Quality Value Companies

 10 April 2021

Dear Fellow Investor,

Last week, I reviewed the case for inflation. On Friday the March PPI data showed a rise of 1% compared to a projected rise of 0.4 % from economists surveyed by Dow Jones. The majority of the increase came from a jump in prices for final demand goods according to the U.S. Bureau of Labor Statistics. With stimulus checks of USD 1400 going to most Americans  money is being spent on real goods.  Couple this with generous unemployment benefits that often pay more than actually working there is a tsunami of liquidity entering the system.  There are over 10 million unemployed in the US who receive some sort of government compensation.     This is happening in most world economies and despite the upward pressure in interest rates some sectors and companies will benefit.

I particularly like quality value companies with low debt which have positive cash flows. 

One such company is Dialog which we hold in our managed accounts.

Dialog price chart by Bloomberg with insider buying and selling

Notice the massive insider buying as represented by the green arrows. Insiders are buying after a big drop in price anticipating an economic recovery and rise in crude prices.

On April 6, Dialog launched phase 3A of Pengerang deep water terminal which is a joint venture with BP of Singapore. This was completed 9 months ahead of schedule within budget . They have already received their first vessel so cash is coming in.

Supporting the inflation case  is an article by Jim O’Neill, former chairman of asset management of Goldman Sachs in this week’s Edge.  He details the unprecedented worldwide economic stimulus and government recovery efforts. Risk is interest rate tightening but for the next few months he stated this should not be an issue.  To hold power, politicians are motivated worldwide to hold interest rates low.   Especially Biden, Johnson, Merkel, Suga,  Xi, and Muhyddin.

Keep safe
Bill

Biden’s dog