A game of investing

19 June 2016

 

Deal Fellow Investor,

Where from here?

Yesterday well over 2300 investors attended The Phillip Capital Investment Conference at the Istana Hotel KL. The ball room was a full house and hungry investors came to discover opportunity. There were many.  

17 prominent speakers gave us their take on what to expect moving forward.

Charts were presented showing slowing growth worldwide, high debt to GDP in almost every country, interest rates worldwide approaching zero and even negative, and increasing deflation. Brixit was discussed and its effects on Malaysia.

Brixit should have little effect on Malaysia as the UK is not a major trading partner. If there is a Brixit that should hit the pound and it would be cheaper to buy a house in the UK or fund your children’s UK education. A few Malaysian property companies such as S P Setia would suffer as well as Genting and YTL Power. We hold none of these for clients.

The general mood of the speakers was caution.  Some recommended buying high dividend shares in established companies. With growth slowing we should focus on stable income to at least beat inflation. Reits were mentioned as well as high quality consumer companies.

One speaker mentioned that with the onslaught of negative news, increased foreign fund selling, gloom and doom and low participation by the retail crowd the market could turnaround if the news flow turns a bit positive. Another words wait for less bad but do not wait for all the news to turn positive as that would be too late.   

Mr Ang Kok Heng, CIO of Phillip Capital spoke about known unknowns or potential black swans that can devastate a portfolio.  He said we can never know all the details of a company and to protect ourselves we must diversify and look for deeply undervalued shares. Anything can happen at any time.

Another way to minimize risk in this atmosphere is buy deeply undervalued companies.

He shared some examples of 2 deeply undervalued companies driven to attractive valuations that offer relatively low risk. Both were trading at less than ½ of book value.  They are possible privatization candidates which could result in windfall profits.

He also mentioned that never in the history of the KLSE which opened for trading in 1973 has there ever been more than 2 down years. Currentlythe  KLSE has been down for 2 years so statistically since 2014 and 2015 were down years the odds favor that 2016 will be a recovery year.

Investing is a probability game and the best we can ever do is make sure the odds are in our favor before we risk our capital.

Invest well and grow your wealth,

Bill

 

This cartoon shows the problems of Europe and  most developed countries. The ship might sink because of massive debt, high taxes, burdensome regulation, but notice the lifeboat sailing to safety. In the life boat are high quality dividend shares, Reits and perhaps some gold and cash.