Performing Index

20 June 2020

Dear Fellow Investor,

Since April 2020, the Malaysian technology index has been the best performing  index in our local market.  We hold some stocks in this sector and plan to add more.  These include Inari and Uchitech.

We also hold stocks which benefit from technology innovation including Kellington, Public Bank and Maybank.

Tech stocks were not considered defensive investments in the past but  the current covid crises reinforces technology’s fundamental role in our lives.  We can find sources of risk reduction and growth potential in companies that have become digital utilities which enable global networks. 

Global technology stocks have had a solid run in a tough year. The MSCI world technology index is up by 10.3 % this year while the MSCI country world index is down 3.9 % . This is not just FANG stocks but a wide spectrum of technology stocks .

Earnings have been resilient across the sector as global tech stocks have delivered much stronger earnings and revenue growth than the broad market.  The covid crises has accelerated these trends.

Below is a chart from Alliance Bernstein which illustrates the point in terms of earnings per share and revenues.

The Utility Benefit: Can’t Live Without It

 

Tech shares role has become  that of a utility. Consumers and businesses can not live with out it.  Broadband, hand phones, and streaming services are essential. As the pandemic increased the need for remote shopping, learning and working have increased. For companies it has become indispensible because without a robust digital infrastructure companies can not operate efficiently in work from home mode.

Just as a utility stock provided reliable recurring revenue and stability, investors in technology require the same. This includes cyber security, cloud infrastructure, automation, and payment systems.  

 

As we research opportunities we focus on those businesses which are adapting to the new environment and technologies.  SATS the Singapore airline caterer which we hold has been hit by the virus panic and air travel slowdown but has been recovering due their strong balance sheet, their focus on automation, robotics, artificial intelligence and  innovation.  Much of their business is in China and China air travel is returning to normal . 

 

World markets are consolidating their strong gains since April and are awaiting more central bank stimulus. As the US November election is less than 135 days away, the odds favor more stimulus, a recovering economy and higher stock prices.   This will benefit Trump as most voters vote their pocketbooks. The riots, virus and demonstrations are a distraction.  By proxy, Malaysia, Singapore and Asian markets will benefit. 

Invest well and grow your wealth, Bill

 

Critter of the week is a revived deer. Where there is life, there is always a chance. The same with stocks

 

                              Texas Men Revive Lifeless Baby Deer Found at Lake Using CPR

Two Texas men revived a baby deer found lifeless at a lake in Tyler, Texas, by performing CPR and blowing into the animal’s mouth.Brian Ballard was on a tubing trip to Lake Tyler with his family when he came across a lifeless baby deer underwater, the Tyler Morning Telegraph reported.

Ballard pulled the deer onto his boat and compressed it from its sides. Ashton Byrd, someone from a nearby boat, jumped over to assist Ballard.

The two of them then blew into the fawn’s mouth and nose, and the fawn stood up after a couple of minutes. Ballard said Byrd then took the fawn to a wildlife rehabilitation