The Importance of Remaining Confident and Patient with A Great Company

Google is one of the top 3 holdings in my US Growth Portfolio.  On 7th February 2023, its share price plunged from USD 107.64 to a low of USD 89.13 on 24th February 2023, a decline of 17.2% in just 2 weeks.  The reason for the decline is due to the Microsoft, another tech giant which is also one of the top 3 holdings in my Portfolio, incorporating Artificial Intelligence (AI) into its search engine Microsoft Bing and Edge browser.  This move, though expected, came too soon and it caught Google off-guard.  In an interview, Microsoft CEO Satya Nadella said that he wants to make Google "dance" with their new chatbot "new Bing".

This move definitely created some stress within Google, and that 'forced' them to push out their own version of AI, Bard.  It was probably not ready and unrehearsed, as Bard gave an incorrect answer to the question posed during its presentation.  To make matters worse, in mid-April, Samsung released news that it may have the intention to change Google to Microsoft Bing as the default search engine in their phones.  All these news definitely spooked many investor and that exacerbated the fall in Google's share price, splitting investors into 2 camps.  On one end, there were naysayers within the investing community, worried about the future of Google with the up and coming competition from Microsoft.  On the other end, there were supporters who were not too concerned with the small market share of search engine Bing as Google remains the giant in the field.  On top of that, Google remains very much involved in the research and implementation of AI, and being a cash generator, investors are confident that Google will turn the situation round back to its favour.  For me, I remain confident as well, and I just slowly nibble the shares of Google by dollar cost averaging.

True enough, on 10th May 2023, Google's CEO Sundar Pichai and Google's management team introduced a more global, more visual and more integrated Bard AI.  This presentation event won praises by participants and analysts, and it definitely helped to restore the confidence of the investors, boosting Google's share price from USD 107.35 to USD 123.52 on 18th May 2023, a whooping 15.1% in the span of about a week!  Furthermore, on 19th May 2023, Samsung released the latest news that they will continue to use Google in their phones as default search engine.

This clearly illustrates that when the company's fundamentals remain strong, cashflow level remains healthy and its moat remains out of reach by other competitors, investors should remain confident and patient to let the value of the company emerge and reflect in its share price.  For the case of Google, what it needs is just time to work at its own pace to develop its AI program.

Closer to home, I have another holding in my portfolio that has been performing poorly recently as well.  ParkwayLife REIT, the landlord of 3 main private hospitals in Singapore, namely Mount Elizabeth Hospital, Gleneagles Hospital and Parkway East Hospital, and numerous nursing homes in Japan, has consistently perform beyond expectations.  It is one of the REITs listed in SGX that has consistently increase its distribution per unit since IPO.  

However since the US decided to increase interest rates rapidly over the past year, the performance of ParkwayLife REIT has been under tremendous pressure due to its low yield of approximately 3.3%.  As the yield is below the risk-free rates of T-bills and fixed deposits, many investors withdraw from their investment in ParkwayLife REIT and place their monies in these T-bills and fixed deposits to earn higher interests.  This is understandable because why settle for lower yield when a better return can be obtained risk-free elsewhere.

However, in my opinion, I think it is worthwhile to hold on to my investment in ParkwayLife REIT.  Based on the renewed master lease, after the renovation and enhancement works are completed for the 3 Singapore hospitals, it is projected that their distribution per unit can increase from 14.4 cents currently to 16.4 cents in 2026, an increase of about 14%, and a yield of approximately 4.3% based on current share price of $3.80.  Most importantly, I still believe in the fundamentals of ParkwayLife REIT, as their performance will remain stable, as long as Singapore remains a popular medical hub.  

In conclusion, always study the fundamentals of a company before investing your monies in it.  Once invested, ignore the noise that may play with your emotions.  Remain calm and evaluate all scenarios.  As long as there are no deterioration of the business and fundamentals of the companies, just stay vested.  Of course, it does not mean that investors must constantly add on to their investments.  Very often, investors must remain rational and run the numbers logically.  During such times, if it does not make sense to continue injecting capital to a REIT like ParkwayLife REIT due to its unfavourable yield, just hold on to your investments, and only continue to dollar cost average into the shares when the environment is more favourable.  Similarly, if Google's share price has run way above its fundamentals and investors do not wish to average up, then it is always good to keep cash and remain patient for opportunity to come knocking.  Remember that sometimes, it is better doing nothing than doing something.  Barista FIRE, here I come...!