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3 Important Investing Lessons I Picked Up from 2021

·5-min read
Lessons Learned
Lessons Learned

As an investor, it’s important to learn and grow over time.

Keeping an open mind and learning from mistakes are some of the ways you can improve as an investor.

This learning journey doesn’t end as the stock market always throws up interesting scenarios for you to learn from and absorb.

By observing businesses and how they react or respond to competition or external events, you can also learn more about how they operate.

Armed with this knowledge, your investment decision-making process will be enhanced.

And as we grow and mature as investors, the ultimate goal is to make better-quality investment decisions that can help to grow our nest egg for retirement.

2021 was an interesting year as businesses learnt to adapt to the rapidly-evolving pandemic.

Here are three important lessons I picked up.

Growth amid adversity

The pandemic hurt a wide swath of industries such as aviation, tourism, and hospitality.

However, I discovered that there were bright sparks amid the chaos.

Certain companies had performed well despite the economic challenges.

Not only did they remain resilient, but they also posted surprisingly strong growth.

Take iFAST Corporation Limited (SGX: AIY) for example.

The financial technology company witnessed a surge in account openings as people went online to search for investment options.

For the first nine months of 2021 (9M2021), iFAST saw net inflows of nearly S$3 billion, pushing its assets under administration (AUA) to a new record high of S$18.38 billion as of 30 September 2021.

Meanwhile, the fintech business saw its net revenue climb by 38.1% year on year to S$85 million for the same period while net profit jumped by 63.6% year on year to S$23.4 million.

Another surprising winner was The Hour Glass (SGX: AGS), a retailer of luxury watches with 50 boutiques in the Asia Pacific region.

Despite being a brick-and-mortar business, demand for timepieces remained strong and led to a 62% year on year surge in revenue for its fiscal 2022 first half.

Net profit more than doubled year on year to S$62.6 million.

Software-as-a-service companies also reported strong revenue growth.

DocuSign (NASDAQ: DOCU), a cloud based e-signature provider, reported that fiscal 2022 third-quarter revenue jumped by 42.4% year on year to US$545.5 million.

There are other examples of companies that have chalked up higher revenue and earnings.

If you look hard enough, you can spot a few of these businesses that demonstrated their resilience.

Reacting and pivoting

The pandemic has also thrown up some examples of how businesses managed to pivot to stay relevant.

This is an eye-opener as it shows that management is willing to be flexible to adapt to changing business conditions.

SATS Ltd (SGX: S58) was a great example of a blue-chip company that pivoted successfully.

The ground handler cum food solutions group is slowly reducing its reliance on travel-related businesses.

For its fiscal year 2019 (FY2019), travel-related revenue made up 86% of its total revenue, but the proportion has declined to just 53% for its fiscal 2022’s first half.

Sembcorp Industries Ltd (SGX: U96) is also shifting its priorities to focus on renewable energy.

Its Investor Day highlighted this pivot and the utilities and urban development group intends to grow its profit contribution from its sustainable solutions portfolio from 40% to 70% by 2025.

Keeping cash on hand

2021 also highlighted the value of keeping cash on hand for attractive opportunities that may crop up.

The Singapore stock market saw a breath of fresh air close to the end of the year when two REITs were listed on the exchange.

With the cash built up from earlier in the year, I managed to subscribe successfully for units of Digital Core REIT (SGX: DCRU), a data centre-focused REIT with an initial portfolio of 10 data centres in the US and Canada, during its recent IPO.

2022 may offer tantalising investment opportunities as special purpose acquisition companies, or SPACs, make their debut on the local bourse.

Keeping cash on hand allows you to take advantage of such opportunities when they do come by.

Get Smart: Incorporating the lessons

These three lessons are by no means exhaustive.

As you continue to journey on, other valuable lessons may crop up from time to time.

It’s important to learn what we can from our observations and then incorporate these lessons into our investment process.

Only then can we continue to improve as investors and make better-quality investment decisions.

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Our safe-harbour stocks are a set of blue-chip companies that have been able to hold their own and deliver steady dividends. Growth accelerators stocks are enterprising businesses poised to continue their growth. And finally, the pandemic surprises are the unexpected winners of the pandemic.

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Disclaimer: Royston Yang owns shares of iFAST Corporation Limited and Digital Core REIT.

The post 3 Important Investing Lessons I Picked Up from 2021 appeared first on The Smart Investor.

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