A Better Second-Half?
In the last issue, we had some reflections after experiencing an eventful first half. So, what is our prospect for the second half?
The global stock market has been bullish since the end of 2016, led by the US Dow Jones, S&P and Nasdaq Indexes. On 14th July 2017, the Dow Jones and S&P Indexes broke above historical records, while Nasdaq climbed to a near all-time-high after experiencing an abrupt plunge three weeks ago.
Interestingly, while most of the global stock market indexes are bullish (standing above the Moving Average 50 line), the Malaysian Composite Index FBMKLCI has started its correction since 19th June 2017, forming a downtrend channel. Many investors perceived the investment atmosphere for the second half to be more challenging, mainly because of the following reasons:
- The stock market has generally gone up a lot this year. Therefore, the valuation is no longer attractive.
- The US Indexes breaking new highs mean richer valuation and higher market risk.
- The change of global market sentiment has added more uncertainty to the local bourse.
- The 10-year anniversary of the last global financial crisis has added more anxiety to the market.
With the market turning delicate lately, how would our portfolio perform?
Refer to the table; since its inception in November 2015, we’ve gained 226% returns till 17th July 2017, which has given us a better position to decide what to do next. In spite of the positive result, we need to be cautious for the second half. Here is what we could do:
1) Portfolio Restructuring
Regular portfolio review and restructuring are essential because sometimes the companies invested do not meet our expectations. For example, a company with disappointed earnings, or its price movement which turn sideways or down trend that causes paper loss. In our portfolio, we’ve observed FPGROUP’s share price has turned sideways for more than a month. Therefore, we decided to switch all FPGROUP to CRESTBUILDER, as we see a few positive highlights of this company:
- The company expects a better performance in FY2017 as it is looking to complete a few projects this year.
- As reported on Bursa website, the company bought back its own shares from August 2015 to June 2016.
- Based on the company’s annual report 2016, the company has construction contracts worth RM1.3 billion as at 31st December 2016.
- From The Edge Daily on 8th June 2017, the company is tendering 1.8 billion projects and is expecting more tenders in the coming months.
The 50000 shares FPGROUP sold at 0.835 has given us the sales proceed of RM41750, which allows us to buy 40000 shares of CRESTBUILDER at 1.08 with bit more of cash. We also recorded dividend of RM750 from Superlon (RM0.015 per share ex-date on 5th July 2017) and our new cash level is now RM24425.
2) Focus on companies with bright prospect
Seasoned investors would not simply let go off companies with bright prospect and earnings visibility. This implies that as long as the market does not collapse, this kind of company would be a defensive play, as their growth drivers would give more certainty.
3) Have a clear plan
Setting the right strategy is important before you begin any trade. What will you do if the market does not go your way? If you cut your losses; how many percent? It all depends on your risk appetite and make sure you execute it strictly.
So will the second half be better or tougher? The market will tell. Instead, let’s mind our business by focusing more on our portfolio and do the right things.