Hidden potential selling means smart money will blast the media with bullish stories

25 November 2017

Dear Fellow Investors,

On 20 November 2017, Nestle had an ultra wide range price gap on the highest volume in 8 years.

Notice the wide gap on the chart. Nestle daily chart with last week’s price action. Notice the  gap on ultra high volume.

Some would call this a breakaway gap but since Nestle has been in a steady mark up phase for the last 3 years I would designate this as hidden potential selling and a change in behavour to distribution from markup. 

In fact one of the company officers as reported in the Bloomberg’s insider dealing report  sold 600,000 shares on this bar.

Hidden potential selling means smart money will blast the media with bullish stories to induce the crowd to buy at the high while they sell.

This volume was significant as the usual volume in Nestle is only a few thousand shares.

Smart money in the last week continued to sell in this distribution stage.

Will smart money continue to hold up the price so they can off load more shares ?

I have no idea but when I see something like this, I am not going to stand there and hope as the odds are not in my favor.

For all our clients and myself who have held as long as 7 years, I sold. We made handsome profits.  I am not smart enough to know the exact high or the low but when the odds are against me I look elsewhere.  Our job is to make a profit not to pick the high. 

Where should we look to find better odds?

We should look for companies that are disrupting traditional businesses whose focus is  robotics, artificial intelligence, micro processors, automation, and digital services.. 

There are some in Malaysia such as Inari and Uchi Tech which we hold. Our recent purchase of Nidec of Japan for our PGWA clients  fits  every criteria for disruption.

Contrast  this with media companies in Malaysia which have dropped an average of 25 % in the last 2 years. Retailers have fared worse. Property counters in Malaysia have been a disaster so far in 2017.

Sears, a major 100 year old retailer in the US has dropped over 90 %, while Staples, one the biggest office supply companies in the world is down 50 % in the last year. Amazon however is up over 1000 % since listing.

Lenin a Russian politician, said “ there are decades which pass and nothing happens and then weeks where decades happen.”  My gut tells me we are in one of those weeks.

A play on China and technology

By the way, we bought EWH for some of our PGWA clients. It is an ETF traded in New York which has a big overweight position in Tencent as well as other blue chip Hong Kong shares.  Tencent  is a leading edge technology company giving Amazon, Apple and Facebook a run for their money. 

EWH continues to make new highs and pays a 2.8 % yield.  PE in the Hang Seng is only 13.4  a far cry from overvalued US shares.

Invest well and grow your wealth

Bill

Today's colorful critter is an Indian roller from India

Demand and palm oil prices increase due to population and growth

18 November 2017

Dear Fellow Investors,

We continue to search for value.Within the current KLSE inertia   more value opportunities are emerging.

One such opportunity is in the plantation sector. There are some quality plantation shares that offer solid fundamentals, high dividends and honest management. Some are trading at reasonable valuations.

Two small countries Malaysia and Indonesia produce 90 % of the total world palm oil which represents a large share of edible oil. Our largest buyers China and India can not grow palm oil and as their wealth and population grows they will continue to buy more palm oil from us.  That means well run plantation companies will benefit from sustainable profit growth.

As value investors we always focus on profit growth over time.
Based on the latest PORLA report the world requires over 7 million tonnes of additional edible oil per year. Demand will increase as well as palm oil prices due to population and wealth growth.

Global consumption of vegetable oils is in a steady uptrend since 1995

We intend to add a quality plantation counter to your portfolios in due course.  

It looks like the tax overhaul in the US is on course to become law. It will lower taxes for corporations and individuals.  and  will stimulate consumer spending and boost stock markets world wide.  

If the liberals/socialists in the US block the Trump tax cuts it should not affect the supply demand for oil seeds and most of the shares we hold.

Invest well and grow your wealth
Bill

Today’s beautiful critter is an albino moose from Sweden. Government officials wanted to euthanize the moose because it was eating apples from the  forest and was a general nuisance .  

Thanks to You Tube publicity there was a huge public outcry and the government officials backed down.

Thank God for technology. It saved the moose as the moose is now safely in a sanctuary.

Magic carpet ride

13 November 2017

Dear Fellow Investors,

There is a magic carpet ride that never seems to end. It is the technological revolution that is changing the world and the way we invest. 

Electric cars, smart phones, big data, artificial intelligence, automation and robotics are the places we want to have exposure.

Inari which we bought a year ago has been a play on Apple and smart phone technology as Inari manufactures the radio frequency chip for the Apple phones as well as other phones.

SATS one of our Singapore holdings  has been a play on automation. They have a virtual monopoly on ground services and catering at Changi airport in Singapore. They have been replacing human workers with robots to reduce head count and increase profits.

Their latest quarterly/ half year report released yesterday shocked many bearish analysts. Profits, growth and earnings were up despite profit margins of air lines being squeezed  and on this earnings release the share jumped 6.8 %.

Based on their recently signed  contract with JetStar to provide in flight service for over 600 flights a week and the opening later this year of the 4^th Changi terminal, growth in earnings should be sustained which should result in higher dividends and a higher share price.

Kossan Rubber another one of our holdings has performed in part because of their focus on innovation and automation which has resulted in lower worker headcount and increase in profit margins. There completion of a new modern production line will increase profits

Uchitech, a recent purchase for our managed accounts leverages on microprocessors for medical equipment and coffee machines.

Our most recent acquisition- Nidec- is a play on  robotics, automation, micro motors and  electric car components.

When we invest in any company we need to focus on how the company increases earnings with technology.

Low interest rates virtually world wide below inflation rates and loose monetary policies help the carpet fly. The new Federal Reserve chairman, Powell is a super dove and will provide stimulus to keep the carpet flying.

Trump fired Yellen as she was not dovish enough and she was a Hillary Clinton supporter. 

Our newly hired analyst, Angelina, is tech savvy having recently graduated with a degree in mechanical engineering. We look forward to her research on technology focused companies to make more money for you.  

Invest well and grow your wealth

Bill

Today’s critter is a mallard duck from Canada

Meeting with head of investor relation of Nidec

3 November 2017

Dear Fellow Investors,

Yesterday, I had a meeting at the KL Hilton with Mr Masahiro Nagayasu head of investor relations of Nidec., a multi national  with an over 80 % world market share of micro electric motors.

We have been buying this company after last month’s visit to their company headquarters in Kyoto.so this was a good opportunity to find out more.

When I bought it I knew we had an edge . Now I realize we have a bigger edge.

I am impressed by Nidec’s   focus on high tech and innovation. This is where investor money is flowing.

For example, they are leveraging on the global electric vehicle trend.

The way to make money is to buy into a trend before the crowd. The electric car trend is in its infancy. Based of the above Bloomberg chart we are in the early stages of electric cars.
  
Buying into a hot story without performing due diligence is the recipe for big losses. Investing in an unfamiliar market such as Japan has issues such as language and culture. That is why I took a day from our precious holiday to Kyoto to see Nidec for myself .  

A review of Bloomberg’s research portal shows Nidec to have strong fundamentals such as growing earnings, profits, ROE and low debt.

They have a diversified customer base including Honda, Apple, Seagate, Rolls Royce, Caterpillar, GE and Shindler.

98 % of Nidec’s production is outside Japan in 43 countries including Singapore, China, Thailand and Vietnam. This helps diversify currency and labor risk.

I prefer companies which are component suppliers such as Nidec to the actual electric car company.

I would not advise buying a pure electric car company- look at the collapse of Tesla share price last night-

Tesla is overloaded with debt, high capex and questionable management.  With companies such as this it is only a matter of time before the ice breaks.

The reaction to the Malaysian budget was muted. The broad market continues to drift. We will continue with our defensive dividend strategy and focus on high quality niche companies. At some point the sun will rise. It always does.  

Invest well and grow your wealth
Bill   

With Japanese government buying of ETFs the Nikkei has reached a 21 year high. Will the momentum continue ?  If you think so Nidec is a low risk, high potential profit  play should clouds emerge.

Nidec is an approved share for our Phillip Global Wrap Accounts. Please contact me if you need more information.