Building Up
A Basket of
Defensive Stocks
From time to time, there would be some friends / followers keen to
know my next target stock to buy. I am
actually used to such question that I have decided to come up with a standard
reply: The moment I BOUGHT any stock, I will post in our WhatsApp Group so that members are
informed and will make their own decisions.
Although I share with my stocks purchase, I sincerely believe not all my
stocks purchased will be followed by all. Meaning NOT all will simply go and
buy. Many of my followers / friends are seasoned investors, too and they do have knowledge and good judgement on
stocks too.
A few of them are very well versed with certain stocks which I am not.
But nevertheless, the WhatsApp Group is a very good platform for amongst us to
share our views and at times certain jokes as well.
Anyway, where is the stock market direction heading this year? Which
theme are investors looking at? Stocks that are set to gain from the
strengthening of the Ringgit? What about plantations stocks? One kind famous
blogger Calvin has been fiercely
promoting plantation stocks in view of less production this year due to the El
Nino effect. At the moment, his call seems to be on the right track as futures
prices are trading higher this year for plantation.
What about those related to oil and gas? Oil seems to be hovering around
USD 40 plus minus range? Some days you will read oil prices moving up and
another day there will be a report of something happening and oil prices move
down.
If an investor is to take all those above facts into consideration
before investing, I think it will be very difficult because situations can
change very fast. Though the USD appeared to be not so strong vs the Ringgit,
but I bet many are not willing to bet
that the Ringgit will trade back to its RM3.30 levels. The best it can trade is
RM3.80 levels, that is also my personal opinion.
Although I do understand all those facts will have an effect on stocks,
I do not want it to seriously effect my stocks selection. I will take a
different approach that is not so mind-blogging.
I will use the dollar-cost averaging methods this year. I will try to
buy a certain stock (which hit my target price to purchase) every one month
plus or so.
In short, I intend to buy a basket of quality stocks (in my opinion
only) that if one holds over a period of between now and three years, one has a
better chance to reap its rewards when the share price moves up eventually due
to consistent improving profits.
Some of my criterias are : the
companies are paying good dividends regularly, having good cash-flow in their
business, are cash-rich and focussing on their main business rather than trying
to diversify into totally different kind of other business they do not know or
not very familiar with.
Readers would have noticed that I have been on a buying spree since the
end of 2015. I had bought NTPM, CCB, Chin Well and the latest BP Plastics, but periodically so
that as to average out.
At the moment, NTPM is positive, CCB and Chin Well are more or less
same, while BP Plastics is on the negative side. Am I worried now that one of
my stock selections is in the negative area?
No, I am not perturbed at all about the share price moving down after my
purchase. I don't really see the short term price movement as bothering at all.
What I am really worried is the quarterly results.
Results are all that matter for any stocks. A good string of sequential
quarterly results can move a stock price up by some percentage. But it does not
guarantee it will not come down should overall market sentiment takes a severe
beating due to certain crisis.
Still, a better quarterly result is so much better than a poorer
quarterly result. Even then, as I experienced recently three of my stocks were
actually traded down at certain stage after announcing good quarterly results.
(You can refer to my previous blog : When good results are still not good enough).
I still believe if one takes a longer term horizontal view of three
years holding on to such stocks (which has the criteria as mentioned), one will
reap rewards.
Two such stocks which fit into my criterias bought and were sold off
after a few years later for good bumper profits were Hup Seng Industries Berhad and YSP Sah. These are two classic
examples.
I will be looking to buy another stock in due time. But the stock which
is in my radar must more or less hit my target price. But it is not so
appropriate if I were to tell readers the list of my target stocks and then I
did not purchase them later if they fall into my target price.
This also helps to explain to my reader CK who asked me for which
stocks I am aiming to buy. So to you, CK, I hope my views and comment shared
will help explain more precisely why I did not wish to name any stocks I have
not yet bought but are in my radar list.
I have always believed actions speak louder than
words.
[Also from now onwards, I have decided not to post any buying and
selling contract note of my latest shares. I believed it is not really
necessary because if I buy, then I really buy because I can't cheat everyone by
saying I buy when I actually didn't buy or vice-versa). The truth can always be
unearthed in the end). As they say, you can cheat or tell lie once and get
away, but eventually you will get caught if you keep doing so].
