16 Oct 2021
Dear Fellow Investor,
Howard Marks, a prominent fund manager wrote a book Mastering Market Cycles and below is a quote.
He wrote that while investing is inherently highly uncertain, there are two rules he believes hold pretty steadily:
“Rule number one: most things will prove to be cyclical. Rule number two: some of the greatest opportunities for gain and loss come when other people forget rule number one.
Bloomberg analyst’s consensus of Genting Malaysia. This is a reversal in their bearish outlook a few months ago when Genting hit a Covid induced cycle low.
Many examples of Howard Marks observation are evident in our market. Some of the recovery shares being accumulated by professionals and insiders such as Genting Malaysia and Dialog hit cyclical lows due to the Covid induced market panic. Heim and Carlsburg are also examples of shares hitting cyclical lows and recovering as Malaysia gets back to normal.
The Hong Kong country fund EWH traded on the NYSE also made a cyclical low and is recovering. This EFF mostly holds property, banks and insurance companies as well as some technology companies. This ETF was hit hard due to the China government crackdown on technology companies. Based on the price action the bad news appears to be absorbed. Even Charlie Munger, Warren Buffet’s partner took a large position in Ali Baba when price hit the cycle low.
Our SATS and Comfort del Gro shares are coming back to life as Singapore begins to open up. Both are high quality companies.
Mr Tong a very successful investor who writes the Edge market column has reversed some of his positions by exiting high growth shares in the US and Malaysia while switching into recovery shares. Do check out his latest Saturday column and read his rational for the switch.
The caveat I would advise in buying cycle lows is simple. Stick with quality proven companies as they have the best odds of recovery.
The tech boom is over
This is an index of tech companies created by Goldman Sachs who have not shown any profits. They are bought by investors who believe in rosy profits in the future and are willing to wait. Since the beginning of 2021 he index has dropped over 25 %
Rising interest rates and inflation are the reasons for the under performance. These put pressure on profit margins.
We are holding some technology shares including Inari and I am keeping a close eye on them. As they have strong cash flows, earnings, revenues , profits and low debt, I am not overly worried. I do not think any would qualify for the Goldman unprofitable company list.
Take care..
Bill
World supply chains have been disrupted and are effecting markets. Much is due to politics and in the US, Biden’s shutdown of oil pipelines and cancellation of oil drilling permits which has caused dramatic increases in oil prices. Oil is the lifeblood of world economies and rises are massively inflationary. This will put upward pressure on interest rates and possible stagflation. This is another reason to hold quality shares.
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