolkit for Finding Value 

Among the blue chip stocks in my portfolio, I prefer to fall back on simple, powerful financial metrics to ground my decisions. 

  • Price-to-Book Value: For Banks and REITs, this is an important metric due to their nature as asset-heavy businesses. The historical average P/B value is one useful yardstick to use when deciding whether a stock is cheap, expensive or fairly priced now.
  • Dividend Yield: As a stock's price rises, its dividend yield falls. If a stable blue-chip's yield drops to a multi-year low, it's often a clear sign that the stock is getting expensive. Dividend yield gives an estimate of the immediate cash-on-cash return from investment.

Recent Moves in Market ATHs

Even with the market climbing, I use the same principles to find opportunities to deploy my free cash every month. Here are some of my recent additions:
 
DBS at $50.03: I added to my position in DBS despite it trading near a historically high P/B ratio above 2.0. The forward dividend yield remains a very attractive 6% at $3 per share. It's a core "Main Dish" I'm willing to pay a premium for.
 
CFA REIT ETF at $0.823:  The entire SREIT sector has been recovering, with the Singapore Overnight Rate Average (SORA) falling significantly this year and hovering around 1% now. This trend in SORA is likely to continue with the US Fed signalling rate cuts to come this year. 
 
Individual REITs: I've also been selectively adding to individual names, to align with my preferred position sizings. I added to Suntec REIT, Parkway Life REIT (PLife), Frasers Centrepoint Trust (FCT) and CapitaLand Integrated Commercial Trust (CICT). 
 
On top of P/B and dividend yields, my personal preferences for position sizing also come into play. Certain blue-chip counters like Mapletree Logistics Trust (MLT) have great valuations as of now, but I have opted not to add any more due to an already-sufficient position sizing. 
 

What moves are you making now that the market is at all-time highs?

Disclaimer: This blog post is for entertainment purposes only and does not constitute financial advice. Please do a your own due diligence

 

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