A prime example would be the sudden bearish reversal in red-hot online gambling stocks due to proposed tighter regulations, while sentiment on the telecommunications sector was heavily weighed down by fears of tighter competition brought about by the Konektadong Pinoy Act.
Meanwhile, Real Estate Investment Trusts (REITs) are driven higher by declining yields on comparable fixed-income securities as the BSP continues to ease its monetary policy.
The property sector is also buoyed by easing interest rates, and sentiment is further improved by the efforts of developers to diversify their revenue streams away from the oversaturated mid-market condo segment.
Investors are typically advised to diversify their investments to reduce risk and improve their chances of achieving positive returns in a mixed-sentiment environment like this.
However, this does not mean that one must have exposure to as many sectors as possible.
After all, we have already established that not all sectors are made equal, as some are held back by headwinds while others benefit from tailwinds.
As such, mindless diversification for the sake of diversification could lead to exposure to challenged sectors.
Instead, a smart investor must first identify and avoid the bad sectors, while leaning further into the good ones.
The APS model portfolio
This is something we put into practice while constructing the APS model portfolio, where we diversify by including at least one stock from sectors expected to outperform, while excluding stocks from riskier sectors.
At the same time, we also place emphasis on the total returns of these stock picks, as we not only aim to beat the index and risk-free returns, but also ensure — as much as possible — that the portfolio provides our clients with positive returns even in the event of a market downturn.
In measuring the APS model portfolio’s investment performance, we put greater weight on total returns (which include dividends received) rather than just portfolio returns (capital gains or losses).
The 2024 iteration of our model portfolio delivered a full-year total return of 14.04 percent, which beat the PSEi’s full-year return of 1.22 percent.
Of the total return, dividends contributed 3.74 percent, which mostly offset the negative returns of certain stocks in our portfolio.
We carefully considered both the global and domestic policy backdrop when constructing the 2025 iteration of the APS model portfolio.
This led us to put a heavier weighting on dividend stocks and a lighter weighting on carefully selected growth and deep-discount value stocks.
Thanks to this strategy, our model portfolio outperformed the market by 4.41 percentage points, with a 6.28- percent return since its inception in June, versus the PSEi’s return of 1.87 percent over the same period.
Of the 6.28 percent total return, dividends made up only 0.24 percentage points, but we expect dividends to contribute a larger portion of returns as more payouts are declared.
Assessing and evaluating investment returns is essential to ensure that investments remain aligned with expected performance.
It helps investors determine whether current holdings are delivering value or if portfolio adjustments are needed.
Furthermore, comparing historical and current returns is a great way to ensure that these stocks have a consistent record of delivering returns — a sign that they may continue to do so in the future.
By doing this, investors can better align their strategies and tackle uncertainties with a logical and tested approach.
