Expect volatility next week

25 March 2017

Dear Fellow Investor,

Expect volatility next week. Trump did not get his way to repeal Obama Care in a scheduled vote on Friday.  The perception among many investors is that the opposition joined by some of his own party may obstruct his promise to lower corporate and personal taxes. Even his promise to rebuild American infrastructure is  under threat.  

These are the reasons world markets have gone up as they anticipated an infrastructure boom and lower taxes.

The uncertainty of future policy will create volatility.

Washington D.C, as Trump said is a swamp of corruption filled with  double dealing, crooked, self serving politicians who stand in the way of progress. They care little for what’s good for America and the world but only care about themselves.

In my opinion, Trump will ultimately prevail.

He quickly cut his losses like any good businessman  on Obama care  and said he will focus on tax cuts and infrastructure spending.  Even crooked politicians will support tax cuts and infrastructure spending. This is always bullish for markets and especially commodities and hard assets.

As an investor I focus on long term unstoppable trends rather than the short term noise such as politics in the US.

Let us focus on huge, long-term secular global trends… unstoppable changes usually accompanied by shifts in demographics and technology that are set to fundamentally alter entire nations and industries. 

For example…  Asia  is set to have the largest elderly population by 2030. Plus, the middle class is booming. Those are two  reasons why we focus on the insurance industry as a major beneficiary of this trend. Another recent megatrend we identified lies in robotics and automation.

Every company we research we look for how they are using automation to increase profits.

Infrastructure spending is another unstoppable trend especially in India and China. This will support base metals such as copper, aluminium, lead, zinc etc. I am looking for growth opportunities in India and  Vietnam as well as under researched small cap opportunities  in Japan.

We need to look beyond the popular shares bought by most fund managers and the public. Look for opportunities away from the mainstream.

Invest Well and Grow Your Wealth
Bill

Foreign funds are returning in size to Malaysia

19th March 2017

Dear Fellow Investor,

Foreign funds are returning in size to Malaysia after  3 years.

Notice the Thursday 14 March foreign fund daily net inflow of RM 616.0 million as reported by Inter-pacific Securities and published every weekday  in the Sun.

Why are the foreign funds returning ?  In a nutshell,  The Trump bull is charging world wide and there are many undervalued stocks in Malaysia which have caught the eye of foreign funds. The RM is undervalued and has begun to stabilize as well as interest rates. 

Earnings growth is also picking up.

All of these positive facts are emerging in an atmosphere of extreme pessimism.    

Our strategy ?

Look for off the radar screen companies less covered by mainstream analysts.

Pong Teng Siew, head of research with Interpac  Securities with his analyst  Ling Ling, myself  and Tai Chun Wah the finance director of Cocoaland in the boardroom at their Rawang plant.

Visit small/ mid cap companies such as Cocoaland Malaysia. Speak with the management. Discover their competitive edge. If the share suits you, review their financials and define a low risk entry.  Once the entry price is triggered activate your trading plan with a risk level and a profit objective.  

This is what we do for you who have trusted your hard earned savings to us.

Invest Well and Grow Your Wealth,
Bill

A Russian hound guarding a child in St Petersburg just like we guard your capital..

Higher rates are an indication of economic recovery

12 March 2017

Dear Fellow Investor,

The base metal index, traded on the Toronto Exchange which includes copper, lead, aluminium, zinc etc has fallen 12.5 % in the last month. It seems to be on target to test support a 11.25.

Daily chart of the base metal index traded on the Toronto Exchange.

For this reason we sold all  our Press Metal Sdn Bhd position on a break of chart support Wednesday @ 2.60.   Also China has slowed down their base metal purchases and copper commercial traders are increasing their short positions. 

Press Metal is a play on aluminium as they are the third most efficient aluminium producer in the world and enjoy high profit margins as  well as favourable demand trends. Infrastructure development in China/ US/ Europe are strong tailwinds for higher base metal prices so let the market shakeout before we buy Press Metal again.   

In last weeks letter I detailed our 2017 performance. It included the SGD currency gain, Singapore share gain as well as the KLSE share gain.

Most of our clients have portfolios in Singapore, Hong Kong and Malaysian shares . Our EPF accounts only hold Malaysian shares and the performance for Malaysia for 2017 averaged 9.3 % while the Sing/ HK and Malaysia portfolio averaged 13.6 %.

Obviously, I can not promise short term performance because no one  except God knows the future. The odds for the immediate future is 50/ 50 but then we have to pay costs  it is generally a negative sum game unless you understand the dynamics of price and volume

As a value investor, I am more confident in long term performance of quality companies which we hold.  If they have a history of sustainable earnings growth with competent managers it is likely they will continue to perform.  

If we buy them at least the odds are in our favor and our costs are minimal.  Our dividends allow us to compound our returns .

Sorry for the confusion.  

On the 16^th of March interest rates in the US are expected to rise.  The world waits but I am not worried. Higher rates are an indication of economic recovery.  This will benefit our investments.

Crude Oil continues to drop due to over supply issues but longer term demand will catch up especially in Asia, India and China. We hold Gas Malaysia for our managed accounts and that has performed well and does not seem to correlate with crude oil prices.   

I recently sold the XLE in our Singapore PGWA accounts. This is an ETF traded on the NYSE that holds a basket of quality oil companies. We made  small profits and earned some dividends .    

If crude oil gets slammed  another 10-20  % we will buy again.

Invest Well and Grow Your Wealth
Bill

Long Term Value Investing

5 March 2017

Dear Fellow Investor,

We are focused on long term value investing.  In the last 2 months we have recovered from a challenging 2016 and our overall average performance in 2017  is  a positive return of 13.6 % . This has more than covered our small losses of 2015/2016.

In 2016, we took several small losses- why?  Conditions changed.

Some were management and tax issues,  one a rights issue which diluted the share holder equity and most had heavy insider selling. Surprise excise tax rises on tobacco hit BAT so we sold . BAT has continued to plunge so if we did not sell we would have lost more. 

Insiders know their companies better than us and they act first to dump their shares on the unsuspecting public. We held on to our winners and that has made 2017 a profitable year.

Investing is like going to a movie theater. When ever we attend a movie or any public event with a large crowd the first thing to do is look for the exit door. Chances are nothing will happen but what should we do if there is a riot or fire ?  If we mentally pre plan, that could save our life.   We know exactly where to exit.

Investing or trading is also a  probability game. We are dealing with unpredictable human beings with hidden agendas so we must always be on guard to avoid becoming a victim of their scams.

To put the odds in our favor we focus  on companies with low PEs, rising earnings, low debt and increasing cash flow.  We prefer low profile  mid cap off the radar screen companies run by ethical management.

Our scanners are picking some of these companies up in Singapore, Hong Kong and Malaysia.

Do give me a call if you wish to join us or add to your existing EPF/ PGWA account .

Invest well and grow your wealth

Bill

This smart cat, just like an investor takes the opportunity, a juicy fish. I have a dog named Rover who is a super Dalmatian mixed with pit bull and he is an expert in catching rats, snakes and other pests.  He silently lies in wait to ambush his prey- just like a good investor. We live in a terrace house and behind is a jungle  -like the stock market-with a lot of juicy prey to keep Rover happy.