What in the world is this?
The investment clock tells us where we should place more of our assets in a tactical discretionary asset portfolio. Its a bit confusing given that we have a few of the factors at different times while government intervention distorts several natural cycles. Here are my honest thoughts:
1. Boom and bust cycles have shorten indeed - some believe that it moved from 10 years to 5 years.
- The last big recession was 2008. Generally a recession comes every 10 years (I still believe this is the case) - 1987, 1997, 2008, 201?.
- My best guess is that somewhere between 2016-2018 is a very cautious period.
2. Now back to the investment clock - Given the falling commodities environment (we appear to be in a recession at 3 o'clock, in Singapore's case - falling real estate makes it a 6 o'clock)
3. However on the flipside, USA and China are keeping or slashing interest rates to boost the economy thus keeping the economy in the recovery cycle - signified by rising shares.
Application
So here is the key question, what do I invest in or do I stay out?
1. Blue chips that have undergone significant correction
2. Growth story of emerging markets is still intact
3. If everything fails - utilities, infrastructure and non-discretionary consumer staples are your best bet
Asset allocation recommended
I believe an asset allocation of 50% equities (30% quality/growth and 20% Reits), 10% special situation investments, 30% cash and 20% bonds would do well.
And last of all here is my watchlist
1. Boustead - ($1.875)
An interesting play on oil, property, geospatial (mapping) technology, utilities. Basically a mini conglomerate with strong orderbook. I did a investor meeting with the IR team before for a competition and I found them an honest bunch of folks with the CEO being a rather lively man despite his age.
Pros: Strong orderbook, strong partnership with Fortune 500 companies, geospatial technology rather useful and a good cashcow
Cons: Rather cyclical in nature given the building of oil storage facilities, utilities (water - rather unprofitable).
Catalyst: Potential REIT
2. Keppel Corp - Pride of Singapore ($9.17)
Under the new leadership - Loh Chin Hua (Former Fund Manager from GIC), Keppel has make headways into the investment fund business. Rarely making a wrong footing, even long only fund manager Aberdeen is a big fan.
Pros: Strong cash position, market leader in offshore and marine (rig-building), Keppel Land has iconic buildings (Reflectiosn, OFC, MBFC) and unique investment markets such as Myanmar and Sri Lanka. Rather balance conglomerate covering the whole business sphere from - offshore support (rig-building), Property (commercial and residential), Infrastruture (utilities - clean energy and water production), Tele and Transportation (Logistics, Data Centres) and Investments (Krisenergy, K1 ventures, M1, Keppel Reit and Dyna-mac)
Cons: Susceptible to market volatility due to the nature of business being cyclical - Property + Oil.
Catalyst: Triple investment trust structure allows parent to monetize the assets and reuse capital (think Keppel Reit, Data Centre Investment Trust and Keppel infrastructure trust).
3. Sembcorp Industries - The utilities whiz ($4.59)
Once a company that had its hand in everything including the Delifrance franchise, sembcorp has truly come a long way and streamline its effort into the defensive company with a growth strategy.
Pros: Utilities has long been stated as a boring business, but for sembcorp - its ability to produce year on year earnings and strong ROE has made it an industry leader in power and water production playing on a huge market in the global market. Even its subsidiary - Sembcorp Marine (61% stake) is worth a good punt at such a reasonable price.
Pros: Defensive with a growth strategy enough said
Cons: Property and investments (gallant venture) has been quite a damper, also affected by falling oil prices due to sembmarine
Catalyst: Payout of higher dividends, moving into new markets and possibly selling some utilities to Investment trusts structures
4. Soilbuild Reit ($0.790)
With little history and not much investment interests. This stock is purely for a good dividend yield (7.8% expected) with reasonable debt gearing to protect against interest rises and possibly make good acquisitions when necessary
Pros: Low leverage, Good management, Fully Occupied property
Cons: Less growth, Lack of institutional interests, Singapore centric business
Catalyst: Surprises on the upside - rental revisions, moving overseas for deal accretive moves
5. ST Engineering - Singapore's defense machine
The nature of this business is quite interesting. Being a huge conglomerate (>$10 bln in market cap), the company has experience quite strong interests in the Aerospace and Marine industry. Its defensive nature "pun-intended" allows it to be quite steady in an environment where everything fluctuates. It is however pretty dependent on Singapore's defence budget (expected to be around 5% of the annual GDP)
Pros: Defensive nature, strong dividend payout (>60% of EPS), unique innovations allow it to compete and build weaponry for europe and middle east markets
Cons: Possibly slow to new opportunities - not a terribly exciting growth stock
Catalyst: Huge bumper orderbook, increase in SG defence spending, new innovations to sell to new markets
To be honest, stick to REITS and Blue Chips for now - stay safe and happy investing!
Regards
No comments:
Post a Comment