The metaphor of a kaleodoscope vs a telescope

25 April 2020

Dear Fellow Investor,

Looking for opportunity :  The metaphor of a kaleidoscope vs a telescope.

Our laser focused investor uses a telescope to uncover hidden opportunities in the markets.   He looks into specific criteria to uncover undervalued quality companies.  The herd looks at the market through the lens of  a kaleidoscope which is unclear, confusing  and unfocused.  The confusion might cause some to gamble, play derivatives, and play the latest darlings of the market.  These strategies are the worst things to do.   

This weeks Edge has an excellent article on page 20, 21 detailing some ideas by 5 professional investors. In particular the comments by Dr Tan Chong Koay head of Pheim Asset Management are currently applicable.  He shares how the performance of the economy at times diverges from the market.    In 1998 when the economy was worse than bad. The economy declined 21.2 % in the 4^th quarter of 1998 but the KLCI was up 137.4 % by the end of the year.  Currently he advises to buy/hold  companies with low gearing, good management and reasonable valuation.  He looks for recovery going into year end.

We hold these types of shares for you to ride out the storm.

Many US states are slowly reopening and people are going back to work. Restrictions are being lifted.   Infection/ death rates are declining. Stanford University did a study showing mortality rate is .02 for those who catch the virus which means 98 % of those who are infected recover. Those over 75 years old with preconditions like diabetes, obesity, and heart disease however are 8 times more likely to die. Those the study concluded who are at risk should isolate and take precautions.

We need to get the economy moving again although a few will die but the vast majority will live and prosper .

Critter of the week is the work horse. There is a saying : If the horse don’t eat, the cart don’t move.