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