Dear fellow readers,
Once
again, these writings are just my humble highlights (not
recommendation), feel free to have some intellectual discourse on this.
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I think the pictures above speak a thousand words. I shall not dwell into it any deeper. We received a lot of personal messages asking whether should they cut loss or average down or invest more in today's climate. Some even ask me will KLCI collapse as it enters the bear market territory with recession on the way.
The concerns are highly legitimate. After all, these are questions not even AI, Roboadvisors, Unit Trust managers can come close to answering. To be fair to all, I should explain it in 3 folds :
1. No one knows the bottom, and no one knows when it will rebound.
Essentially, I can conclude that those who champion technical indicators as the holy grail in investing, lost money. Those who follow prominent investor lost money. Those who used margin lost even more money. Those who follow political network / insider cable new lost money.
However, those who are still sustaining or faced minimal loses are those who have strictly abide by Fundamental Analysis (FA) or held Dividend Yielding (DY) stocks. These two metrics are the hallmark of investing. In the past 10 years, we have yet to see KLCI in such a doldrums. Each year we think the worst is over, we can surprised and shock how bad it further becomes. And we conclude this is due to the continuous fall of Domestic Direct Investment (DDI) - This will be our story for another day.
So does that mean now it's the best time to collect all high DY defensive stock with good FA? My answer is yes but follow these 6 parameters when choosing the stocks to enter :
- good DY (consistent track record, not one off)
- has business exposure overseas and local (preferable overseas ex China )
- strong cash flow and cash reserve with minimal debt / liabilities be it short term or long term
- no links to political personalities, parties or govermentt contracts
- business clients are need base demand instead of luxury demand
- good solid management reputation (no hanky panky)
2. How to know the direction of the local Market?
Always observe Global Indicators :
- US market (S&P 500, Dow, US Election heating up etc)
- Observe oil market, OPEC policy guidance
- Observe Japanese Yen (safe havens)
- Observe gold price (safe havens)
3. Buy when others are fearful, sell when others are bullish.
Normally true if the fundamental of the economy remain status quo and due to the external factor. Sadly, today Malaysia is facing the perfect storm. Namely : external headwinds of Covid 19 and US uncertainty + local domestic political crisis (which will prolong)
Lastly, if you have spare cash, set some aside for rainy days. For excess cash which will not impair your existing obligations, can start putting into the counters we have shared with all in the past amongst those would be CCK, OCK, RCE Capital, DKSH and Riverstone Holdings Limited.
Please stay tune as we have been doing some serious investing and will be looking to call more FA stocks in the coming future.
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Food for thought:
https://klse.i3investor.com/blogs/tradeview/2020-03-05-story-h1484718676-_Tradeview_2020_Guidance_In_A_Bear_Market_Correction_or_Selldown_CCK_OC.jsp
