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Sunday, May 19, 2019

Global Portfolio outperforms MSCI index and has positive absolute returns

Tong's Value Investing Portfolio as of May 16, 2019
Tong Kooi Ong

The tides appear to have shifted once again for global stock markets. After fanning hopes for an imminent breakthrough on a trade deal for months, President Trump escalated tensions, with a trademark tweet, a couple of weekends back.

The US followed through by raising tariffs from 10% to 25% on some US$200 billion worth of Chinese imports, which were postponed from 1 March. It is also said to be preparing to levy taxes on the remaining US$300 billion plus of goods that are currently exempted. China, in response, raised tariffs on US$60 billion worth of US imports.

The unexpected turn of events had investors scrambling, sending stock prices around the world broadly lower.

Higher tariffs will hurt both the US and China’s economies and the domino effect will reverberate throughout the global supply chain. President Trump maintains that China will be paying the additional tariffs. In reality, the taxes will be shared by Chinese exporters, US businesses (importers) and US consumers. The proportion will differ depending on the products and relative bargaining and pricing power.

In the immediate term, however, investors are betting that Chinese manufacturers will bear the brunt of the trade war, in terms of reduced demand from trade diversion, which could also affect future investments in the country.

Chinese stocks were by far the out-performers in 1Q2019, when hopes were high that a trade deal was imminent, but turned big losers in May. The selloff also dragged down regional markets while US stocks have held up better by comparison.

Trade negotiations are continuing but it is anyone’s guess when, or if, another truce or deal can be struck. Should the trade conflict persists or worsens, I suspect we could see another divergence in global stock markets – with the US out-performing the rest of the world. This would be a repeat of what happened in 3Q2018.

The US economy is on a stronger footing, even though China is stabilising. GDP grew a faster than expected 3.2% in 1Q2019. Unemployment is at 50-year lows and wage growth is gaining traction as the labour market tightens. And as mentioned previously, household debt has been on a downtrend since the financial crisis. All these will go some ways towards helping consumers adjust to the eventual price increases resulting from the tariff hike, which will take a few months to filter through.

US corporate earnings too have been more resilient that initially expected. 1Q2019 earnings for the S&P 500 companies (with 90% having reported) contracted by just 0.5%, far lesser than the earlier projection of -4% before the results season began. Revenue was up 5.3% for the quarter, also higher than the previous estimate of 4.8%. Domestic-centric companies are reporting better earnings than those with global exposure, underscoring the relative economic weakness in the rest of the world.

Chat 1: Performance of Global Portfolio vs. MSCI World Net Return Index

Total returns for my Global Portfolio now stand at 5.6% since inception. The portfolio is out-performing the benchmark MSCI World Net Return Index, which is up 3.2%, over the same period.

The Global Portfolio has seen its fair share of volatility over the past year and a half. We have made mistakes and taken losses. At its worst, total portfolio value fell by as much as 20.3% in the immediate aftermath of the 4Q2018 global selloff.

A string of good investments and improved sentiment for global markets in 1Q2019 have turned the portfolio around. Our decision to dispose of DIP Corp, China Sunsine, Sunpower and Nine Dragons Paper appear timely as were our acquisitions of Malayan Flour Mills (for which we have already locked in gains), Builders FirstSource, Disney and Ausnutria Dairy. I will write more about the outlook for stocks in the portfolio next week.

I acquired 40,000 shares in one of Malaysia’s largest banks, CIMB Group Holdings Bhd, and pared my holdings in Ausnutria Dairy by half, netting a gain of 61.5%. With these latest transactions, my Global Portfolio is now about 75.8% invested.

I am looking to invest the balance of the cash holdings, possibly in the US market. As explained above, we believe US stocks would outperform in the near to medium term. Currently, the portfolio is about 54.8% invested in US stocks and 31.9% in China-based companies, at prevailing market values.

Potential fallout from trade uncertainties between the US and China kept Asian stock markets on the back foot. The Bursa Malaysia continued to see selling pressure from foreign funds, with net outflows totalling some RM3.3 billion in the year-to-date. The FBM KLCI is the worst performing index in the region this year.

Stocks in my Malaysian Portfolio ended the week flattish, mirroring weakness in the broader market. Total portfolio returns now stand at about 48.1% since inception. This portfolio continues to outperform the benchmark index, FBM KLCI, which is down 12.6% over the same period, by a long way.


Performance Comparison Since Inception (%)
%-12.648.1-20-15-10-50510152025303540455055
  • Tong's Value Investing Portfolio
  • FBM KLCI
SHARES HELDQUANTITYAVERAGE COSTCOST OF
INVESTMENT
CURRENT
PRICE
CURRENT
VALUE
GAIN /
(LOSS)
GAIN /
(LOSS)
SCGM BHD11,0661.72919,190.70.91010,070.1(9,120.7)(47.5%)
AJINOMOTO (M) BHD1,50011.81317,720.017.52026,280.08,560.048.3%
Y.S.P.SOUTHEAST ASIA HOLDING10,5002.41325,340.02.56026,880.01,540.06.1%
FORMOSA PROSONIC INDUSTRIES18,0001.44025,920.01.75031,500.05,580.021.5%
POH HUAT RESOURCES HOLDINGS13,0001.47019,110.01.52019,760.0650.03.4%
SUPERLON HOLDINGS BHD15,0001.28919,327.51.03015,450.0(3,877.5)(20.1%)
CIMB GROUP HOLDINGS BERHAD6,0005.14030,840.05.13030,780.0(60.0)(0.2%)
Total  157,448.2 160,720.13,271.92.1%
        
Shares bought       
No transaction.       
        
Total shares held  157,448.2 160,720.13,271.92.1%
        
Shares sold       
No transaction.       
        
Cash Balance    135,453.4  
Realised Profits / (Losses)    92,901.6  
        
Change since last update May 9, 2019       
Portfolio      0.3%
FBMKLCI      (1.2%)
        
        
Portfolio Returns Since Inception  200,000.00 296,173.596,173.548.1%
Portfolio Returns (Annualised)      10.4%
        
Portfolio Beta      0.906
Risk Adjusted Returns Since Inception      53.1%
        
        
Performance ComparisonAt Portfolio StartCurrentChangeRelative Portfolio Outperformance
FBM KLCI1,829.71,599.2(12.6%)60.7%
FBM Emas12,700.411,297.7(11.0%)59.1%
Footnote: 
*Current price is as at May 16, 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.

STOCKS SOLD IN THE LAST 12 MONTHS (Currency: MYR)
SHARES SOLDDATE BOUGHTDATE SOLDQUANTITYAVERAGE 
COST
COST OF 
INVESTMENT
PRICE SOLDSALES 
PROCEEDS
GAIN /
(LOSS)
GAIN /
(LOSS)
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%)
WILLOWGLEN MSC BHD14-Dec-1714-Feb-1919,9000.5009,900.00.4649,236.0(714.0)(7.2%)
SAM ENGINEERING & EQUIPMENT14-Jan-1914-Mar-193,0007.38022,140.07.90023,700.01,560.07.0%
PANASONIC MANUFACTURING MSIA16-May-1818-Apr-1960026.15717,182.037.87022,722.05,540.032.2%
HONG LEONG INDUSTRIES BHD14-Dec-1718-Apr-192,0009.12618,251.010.64021,280.03,029.016.6%
MALAYAN BANKING BHD16-May-1818-Apr-193,00010.25030,750.09.13027,390.0(3,360.0)(10.9%)
ECO WORLD DEVELOPMENT GROUP BERHAD28-Jun-1818-Apr-1915,2001.23518,772.00.92013,984.0(4,788.0)(25.5%)
DIALOG GROUP BHD06-Sep-1818-Apr-195,7003.45219,676.43.11017,727.0(1,949.4)(9.9%)
HARTALEGA HOLDINGS BHD28-Mar-1818-Apr-1911,0004.61050,710.04.75052,250.01,540.03.0%
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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