Icon8888 Gossips About Stocks
(Icon) 2017 Arrived Early. Time To Reshuffle Portfolio
1. Portfolio Management
When I looked back, it seemed that I churned my portfolio on a yearly basis. Namely, I bought something at the beginning of the year and sold them after an approximate 12 months holding. I would say that it was by coincidence rather than something cast in stone. That was how things worked out at least in the past two years.
In 2015, I started the year with export stocks. Many of those stocks did well. By early 2016, I cashed out after the Ringgit started showing signs of strengthening.
After that, I tried my luck on various other stocks but did not have much success. In March 2016, opportunity presented itself. Air Asia reported a sterling set of results. I put a substantial portion of my money in that stock at about RM1.80 (average). And the rest is history - the stock rose all the way to RM3.30 (has since retraced). It helped to make 2016 another year of satisfactory return.
2. Looking For An Enduring Theme
How did I make decisions on what to put into my portfolio ? As much as I dislike Uncle Koon (nothing personal, I am just not a big fan of how he conducts himself), I picked stocks based on his guiding principle - buy stocks that this year's earning is likely higher than last year.
To fulfill the above condition, I look for an enduring theme everytime I reshuffle my portfolio. I have mentioned this before in my 24 June 2016 article "Predicting Future Earning" :-
I applied this principle in 2015 by betting on export stocks. With a bit of luck, the method worked.
I applied the same principle in 2016 by betting on Air Asia. So far, it is working. I am still holding on to some Air Asia shares, waiting for the fat lady to sing. However, as 2017 draws closer, I am looking ahead pondering about life after Air Asia.... "What should I buy in 2017 ?"
3. Donald Came To Town
Well, it seemed that I didn't need to wait long for an answer - on 9 November 2016, Donald Trump was elected the 45th President of the United States. Shortly after that, he released a policy paper detailing some of its plans for the US economy :-
(a) Yearly Infrastructure Spending To The Tune of USD100 billion This will generate economic activities and create substantial demand for construction materials.
(b) A USD1 Trillion Tax Cut Americans will have extra cash to spend.
(c) Kick Out Illegal Immgirants Labour cost will go up. Businesses will pass on the cost to consumers.
All the things mentioned above will lead to higher inflation. This increases the chance of rate hike by Federal Reserve. USD is expected to be strong going forward.
As though this is not enough, Donald is pouring oil on fire by proposing to reduce overseas repatriation tax from 35% to 10%. Many large US corporations hold vast amount of money overseas. According to news articles, three companies alone (Apple, Microsoft and Pfizer) hold more than USD500 billion cash overseas. A Congressional Report estimated that total amount is approximately USD2.6 trillion. If all these cash are sent back to US, we can expect USD to strengthen even further.
4. Export Stocks Back In Vogue
In view of the latest development, naturally I will have to identify export play as one of the major theme for 2017. In the past few days, I reshuffle my portfolio by adding various export stocks. They are the usual suspects : Geshen, Hevea, Jayatiasa, Latitud, Poh Huat, Prolexus, Supermax, Thong Guan, WTK.
After the reshuffle, my portoflio now comprises 1/3 Air Asia, 1/3 export stocks and the remaining construction, consumer and banking stocks.
5. Concluding Remarks
Different people have different way of managing their portfolio. As discussed in this article, I try to buy stocks that have potential to perform within a period of 12 months. This is very different from what was taught in business schools and by prominent investors such as Warren Buffet, Benjamin Graham, etc who advocate taking a longer term view.
I am not saying that it is not good to follow those Gurus. All I am saying is that my method suits me. It has worked well for me at least in the past two years. I would like to give it another shot in 2017.
As for my latest bet on export stocks, will it be successful ? Nobody knows. Things are rarely smooth sailing when comes to stock market. One potential risk that I can think of is that Donald The Bird indeed goes rogue by turning protectionist. To honour his campaign promise, he actually imposes hefty tariff on imports, not only on China, but on all other export countries. (In any event, we are all doomed even if he only zeroes in on China - a China in trouble will drag all of us down with it).
As a result, I would like to caution my readers not to blindly follow my method. I am just an ordinary chap trying to do things based on rationality. Investing is 50% about skill, 50% about luck. Only time can tell whether my latest round of reshuffling is a right thing to do.
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Discussions
23 people like this. Showing 50 of 64 comments
I stay away from chin well because I don't know how the chinese competition will affect them
2016-11-16 12:00
Well, to avoid Donald Trump's enacting tariff against all imports, safer bet is export counters that don't sell to US, like Hevea and Tguan.
2016-11-16 12:05
Icon has reshuffled his portfolio....His capital must be very big to make early preparations. I'm still waiting upcoming QR by this month.
2016-11-16 12:10
I am still very bullish about CIMB. If you ignore the price weakness due to foreign funds pull out, they are supposed to reach all time high profit by 2018 (based on various analysts' projection).
2016-11-16 12:17
Thx sifu icon for sharing.
Icon8888 aldy told us so much abt AirAsia, the last mention was believe the sales of leasing unit..Lol..lets pray pray..
2016-11-16 12:49
Thanks for sharing and giving us the macro viewpoints.Just would like to add to your views.On the export sector there would be new headwinds approaching.I would sum it as the pull and push factor.The government has put the freeze on foreign workers and has lifted the ban on certain sectors like manufacturing.However there is the push factor at play...foreign workers now in Malaysia would have finished their contracts and would not renew their contracts.Consider the following...exchange rate US$ RM end December 2014 3.50 , end December 2015 4.29 and today about 4.35.The foreign worker is repatriating less now in terms of savings and it is not an attractive option as they would rather work in a country for 2 years with a stable currency and less inflation as he is taxed 6% GST also for buying cigges and maggi mee :(
So the plans for MyEg to go to rent out hostels to foreign workers would seem a daunting task now.Just my 2 sens (and shrinking) opinion.
2016-11-16 12:49
Ricky I bought some jtiasa. Just in case cpo plummets, at least I still have FFB growth
2016-11-16 12:52
I follow you, u buy what i sailang what....wakakakakak we follow Donald, sure win...
2016-11-16 12:58
so u only choose jtiasa for plantation stock? jtiasa is my top pick now. (^o^)
bro icon888, what is ur view if i plan major buy in for mbsb & bjcorp in mid 2017 ?
2016-11-16 13:04
Hello Icon8888 bro, it's been awhile hasn't it?
How are you faring? From your article I assume you have been doing well?
Actually, with WTK you already have a proxy to CPO, so no need to worry too much about it.
Anyway, not all Value Investors hold their stocks indefinitely.
This is a trait only practiced by certain value investors like Buffett, Graham, Peter Lynch. Other value investor such like Marks, Browne does not hold indefinitely and sell when it reaches it's above intrinsic value.
I believe you belong to the latter group. No right or wrong, just different strategies for different individuals.
2016-11-16 13:21
Thank you Icon sifu.
according to your normally practice, will you sell you "good" stock (stock that growing every quarter)when there is "big" correction?
2016-11-16 13:25
hello icon8888, its been a while not hear from you. Good to see this article helping ppl on the 2017 portfolio management.....
2016-11-16 13:50
Donald Trump is our new President. His policy is buy US first. Buy oversea last.
2016-11-16 14:29
Congrats, Icon8888, I see your articles get a lot of response, all favourable.
Welcome back.
2016-11-16 15:19
Icon,
From what I see from export stocks (value + growth) stocks combination in 1st year to growth stock of AA in 2nd year. For 2017 is another mix bag of value & growth stocks.
What I still like in the 2017 selections for the like of - Geshen, Hevea, Jayatiasa, Latitud, Poh Huat, Prolexus, Supermax, Thong Guan, WTK - there still have the basis for a good company such as values of consistent operations, good returns on capital and a pretty healthy balance sheet.
I also believe no matter who is the US president or how radical he/she is, if a company continuously derive intrinsic value from their ability to generate profit and proven consistently to be able deliver healthy earnings is a safe bet. The macro and external factors like change in tariff, demand, forex, and trade policy are consider as bonus advantages or disadvantages to a company.
Btw - since your 2017 is a mix bag of selection between value & growth stocks, guess it is covered in both ways since value stocks tend to outperform during economic growth period while growth stocks perform better in general when the economy turn to weaker. Unless anyone got a working crystal ball to tell what lies in the future, I am all ear for it.
Good sharing, hope for more constructive inputs and brainstoriming ideas everyone.
Cheers.
2016-11-16 16:21
Icon, still keeping Mflour that you wrote about it in May '16? Any view on the upcoming qtr report?
2016-11-16 22:55
A big thumb up for sifu Icon on sharing his logic behind his portfolio management.
2016-11-16 23:21
just curious here,does mkh benefits from strong USD because of its oil palm sector?
2016-11-17 01:21
Thanks for sharing, Icon888. Great call on AAsia
If you have the time, it'd be great to see a writeup on Jtiasa. Also, do you have an opinion of their coming Q earnings? Thanks
2016-11-17 14:17
Donald the wall builder will proceed with his great wall empire. Ego and good for business
2016-11-17 16:45
Richard Branson said it is not up to one man to shape the world we live in - it is up to all of us. So I think with their past 44th presidential legacy and with senate & house of congress will govern & prevent any drastic move
2016-11-17 17:58
Icon, I like your focus on future earnings of stock that you want to buy in 2017.
What are about plantation stocks (e.g. FGV, Sime, etc) as CPO prices are rising and next year is a bumper crop after a drought year. Earnings are in USD (CPO prices correlated with USDMYR) and labour wages and some costs are in Ringgit.
Airasia may not be a good bet now as it is no longer a low cost carrier. Where got low cost when there are no low cost terminals in Malaysia? Where's the competitive edge?
2016-11-17 18:06
Very reasonable strategy here. I'd say 12 months would already qualify as "long term" with some people. We don't have to set it in stone. If the situation changes, it can be less. Or add another six months.
I'm going to load up on export counters too. Waiting for dips to enter. And then just wait.
2016-11-18 11:03
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This book is the result of the author's many years of experience and observation throughout his 26 years in the stockbroking industry. It was written for general public to learn to invest based on facts and not on fantasies or hearsay....
Icon8888
u r welcome
2016-11-16 11:59