At the end of 2020, I was bullish on the stock market in 2021.
It should be a recovery year from the pandemic as Covid-19 vaccines were rolled out in stages.
Now we are approaching the end of year 2021, and it turns out to be a tough year for stock market in Malaysia.
Unless you packed your portfolio with quality tech stocks, it's very likely that you will close year 2021 with a loss.
If you have Genetec or Kobay in your portfolio early in 2021 and hold on to them until now, you will be big winner in 2021.
Genetec rode a rocket from RM1.80 to RM50 while Kobay jumped from RM2.40 to RM18 (adjusted to bonus issue).
I had Genetec in my portfolio at the start of 2021 at a cost of RM1.49, only to have sold them "happily" at RM4.20...
If you have a few US stocks mixed within your Malaysia stock portfolio in 2021, I believe that you will not do badly either.
Year-To-Date, Alphabet rose 67%, Apple rose 33%, Amazon rose 6%, Microsoft rose 50%, Nvidia rose 116%, FB rose 25%, Intel rose 2%, Netflix rose 13%, Tesla rose 27%, Oracle rose 62%, Ford rose 138%, Berkshire rose 32%, Adobe rose 17%, Dell rose 91%, Broadcom rose 46%, Qualcomm rose 20%, Airbnb rose 12%, Nike rose 16%, McDonald's rose 26%, Domino's Pizza rose 40%, Bank of America rose 50%, ExxonMobil rose 48%, Pfizer rose 66%, Moderna rose 152% etc.
Inevitably every investors who hasn't tried US stock market will have this in their mind: Is it time to invest in the US stock market?
Investing in US stocks is much easier and cheaper now compared to 10 years ago. Local investment banks and many international online brokerage firms offer this service.
Many years ago I did have interest to invest in some US stocks. I felt that Google was a great business with massive potential.
However, I found that investing in US market was troublesome and "expensive" at that time and I didn't really make a serious effort to buy US stocks.
Later I had interest in a few Singapore listed stocks but I still did not try hard to take my first step out of Malaysia market.
As I was doing quite OK in Malaysia stock market, I told myself to just concentrate on my own "strength" which is to invest locally.
Of course we can't compare US market with Malaysia market, they are just incomparable from any angle.
In the US, we have world leading giant companies with moat, as well as exciting up and coming companies with explosive growth potential.
In Malaysia, we have only over 900 listed companies in which more than half are "half-dead" or already dead. Others who are alive are struggling for growth.
There are some good companies but they are mostly cyclical in nature.
Sometimes I feel like there are no more stocks with good potential in Malaysia for me to choose anymore.
That means I have to look elsewhere.
Nevertheless, as long as there is up and down price movement in the stock market, there is an opportunity to make money from it.
If we miss out a super stock that has gone up multiple times, there is always another opportunity waiting at the corner.
If you missed out on Inari, you have Pentamaster.
If you missed out on Pentamaster, you have Frontken.
If you missed out on Frontken, you have Dufu, UWC & Greatech.
If you missed out on Dufu, UWC & Greatech, you have JFTech, Unisem & MPI.
If you missed out on JFTech, Unisem & MPI, you have Kobay, Sam & Genetec.
If you missed out on Kobay, Sam & Genetec, you have ??? What's Next?
Yes, it won't stop here and surely there will be certain stocks that fulfill the potential to fly at any time.
Thus, I think there are still opportunity in Malaysia stock market, even though the KLCI is pathetic and overall sentiment is not good at the moment.
That's the main reason I still stick entirely to Malaysia stock market.
Some people might say that investing in oversea stock markets is a good diversification. I totally agree with that.
In Malaysia market alone, we can have all sorts of diversification for our investment.
Invest in 7-8 stocks at a time rather than 1-2 stocks is a diversification.
Invest across a few sectors rather than one sector is a diversification.
Invest some in short term and some in long term is a diversification.
Spreading your investment in blue chips, small caps, dividend and growth stocks is a diversification.
Place your money in FD, unit trust, ETF and property other than stock market alone is a diversification.
Nevertheless, over-diversification might do more harm than good.
What is over-diversification? I don't think there is a definition for it. Everyone will have different opinion about it.
In general, if you are good at one thing, it's better to spend more time and effort on it rather than diversify just for the sake of diversification.
A very successful stock market investor might suddenly want to diversify into property market after seeing people earning big money during a property boom.
So he shifts half of his time and energy to study the property market while spending less time on stock market which he is good at.
In the end, he may end up not doing well in property investment and missing good opportunities in the stock market.
If I were to diversify my portfolio into US market at this stage, most probably I will only invest in those powerful companies like Microsoft, Apple, Alphabet, Meta, Visa etc.
This is very different from my strategy in local stock market in which I rarely invest in very big companies.
I don't think I have the enthusiasm to study the relatively unknown small or mid cap stocks, and read news from the US. I don't even read half of local business news...
As investing in US stock market is made easy nowadays, there are more and more investors sharing US stocks on their blogs, YouTube Channels and Facebook.
Sometimes I do read and listen to their US stock recommendations. Some stocks are really interesting and I'd have already bought them if they are in Malaysia market.
However, I still find it hard to buy my first US stock.
Another reason why I'm still yet to invest in oversea markets is the lack of resources. I don't know how and where to find a growth company.
When I looked at the financial report of a US company in its investor relation website, I was immediately destroyed by too much information there.
Definitely it's good to have those detailed financial information and better corporate governance but I was just too lazy to go through them since I'm already accustomed to Malaysia style simple financial reports.
If I can go through more financial reports and presentations by US companies, I'm sure that I'll gain more knowledge in accounting and business world.
Since there are so many benefits investing in US markets, why I still haven't make my move?
I'd say it's because of the comfort zone and laziness.
I'm comfortable and familiar with the "pattern" of Malaysia stock market. I stay in this country and know first-hand what's going on with the politics, economy and the people here.
Besides, I'm also quite lazy to read news, quarter reports and annual reports. I only choose certain parts to read.
Anyway, not all well-known US stocks do well in the past one year.
Year-To-Date, Zoom lost 50%, Twitter lost 21%, Uber lost 26%, Paypal lost 19%, Visa lost 2%, Pinterest lost 49%, Disney lost 16%, Delta Airlines lost 8%, Boeing lost 6%, Verizon lost 10%, AT&T lost 20%, Walmart lost 2%, Merck lost 2%, Fedex lost 6%, First Solar lost 10% etc.
All those US stocks mentioned here are the big and famous one which I know. There are many other smaller companies which I'm not sure about their share price movement.
I believe that winning stocks in the US market are much much more than losing stocks in 2021.
Dow Jones, Nasdaq and S&P 500 indices continue to break new high during the pandemic. How long will this trend continue?
It seems like year 2022 will be another good year when US raises its interest rate.
On the other hand, KLCI has been trending down for 7 years since its peak in mid 2014. How long will this trend continue?
Is a trend reversal around the corner?
I won't rule out investing in US stock market in the future and I'd better prepare myself well for it.
When I can't "cari makan" in Malaysia stock market anymore, then it's time to switch.
Indeed..
ReplyDelete:)
Delete"If I were to diversify my portfolio into US market at this stage, most probably I will only invest in those powerful companies like Microsoft, Apple, Alphabet, Meta, Visa etc. This is very different from my strategy in local stock market in which I rarely invest in very big companies."
ReplyDeleteThe above statement is true. I concur that the main difference between US market and Bursa is its mega stocks, eg. Apple, Microsoft, etc, can perform better than small medium stocks. I think one main reason is those mega stocks are "global" companies and their growth is almost unlimited, whereas small medium US companies are doing business locally in US, and therefore, their growth is constrained.
The U-tube below compares well the performance of mega stocks and small-medium stocks in US.
https://www.youtube.com/watch?v=KBxHs6bb_ZQ
In Bursa, we do not invest in companies such as IHH, Sime, Tenaga, Public Bank, etc because they can't grow much. Thus, we shift our attention to look for good small medium stocks, and that need time and efforts to hunt.
ReplyDeleteSince we know US mega stocks are where we should put the money if we invest into US market, we can consider to use portion of our fund to buy S&P or Dow Jones or Nasdaq ETF instead. In this way, we can save time and can focus our efforts in hunting for great stocks in Bursa.
Yeah, Bursa's performance has been disheartened; it ranks bottom #2 performance among Asian stock market in 2021 YTD; it is only HK market is worse than us.
ReplyDeleteBut, if look at the positive side, what come down more will go up more. If this happens, than Bursa should perform better than most Asian market in 2022.
I always compare what happened in 2018 and 2019. In 2018, I suffered the biggest lost and was very disheartened on Bursa, and then I had my best year in 2019.
In short, I opine that Bursa is where we can get the most info for small-medium stocks, and there are still a lot of potential to explore, I would still invest most of my time and fund here. As for US market, I will wait for the correction, and probably will then buy its index ETF or use my EPF money to invest into unit trust focusing on US blue chips.
ReplyDeleteThanks for the YouTube sharing, it seems like small & medium US stocks are actually suffering. I'm also considering ETFs that track US indices, but not dare to buy yet as the indices always break new high... As you mention before, next year when US raises its interest rate, local stock market may suffer. However, if stock market is predictable then it's not stock market. Lets hope for a better year.
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DeleteBy the way, I just found CJCen may be interesting. It has disposed its loss-making courier service business on 1July'21, and turned profitable in July-Sept'21 quarter. I am almost certain that it will continue to be profitable in quarters to come with only its Total Logistics and Procurement Logistics are operating.
ReplyDeleteIn addition, I compared the performance of its Logistic segments in year 2016 (good year for CJCen b4 venturing into courier service business) against 9M2021, I found its Logistics segments have actually shown growth in revenue and earnings. Thus, CJCen should do better in 2022 compared to last great year in 2016, after disposing its courier service business. Its peak stock price was RM1.40 in mid 2017 vs 56sen per share now.
Just for sharing.
CJ was in my watch list when it started its courier business. I tracked it until given up hope. When it planned to dispose the courier business, it's in my "to buy" list but didn't reach my desired price. Its latest QR was quite disappointing though. May be it's affected by lock down but the management didn't mention about it. I'm still following it closely. I think it has the potential
DeleteI see, so CJCen is in your "to buy" list. Can I know what other stocks are in your list? Maybe I can take a look and share with u my finding and view :)
ReplyDeleteCan have a look at CMSB.
DeleteI would like to add more clarity on "As you mention before, next year when US raises its interest rate, local stock market may suffer." My "speculation" on US interest rate hike vs Bursa performance are as follows :
ReplyDeletei) When nearing the rate hike, I speculate that US market and Bursa performances will trend down. This is due to market has negative expectation.
ii) But, when the rate hike is realized, I speculate that US and Bursa performance will turn upwards. This is speculated based on historical trend.
I assume US' 1st rate hike is in mid 2022; that's why I speculate stock market may perform poorly from Mar'22 till mid 2022, and then recover and turn upwards from mid 2022 to end 2022.
Noted. Lets see how it pan out :)
DeleteCoincidentally, I'm at the exact same situation with you right now, thinking to put some of time capital into US market.
ReplyDeleteMy blog: https://cheekaan.wixsite.com/ckinvestmentblogmy
You have a great blog!
DeleteThanks mate, it was partly inspired by your site.
Delete"Can have a look at CMSB."
ReplyDeleteI bought and disposed CMSB before in 2018/2019. I just took a re-look at its current performance vs stock price. In short, I think CMSB worth considering as it's annualized financial performance in 9MFY21 is higher YoY if compared against FY20 but its stock price has declined from RM2.40 in Feb'21 to RM1.27 now. This is a typical divergence of performance vs stock price.
There are several positives and negatives I can gather on CMSB.
ReplyDeletei) CMSB is cheap at RM1.27 per share @6.9x PE (calculated using 9MFY21 annualized core EPS) and 0.46x P/BV (with reported ROE = 9.8%).
- The fall of it's stock price from Feb'21 to 27Dec'21 is not aligned with the financial performance as annualized 9MFY21 profit is higher YoY compared to FY20. In fact, it's annualized FY21 PATAMI ranked #2 in past 6 years; it is only lower than FY18, but higher than FY16/17/19/20.
ii) Ferrosilicon's price remains high in Q4 FY21 (albeit lower than average price in Q3'21). This means OM Materials will continue to contribute highly to CMSB's profit.
iii) The lifting of MCO will benefit its construction, road maintenance, construction materials and property development segments in coming quarters.
The negatives are :
ReplyDeletei) Poor sentiment in construction industry and stocks. The construction-related industry may remain low in performance for longer period of time.
ii) The FeSi price is hard to predict, if it comes down, then CMSB's profit will be very much impacted negatively. CMSB's 9MFY21 profit was very much lifted by profit from OM Materials.
iii) Management guided that its Cement segment (major segment) performance will deteriorate QoQ in Q4 due to scheduled maintenance and higher clinker cost.
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ReplyDeleteCMSB has a characteristic of high price volatility. This means if and when the sentiment of construction segment turns positive, it's price can move fast and a lot.
ReplyDeleteThe market seems like ignoring its improved profit YoY and focus on the negative, which is poor sentiment on construction industry; resulting, CMSB's stock price continues to depress..or maybe market opines that the profit came from commodity, FeSi, will not sustain.
It's price was at ~RM1.12 in mid Mar'20 during pandemic. It's last bottom was ~RM1.05 in Aug'21. I think it would be safe to buy if CMSB can fall down to RM1-RM1.10 level. It is still cheap at RM1.27 now. I will keep close watch and may buy in time to come.
If buy into CMSB, I think one has to also keep close eyes on FeSi price.
Thanks for your useful input on CMSB. I have written about this company together with my views on it and will post up soon.
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