13 March 2021
Dear Fellow Investor,
Among the best performing shares in the KLSE last week were Heim, Carlsberg, Dutch Lady and F & N. These are high quality recovery shares as Malaysia gets back to normal. Heim has risen from rm 17.80 in October 2020 to rm 26.24 as of the Friday close.
Quality shares are like tennis balls. They will go down with everything else during a panic or collapse but will recover faster like a bouncing tennis ball. The low quality shares are like lead balls. When they hit the floor do not expect a bounce. The benefit of these quality value shares is that they also usually pay regular dividends so while we wait for recovery we earn some income.
The money you have intrusted us to manage , we have diversified into value and growth. Value gives us stability and money now while growth gives us future potential money. If interest rates rise a lot than the value of future cash flows will diminish. Growth shares will suffer, especially the highly leveraged ones with weak financials.
Presently, I do not forecast a big rise in interest rates and inflation based on the TIPs (Treasury Inflation Protected security).
If players think that inflation and interest rates are going up they will buy TIPs as a hedge on their treasury bonds. Bonds lose value if interest rates go up. The players in this space are institutions and pension funds who have the best research and insider connections. The chart to me signals consolidation and no dramatic moves one way or another. Notice that in the last 5 weeks TIPs have dropped although the 10 year US T Bond rates have increased. The professionals are not worried about higher rates at this time.
Our high quality growth shares such as Inari, Uchitech Canadian Solar and Kellington should be fine.
Keep safe
Bill
Biden and his Sec of the Treasury Yellen will print and pump multi billions into green energy which will benefit solar stocks, and electric vehicles.
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