Monday, January 26, 2015

Tuning Out the Noise and Focusing In

There is so much noise and chatter recently, I feel.

Since SGX reduced it's board lots from 1000 to 100 and I strongly support and use Standard Chartered as my broker, I think that looking locally has a lot of opportunities.

It's no secret, but many may not be aware or willing to accept it, but the European and US stock markets are very expensively valued from an objective viewpoint. From my personal perspective, it's batshit crazy. I'm not even going to name some ridiculous names. Anything over a PE of 100 should require a sanity test to own.

The STI is honestly not that expensive when compared to history. My only concern is contagion. Market sentiment spreads fast and hits many other markets. That means even though we are not expensive, a downturn in other big markets could drag us down with them. This is something that I believe is very realistically within the realms of possibility. When is the last time we've had a recession? Statistically, this eternal summer will not last forever.

However, not everything moves in the cycle together at the same time. It will eventually be somebody else's day to shine.

In terms of looking at this from a global macro perspective, I have long held that precious metals and Russia will be the next big things. We shall see.

I also believe that we will see oil and oil-related stocks see their bottom soon. However I do not think that we are there yet and I am still waiting for a final shakeout. If we have a massive spike down soon, you can be rest assured that I will be running in guns blazing, joining the knife catching party. I have't seen that big move yet, so I'm still waiting. It looks so no-brainer to jump into stocks like Keppel now, which is exactly why I don't think it is the right time. It feels almost too easy. But who knows, maybe this is it and we blast off from here and I really am a greedy idiot with no brains.

I am compiling my list of oil-related stocks now. They ended up mostly being marine and offshore related though. Based on an SGX article, I found that there are 52 mainboard counters in the Maritime & Offshore sector. However, I do note of other counters that seem to be related but are not classified with them, like Mun Siong Engineering and SHS Holdings. I don't really envision Oil bottoming out for at least another month or 2, which gives me enough time to scrutinize that list and filter out all the garbage. And trust me, there is a lot of garbage in this space. I'm not sure if these related industries will be a good play to capitalize on the bottoming of oil, but I suppose this is about as good of a place as any to start.

Slightly further in the future, I think property counters are going to be the hot stuff (downwards). This CIMB report lists a few of the large cap developers, but I think that many are missing. I think companies like Sim Lian, Fragrance and Aspial are property counters and should be considered along with the rest of the group too. The CIMB report screams buy, I think I shall wait. No blood on the streets. I want to see bloody, dirty, ugly, tooth-and-nail, urban, free-for-all fighting, and then I'll come in and mop up the suckers. Again, maybe I am expecting too much and trying to be too greedy, and we base out here, but I doubt so. Things gotta get a lot more dirty and choppy before the stage is set for upsides.

My last sector to watch is commodities. Tickers like Noble, Olam and Wilmar has not been doing well as the prices of commodities across the board has been hammered. Plus, I like businesses that deal with hard assets.

Of course on top of all of these specific sectors that I am looking at, if any specific tickers sudden fall out of favour, I will be watching and waiting. I don't know, but I have a really strong and strange attraction for ugly, crappy stocks. It's not easy buying crap that have a trendline heading towards zero, but there ain't no other way I know of to buy low and sell high if you don't buy low.

Any sectors that you guys are focusing on? Or any good strong companies in this sector that you wanna promote? Don't shy! I told you my thoughts, let's hear yours!

*The Motley Fool has done some heavy lifting and sifted out these 6 companies. They also went to find out the weakest ones too. Useful? I'm sure it's a good place to start.

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