How can we benefit from the recovery.

21 April 2018

Dear Fellow Investor,

Last week, I reviewed the up trending CRB index. The current CRB trend reveals the slow and steady return of inflation.

Interest rates are gradually rising world wide. Commodity prices such as gold, silver, crude oil, iron ore are beginning to move. Property in Singapore is beginning to recover. Those that are lagging such as crude palm oil  are set for recovery.

Weekly continuous gold futures shows a gradual rise from the July 2017 lows at 1210  and current absorption at the USD 1350 to 1360 highs. Odds favour higher prices from here once sellers are absorbed.

How can we benefit ?  Buy gold ? Buy shares? Buy property ?

As equity investors we should consider to focus on value  rather than growth.

Value represents real assets while growth reflects hopes and dreams. Real assets include property, precious metals, commodities and in the context of equity investing  companies with low borrowings or net cash, fortress balance sheets, reliable cash flow, steady and rising dividends and recurring revenue.

The tide is shifting from less flashy, high profile companies such as Facebook, Amazon  to undervalued low profile dividend shares such as we hold in your portfolios.

After the 2009 recession, governments worldwide introduced ultra low interest rates to stimulate growth. Growth shares outperformed. With interest rates rising, the steady profits of value companies are becoming more attractive .  There was a study by Fortune Magazine that since 1947 there have been 6 cycles of quantitative tightening coupled with rising interest rates. In each case value shares outperformed growth shares by an average of 11 %.

From Fortune magazine, April 2018

The recent steep correction in the high flying US and European markets could  be an early warning sign of this shift. The same might be said of the small and mid cap share correction in our local markets. Blue chip shares which we hold have held up well. If the BN remains in power our portfolios will benefit.

Invest well and grow your wealth,

Bill

Today's 'critter' is the common shelduck.  It is widespread and common in Eurasia, mainly breeding in temperate -- and wintering in subtropical regions.  It resembles a small short-necked goose in size and shape. It is a striking bird, with a reddish-pink bill, pink feet, a white body with chestnut patches and a black belly, and a dark green head and neck. Sexes are similar, but the female is smaller, with some white facial markings, while the male is particularly crisply coloured in the breeding season, his bill bright red and bearing a prominent knob at the forehead.