Get 10 CPE points by attending our Quality Value Investing Course soon.

17 March 2018

Dear Fellow Investors,

“Value investing requires looking beyond the headline numbers” is the title for Tong’s value investing column in this week’s Edge.  

I might add look beyond the headline news and announcements and look at the business you might invest in.

The CNBC news parrot in the above illustration proclaims, “The bottom’s in… The bottom’s in, The bottom’s in, Buy, Buy, Buy !

What I do mean is by all means look at the numbers and ask if the financials are sound. Are sales, earnings and revenues rising ?

If your investment idea passes the financial filters, then examine the quality of the business.  Quality is a subjective issue. It includes honesty of management. Does the management operate prudently for the benefit of the shareholders?  Does the company have an investment moat to protect itself from competition ? Do they finance acquisitions via organic cash flow or via cash calls ?  Do their  acquisitions synergize with their existing business or are the managers trying to build an empire ?

Much of this information can be known by attending the AGM, reading the annual and quarterly reports as well as visiting the company.  Every listed company has a website and that will give you a lot of information.

Isn’t this a better way than listening to the parrot ?  

If you want to know more about Quality Value Investing:  

On Friday 23 March, I will be conducting an in house Quality Value Investing Course at my office in Phillip Capital. It will be from 9 to 5 30 and carry 10 CPE points for licence renewal.

The focus will be on selecting Quality companies using qualitative analysis. 

We will use the IVSA price and volume filter for timing buys and sells.

This is a great bargain of only RM 192. No one in town will give you this price for a CPE 10 point course with such take away value.

Others charge RM 1000 + for a similar syllabus.

We have only 9 seats left so if you wish to attend, please ask the administrator.  Tan Tze Mee  and she can send you a brochure.tzemee@poems.com.my

Invest well and grow your wealth

Bill

Today’s critter is a beautiful leopard from the Namib dessert. It is highly endangered and keeps a watchful eye for predators at the watering hole.

RSVP FOR CPE COURSE 23 MARCH 2018

Dear Fund Managers/ Investment Planners

Kindly ignore previous email. Please refer email below:-

We would like to invite you to join “Value Investing in quality Bursa Malaysia Shares” on 23rd March 2018. Details of this training as per below:

To register for this training, please reply to this email. Your email should include all of the following information: -

·  Full Name

·  NRIC/Passport Number

·  CMSRL License No. (If any)

·  Email Address

·  Contact Number

·  Proof of payment RM 190.80

 To make the payment, you may bank in to the company’s account as below:-

Bank                              : Maybank

Account Name               : PC QUOTE (Malaysia) Sdn Bhd

Account Number            : 514011722786

Fee                                : RM 190.80

Important Note: Please note that the places are limited, First come first serve.

The Market Dogs that did not Bark

12 March 2018

Dear Fellow Investors,

There is more upside in global markets according to Citi Bank Research:

As of 18 Feb, Citi Bank monitors 18 factors that provide warning signs before a sustained world market selloff. As of Friday in the US markets there were only 3.5 of the indicators flashing a red signal.  – these were stretched equity valuations, a flattening yield curve, and extreme bullish sentiment by retail investors. 

By comparison, during the great financial crises and dot com bubble 13 of the 18 indicators were flashing red.  Outside the US equity valuations and investor sentiment remain modest. This includes Malaysia, Singapore, and Hong Kong.  

Last week there was a great article in the edge about The Market Dogs that did not Bark by a Russian economist, Anatole Kaletsky.

It was based on a Sherlock Holmes case involving a house robbery. When a suspect was brought to the house the dog did not bark meaning that the dog was familiar with the thief.

 

 

Skaletsky uses the Sherlock  metaphor to describe the 3  dogs in today’s markets. The dogs are the oil dog, the interest rate dog and the currency dog. None of these dogs are barking now, maybe growling. If they do, that is the warning sign.  

Oil is ranging between USD 50 and 60 per barrel, interest rates are  gradually rising but not accelerating while currency rates are stable.  

On Friday 23 March, I will be conducting an in house  Quality Value Investing Course at my office in Phillip Capital. It will be from 9 to 5 30 and carry 10 CPE points for licence renewal.

The focus will be on selecting Quality companies using qualitative analysis.  

We will use the IVSA price and volume filter for timing buys and sells.

This is a great bargain of only RM 192. No one in town will give you this price for a CPE 10 point course with such take away value.

Others charge RM 1000 + for a similar syllabus.

I will send a separate flier with  registration details. Space is limited so please book early if you wish to attend. You can email me and we can arrange to reserve a place for you. 

wermineb@gmail.com

 

Invest well and grow your wealth

Bill

Today’s critter is an Abyssinian cat sent to me by a friend in Canada

“Despite the cold and the snow, there was a cat I hadn't seen before helping him/herself to the free cat food I leave out all the time, now that both of our own cats have passed on.  It wasn't a pure bred Aby, but there was Aby in it, so that's today's 'critter'...the Abyssinian cat. “ .

 

 

 

Smart money is buying while the uninformed emotional retailers have been heavy sellers.

3 March 2018

Dear Fellow Investors,

Dolly and I just returned from a relaxing one week holiday in Adelaide. Adelaide is laid back, uncrowded with many attractions including a world class zoo, interesting museums and friendly and honest locals.

My brother and his wife from the US joined us and he left his hand phone in an airport taxi on the way to our AirBB  The next morning my brother’s phone was returned by an honest driver.  

Our hostess had made  calls to the airport taxi operators and they messaged all their drivers.

The Australian economy is doing well. My shopping basket indicator which observes how much people are buying shows Coles supermarket customers have full baskets which include high quality cuts of meat, fish fruit and vegetables .  Australians are very health conscious and spend a lot on high quality food.

We got an objective view of the economy by visiting Phillip Securities who have an office in Adelaide. The office  is manned by an independent fund manager who has extensive knowledge of Australian shares.

He shared some valuable research on the resource sector and the market in general.

For Malaysians who have Phillip PGWA accounts, we can purchase quality shares in Australia without being subject to their high capital gains taxes.  Do call me if you want more information on this.

This can provide us with diversification into a strong AUD currency, a well managed economy and a strict regulatory environment.

Gut wrenching volatility and extreme emotions have dominated world market action in the last 2 weeks.

Smart money is buying while the uninformed emotional retailers have been heavy sellers.

Fears include a potential trade war initiated by Trump, higher interest rates and QT (quantitative tightening).

I am not concerned presently but should the smart money move to the sell side we must take preventive action.  Our shares are holding well. Our  shares are all solid value, low or no debt  and pay solid dividends. Our recent purchase of HL Bank is  of  the highest quality and will benefit from higher interest rates.

Invest well and grow your wealth,

Bill

Today’s critter is a greyhound we met in Gleneig  a seaside resort near Adelaide.

Australians love animals and this greyhound was adopted after having retired from racing.  Perhaps he under performed at the race track and the owner put him up for adoption ? 

Happy Lunar New Year

Dear Fellow Investors,

According to Feng Shui masters, the year of the Earth Dog is supposed to be good for so called fire industries including technology, utilities and the Internet.

My take: We still must do our detailed research. As Peter Lynch said “Investing in companies without performing proper research is like playing stud poker without looking at our cards.”

As a follow up from last week’s letter

From, CNBC:

Two weeks after markets freaked out, the worst appears to be over for now.  

The gut-wrenching tug of war between rising interest rates and falling stock prices seems to be taking a rest, and strategists say the worst of the February correction may be over for now.

  Stocks closed out their fifth day of gains, with the S&P 500 just 4.9 percent away from its all-time high.

The KLSE was not much affected by the world wide stock market panic as it is difficult for bear raiders to short sell shares in the Malaysian market as the bulk of quality shares are held by institutions who will not sell in a panic.

A bear raid was initiated in the US markets by the fear of higher interest rates and a bearish CPI number.  CPI or consumer price inflation is a highly manipulated number by the US government.  Professionals do not focus on it.

The media whipped up the fear and retailers panicked.  There were margin calls and forced selling.  The panic spread around the world.

As calm returned, short sellers around the world were forced to quickly cover and we experienced a V recovery. A short seller faces unlimited risk and can quickly go bankrupt should the market go up.  Cover means to close the position.  

I expect the markets to be quiet next week with the CNY, so continue to focus   on quality.

Dolly and I leave for Adelaide Monday for a week break. Investment questions, you may email me for administrative issues please call our customer service @ 2783 0300.     

Invest well and grow your wealth

Bill

Exotic fish from the KLCC Aquaria

A friend from Canada visited me last week. I took him to the KLCC Aquaria and he was impressed. I was surprised to see they have upgraded their facilities with new animals and exhibits. They even have background music with jungle sounds. A visit would be a good CNY present for your family.

Do not panic and buy at these lows if you have the cash

Dear Fellow Investors,

In October 2008, Lehman Brothers declared bankruptcy. World stock markets collapsed.

Warren Buffet on 17 October 2008 wrote an article in the New York Times and headlined the article BUY !  He bought  over USD 10 Billion. in stocks while the S & P was at 900   In 8 years  his investments have tripled as the S & P is now over 2850.

Since 1987 there have been 10 major corrections in the US markets. Each time those who had the courage like Warren Buffet to buy made money.

Will this time be different ?

I do not think so.
If history is a precedent, my bet is not to panic and buy at these lows if you have the cash. Risk is relatively low .

Earnings yields spreads are positive. What that means is that the risk free return of the US T Bond of 2.85 % is less than the trailing earnings yield of the S & P 500 of 4.1 %.

Notice the blue line. The spread of 1.3 % is positive. If history is a precedent, as long as it remains positive there will not be a recession and market collapse as in 2008.

Under pining the earnings yield spread is the recent massive Trump tax cut which has reduced taxes across the board including the drop in US corporate taxes from 35 % to 21 %.

This will and is boosting earnings to compensate for gradual rises in US interest rates.  Couple this with the Trump wholesale elimination of the business killing Obama regulations, the background for world equities is positive.

Expect  the recent weakness in world markets to subside and be patient. It could take 2 to 3 months.

We are positioned in solid blue chip companies with low or no debt and with our cash are picking up quality shares to take advantage of the panic. We collect our dividends while we wait.

Invest well and grow your wealth.

Next Friday will be spending the Chinese New Year in Adelaide and back the following week. If you need any assistance please call our customer service desk at 03 2783 0300. You may also email me.

Bill

This is a snowy owl from Northern Canada. They are arctic birds and like the cold.   

Value in markets by identifying money trees like redwoods.

3 February 2018

Dear Fellow Investors,

The Redwood trees in Northern California are the tallest trees on Earth. They can live for over 3000 years.

Notice the size of the man standing next to the giant Redwood

Imagine all the storms, droughts, and forest fires these trees have experienced and yet they are still standing strong.

We find value in markets by identifying money trees like redwoods. These are shares that grow over time, survive adversity and continue to grow stronger.

We may be entering into a period of adversity. US Interest rates are rising, bond prices are falling and stocks are correcting. The water is heating slowly but not yet boiling.  World wide, investors are demanding higher rates to compensate them for a falling US dollar and rising budget deficits. Some investors are asking why should I hold shares and get a dividend payment less than a risk free US
Treasury bond ?

We need to be mindful of managing our risks should the water start to boil.

The shares in our portfolios are solid companies with low or no debt  which mitigates interest rate risk. They are like money trees compared to killer trees.

Debt is the killer of capitalism. Debt adds uncertainty and risk. Good businesses don’t need much debt to operate. Debt also reduces operational margin of safety and manoeuvrability.  

As long as our companies continue to grow earnings and have solid balance sheets we will survive and prosper over time.

I have moved to a defensive position. keeping cash reserves to take advantage of lower prices should they come.

Should major supports in shares we hold break down, we will lock in our profits and live to fight another day.

Invest well and grow your wealth
Bill

This dog is a survivor !  Saved by the technology of a microchip.

APOLLO, Pa. — A family has been reunited with its dog 10 years after the dog went missing.

Debra Suierveld and her family assumed their dog Abby had died after she ran away in 2008 from their home in Apollo, but decade-old sadness turned to joy on Saturday when Suierveld received word someone had found the dog.

The black Labrador mix showed up on George Speiring’s front porch in Lower Burrell, 10 miles west of Apollo. 

Speiring contacted Animal Protectors of Allegheny Valley, which discovered the dog’s microchip and was able to contact Suierveld.