2013: A half year thought

Time has past. But still the same, in investments, you just do not know what you are going to expect. Despite the ups and downs, generally the market have been very good for many investors. I was watching CNBC this morning and it seems that the Dow has rose more than 15% over the last 6 months. FBM KLCI, over the same period on the other has rose 6.95% - see below.

Over the same period, we have seen a general election - at long last, with little change in the local political scenario, so it seems. I believe policies will still be the same (as we are having the same government with the same team) but with some tightening of the government's expenditure as we cannot continue to grow our spending as much as we have had over the last 5 years. Nevertheless, as in anywhere, we just have to do what's best for ourselves and stop hoping for things to happen externally, which may or may not affect us.

On the performance of the portfolio which I share, over the last 6 months it has been fantastic. I do not have the record on the last day of closing for 2012 but the latest I have was for 28 December 2012 and here it is.

Against the latest as at 28 June 2013, which was the last trading for the closing mid-year 2013, the portfolio rose by about 50% to about RM135,000. Anyway, this kind of performance is one which we do not expect to emulate all the time. What we hope as an investor is to do a 10% to 15% and anything between those numbers on the average over a long period of time is just good. Anything beyond 25% over a long period of time would just be out of this world.
Even Berkshire Hathaway over a period of more than 47 years (1965 - 2012) did a 19.7% on a compounded basis. Look at where the company is today - but of course we can say that it started from a much larger base.

What do I see in the portfolio

As you can see in the portfolio, I hold 8 stocks today after having bought and sold SP Setia and Wing Tai. Over the last half year, I sold Padini and TimeDotcom as well. Then of course, I bought Bonia. YSP and Parkson.

You would have noticed in those portfolio, these are the companies which have a common theme. They may be in different industries but they seem to be much easier to understand or comprehend where their strengths are.

1. DKSH - not that many people will know DKSH but if you are in the daily grocery shopping be it for milk, foodstuffs, pharma products, one will not miss this company. DKSH is one of the largest market expansion company in Malaysia, if not the largest. They distribute for all kinds of brands except for their own. A very focused company and I have made a lot from this company having seen the turnaround early on.
2. Wellcall - again another company which not many would notice. It does rubber hoses for mainly industrial use. Rubber hoses means it uses rubber as its main raw material and in Malaysia what do we have? Globally, it does not have many competitors and having located in Malaysia and it being already established means that it is a company which has a certain competitive advantage.
3. NTPM - Another company which is a leader and again not that many people would have noticed it. The largest tissue paper seller in Malaysia - whether economy is good or bad, I would think today, not that many can reduce on tissue paper usage. In Malaysia, tissue paper has become a 2 player game (of course with some smaller players) - Kimberly-Clark and NTPM. The growth for NTPM would be dependent on its foray overseas as well as its other products which are gaining momentum.
4. Jobstreet - need I say more? It is the leader in Malaysia, and its second competitor, Jobsdb is probably losing market share (the way I see it although there is no data available) in Malaysia. Has a good momentum seen in Philippines as well. Very strong cashflow and dividends - which is all important.
5. Airport -  Anyone do not agree this is a monopoly? There are many other companies which are monopolies but still I do not buy them, but this one is for the eagerness among the people in Malaysia and regionally towards travelling be it for business or leisure. It has received some flaks (because of mainly KLIA2) - me inclusive but yet, this company will just do well. If it is not, then something must be very wrong.
6. Parkson - Again a common theme. I have held AEON before. During then Parkson was more expensive. Now this has sort of turnaround mainly due to the results of each of these companies - moving a different direction. AEON has done very well, due to it seeing the change of the retail business early on. Parkson caught on that a little bit late, but they are changing to the tune of the need for change. The overseas expansion attracts me, and I think it is the right decision. Whether the execution is done correctly or not, remains to be seen. However, I rather have a company which does not sit still rather than seeing a company which allows its market share being taken away.
7. YSPSAH - now this one is a little bit of a surprise. It is a smallish company doing pharma. Pharma is a competitive business but yet for those that have their mainstay over a long period of time, as long as they consistently fight on, they are doing ok. The market for pharmaceutical products will grow, but more and more people or companies would be going for the lesser brands due to price. Globally the large pharma are facing a good fight from the more generic drug producers and I am betting on this small company to continue with its niche supplying to the regional market.
8. Bonia - there is a market for mid-level leather products although the world at one point of time went crazy over the luxury goods products players such as Prada, LVMH, Coach etc. This company is inexpensive when I bought it and I think its positioning is superb. More people at the middle income level would be having more than one handbags, working or casual shoes and Bonia will benefit out of it as long as they keep themselves in the fashion. They do not need to be the leader in making fashion statement but they have to stay current.

Now, what do I think of the market moving forward.

Obviously, it is getting more expensive especially for some of the mid-cap stocks but as compared to many other investment options like properties, bonds, commodities, I still think at this moment of time stocks are still the more attractive asset class to hold. Little do I see the over-exuberant side of the people whom are into stocks, but for a while commodities and now properties seem to be heading that side. In fact, if you noticed, commodities play are facing some challenges (Jim Rogers would want to rebut this though!).

On properties, haven't anyone felt the craze and to a certain extent led to the herd mentality started over the last few years? The lending data and everything else points to that. In fact this issue is not Malaysia alone but the entire region. I have been wrong many times but this kind of feeling just gotten me uneasy. The developers just have got to find new and indigenous ways to sell and often times when there are new creative ways to create sales of product, in the beginning it would fuel the growth but after a while it cause crashes. My experience seeing and reading from during my lifetime:

• Junk bonds led by Micheal Milken and several others (KKR etc) in US and the latest in US again the sub-prime products created was once thought to be clever but see what happened!
• In China now, the central government just do not know what to do. Seldom is the shrinking of the monetary policy practiced, but this is just what they are doing now. We just would not know the quantum of the problem there as the government is not very open in terms of what they do.
• In Malaysia, once a collapse was due to the unchecked practice of the stock broking houses in terms of credit they were able to give which probably give led to the collapse of the stock market in 1997. There was just too much credit into the system.

In stocks, among many friends, I do not see people talking about them and this makes me comfortable. In fact, they talked more of how much their properties are worth nowadays and some intend to buy one or two more for their children as they feel that their children may not afford one later on. From there, I still think stocks is the way to go although we may not see another 50% rise in the next 182 days.