US presidential election will benefit our stocks.

18  May 2019

Dear Fellow Investor,

Next year 2020 will be the US presidential election and it will be important for Trump to deliver a prosperous economy to increase the odds of his victory and thus benefit our stocks.

For now the US economy is doing well with record low unemployment, relatively low interest rates and  well performing US stock markets.

What could upset the apple cart is the escalation of  trade conflicts between  China. and the US.  

Even Warren Buffet in his recent AGM warned that trade wars hurt all parties. I do not think Trump will ignore Warren Buffet’s advice.

Last night Canada reached an agreement with Trump to end steel, aluminium and agricultural tariffs. Trump also extended a 6 month moratorium on auto tariffs with the EU. These are good signs and might motivate China and the US to find common ground.

Because of the current solid economic performance Fed Chair Jerome Powell is reluctant to lower interest rates but there is a seasonal pattern in play.

In the 3^rd year of a presidential cycle, many former US presidents pressured the federal reserve to cut interest rates. Jerome Powell looks like a man who knows how to cooperate.

An interest rate cut will support world markets and increase the odds of Trump winning a second term.

On the home front, there are some positive signs. Economic growth figures released by Bank Negara beat economists estimates and came in at 4.5 % Also the establishment of a Debt Management Office (DMO)  led by the finance minister will look for savings on debt restructuring.  The 1600 level on  the KLSE is well supported.

On 13 June I will be attending the AGM of Kellington Group, who manufacture industrial gases.  They have performed well and should continue to do so in spite of trade jitters.   

Many quality KLSE and SGX companies  were trading when we bought at less than intrinsic value which does give us a margin of safety.

If the cycle turns we will do well and if it doesn’t our risk is low and we still collect our dividends.

Invest well and grow your wealth
Bill

Critter of the week is the newly born giraffe at Zoo Negara. We hope to visit him Monday.These are amazing animals.  

 

Trump trade tweets

11  May 2019

Dear Fellow Investor,

World stock markets last week experienced extreme volatility because of the Trump trade tweets. Traders who bought index futures based on a positive outcome lost money as well as the short sellers.  who bet on a trade talk collapse.

By Friday nothing much happened and the powers that be decided to kick the can down the road. Markets ended flat. Friday the Dow Jones was heavily down but in the last hour reversed losses to close in positive territory. Trump posted a positive tweet near the day’s low saying trade talks will continue.

Hoping for a positive Trump tweet is not a plan I would recommend.

Asian market should be positive on Monday.

A good indicator of impending doom is the gold price. In times of stress and panic, gold will rise as gold is the ultimate safe haven.  In calmer times gold will drift lower. By the end of the week gold ended slightly up signifying nothing.

To prosper in markets we should focus on things we have some measure of control. That would be the companies financials, the companies earnings, sales and revenue growth, and return on equity over at least a 10 year period.

Interest rates, currency values, politics are things we can not control or forecast so why bother ?

Warren Buffet always asks before he invests, “ Will the company be around in 10 years ?”

Three weeks ago, I attended the AGM of a high quality plantation company.

It meets all my financial criteria and is well managed. The dividend is well covered and is trading at a reasonable valuation.  Because the sentiment and news flow is so negative towards the plantation sector, my opinion is that risk is low. Plantation  stocks are not in a crowded space.

Once I finish buying this counter for my clients, I will publish the name of this company in my weekly report.

In contrast, the IPO of UBER was launched Friday on the NYSE. By the close it dropped over 7 %.

This was an IPO in a crowded space. The brokers, financial media  and investment bankers were hyping this share to their clients and public  and those who bought suffered large losses.

UBER has never made a profit, has no earnings and a very unhappy workforce who are on strike worldwide over low wages.

I do not think this business will be around in 10 years.

Invest well and grow your wealth
Bill

Critter of the week is a Penang owl. When we visited the plantation company they told us that owls and leopard cats are crucial in controlling rats which attack the palm fruits. :As investors we need to behave as the owl .

 

A low volatility solid blue chip dividend shares

4  May 2019

Dear Fellow Investor,

On Friday,  the monthly US jobs report was released and US markets advanced strongly on a drop in the unemployment rate to 3.6 % from 3.8 %,  (a 49  year low) wages rose 3 % and Trump’s approval according to Rasmussen polls rose to over 50 %.

The Asian market country fund ETFs which trade on the NYSE rose strongly anticipating strong Asian markets next week.

EWM, the Malaysian country fund rose 1.13 %,  EWS, the Singapore country fund rose 1.04 % and  EWH, the Hong Kong country fund rose 1.42 %

These are substantial moves as these etfs focus on low volatility solid blue chip dividend shares.

Surprisingly, the US dollar index fell which should add to Asian market gains.

Just as Donald Trump is doing the right things for the US economy, DR M is also making the right moves  . It was announced that substantial sums missing from 1MBD  are being returned to Malaysia from Singapore and the US. He is also approaching Switzerland, UK and other countries to recover missing money.

Dr M like Donald Trump has business savvy and knows how to put deals together. Lets prey to God for him to maintain his strength to continue the positive momentum.    

The most important thing he is doing is building positive relations with China that will benefit all parties. This is shown by a gradual rise in selected KLSE   plantation and construction shares

Tuesday, Next week, I am attending a briefing by a prominent banking analyst and will keep you posted on relevant  take a ways . For the Malaysian economy to recover the banks must recover.  Across the bridge, Singapore banks are beginning to recover. Our OCBC  holdings are performing well which should spill over to our Singapore REIT holdings. 

Invest well and grow your wealth
Bill

 Critter of the weeks is a best of friends picture :

Construction shares are getting a lift

27 April 2019

Dear Fellow Investor,

Good news continues to emerge: China has agreed to step up purchases of CPO. Dr. M and his trade representatives have forged several large deals with China including the expansion of the belt and road initiative and the resumption of the ERL project.

Construction shares are getting a lift.

Foreign investors are slowly coming back to Malaysia.

It reminds me of the early rising of the sun as rays of light start to emerge from the dark.

I spoke with the CEO of a prominent plantation company. He told me that for the KLSE and Malaysia to recover,  CPO must recover.  Over 100,000 small holders depend on CPO and with the price drop they have suffered.  Many small towns in Malaysia are economically  quiet and spending has dropped China buying could be the catalyst for recovery.

A weather event would help. Now the growing season for corn, soybeans and wheat is beginning in the US.

Should a drought appear due to global warming the grains would shoot up and CPO would join the party.

For the US grains there does not seem to be a weather premium in the prices meaning the crowd does not anticipate any problems. Guess what ? the crowd is almost always wrong.

Even the continued onslaught of bad news is not depressing prices of quality plantation companies which means the bad news is discounted.

The stability  of oil prices also benefit our countries financial position.

GDP in the US was announced Friday and it came in much higher than expected. This reversed early losses on the Dow and Nasdaq so expect higher Asian markets next week.

Invest well and grow your wealth
Bill

Critter of the week  is the leopard cat. They are used in CPO plantations to kill rats. A leopard cat can kill and eat at least 2 rats a day.

 

Revived and Overhauled

20 April 2019

Dear Fellow Investor,

We wish to thank all of you who attended our Investors Club meeting today at Phillip Capital Mgt. We hope you benefitted.

For those who did not attend, below is a summary of the high points:

I opened the session with Good News for a Change by showing today’s Star headline

“Revived and Overhauled”

Bandar Malaysia  will be transformed from a  money black hole to a revenue generator. It will house 10,000 affordable homes, a people’s park as well as a tech sector from China housing Alibaba and Huawei

This will benefit some construction counters and stimulate the economy.

I then shared the catalyst which could revive the market.  CPO- if crude palm oil  starts to recover and China steps back in the market over 100,000 small holders will see their incomes improve. Spending will increase when they have more money in their pockets, political tensions will ease and plantation shares will advance. Already some plantation counters are forming support and not declining in the face of the onslaught of bad news. The Felda bailout will also benefit the small holders who represent 55 parliamentary seats.

When a market does not go down on bad news it means the bad news is discounted.

Fund Manager Kevin  and analyst Angelina gave a briefing of the rubber gloves sector and detailed which counters offer  the best risk versus reward opportunity.

Kevin also answered  a question about property market recovery. He said Bank Negara must ease credit to stimulate loan growth  before property can recover.  It may take several months. Insiders are now buying bank shares as reported on Bloomberg work station. When loan growth picks up, bank shares will recover. Insiders buy on bad news and fear.

We plan to hold the investors club on a monthly basis and will let you know when we will hold the next meeting in May.

Any feedback is appreciated.

Invest well and grow your wealth,
Bill

Critter of the week is a dog back from the dead:

It's alive!' Dog digs out of OWN grave after owners thought he had died

A DOG digged himself out of his own grave after his famiy buried him alive – believing he was dead.

 

First monthly Investors Club Meeting

13 April 2019

Dear Fellow Investor,

Next Saturday 20 April we are having our first monthly Investors Club Meeting  We meet at 11 AM at my office in Phillip Capital Mgt. B-2-6, 12 Jalan Yap Kwan Seng,  (Megan Building is next to Am Bank). There is plenty of parking and the LRT stops at the KLCC which is near by.

4 fund managers and our analyst are in attendance and you are welcome to bring your market related questions.

Fund manager Kevin Christopher will speak about opportunities in the rubber glove sector as well as current undervalued shares.

 I will speak about the Capitalist Code, a book by Ben Stein and how to build residual income in dividend shares.

I will also answer the question many of you have asked me. Why is the KLSE underperforming and what are the catalysts which could turn the KLSE around.  

Hint: It is not as bearish as most pundits and media  report.

Please let me know if you wish to attend.

Invest well and grow your wealth

Bill

 

Critter of the week is the eagle. This one is from Canada but there are many in Malaysia including the lush, green Royal Selangor golf club.  As investors we have to adopt the behaviour of the eagle.  Always wait patiently for opportunity and when it comes swoop down without hesitation and enjoy a good meal.

     

Bright spot in the KLSE

6 April 2019

Dear Fellow Investor,

One bright spot in the KLSE is the REIT sector. Below is a chart of Sun Reit.

Daily chart of Sun Reit from Share Investor.com

After  major world wide panic selling in November/ December 2018, there was a shift to defensive assets. Notice the increase in volume as price rose  beginning in January 2019.  Increasing volume reflects increasing demand. High momentum favors higher prices.

Across the causeway, Singapore reits are the best performing sector so far in 2019. This reflects investor focus  on real assets providing value and high yield.

An example is an investment we made in Hong Kong Land which is listed in Singapore but has assets both in Hong Kong and Singapore.

Daily chart of HK Land from Share Investor.com

HK Land is a property developer and own prime assets in Hong Kong/ Singapore and Thailand. They have occupancy of  over 99 % and trade at a price to book of 0.6. PE is 6.8.  Management is by Jardine, a long established developer. A price to book of only 0.6 shows a wide margin of safety.   HK Land is an example of deep value, stability, attractive yield, and blue chip management.  Perhaps Warren Buffet might be interested.

Despite the trend of lower interest rates, growth in the world is slowing.  Debts worldwide are rising to historical highs which put a cap on growth. 

Governments must suppress interest rates to avoid defaults should interest rates rise. Japan and Europe are employing QE to keep interest rates low and the US may soon follow. Debts keep increasing.

How long can this debt party go on ? I do not know but at least I want to be protected with real income producing assets should the debt bubble burst. A small allocation in physical gold might be prudent.

Invest well and grow your wealth
Bill.

Critter of the week is a giant dog  The young lady found him abandoned so she adopted it. She said it is very loving and friendly even though it seems to mixed with wolf blood.