The market is always not easy to predict. As John Kenneth Galbraith says, “We have two classes of forecasters: Those who don’t know – and those who don’t know what they don’t know”.
Six months ago, very few predicted that we could be in the bull market now. Whether you have the Brexit or Trump effect, almost all the stock market indexes in the world have showed bullish. The VIS index, a barometer of the market volatility, has lingered between 11 to 13 the last few months, indicating the market’s perception of low uncertainty. Even though we’ve heard of some unfavourable news, such as the falling oil price of below $50 / barrel and the near-certain interest rate hike by the US Federal Reserve Bank, positive sentiment prevails.
This is non-exceptional in Malaysia. Not only has the KLCI stood above the MA200 line since January 2017, almost all sectors have showed that the bull has returned despite of Ringgit yet to show signs of recovery.
With obvious bull sentiments around the globe, it doesn’t mean majority shares have gone up. In fact, this is the bull market where rationality still exists. People are still buying rationally.
So let’s have a look at our portfolio on 15 March 2017:
Refer to the table, since the inception in November 2015, we’ve gained 114% return till 15th March 2017, which is very encouraging. Compared to KLCI of 3.7% gain, it’s a strong contrast. But our goal is not to beat the Index, but to achieve yearly minimum returns of 20%. Anything above it is a windfall.
To gain 20% returns consistently, we need to be observant and reflective. In February 2017, we’ve seen something interesting during the earnings reporting season.
Sell after QR results announced?
Generally, there are quite a number of companies which announced good results in February 2017. Normally, many people would tend to sell their shares after the quarter results (QR) are released. However, if this is what they do this time, they’ll not be able to buy back the shares at their selling price. For example, JHM, Penta and Lion Industry are a few companies, where their share prices continue to surge for a few days even after the release of QR.
Therefore, if your company is doing well and is still undervalued, hold it.
Bought MMSV (0113)
MMSV also caught our attention recently.
MMSV is a test equipment manufacturer which makes specialised machineries to optically and electrically test LED components that are used in various industries including Smartphone manufacturing, automotive and general lighting industry.
On 13th March 2017, The Star paper reported that ‘MMSV eyes double-digit growth’. Chief Executive Officer Sia Teik Keat indicated there are “more than enough” orders for the first and second quarters for FY2017, thanks to increasing demand from smart phone makers.
To give more certainty, he added that the company could record top line growth of up to 20% for the first and second quarters. With the earnings visibility given, we’ve invested 40000 shares of MMSV at RM0.73 per share on 14th March 2017.
Since we intend to preserve some cash in our portfolio, we’ve sold 10000 shares of Hevea at RM1.5 (after ex dividend) and 20000 shares of Pesona at RM0.68. With the cash brought forward plus the transactions performed above, and the 2 cents dividend received from Hevea, our new cash level is maintained at RM25,560.
As we’re in the bull market, let’s be aware that the end of the bull is the beginning of the bear. So let’s stay vigilant and only invest in companies with sound fundamentals.
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 .