Dear fellow investors / readers,
Happy
2017. Welcome back to a brand new year. The good thing about the new
year is the fact it acts like a "Reset Function". We move on from the
old and welcome the new. Tradeview value investing group looks forward
to the new year with great anticipation and excitement. The first post
for 2017, is to look at the Top 5 Sectors by research houses against my
own personal view. In line with my philosophy "Trading With A View",
this posting is to show the general market view I have for 2017.
Once
again, these writings are just my humble highlights (not
recommendation), feel free to have some intellectual discourse on this.
You can reach me at :
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If
you all observant readers notice, there is no mention of plantation /
construction / steel sectors in my 2016's 3 year view. The main reason I
did not consider these 3 sectors was because 1. weather 2. politically
linked 3. Volatility. Tradeview
group generally avoids GLCs and unpredictable elements when it comes to
stock picking as I have the duty to ensure the downside is taken care
of before I can even hope to achieve meaningful upside.
There have been many talks in end 2016 by funds / research houses that for 2017 , the following sector will be in focus :
1. Plantation
2. Oil and Gas
3. Construction
4. Selected Export counters
5. Election linked Stocks (GLCs)
I will go through each and everyone for the purposes of my readers. I do agree with some but I also disagree with some.
1. Plantation :
I
think almost every investor know apart from oil and gas, Malaysia is a
huge exporter of palm oil after Indonesia. The palm oil market track 2
things very closely : CPO price and weather. Both are interrelated.
Current CPO price has been increasing due to the low stock pile and
strong USD. Many analyst foresee that the earnings of plantation will
pick up in the next QR season due to the turnaround trend it has shown
for the past quarter. Many counters have shot up like TecGuan, MKH, Ta
Ann, KM Loong hs started to exhibit such behaviour.
My
view : Plantation is indeed doing well and I believe next Q will do
well too. However I dont think it will last through the whole of 2017.
Nonetheless, it is good to have exposure to this sector.
2. Oil and Gas :
It
has been a terrible 2 years plus for the oil and gas sector. Although I
called a rebound in oil and gas in March 2016, the rebound was from 35
USD per barrel crude oil to only 54 USD per barrel. Malaysia as a net
exporter of oil have join in the movement with OPEC and Non-OPEC
producers to reduce the global supply to stabilise the oil price. Such
collective effort is the first for all and I am of the view this is
good. However, we must all agree that the days of record oil price is
behind us due to the ongoing movements of renewable energy, green,
sustainability and most importantly, the shale oil produces. Following
OPEC cut, many counters have jump up like SK Petro, Hibiscus, Uzma,
UMWOG.
My
view : While I foresaw the rebound, I am not bullish for the sector. I
am for sell on strength and I believe the range will be at between 55-65
USD per barrel.
3. Construction :
Ever
since the continuing distribution of infrastrucure works, many
construction companies have been doing well. Specifically those that has
the government contracts. This may be so, however only a handful of
construction companies deliver healthy profits with the healthy
orderbooks. Many supposedly big construction firms with big orderbooks
have shown terrible earnings. So unlike most analyst, I am not at all
bullish for construction sector. Yes, we have the HSR, MRT2, LRT3, East
Coast Rail Line and all. All these are well and good if the government
has sufficient coffers to pay out or strong FDI to support these
initaitive. My concern has always been our government coffers are
thining the Foregin Fund has been flowing out for 2 years straight and
somehow not turning around. Government revenue is not increasing, how
can they afford to support so many infrastructures? Yes, there is talk
of China money and oil price rebound helping. However, all these takes
time for it to translate to the bottomline of the company.
My
view : I am not bullish of the sector. In fact, quite reserved. Only a
handful of constructions counters are in my watchlist.
4. Selected Export Stocks :
I
have always foresaw MYR weakening after it rallied back to RM3.80 from
RM4.45 in 2015. The reason was not because of Trump but the rate hike.
Additionally, the risk appetite and currency flow from emerging markets
back to developed due to higher interest rates. Therefore, I have called
my private subscribers to accummulate Hevea at RM1.20, Magni RM4.20,
Superlon at RM2.35 in 2016. However, I was selective. I refused to
touch FL Bhd, WTK etc. Not all companies have shown resilience like the
one mentioned. Export companies is beneficiary of weaker MYR but BNM
new ruling on retaining only 25% of FOREX for export companies is not
good for the export companies in the long term (short term good).
Nonetheless, I am stil pro selected export counters which can show
continuous growth in demand (revenue increasing), not just companies
that relies on forex translation gains.
My
view : I am bullish on selected coutners in the export sector.
Especially those that can show strong . sustainable demand. This is
because the domestic market is very weak.As such, it is better to have
exposure to overseas income / revenue. I encouraged my subscribers to
enter Poh Huat as well following the good QR. I will not claim credit
for Poh Huat as many good writers and stock pickers have noticed Poh
Huat way before me. However, I am joining in to advocate to collect
based on the strong fundamentals.
5. Election Linked Stocks (GLCs) :
Every
election cycle, many GLCs will start to move and the market starts
getting excited over these counters. My question is WHY? Why election
then people feel GLCs will move? I am sure many of you reading this must
scold me for asking such stupid question. "Of course GLCs will move
because of election, government need election funds that's why!" My
apologies, by right, logically this shouldn't happen in an ideal and
truly transparent governance. If anything, one should avoid GLCs with
impending election as the change of government would result a change of
regime and power. Therefore, GLCs are most susceptible to volatility.
Sadly, in Malaysia, we all know GLCs are controlled by the ruling
government and specifically the ruling party / political elites.
Tradeview
group is apolitical. One of the key investment style in the group is to
avoid GLCs altogether. I do not like GLCs for 3 simple reason :
1. Leakages
2. Poor Corporate Governance
3. Huge debts
Ex: FGV / DRB and countless others
My
view : I will avoid GLCs altogether and focus only on value companies
trading at attractive valuations with growth prospect. Therefore, I
cannot be bullish on this sector.
Finally, my advise to all is this, don't keep looking at rotational play or theme plays because it is all short term. Additionally, you will lose money more than you win unless you are a Master of TA or Master of Info (Insider). Focus on value investing and growing with the business. Think of yourself as part owner, shareholder, stakeholder and most importantly, imagine it is a business you want to be a part of as your legacy. That way, I guarantee you, you will exercise the utmost caution of putting your money in that investment. Who wouldn't want to leave a good legacy?
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Please
note that I respect all investment styles and in no way saying one
method of investing is better than another. I know that everyone has
their own preferred method and that is what makes the market
interesting. Diversity.
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Food for thought:
https://tradeview101.blogspot.my/2016/12/tradeview-2017-top-5-sectors-for.html
