Investment in ComfortDelgro is larger now.

On 1 June, I wrote a piece on the new normal and how I was less sanguine about ComfortDelgro's near term fundamentals then.

From a technical analysis perspective, at that time, ComfortDelgro was also trading firmly beneath the declining 50 days moving average (50dMA).

The MACD, a momentum oscillator, was also in negative territory, forming a lower high and a lower low.

With COVID-19 vaccines on the horizon, things are set to improve although, realistically, numbers might not return to pre COVID-19 levels soon.

Having said this, I believe that the worst is over for ComfortDelgro.

There is still that competition from Grab, of course, but Grab is facing the same difficult environment right now.

Anyway, when I invested in ComfortDelgro, I did it with the worst case scenario of a complete write off of its taxi business in mind.

At the time, basically, even without its taxi business, ComfortDelgro would still be able to maintain its dividend to shareholders.

ComfortDelgro is mostly a public transportation company and the entire sector is under immense pressure due to the COVID-19 pandemic.

However, is ComfortDelgro going the way of Singapore Airlines (SIA)?

As things are now, it is highly unlikely.

Apart from my feeling that SIA is less essential compared to ComfortDelgro when it comes to the day to day operation of Singapore (and I could be wrong about this), SIA had a much weaker balance sheet in comparison going into this crisis.

ComfortDelgro's balance sheet is relatively stronger and they should be able to weather the crisis without having to raise funds.

ComfortDelgro was also prudent in not declaring an interim dividend earlier in the year although its balance sheet could support a payout to shareholders.

As investors for income, if ComfortDelgro was a major passive income generator for us, the loss of dividend from ComfortDelgro could be a big hole to fill.

Although there is reason for optimism now, we have to be prepared for more of the same especially if the COVID-19 pandemic drags on.

As an investor for income, this was a major reason for my strategy during this crisis to concentrate my firepower on the accumulation of banking stocks.

The local banks have stronger balance sheets and the ability to pay dividends with relative ease.

Dividend visibility always gives income investors peace of mind while waiting for things to improve.

Still, in my blog of 1 June 20, I said that although I was less sanguine about ComfortDelgro, I would still add to my investment in the business.

At the time, I was thinking of adding to my investment if Mr. Market offered me a price similar to the NAV per share of ComfortDelgro.

However, as things are surely looking up for ComfortDelgro now, this is no longer a realistic expectation.

As ComfortDelgro's share price shot up and broke long term resistance on high volume a few days ago, I bought some.

However, as the stock became quickly overbought, I decided to wait for Mr. Market to take a breather and a possible retracement to support to happen before adding more to my investment.

Prices don't usually move up or down in a straight line for an extended period of time.

Having said this, the COVID-19 pandemic has reminded me of a major weakness in the business of public transportation. 

As passive income generators, these essential businesses might not be as dependable as I thought them to be.

I hope that ComfortDelgro will become a meaningful income generator in my investment portfolio again soon.

If Mr Market were to offer me lower prices from here, everything else being equal, I would probably add to my investment in ComfortDelgro again.

Related post:
COVID-19, ComfortDelgro and the new normal.