Eyeing more export-oriented stocks

Eyeing more

export-oriented

stocks

Once the flavour boys of last year's market rally, export-oriented stocks since late January this year has been bashed again and again for weeks after weeks due to one simple reason : the strengthening ringgit vs USD.

The ringgit has appreciated to the RM4 level from RM4.40 plus range this year. As such, oriented-export stocks are perceived to be affected as their  main bulk  of profits are denominated in USD.

Investors are bracing for lower profits this year from all these export-oriented stocks and have been selling very aggressively regardless of whether the companies concerned are of good quality ones.

Several good fundamental companies have seen their share price peaked as early as January only to plummet down by as much as 30%. An example is Supermax Corporation Berhad which peaked at RM3.56 on Jan 7 and plunged down to the current price of RM2.55 on Mar 30. It is a plunge of as much as 28 %. I was lucky enough to sell off at RM3.52 in January during near its peak.

Another of my favourites Focus Lumber Berhad has seen its share price peaked at its all time high on Jan 11 at RM3.09. In fact, I was on the screen witnessing the buy and sell bids on that day. I just did not do anything and I believed you know what I am talking about. It is a decision I am living to regret with it today as its share price has been hammered down like nobody's business. It closed at RM2.12 on Mar 30, down by as much as

32 %.

As I have shared before, sometimes not taking big profits can be a huge mistake when market sentiment changes. At times taking profits too early can also be not such a wise one as one sees its share price continues to rise further.

Apart from selling Supermax, I did sell off five "unlisted shares" during the month of January. All those were bought years back and resulted in good profits. One reason I sold was to position myself with cash to pick those badly beaten down export-oriented stocks especially those cash-rich, paying good dividends and getting on seriously with their business and managed by competent management.

One such stock is Chin Well Holdings Berhad which I managed to purchase at RM1.69 on Mar or Feb 15. Note that Chin Well's share price reached a peak on Jan 7 at RM2.34. My purchase price of RM1.69 means it has dropped by as much as 27%. Furthermore, its 52-week low is at RM1.30 which means my purchase price is just 39 sen above it and 65 sen from its peak price. I would call it some margin of safety though one can never be sure of what can happen to the stock's future price.

The Ringgit vs USD issue has a lot to do with the investors' perception on export-oriented stocks. Will the Ringgit claws back its way to the RM3.60-RM3.80 range in the next one year or two or will the Ringgit remains traded at the range of RM4 plus minus? I do not have any idea although according to RAM Ratings, oils are likely to trade at average of USD40 in 2016 and USD45 in 2017.

If this is the case, then the Ringgit is likely to remain subdued at RM4.00 plus range for the next two years. Will then export-oriented stocks capitalize on this for the next two years?

One must note that investors should not put too much emphasis on the Ringgit vs USD factors when it comes to investing in export-oriented stocks. Rather I seriously think we should look into their business and fundamental levels.

Many export-oriented stocks had a great year in 2015. Several had recorded big bumper profits and their cash hoards have increased tremendously. Several have become richer than before and hence in a stronger position than ever before.

It is of my very personal view that those heavily beaten down export-oriented stocks are worth to invest especially those paying good dividends ones.

Chin Well won't be the first and last of export-oriented stock for me. I have eyes on several ones. But I prefer to use a staggered-buying basis meaning I will be buying from time to time to average out my investment.

A comment from ck on March 19, 2016

What do you think of IQ Bhd and Prolexus ?

Reply

Unfortunately, I do not know much or what to think of IQ Berhad or Prolexus stocks.

There are over 1000 numbers of stocks and I don't think it is possible for anyone to know well such a high numbers of companies. I will only study certain particular stocks once I am interested. Otherwise I will just skip even any reports of any companies.

Perhaps there are some others bloggers familiar with these two companies who might be keen to share.