Today I have added a new stock for Humblepie FA Watchlist which is Mikrob. A new first entry for 2016. I have included her before in my FA Watchlist during Mid of Nov and taken her out due to uncertainty of Fed Reserve decision on interest rates. Reason for me to feature her again is due to 4 criterias met for my personal stock selection (may refer to i3investor blog for the write up).

 

As forecasted, export stocks continue to prosper during the market uncertainty. Reason? Simple, weakening of RM vs USD.  Why I am looking at a weak RM vs USD for at least the next couple of months? Yellen just hiked the rates for 1x.

Worldwide Central Banks and Economists  are talking about another 4x hikes for year 2016. If per time is 25 basis points, we are looking at another 100 basis for 2016 or 1% hike. No one dare to say  there won't be hike in 2016. When we are expecting further rate hikes, how can our RM strengthern? 

 

Fund Managers / Private Equities will do the calculation on earning spread/risks for owning RM vs USD. When the spread of USD vs RM is thinning, the risk of holding RM is higher. Oil will stay low at least for the next couple of months, our currency will be further weaken by the huge oil pile from the Middle East. Choosing export stocks / partly expose to export is a simple decision. 

 

Generally when a trend started, it will be medium to long term until the Fundamental of the Market changes again before it pulls back. Example, when Oil & Gas stocks started to pick up post Lehman Brother colapsed, most stocks was from single digit PE then go to teens PE then go to the twenties PE. Till the last stage, PE valuation does not matter anymore as most are above PE 20, 30 and 40 which is much higher than the PE for Fix Deposits. What valuation analysts use then? They compare to peers of the same size. Company A, B and C PE 40, left company X, Y and Z still trading at PE 20, so buy X, Y and Z until the Fundamental of commodities changes. All related to commodities started to plunged and people keep holding the stocks and hoping some day it will bounce back. It will come back but perhaps few years down the road. The hype is not there anymore. Look back at Property, Commodities, Oil and Gas, Consumer Base (post GST kaput), they move up for couple of years then now there are not there anymore. 

 

That is why I am keeping all export counters on hand and looking to accumulate more different counters with solid growth plan base on my own understanding of the market. Of coz I will change the direction if the Fundamentals are going against me in the future. Currently Dow down 240 over points at the time of writing and oil falls below USD35. 

Look at RM vs USD, is 4.40. 

 

Question: What do you think of my counters will perform tomorrow looking at current exchange rate? 

 

I am able to sleep even if Dow drops 500 points tonight. 

Head I win, tail, I don't lose much.

 

Till then happy trading ! 

 

 

Sincerely,

Humble Pie

 

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