Time to Hold More Cash

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So far, 2018 has been a bumpy year for the stock market.

Since the correction started in February 2018, the Dow Jones Index (DJI) rebound back to an optimistic 25000 above. However, it did not last long before it came down to form a second bottom at around 24000. When everyone was about to relax, President Trump announced the 25% and 10% tariffs for steel and aluminum respectively, signifying the beginning of a trade war.

Despite the volatility, the US still shows steady growth and strong job data. This fundamental is in harmony with the chart pattern of the DJI (refer chart 1), S&P and Nasdaq Indexes, as the candles are still standing above the MA50 and MA200 lines, implying that the mid to long term uptrends are likely to continue.

However, Malaysia’s stock market tells a different story. Even though the KLCI Composite Index is well above the 1800 level, the local market has showed very weak sentiments. First, many bullish counters have started to turn bearish in the last few weeks. Second, we tend to see more losers outweighing gainers in most of the trading days, with the ratio of two to one, at least. Third, apart from the finance and consumer sectors, other sectors have showed bearishness. This trend change has started since February this year.

In such challenging times, let us see how our portfolio has performed. Here is our portfolio summary on 14th March 2018:

Disclaimer:
The companies or strategies mentioned in this article are meant for study purpose only. It doesn’t constitute any ‘buy’ or ‘sell’ recommendation. Please consult your financial professional if you want to make any decision.

As you can see, we have reduced the number of counters from six to five this time. Our returns have reached 249% since it started in November 2015. Although one company was removed, we have added more shares into an existing company.

Sold Masteel (5098)
On 28th February 2018, we sold 106,667 Masteel shares at 1.23 following the disappointing quarter results released on 27th February 2018. According to the quarter report, the lower margin was due to higher raw materials and consumable costs. Nonetheless, we view this result as below expectation in comparison to its peers, such as Southern Steel and Lion Industries. The sales proceed from Masteel was RM131,200.

Added Comfort (2127)
In spite of the market volatility, it is obvious to see the glove industry remaining bullish. As a small player, Comfort Gloves Berhad has showed attractive valuation with PE ratio of 16 at the price of 1.1. Seeing its net cash position, high Return of Equity (ROE) and bright prospects, we added 20000 shares of Comfort (2127) at 1.03 per share.

With the addition of previous cash and the sales proceeds from Masteel, plus the deduction of Comfort Gloves investment, our new cash level is now at RM153,325.

In a nutshell, one way to reorganise your portfolio is to reduce number of counters while increasing weightage on an existing company. By doing so, not only your cash level has gone up, you would be able to focus more on the existing companies and invest when opportunity arises.

Binyuen is the founder of BY Enrich Resources and the author of ‘Life beyond the Comfort Zone’ and ‘Profit from Share Investment’. His books are available in major bookstores in Malaysia, Singapore or online http://www.teybinyuen.com/profitfromshareinvestment