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Monday, February 11, 2019

Tong's Value Investing Portfolio as of February 7, 2019

Better economic outlook, but poorer corporate earnings expected

This may appear a contradiction but it is not – they can go out of sync in the short-term.

The closely watched US corporate earnings results season currently underway underscores an important factor – that repercussions from China’s economic slowdown and ongoing trade spat are starting to negatively impact profits. Even though the US economy remains on solid footing as compared to the rest of the world, Corporate America is not immune to the global slowdown.

Apple’s warning of slower demand in China, at the start of the year, was just the precursor. Since then, multi-national companies including Caterpillar, Nvidia, Intel, Advanced Micro Devices, 3M, Harley-Davidson and Ford Motor have all reported weak earnings, attributed to slower Chinese demand as well as rising costs due, in part, to trade tariffs.

Additionally, companies are providing cautious, some even downbeat, forecasts for the near-term. For instance, Apple, which reported 4.5% y-y sales decline for the latest quarter ended December due to falling iPhone sales, has guided for another contraction in the current quarter, of between 3.5-10%.

Nonetheless, stock prices have reacted well to the earnings weakness, by and large rewarding both positive and negative surprises. This is in stark contrast to what we saw in the previous quarter when even above expectation earnings results were punished.

This suggests that investors may have over-reacted to the downside in the December selloff and had been bracing for the worst. Case in point, share prices for Apple rebounded smartly, gaining more than 6.8% the day after its results. The Dow Jones Industrial Average, S&P 500 and Nasdaq indices have recouped almost all of their losses in the last month of 2018, led by recoveries for the big tech stocks.

That said, analysts have been progressively cutting back their earnings forecasts. According to data provider FactSet, earnings for 1Q2019 are currently estimated to contract by 0.8% y-y, which is sharply lower than the 4.9% growth estimate at end-November and 3.3% at end-December. If true, this will be the first earnings contraction since 2Q2016.

Elsewhere, hundreds of companies in China, including giants China Life Insurance and Chongqing Changan Automobile Co (Ford Motor’s partner), have joined the chorus on profit warnings. Slower global economic growth and uncertainties over trade will likely damp corporate earnings for Asian companies reliant on exports. This could set markets up for more volatility going forward.

Thus, whilst sentiment has steadied in 2019, so far, investors are still likely to remain cautious. Future expectations remains fraught with uncertainties. Should earnings deteriorate, that will keep a floor on valuations, even if share prices drop.

Stocks in my Global Portfolio ended up 1.2% for the week. Total returns now stand at -8.9% since inception. This portfolio is under-performing the MSCI World Net Return Index, which is down by a lesser -0.7% over the same period.

Unsurprisingly, trading volume on the Bursa Malaysia was thin as many participants are away for long break. The local bourse was closed last Friday for FT Day and then again on Tuesday-Wednesday for Chinese New Year. The FBM KLCI is up 0.6% for the week ended Thursday but is flattish for the year-to-date.

Total returns for my Malaysian Portfolio now stand at 50.5% since inception. This portfolio continues to outperform the benchmark index, FBM KLCI, which is still down 7.5%, by a long way.

Performance Comparison Since Inception (%)
  • Tong's Value Investing Portfolio
SCGM BHD11,0661.73219,218.41.24013,721.8(5,496.5)(28.6%)
AJINOMOTO (M) BHD1,50011.81317,720.018.62027,930.010,210.057.6%
PANASONIC MANUFACTURING MSIA60026.15717,182.038.04022,824.05,642.032.8%
Y.S.P.SOUTHEAST ASIA HOLDING10,5002.41325,340.02.71028,455.03,115.012.3%
FORMOSA PROSONIC INDUSTRIES18,0001.54027,720.01.82032,760.05,040.018.2%
HONG LEONG INDUSTRIES BHD2,0009.12618,251.09.20018,400.0149.00.8%
WILLOWGLEN MSC BHD19,9000.5009,950.00.4709,353.0(597.0)(6.0%)
MALAYAN BANKING BHD3,00010.25030,750.09.59028,770.0(1,980.0)(6.4%)
ECO WORLD DEVELOPMENT GROUP BERHAD15,2001.23518,772.00.92013,984.0(4,788.0)(25.5%)
DIALOG GROUP BHD5,7003.45219,676.43.02017,214.0(2,462.4)(12.5%)
SAM ENGINEERING & EQUIPMENT3,0007.38022,140.07.34022,020.0(120.0)(0.5%)
POH HUAT RESOURCES HOLDINGS13,0001.49019,370.01.51019,630.0260.01.3%
Total  246,089.8 255,061.88,972.13.6%
Shares bought       
No transaction.       
Total shares held  246,089.8 255,061.88,972.13.6%
Shares sold       
No transaction.       
Cash Balance    45,954.3  
Realised Profits / (Losses)    92,044.0  
Change since last update Jan 31, 2019       
Portfolio      (0.1%)
FBMKLCI      0.6%
Portfolio Returns Since Inception  200,000.00 301,016.1101,016.150.5%
Portfolio Returns (Annualised)      11.7%
Portfolio Beta      0.650
Risk Adjusted Returns Since Inception      77.7%
Performance ComparisonAt Portfolio StartCurrentChangeRelative Portfolio Outperformance
FBM KLCI1,829.71,693.4(7.5%)58.0%
FBM Emas12,700.411,753.4(7.5%)58.0%
*Current price is as at February 7, 2019. 
*Portfolio started on Oct 10, 2014 with MYR200,000. 
*This is a personal portfolio for information purposes only and does not constitute a recommendation or solicitation or expression of views to influence readers to buy/sell stocks.

CLASSIC SCENIC BHD01-Dec-1627-Jul-174,0001.4135,651.31.7907,160.01,508.826.7%
PANASONIC MANUFACTURING MSIA21-Jan-1627-Jul-1740026.12510,450.037.10014,840.04,390.042.0%
ELSOFT RESEARCH BHD30-Mar-1724-Aug-178,0001.84414,750.02.65021,200.06,450.043.7%
JOHORE TIN BERHAD - WA 12/1704-May-1724-Aug-1717,0000.65511,135.00.68011,560.0425.03.8%
FOCUS LUMBER BERHAD03-May-1730-Aug-176,0001.6609,960.01.5309,180.0(780.0)(7.8%)
WILLOWGLEN MSC BHD23-Nov-1630-Aug-177,0000.7685,377.01.43010,010.04,633.086.2%
WILLOWGLEN MSC BHD23-Nov-1628-Sep-177,0000.7705,377.01.1808,260.02,883.053.6%
LII HEN INDUSTRIES BHD14-Dec-1628-Sep-175,0002.82014,100.03.72018,600.04,500.031.9%
COMFORT GLOVES BERHAD28-Aug-1708-Dec-1725,0000.96024,000.00.93023,250.0(750.0)(3.1%)
JOHORE TIN BHD08-May-1708-Dec-179,0001.60014,400.01.18010,620.0(3,780.0)(26.3%)
THONG GUAN INDUSTRIES BHD12-Dec-1608-Dec-175,0004.24321,215.04.10020,500.0(715.0)(3.4%)
KERJAYA PROSPEK GROUP BERHAD12-Jan-1715-Mar-1811,0001.02511,280.01.54016,940.05,660.050.2%
KERJAYA PROSPEK GROUP BERHAD - WARRANTS B 2018/202308-Mar-1815-Mar-183,0000.0000.00.330990.0990.0-
LUXCHEM CORPORATION BHD30-Aug-1715-Mar-1816,5000.73212,072.50.72011,880.0(192.5)(1.6%)
WILLOWGLEN MSC BHD14-Dec-1722-Mar-1820,0001.01020,200.01.26025,200.05,000.024.8%
MUAR BAN LEE GROUP BERHAD26-Oct-1722-Mar-1813,5001.24016,740.01.17015,795.0(945.0)(5.6%)
CHOO BEE METAL INDUSTRIES BHD07-Sep-1716-May-188,0002.19017,520.02.44019,520.02,000.011.4%
CHOO BEE METAL INDUSTRIES BHD07-Sep-1721-May-188,0002.19017,520.02.30018,400.0880.05.0%
SUPERLON HOLDINGS BHD01-Dec-1721-May-186,0001.1757,050.01.5509,300.02,250.031.9%
OKA CORPORATION BHD14-Dec-1728-Jun-1812,0001.54118,488.01.27015,240.0(3,248.0)(17.6%)
SUPERLON HOLDINGS BHD01-Dec-1728-Jun-186,0001.1757,050.01.2107,260.0210.03.0%
WILLOWGLEN MSC BHD14-Dec-1728-Jun-181000.50050.00.54054.04.08.0%
PANTECH GROUP HOLDINGS BHD17-May-1802-Aug-1843,0000.58024,940.00.56024,080.0(860.0)(3.4%)
KERJAYA PROSPEK GROUP BERHAD10-Jan-1706-Sep-1811,0001.02011,225.01.40015,400.04,175.037.2%
LUXCHEM CORPORATION BHD25-Aug-1706-Sep-1816,5000.71711,825.00.65510,807.5(1,017.5)(8.6%)
HOCK SENG LEE BHD19-Apr-1806-Sep-1814,5001.52022,033.01.37019,865.0(2,168.0)(9.8%)
GENTING MALAYSIA BERHAD06-Sep-1828-Nov-183,8005.07019,266.03.06011,628.0(7,638.0)(39.6%)
TOP GLOVE CORPORATION BHD06-Sep-1806-Dec-183,6005.50019,800.06.03021,708.01,908.09.6%
MAH SING GROUP BHD28-Jun-1814-Jan-1919,0001.00519,095.00.93017,670.0(1,425.0)(7.5%)

A Note to Readers

It is my pleasure to share with you my Value Investing Portfolio. However, I must emphasize that it is by no means a recommendation or a solicitation or expression of views to influence you to buy or sell any stocks. I am just sharing openly on what I am doing with my stock portfolio.

Further, I like to remind all investors that investing is not just about the profits or returns. You will inevitably suffer stock losses too. You need to understand your own investment objective, risk appetite and the amount of loss you can afford to bear. So, while many investors talk only about absolute returns, I am also sharing the computed risk-weighted returns of my portfolio.

Tong Kooi Ong

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