ComfortDelgro: Why my thesis does not hold true anymore
Investing is personal. It is hard to determine whether one’s decision is right or wrong. Because, how sure can we be?
I am a person where I have to at least like or love the company to some extent before I buy it. And when I sell it, the reason why I bought it in the first place must not hold true anymore. Most people say it is best not to be emotional when it comes to investing. However, I believe there must be some form of emotional attachment to it.
ComfortDelgro was a stock that I like very much last year. I bought it on the premise that:
- Global travel and activity will resume
- Share price at June/July 2020 levels was near post 2008/2009 GFC crisis low
- ComfortDelgro’s share price recovered 75% in 8-10 months post-SARS
- Fundamentally, it is still a sound company and is one of the largest land transport companies in the world
Source: Straits Times. Pre-COVID days.
With no significant improvement in the COVID-19 situation, my view is that at least for this year, there will be very minimal global travel activity. Even though the vaccine was announced late last year, I felt that it was rushed and have my own doubts about it. We have seen many delays in the delivery of the Pfizer COVID vaccine in UK and other European countries, casting doubts on the credibility of the vaccine process.
Just by speaking with several cab drivers, I can tell that they are struggling to make ends meet. A few have candidly told me that it is the tourists and foreigners that make up a huge chunk of their income. Most of them will camp at Changi Airport to take passengers and that is where the majority of their income lies. With a significant reduction in the number of tourists from the last 9 months (almost 90% decrease), income generated by the cab drivers is badly affected. I don’t see this situation improving at least in the coming year. Many have cited that they are planning to stop driving taxis altogether as the daily rental of $100 does not make economical sense to them (they are enjoying a $20/day subsidy but that is not enough).
Also, we are seeing in a rise in the number of imported cases and I believe that the Singapore government will further tighten the border should this persists. This should further dampen the profitability of ComfortDelgro at least in the near term.
As much as I would like to hold on to winners, I am not certain how this year will play out and thought it will be better to take profits off the table. Furthermore, the current share price has run up ~20% since my entry price.
Should the share price corrects in the near term, I might consider to re-enter. For now, I shall hunt for other stocks that will support my macro outlook for this year.
What are your thoughts on the vaccine process? Do you think that global travel will resume partially this year? Share with us in the comments box below.
If you like our posts, follow our Facebook, Instagram and Twitter page (@financeandtoast) so that you do not miss a single update.
Finance and Toast