Indication of profit taking

3 June 2017

Dear Fellow Investor,

In the last 2 weeks, the momentum and volume in the KLSE has dropped . The small cap index after a good run since the beginning of the year has churned at current levels with a slight downside bias. This is an indication of profit taking. Insiders and smart money will attempt to hold the market up so they can off load at good prices.

On the other hand there has been a slow pick up in quality blue chip shares . I have been picking up quality shares for my clients which in some cases are undervalued and have potential for upside.  We can enjoy the dividends, stability and steady growth.

There has not been much interest in most quality blue chips while the hot small caps have run up so the blue chip space  is the area we should focus on. Prices and values for selected shares are reasonable.

Never underestimate the power of QE and this is the reason to stay invested. QE overrides the uncertainty of interest rates, North Korea threats, political turmoil and global warming.

With all the bad news markets round the world continue to go up.  

Crude oil prices at the USD 50 a barrel range are also supportive  for most sectors such as transportation and manufacturing . It makes the cost of doing business predictable.

On Friday 2 June 17, The July 2017  futures for crude oil delivery closed on the CME @ USD 47.74 . For the December 2020 futures delivery the price closed @ 49.46.   Futures traders anticipate trading in a narrow range for the next 3 1/2 years. Those who need crude oil for their business can lock in prices for future delivery  at a price close to today's price. 

In my humble opinion  commercial traders are the smartest and most well informed traders on the planet. They have the best information regarding supply and demand so following them can give you an investing and trading edge.  The CFTC or commodity and futures trading commission, a government body posts the positions every week of the speculators, funds and commercials.  Commercial traders in crude oil would be Exxon Mobile/ BP/ Petronas  etc.

From Warren Buffet.

My first filter for buying a blue chip company is the moat. The moat is the defense from the competition. It could be the brand, the financial strength, the unique product etc.  I like to see a company that consistently grows sales and earnings over  a 10 year period.  That means they have a moat. Sales and growth can be measured objectively by reviewing the financials using Morningstar, Bloomberg or most financial websites.   Carlsberg, Thai Beverage, SATS, OCBC, VICOM, Nestle, Inari, Gas Malaysia, Tambun Indah  which we hold are examples of companies with a strong moat. 

This castle has a wide moat to protect the residents. 

Invest well and grow your wealth,
Bill

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