For quite a while, we’ve not experienced a bull market like now, and you don’t need to look at the technical indicators to confirm it’s a bull market.
If you always feel the market, you’d know the current sentiment is quite bullish. First, the KLCI has been standing above the MA200 line since January 2017. Second, we have more gainers than losers on the daily basis, recently. Third, almost all the sectors’ indexes stand well above the MA200 line. Fourth, the strong Moving Averages (MA) lines for KLCI, such as MA50, MA100 and MA150 have started trending upwards, indicating the bull market is likely to continue.
So, are we more daring in the bull market? Is it time to put more money in the stock market? Clearly, bull or bear, we need to be cautious and don’t let complacency set in. After all, there are more unknowns in the global economy.
Regardless, let’s have a look at our portfolio on 15th February 2017:
Obviously, the results remain encouraging. Since the inception in November 2015, we’ve gained 87% returns till 15th February 2017. How did we achieve it? We don’t buy and hold. Instead, we buy and observe, and remain flexible of our strategy. If the company did not perform as expected, we’ll switch to other companies that have started performing, such as on uptrend or had a breakout recently.
For this time, we’ve done a switch from ILB to KAWAN.
Sold ILB (5614)
While we believe ILB has great prospects with low downside risk, we sold it because we can’t tell when the company’s solar business starts contributing. On 31st January 2017, we sold 60000 shares of ILB at 0.84, giving us sales proceeds of RM50400.
Bought Kawan (7216)
Kawan is Malaysia’s leading exporter and largest manufacturer of frozen Asian food delicacies. Its products consist of paratha, chapatti, naan, samosa and more and there are a few reasons we selected Kawan:
- Its revenue and net profits have been going up for the last 10 years, indicating there is a huge demand for its products and the management is efficient.
- Strong balance sheet. According to its Q3 report, Kawan is sitting on 92.7 million cash with less than 30 million borrowings. This means the company will be able to expand its business with ease.
- The company has been expanding. According to CIMB report, Kawan’s new factory was scheduled to complete by October 2016. The new roti paratha line at the new factory would be 3 times the size of the current line. In addition, the new warehouse freezer would be 5-6 times larger than the existing warehouse. All these simply means Kawan’s revenue and profits will go higher.
- Technically, Kawan has been consolidated for a year and just had a breakout on 10th February 2017. The breakout time is much tallied with its additional capacity and I believe the trend will continue.
Since our analysis is aligned with the technical chart, we bought 12000 shares of Kawan at 3.97 on 10th February 2017, using RM47640 proceeds.
With the leftover cash brought forward, plus the transactions performed above, our new cash level is RM25610.
So the question is not whether the bull will continue to run, it’s what you do if it does? Don’t forget that the end of the bull will be the beginning of a bear. At the end, valuation matters. As a contrarian, why not consider selling while everyone is enjoying the party?
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