Portfolio Review

25 Jan 2020

Dear Fellow Investors,

Portfolio Review

The outbreak of the potentially lethal Wuhan virus has not as yet affected our portfolios in a major way.

Kossan, the rubber glove company has performed well making a major move last week clearing 6 months of congestion and supply. I recommend to hold for the ride until we see insider selling  I am carefully watching my Bloomberg workstation for this indicator and will take appropriate action should I see a cluster of insider selling.

Inari our core technology holding has  advanced strongly  because  its parent Broadcom just inked a deal with Apple to supply more hand phone components to Apple. Inari is at the cutting edge of innovation in such areas as 5 G  which should also boost their profit margins.

Dialog our energy holding is stable and not effected by the virus as they operate an oil storage facility which earns recurring revenue no matter the oil price.

Our plantation counters include United Plantation and Kim Loong are  both earning handsome well covered dividends. There is currently a strong seasonal up trend in the plantation sector so this should benefit these counters.

We cut our Padini shares as the retail clothing sector is not performing. Padini is a well run company but is being disrupted by  on line sellers and the slowdown in consumer spending. On mall visits I notice less customers in the Padini stores.   

Our banking counters including Maybank and Public Bank are stagnant . We bought Maybank after the election anticipating  a turnaround in the Malaysian economy. My analysis was wrong but the generous dividends have covered 90 % of the capital loss.  Book values are at 2008 lows so in my opinion there is more potential upside than downside.

In my younger days, I was an active horse speculator. Horse racing is similar to stock markets. One similarity is to never bet on favourites/ hot horses  and wait for solid horses overlooked by the crowd.  You will get better odds with less risk and more potential reward.  

Maybank fits this profile now.  The hot money crowd is not interested but I am. When we bought Inari 3 years ago no one was interested. The same was true for Kossan, Kim Loong and Heim.

Sometimes the wait is worth it. Next week I will review some of our other holdings.

My view on the coronavirus is:

The coronavirus will probably run its course, in much the same way that any virus will run its course. So, don’t panic. But be vigilant and practice good personal hygiene.

Invest well and grow your wealth
Bill

I will skip the critter of the week to post this advice 

How to travel safely during the coronavirus outbreak: Heavy-duty masks, wearing gloves and carrying sanitary wipes can help reduce risks - but hand-washing really IS the best way to prevent infection, expert says.

Opportunities for 2020

18 Jan 2020

Dear Fellow Investors,

Yesterday I had lunch with the head of research for Interpac Securities and he reviewed the opportunities for 2020.

These opportunities are the tech sector, plantations, and oil

The tech sector will benefit from the  45.9 billion of Foreign Direct Investment which is a 95 % rise from 2019 in this sector. Other sectors have seen an outflow of foreign funds.

According to Sam Cheong of UOB Bank the rise of the digital economy due to rapid technology advancements will contribute 20 % of the economy by 2021 up from 17.8 % in 2015. E Commerce will play a part. The digital free trade zone launched in 2017 will attract investments in e commerce and logistics. With the focus on global markets this will drive demand for Malaysian goods.

Our analyst, Angelina  is currently researching this sector and will be visiting 3 tech companies next week in Penang as possible buying opportunities . I will keep you posted once she finishes her project.

Plantations seasonally benefit this time of the year as demand picks up.  The lessening of trade tensions help. We currently hold United Plantations, which is arguably the most efficient planter in Malaysia.  The generous  well covered dividend supports the price.

Oil and gas should be well supported moving into 2020. Middle East uncertainty and the lessening of trade tensions aswell as  increasing demand from China/ India .  The booming US economy also supports demand. We are positioned  in Dialog, a well run and well managed integrated oil company .

With visit Malaysia 2020, our holding in Genting Malaysia should recover. Malaysia has loosened visa requirements for Chinese tourists who are the best customers. The FOX theme park should be launched by the 2^nd quarter which should attract more local visitors. The Genting Malaysia CEO bought 10 million shares for his own account near the bottom during the recent share price collapse Price has recovered almost 50 sen since he bought.

I always track insider buying as who would know more about a company than the CEO ?  You can find these transactions  reported on the Bursa website.

I also like selected REITs especially in Singapore, Hong Kong due to world growth slowing and low interest rates. We have exposure to  REITs via our PGWA accounts.

Critter of the week is an African elephant standing next to a baobab tree which can live over 1000 years.It is the world’s oldest tree. They store water so the elephant is there for a drink. Like all trees it does not grow to the sky- just like the stock market.

Recession Risk

13 Jan 2020

Dear Fellow Investors,

We returned last night from Australia where we visited the Newmont Gold mine located about 100 km from Perth. It is a vast open pit mine producing over 4 million US dollars of net profit every day based on the current gold price. Newmont has been in business since 1917 and operates mines all over the world.  

Yours truly standing next to our tour leader who has long experience in the mining industry. Newmont’s policy is safety first so when we visited the mine we were required to wear safety hats and protective glasses.

If one were interested to invest in a gold mining company one must be mindful of the risks. These include price risk as gold is very volatile.  Other risks include regulatory risks, tax risks, high CAPEX ,  depletion of resources risk and security risks.  

If you have a bullish view on gold a quality blue chip gold miner like Newmont is a good bet but do be mindful of the volatility and risks. A gold miner is a leveraged play on the price of gold. If gold goes up 10 % a miner can increase in price by 20 to 30 %. The same is true on the downside  should physical gold collapse.  

Newmont keeps a very low profile as the dirt road leading to the mine is not well marked. The headquarters has a small sign which could easily be missed. There is heavy vigilant security on active patrol. We had to go through a guard post to enter and exit the mine site.

Recession risk

Perth and Australia  is slowing down mainly because China has slowed down their purchases of commodities. One of my wife’s relatives has a friend who is a business broker and he said there are many restaurants up for sale as well as other small businesses.

Reasons include mandated high wages, a multitude of regulations and high taxes. Minimum wage is AUD 21.60 an hour., the highest in the world.  Why would someone take a business risk in this environment ? Just get a highly paid government job with little risk .

Our guide did say a mine truck driver earns over AUD 100,000 per year but his income tax is 40 %.

Of course, the government provides many benefits including free health care, education and free inner city buses.

The heat was severe and wildfires are killing many exotic animals. This is a tragedy but there are some signs of hope.

Critter of the week is a trained Kuala hunter  

SYDNEY -- Among the thousands of firefighters battling the catastrophic Australia bushfires, there have been four-legged furry heroes employed with a job of their own.

Dogs are being employed to rescue koalas during the fires, and with the flames expected to continue on for months, they're only just getting started.

TATE Animal Training Enterprises specializes in detector dog services in Sydney, and its team of pups has saved dozens of koalas, owner Ryan Tate told ABC News.

Building A Base

4 Jan 2020

Dear Fellow Investors,

Building a base

Weekly chart of EWM, which is the ETF traded on the NYSE representing the KLSE index

Since October 2019, the KLSE has been forming a bottom. In November the 50 week moving average represented by the blue line stopped the advance and price fell back to form a double bottom. Last week price broke the moving average resistance and closed higher. The moving average resistance is  now support  Ringgit strength has supported the advance as well.

Could this mean foreign funds are returning ?  Time will tell.

Supporting the macro picture is the trend of US interest rates.

TLT which represents the 20 year US treasury bond as traded on the NASDAQ.

What happens with US long term interest rates will impact our investments in 2020.  As long as rates are low and stable our Hong Kong, Singapore and Malaysian portfolios  should perform. Low rates particularly benefit our REITS as well as our blue chip dividend shares.

The above chart reflects this scenario of low to stable interest rates.  Trump will stand for re election in November 2020.  To keep power he is motivated to keep rates low and this will benefit markets world wide. The resurgence of palm oil and crude oil are tailwinds that will benefit the KLSE.

On 7- 13  January Dolly and I will be visiting Perth for a short break. We plan to visit Newmont Gold, the world’s ;largest gold mine. Hopefully, Perth is not effected by the wild fires.

If you have any question please email me or account questions to Nora 03 2783 0300.

Invest well and grow your wealth
Bill

Critters of the week are rescued Koala bears from the Sydney Morning Herald  headline

Hero dog saves injured koalas from Australian bushfires Faye Brown Wednesday 20 Nov 2019