Building Up A Basket of Defensive Stocks

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].