2018 Financial Budget

28 October 2017

Dear Fellow Investors,

We are well positioned in our portfolios to benefit from the 2018 budget announced yesterday.

The budget is family friendly with a 15 % hike in subsidies and social assistance. Grants have been offered to  small businesses interested to grow and expand

Financial policies will be put in place to make it easier to buy a house. 

Income taxes were cut for the middle income   group earning between  RM 4,000 to 7,000 a month.

This will benefit  wage earners  Grants were made to rural folks, farmers and low income earners

Why will we benefit ? We benefit because we have focused on quality consumer stocks such as F &N/ Nestle/ Carlsburg/ Uchitech and Heim. 

Taxes were not raised on alcohol and cigarettes so consumption of these items as well as ordinary consumer goods will  increase as well as their share prices .

Monthly F & N Chart which has held up well in the recent 8 % drop in the KLSE. Will this share go up on the new budget?

On the US front the House of Representatives passed the 2018 Trump budget in a tight vote of 216 to 212 thus confirming the senate vote. 

This paves the way for  corporate and individual massive tax cuts which Trump has been fighting for. 

This will boost world markets including Singapore/ Hong Kong and Japan. Businesses will have more money to expand and consumers more money to spend.

Invest well and grow your wealth
Bill

An inspiring story  of 2 sailors and 2 dogs adrift at sea for 5 months  rescued by the US Navy.  

Two women have described their despair during five months lost on the Pacific Ocean, trying to avoid the attention of sharks and stave off thoughts of death after their stricken yacht drifted thousands of miles off course.


Jennifer Appel and Tasha Fuiava, from Hawaii, said their two dogs kept up morale during the darkest moments.

Their ordeal came to an end on Wednesday when they were rescued by the US Navy. They were picked up about 900 miles southeast of Japan, about 5000 miles from their intended destination of Tahiti.

Bomb Sniffing Labrador.

21 October 2017

Dear Fellow Investors

How do we  maintain our objectivity during market turmoil and volatility ?

Do we do what the amateur investor does and sell high quality companies during a market panic?

Above is a chart of CVS Health Corp, a high quality share traded on the NYSE.

Notice the extreme volatility in the price  as contrasted to the slow upward progress of the earnings line.

Earnings growth which is the true measure of a quality company continues to steadily grow while price swings all over the place.

Many uninformed investors would sell at panic lows although earnings growth did not suffer such as in 2001 and 2009.

These same investors would buy when prices stretched beyond value as is presently the case.

Wouldn’t it be better to wait patiently for mean reversion before accumulating?  In this way risk is reduced and potential profit is increased.

Market prices as Warren Buffet would say move by emotion while earnings growth move via fundamentals. In the end fundamentals converge with price.

This chart is from Invest Like a Guru by Dr Charlie Tan, a value investor.

Our managed portfolios continue to be resilient despite the uncertainties, negative sentiment , and lack of commitment . Our dividends continue to roll in.   Singapore is turning around and Hong Kong continues to run.

Donald Trump won an important victory in his budget battle and tax reform bill with congress on Thursday.

This victory paves the way for tax reform where more money goes to the people for spending and wealth creation/  and less to government. 

Trump recently made a statement that enraged the atheists, liberals and Obama/ Clinton socialist big government  supporters. Trump said I worship God and not government.

The US markets reacted favorably to Trump’s victory and moved to new highs.

This should spill over to Asia next week. .

Moving forward our focus should be on sectors benefiting from fin tech, automation, robotics, and disruption. 

The focus of this presentation on Saturday 29 Oct 9-5 PM is on these topics. As clients you are invited . You may call the number on the flier for info or contact me.

Invest well and grow your wealth
Bill

Here is our critter of the day, a bomb sniffing labrador.

Bomb-sniffing dog fired from CIA after she loses interest in finding explosives

Jacl Bogle

15 October 2017

Dear Fellow Investors,

Jack Bogle, founder of the Vanguard Group advised investors to stay focused on buying  good businesses for the long haul.

Value is created not by market prices but by intrinsic values and by businesses who put their money to work to earn a steady return in a competitive world. 
Bogle cited earnings growth as his main filter.

 Jack Bogel, master value investor and multi- millionaire
  
This value investing method requires patience and sometimes under performance compared to the momentum style. Momentum profits are wonderful until the market falls over the cliff. Value stands the test of time.  Warren Buffet the greatest value investor of all time has under performed the last 2 years but I would still bet on him

Case for buying quality/ value shares:

The only alternatives to shares presently are property, bonds and money market funds

With inflation  greater than bond and money rates bonds and FD are guaranteed losers.  Property is an alternative to shares but there are problems with liquidity and the cyclical nature of the property market.

I do however like Singapore and Hong Kong REITS as they offer liquidity, dividends  and steady growth.

Singapore/ Japan/ Thailand equities/ property are  recovering  while Hong Kong goes from strength to strength.

The KLSE continues to lag but there are selected values for us to accumulate.

Monthly chart of Kepple Corp.

For the last 2 years, Kepple has been consolidating with an upside bias. Although they are diversified into China property they are also into oil rig building and the slightly positive .trend in crude oil supports them for now. 

Kepple has a strong balance sheet and has survived the oil price collapse.

We currently hold Gas Malaysia which has the Malaysian cooking gas monopoly. It is a simple, well managed   quality company with low debt . 

We have avoided for the last 3 years  the highly leveraged up stream oil companies .  High debt has killed many of them.

I am very happy to inform you that we have hired for our team a share analyst. She has a masters degree in engineering but prefers to work in the investment industry. Many prominent fund managers/ analysts have engineering degrees. 

She will help in our search for quality companies .as well as monitor the shares in our portfolios

Invest well and grow your wealth
Bill

A taper at the Negara Zoo. Compared to other countries, the Negara Zoo provides a lot of room for their animals to roam and enjoy themselves 

Trip to Kyoto & Osaka

7 October 2017

Dear Fellow Investors

We just returned from Kyoto and Osaka where we enjoyed a fabulous and eye opening  holiday.

Our Kyoto hotel  was a smart hotel. The only employee was the cleaning lady. We self checked in and entered our room with a password  sent to us by email.

The tiny 400 square foot room was fully equipped with a mini kitchen, washing machine, mini TV, and a micro wave oven.  

The room and hotel were super clean and quiet.  

The smart hotel is an example of Japanese technology  Japan  is a world leader in artificial intelligence, robotics  and smart technology and I found a well established company to leverage on these trends. More on that later.

Traveling  in Japan is super efficient. The underground and bus services go to all tourist sites and have signage in both Japanese and  English.

Information counters with English speaking staff at most stations are very helpful and knowledgeable.

We planned our holiday using the Lonely Planet Guide. We highlighted the prominent venues and were able to visit them by taking advantage of the public transport system. This saved us thousands of Yen in expensive tours and taxis. We also had the flexibility of moving at our own pace.

The food was delicious and super clean.

A restaurant specializing in tuna.  

The company we visited was Nidec Corp, who have an 80 % world market share in micro motors. The micro motor in your Apple/ Samsung hand phone was made by Nidec.

Founded by 3 men in a garage in 1947 they have become a multinational corporation with a global presence.

I asked them how they performed in the 1999- 2000 technology crash and 2008 bust  where quality shares such as  Yahoo, Microsoft, Intel and Cisco dropped as much as 80 %. Mr Nagayasu, showed me a Nidec price chart in which they dropped less than 5 % and resumed their steady uptrend.   

The chart reminds me of Nestle Malaysia, a share that steadily progresses upward no matter, how bad is the news.

Mr Masahiro Nagayasu General Manger of Investor Relations and myself at the company headquarters in Kyoto.

This is not a trading share but could be a long term buy and hold for your managed accounts . It is a component of the Phillip Japan Fund.

If you are interested to take up this share, I am happy to explain in more detail and answer your questions.

Singapore is bottoming out as the real estate markets are beginning  to recover.

The KLSE remains in a holding pattern while Hong Kong continues to make new highs. 

There is an old saying in markets :
“ Never sell a quiet market “  This is the KLSE now.  If you hold quality shares, be patient – collect your dividends  and wait for your reward.

Invest well and grow your wealth

Bill

Elephants at the Kyoto Zoo waiting for a treat.

What we endeavor to do.

23 Sept 2017

Dear Fellow Investor,

As mentioned in last week’s report many Singapore traders are in a state of paralysis driven by fear, bad news and uncertainty.

The STI index has been steadily correcting having fallen from 3350 to 3201 in the last 1 ½ months.

In my opinion this is a buying opportunity because bullish factors are slowly  diverging from the bearish view of the crowd.

OCBC accumulating at a major support

For example, OCBC which we have held for many of our clients for over  5 years on 22 August announced positive results led by their wealth management and insurance businesses.

Singapore's Oversea-Chinese Banking Corp. reported a nearly 14 percent rise in quarterly profit, largely led by sustained growth in its wealth management business and robust results from insurance operations.

Banking performance is a lead indicator of recovery. and OCBC is a premier Singapore  bank exposed to all major sectors of the economy including property, construction, logistics, telco, and consumer products  

Their share price has been steadily rising and the handsome dividends keep rolling in. DBS and UOB have also been performing well.

Some real world economic facts such as higher tourist arrivals, industrial production up 21 % in July, sea and air cargo volume increasing  support the recovery. Global economic recovery is helping Singapore’s neighbors such as Thailand, Indonesia and Malaysia. This indirectly benefits Singapore.

The wealth management business has been steadily growing in Singapore. The growth has been 8 % year on year while in Hong Kong the rate is 7 % while in Switzerland the growth is 3 %.   Money flow  to Singapore from China, US, Europe and Asia is an emerging trend due to Singapore’s AAA credit rating, stable currency and political stability.

This is the macro view but let’s look at the practical way to pick opportunities.

These are 4 guidelines from Joel Tillinghast a billionaire  UK fund manager and writer of Big Money Thinks Small.

1-          Does the stock have a high earnings yield- that is a low PE

2-          Does the company do something unique that will allow it to earn super profits on its growth opportunity ? Does it have a moat ?

3-          Is the company built to last or is at risk from competition, fads, obsolescence or excessive debt ?

4-          Are the companies finances stable and predictable into the extended future or are they cyclical, volatile and uncertain ?

Most companies fail the test so it takes effort and research to find these gems.

This is what we endeavor to do.

On  27 September  Dolly and I will be traveling to Osaka and Kyoto and returning on 5 October. If you have any queries you may email me   

For account queries you can call our customer service desk @  03 2783 0300

Invest well and grow your wealth

Bill

A castle in Japan with a moat. Our shares must have a moat. 

Bullish market for the next 12 months

16 Sept 2017-

Dear Fellow Investor,

My outlook for the next 12 months for the US markets is bullish.

Weekly Dow Jones up 470 points this week

The Dow Jones continues to make new highs and some of the bullish reasons include:

Trump’s willingness to compromise on social issues: 

This will get  liberal members of his own Republican party and the opposition Democrats to support tax cuts, raise  the debt ceiling and infrastructure spending.  

Corporate tax cuts will fund share buybacks and increased dividends. Buybacks increase earnings for existing shareholders.

Individual tax cuts will stimulate consumer spending which is good for business.

These are  the main bull points. So far since Trump was elected the Democrats and liberal Republicans have blocked him at almost every turn. They refused to repeal the Obama health care disaster and blocked/ obstructed many of his judicial/ cabinet  nominees .

The twin hurricane disasters forced the opposition’s hand to grant disaster relief.

Trump crossed the political aisle to forge an alliance with his political enemies to do the right thing. and release the disaster relief funds

I saw Trump on CNN in Florida directing the relief operation. He showed his focus and skills in construction and rebuilding.

Even the mainstream Trump hating media: CNN/ CNBC/
BBC/ Bloomberg could not find fault.

Florida and Texas are recovering much faster than expected and Trump’s approval ratings have jumped.

In my life I have never seen a US president with Trump’s building/ development skills. 

Most like the Clintons/ Obama/ Bush   were political  hacks, out of touch, corrupt, and self serving   

As the US markets represents about 60% of the world’s equity capital, this will benefit markets around the world including Hong Kong, China, Singapore and Malaysia.

I particularly like Singapore due to the extreme negative sentiment as well as, doom and gloom among the investment crowd. 

I read that  Singaporeans  are selling their shares out of fear of North Korea  starting a war.  This is absurd. It is bluster and hot air by Kim.  Russia/ China and the US will never let it happen. Bookmakers in London access the odds at 99.9 % there will be no war.

Extreme fear by the sheep is always a good buying opportunity especially when the odds favor you by 99.9 % of winning. 

Because of the negativity we can buy selected quality shares at a discount while enjoying healthy dividends.

The same is true for the KLSE especially selected quality mid cap shares trading at reasonable valuations.

Invest well and grow your wealth
Bill

One of my colleagues  at Phillip owns a similar cat. It is a rare leopard cat. She told me it is an expert rat catcher.

Value represents assets while growth represents ideas.

10 Sept 2017

Dear Fellow Investor,

A  tragic but ultimately   bullish event happened last week in Texas.  

This hardy Texas dog knows how to survive. without help. Hurricane Harvey destroyed over 100,000 homes and billions of dollars of infrastructure but  in the crises lies opportunity.  

Trump joined with the Democrat leadership (opposition party)  to raise the debt ceiling for 3 months to avoid a government shutdown and release over 10 billion in aid to the Hurricane Harvey victims. 

Even the liberal democrats, socialists and Trump haters could not refuse life saving aid in the face of misery and suffering. 

They put their ideology aside for the greater good.

This is evidence of Trump willing to meet with the opposition and compromise rather than taking a hard line stance.  

It could mean there will be progress in reducing taxes for individuals and corporations, providing funds for rebuilding infrastructure and building the Mexican border wall to keep out the drug dealers, criminals, terrorists and illegals  

Trump’s leadership and expertise in infrastructure and property development  his shined.

His response to Hurricane Harvey  and the debt ceiling has resulted in a jump in his approval ratings from the low 20’s to over 45 %.

This will boost stock markets world wide.  It will boost commodities and companies linked to building and development. Even gold and silver have caught a bid and awakening from a 5 year bear market.

Lets continue to focus on value stocks that offer growth. Value represents assets while growth represents ideas.   I like a combination of both.

Invest well and grow your wealth

Bill

Today’s ‘critter’ is the Patagonian mara…a relatively large rodent…and somewhat rabbit-like animal that is found in open and semi-open habitats in Argentina. The KLCC Aquaria has a similar animal.