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Tuesday, 26 January 2021

(Tradeview 2021) - Malaysia's Glove Makers Deserve A Fair & Objective Assessment (Regardless Of Their Share Price)

           


When Bill Gates first actively went around the world promoting the development of vaccine research and spent much of his wealth raising awareness, there is the lack of attention given by the general public. However, with the Covid-19 pandemic, everyone started to call Bill Gates a visionary. His Ted Talk 5 years ago titled "The Next Outbreak" chalked up close to 33 million in views today with the explosion happening only when Covid-19 erupted in 2020. Feel free to watch it here : 



 

The argument can be said to be the same for Glove makers. Some 30 years ago, glove manufacturing was not what it is today. Glove manufacturing is an extremely tough, competitive and difficult industry earning only meagre margins as the bulk of the profits are taken by glove distributors abroad. Your big names like Cardinal, Ansell, Kimberly Clark and many others. The Malaysia glove industry came about because of the natural rubber / latex supply due to rubber plantations in the country. The access to raw materials as well as some level of manufacturing capability led to these savvy entrepreneurs to pivot from using Latex or Natural Rubber for tyres to new products like rubber gloves. Some saw the opportunity with the heightened awareness due to AIDS pandemic abroad. For many years, Malaysia glove makers sweat and toil being the "sweat shop" / OEM for foreign distributors, hospitals and government. Fast forward to today, the Glove industry have improved leaps and bounds, most importantly, Malaysia has become a world leader that controls the supply of gloves in the world with an estimated 67% of global market share. From 1980s till today, there were 250-300 glove manufacturers then, now there are only 45 world class players in the country.  

Manufacturing as an industry itself relies on productivity, cost efficiency and economies of scale to achieve cost optimisation in order to be become profitable. It is extremely hard to achieve that because most manufacturers will get pressed by their distributors or clients. Manufacturers are the lowest cost centre in the entire supply chain. Majority of the glove makers in Malaysia are run by family owned companies, very few by large MNC. This is because manufacturing is a hands on, laborious, 24/7 long hours complex operation. A machine breakdown or an electricity blackout for 1 day can easily wipe out the potential profits for the entire month. If not for this global pandemic, glove manufacturers would be extremely happy with a commendable high single digit to low double digit profit margin. 

I think most readers would know some of the things mentioned above by now, apologies for being long winded, but why am I repeating this? The reason I am sharing this is because, I hope readers know it has been an arduous journey for glove makers. This so called "windfall" or "stroke of luck" as stated by some did not happen overnight. It was due to lots of blood and sweat. It is very easy to be envious when others are doing well in a tough time. It is also very easy to condemn and criticise. Talk is cheap but that is the reality of today's world. When we are suffering, we hope the world suffers with us. This is because as human, we take solace in collective suffering. If we are the only one suffering, we would feel very depressed right? 

Actually, this is not the right mindset. In Chinese, there is this saying "将心比心”。Loosely translated, it means having empathy and putting yourself in others position. If you worked hard for all your life as an honest entrepreneur, and you have done right for most part, is it fair to be run down just because you are doing well today albeit with some flaws? Don't get me wrong, I am not defending any company in particular but the glove sector as a whole. In addition, there are many layers of problem with regards to ESG, labour issue in our economic sector which most people know about such as : 

1. Foreign labour dependency is not a singular issue of the glove sector but majority of the sectors in Malaysia because locals are not interested in 3D jobs - dirty, dangerous, demeaning

2. Agency monopoly / cartels exists which control the supply of labour between Governments (politicians) leading to exorbitant agency fees imposed on foreign labours.

3. Hypocrisy of foreign distributors and corporations that forces local glove manufacturer to lower cost, compress margins in order to enjoy profits on their end. (On one hand talk about ESG, on another hand press the price of OEM manufacturers. This is not only applicable in the glove sector but other industries too)


In 2014, I remembered our country's top national Badminton player was embroiled in a doping scandal. This was when he was World No.1 and at the height of his career. It was the worst possible scenario for any athlete. I remembered back then, most Malaysians were skeptical whether it was true. Eventually, our national hero was given 8 months ban due to illegal substance Dexamethasone. The point to note, our national Badminton shuttler wasn't aware and the drug was not performance enhancing but for rehabilitation given to him by those in charge of his care. He paid the price of the ban and came back to competition including the 2016 Olympics where he nearly won our country's elusive Gold medal. He said during his retirement press conference, that his greatest honour was being able to play for the country. I believe he was an exceptional talent. Those that comes in generations or decades. However, the Malaysia badminton ecosystem have always been able to nurture and support talents. This is because the sport itself had the support of the government, association and the people. If the media, government, associations back then chose to only focus on sensationalism / populism without giving the benefit of doubt and crucify him, he probably would not have the chance to rebound and make it for Olympics. Also, imagine, the world's impression of Malaysia's badminton when this doping incident exploded. Just because of one doping case which was a mistake, does it mean all Malaysia's badminton athletes are dopers? 



Few years ago, two former national shuttlers was banned for life for match fixing. One was a promising young star who even won the world junior championship. Due to the match fixing, he was banned for life. I felt the punishment to be harsh as he was young and misguided by a senior national shuttler. This boy trained his whole life to be a national player (neglecting his studies), now that he is banned for life what can he do next with such a long path ahead? People make mistakes, but unlike our national hero's case, his matter was not given the same benefit of doubt and a second chance. So, what has this story got anything to do with glove makers? There are many similarities in the varying ways some quarters of the media, experts or commentators treat our Malaysia glove makers. 

1. Because of the labour and ESG issue highlighted on a few glove makers, the entire glove industry was painted with a stroke of brush across the board as "forced labour industry"? Is that fair? How about those others glove makers who complied with all laws and regulations? Also, when we talk about forced labour, what about the other industries which are much worst? Why is the glove sector singled out? Is it because of the sky high profits they are making now? Have anyone been to the construction "kongsi" and plantation "estates"?

2. Just because the Glove makers are finally doing well, some have been loud to ask for windfall tax incessantly as it is a populist move. How about the years when they were making losses and taking out substantial loans, raising bonds for cashflow purposes? Where was the help? Also, the taxes and levies they have paid over the years to government, jobs created and capital investment made? Granted, MIDA have supported the industry with promotion, patent application and other forms of assistance. However, compared to other industries in our country, the glove sector predominantly was organically developed and grown by entrepreneurs of grit.

3. An objective media shines light in darkness and brings justice to the weak, it also condemns the powerful without fear or favour. I think the role of the media is extremely hard and good journalism should be respected. I have much respect for those who practice true journalism. However, for those media who brings down the ethical standard and good name of a free and impartial press in return of clickthrough or viewership, readers ought to be discerning. The 2 examples below : 

- News portal A decided to publish a letter from an anonymous contributor, referencing his friend (which is tantamount to hearsay) alluding that a glove manufacturer in the country lacks integrity and filled with hypocrisy. It is one thing to report a news with sources and keeping it anonymous to protect the identity. It is another to reproduce a letter by an anonymous writer referencing a friend. Isn't it a tad too much? If indeed the writer's friend went through grave injustice, there is the media and there is the law. The media cannot win your compensation, the law can. As a lawyer myself, I know for a fact we have robust industrial court that protects employees. 



-News portal B decided to conveniently attach the picture of glove manufacturing to a "clickbait" title on FMM letter to manufacturing sector warning of disastrous outcome if the Covid-19 issue does not come under control. FMM in the letter which I sighted, never once mentioned glove manufacturers. So why did the news portal do this? Was it a genuine mistake or a pre-conceived notion / generalisation to imply that Covid-19 cases are all from glove manufacturers? Is this fair to other glove makers who complied with all regulations and have no Covid-19 cases? How about the construction, electronics, furniture manufacturers and others which had Covid -19 outbreak? If this is not coloured lens, I don't know what is.


















Yesterday, the government after conducting "Ops Glove" found that 90% of the glove industry players are compliant with the regulations and laws. Which means those who are in violation are in the minority. Those who violated and did not do enough, should pay the price and subject to the repercussions of the law. Everyone deserve a chance to improve and upgrade themselves failing which, they should be held accountable once more. As media reports on the flaws and failings of the glove industry, they should also shower praise for those who done right by the law. They should accord fair opportunity to hear both sides of the story instead of relying only on Andy Hall, the activists who has his agenda. Trial by media, shouldn't happen especially if sensationalism gets in the way of true journalism. Lastly, to be fair to all, apart from "Ops Glove", there should be other "Ops Bina", "Ops Sawit", "Ops Petroleum" etc. That way, it is fair play to all. Selective persecutions should not exist in today's society and I look forward to news portals above to continue to facilitate the role as the guardian of truth when the time comes. 


 
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Thursday, 21 January 2021

(Tradeview 2021) - A Reflection on Covid-19 Pandemic, Being A Fundamentalist Saved Me

         




If 2020 has taught me anything, it is never to take things for granted in life. The global pandemic have upended even the most normal of life and reshaped people's perspective in life. It has given me lots to think about, to reflect upon and to look forward to. My generation is very fortunate to not have to go through World Wars 1, 2 due to a long period of peace and prosperity. This has made many complacent about life. Think about it, in a way, the fight against Covid-19 is a form of global war, it is World War 3, except, we all have a single common invisible enemy.



As an investor, when we talk about war times, it is a time of great volatility and uncertainty, followed by a sustained period of recovery and growth post-war. Most wars last several years, at times decades. Spanish Flu lasted from January 1918-April 1920 (2.3 years). During the start of Covid-19 in 2020, many investors would have thought the best thing to do is to stay away, lock up all the funds and save it for rainy days. If indeed investors have done that in 2020, then it would be a great loss not forgetting missing out on some unbelievable action. 

Recently, a prominent investor who always promote "The Golden Rule", suddenly flipped and said fundamental investing led to his investment losses and price chart is the way. I unequivocally reject this notion and would like to put it on record, fundamental investing is the best if not the safest form of investing in the stock market. This has proven to be true by many who walked the path before us, like Peter Lynch, Warren Buffet, Dr Neoh Soon Ken, Mr. Fong Siling and others. These individuals are successful consistently over a prolonged period of time. They are not one hit wonders. 

I cannot speak for others but I can speak for myself. I am thankful to have invested in 2020 and took the biggest position in my lifetime during the "March Plunge". This set up 2020 to become the best investment year on record. Some argue this is due to luck, guts, or risk taking. On the other hand, I believe it is a culmination of years of investing mistakes, experience and a strong belief in fundamental investing. Think about it, when Bursa as a whole lost RM 190 billion in market cap from the stock exchange in the span of 1 month in 2020, who in the right mind would throw money to buy and hold? Only a fundamentalist. This is because fundamentalist see stocks not for its price but the value behind the company.

Entering 2021, many have asked me what is my outlook for the year. Unlike some, I am unable to give an accurate view at the start of the year. Just imagine, 6 days into a new year, the US Capitol was stormed by rioters due to Trump. Who could have seen that coming? I do however hold certain view firmly, I believe Covid-19 wont be eradicated overnight and looking at recovery thematic stocks especially in the area of airlines, tourism and retail is too premature. I said that 3 months ago. This is because structural damage has been caused to these sectors which requires time to recuperate. If one would like to look at recovery play, the best considerations are still banks, utilities, telcos and select FMCG /Consumer stocks.




As I am writing, I see many pockets of irrationality in terms of valuation. Not only the overvaluation but also undervaluation. I see the local tech sector to be severely overvalued (highly dangerous) and the banks, gloves, utilities, select consumer/FMCG to be undervalued. I also see polarising view between "expert opinions" & "research analysts". For instance : those glove "gurus" or bulls last year are now weary about promoting glove stocks. Interestingly, they advocated "all in" to glove stocks last year against a diversified portfolio. Similarly, the "recovery theme" gurus talking about airlines, hotel, tourism and retail loudly end of 2020 suddenly became quiet once MCO 2.0 was announced. I find this perplexing because confidence can just evaporate overnight due to the price action of stock price. This is the power of the stock market.





"Ignorance", "overconfidence" and "greed" are 3 most devastating traits for investors. On the contrary, "patience", "prudence" and "conviction" are 3 most valuable traits for investors.  Going contrarian doesn't always mean investors would make money. However, buying fundamental stocks in terms of value will almost always lead to success. The difference? Horizon. Timeline. There is no point being a preacher on fundamental investing as investors mostly learn from experience. If you are doing well with your investment style, then do what that suits you. If you are not doing well, why not give what I have written some thoughts, try it for awhile and let the results show after some time. Try extending your investment horizon, sit on it and wait for the results to show you. If its too painful to sit for a long time on stocks, separate your investment capital into 2 baskets, 

1. short term active trading basket 

2. long term value pick baskets. 

Compare the results after 2-3 years and let the results show you. If there is a good time to start, the time is now. Let 2021 be a year of new resolutions, realisation and aspirations. If US can hit reset with President Biden after 4 Years of Donald Trump, investors can reset their investment mindset too.




 
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Thursday, 14 January 2021

Tradeview Commentaries (14th January 2021) - This Is A Time of Irrational Exuberance of Epic Proportion

        


Pic from Forbes


Dear all,  it is almost 1 year since the last MCO in March 2020 that caught everyone by surprise. Most expected Covid-19 to be over by now entering 2021. Sadly, Malaysia once again entered MCO 2.0. This was coupled with the nationwide Emergency Proclamation. Whether we agree with the rationale behind these measures is not important anymore, the issue at hand that we have to face is the rising Covid-19 cases to record levels and alarming infection rate in the community. With things as it is, we are not yet on the path of recovery as what most pundits / "experts" have forecasted as early as Oct 2020. 

I have written on this topic before and warned multiple times that investors should not count their chicken before it hatches. I said, recovery play can be considered for Banking, Telco, Utilities and select blue chip names. I repeatedly warned against Hospitality, Tourism, Retail. By nature, I am an optimist. I believe in the resolve and ingenuity of mankind to adapt & overcome adversity. However, it doesn't mean an announcement of vaccine translates into a "global rain shower that eradicates Covid-19 overnight." 3 months since the announcement of Pfizer, Modern, Astra Zaneca vaccines in November, it is proven fact that the numbers continue to sky rocket daily (globally and domestically). This is largely due to the 3 reasons below :

1. Slow execution / implementation of mass vaccination globally (logistical / manufacturing hurdles)
2. Slower receptiveness towards receiving vaccines 
3. Lax mindset, overconfidence or failure to abide by SOP in view of the vaccines newsflow

I am not a medical expert so I dont want to elaborate further beyond this. I believe most would agree the main reason our own country's Covid-19 cases spiked was due to the relaxation of CMCO allowing interstate travels followed by the Christmas & New Year holidays. Now imagine this for many countries around the world with larger population which are less law abiding. 

The stock market is a reflection of an important part of the economy but it does not represent all of the economy. We can see the rich gets richer and the poor gets poorer everyday with the record high unemployment rate, business shuttering yet market cap of billionaires reach new stratosphere. This wide disparity is particular obvious in the stock market. Many astute investors whom I know personally have even told me, 2020 was the best year for them in terms of ROI. What does this show us? 

It means this is a time of great irrationality largely driven by the liquidity flooded by central banks around the world (expanding M3, money supply in the economy) and expansionary fiscal policies for countries which can afford to do so. This is why, the stock market runs ahead with such expectations whether rational or not. Remember, this is a time where Tesla with no profits have become the world's 6th largest company by market cap making the founder the richest man in the world. It is also a time where Bitcoin broke US $40,000. This is a time of "irrational exuberance" of epic proportions.

Locally, I am seeing tech stocks which are actually manufacturers trading at 100x+ forward PER, stocks which signed MOU with nothing to show for rallying, stocks with extraordinary earnings being shorted ridiculously on weak justifications. Of course, everyone is entitled to their opinion. After all investing is subjective and the stock market is a platform for exchange of investment thesis. Right or wrong, we will know in due course.

With all things, irrationality will normalise. If you believe in Yin & Yang or Newton's 3rd law, you will understand there must be balance. I believe for 2021, there will be opportunities but investors have to be selective and ignore the noises. Risk management is still the way forward. A balanced portfolio not heavily skewed to any sectors with sufficient cash holdings in hand is good. Value + yield stocks would be the best combination.

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Monday, 11 January 2021

Tradeview Commentaries (11th January 2021) - All Things Being Equal, Are Gloves Back?

       



Pic from The Star


Dear all, due to last Friday surged in buying volume and share price ascend of glove makers across the board, the KLCI index turned positive by 1.9% to close at 1630. What is impressive is not only the magnitude of purchase but the rally upwards. Over the weekend, I received many calls, emails, messages asking me whether is this the start of the glove mania again. Should investors consider taking a position in Gloves?

I am sure most readers have noticed by now that I am not a short term thematic investor. I do not look to invest in stocks week by week or month by month. The past 2 months, the sell down of gloves have been very frightening even for the most seasoned investors. I have friends around me who actually cut loss last week, throwing in the towel despite my repeated advice to them to hang in there. These are not new investors with minimal investment experience. They are investors who have the market knowledge and view but could not withstand the frightening selloff for the past 2 months which worsened when short sellers came in last week. 

It caught many by surprise considering early in the week, the massive short selling flooded glove sector to start the year. When they saw what happen on Friday, they called me. They couldn't believe what happened. They felt cheated. But I did not rub it in. I simply told them, believe in fundamentals, believe in the logic and believe in the rationale of investing. Do not be swayed by market sentiment and noises. Otherwise, there is no point investing, just put the money in FD and lock it away. 

We have seen many rejoicing, gloating and showing off with the glove superb rebound last Friday. However, I did not write any articles over the weekend. There are 2 reasons : 

1. I do not think this overnight rebound should be misconstrued that "Gloves are back". I believe it will be a very tough fight between the bear and the bull upwards. This is especially so when the short sellers have plenty of ammunition. Definitely, the stock market do not move in a straight line so there will be gyrations on the way up just as there is the gyrations downwards. To be fair, gloves should never have been dead in the first place. There were too many non-rational investors and commentators in the stock market providing input on this subject. Everyone is like an expert. Who do you trust?

2. I do not believe in "Gloating" or "I told you so" mentality which is unhealthy for the investment community. In fact, we should all work together and study why and how the experience of glove selloff in the past 2 months should become a guide towards the future. 

As per my title, all things being equal, are gloves back? My humble view -  investors should consider whether do you have the stomach to continue holding on and soldiering on believing the fundamental quality of glove stocks. If the answer is yes, then you can still ride glove stocks no matter what happen next week (MCO / Politics / Vaccine etc). If the answer is no, then investors should sell on strength because we know short sellers are back in droves, this round it is unlike 2020. So it all comes down to your investment horizon, risk tolerance and mindset of investing which will determine if you should continue holding or otherwise. As for me, my favourite glove stocks especially for long term investment remain to be Riverstone and Hartalega. This shall be a topic for another day. 

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Thursday, 7 January 2021

Tradeview Commentaries (7th January 2021) - Blue Sweep in US, Riot In Capitol

      




Pic from Business Insider


Dear all, Democrats have pulled a stunning upset by winning both Georgia race. This will flip senate control back to Democrats since 2014's loss. This would also be the first time since 2009 where Democrats control the White House, Senate and Congress. What this means - a strong Biden Presidency. Democrats would have the opportunity to rollback policy damages caused by Trump administration and rectify the wrongs domestically or foreign. 

Market is currently mixed with tech leading the plunge due to the potential anti-trust movement by the left wing of Democrats. However, other stocks are doing rather well as they expect a larger stronger stimulus which is broad based and favouring small businesses. I think if Republicans were still in control of the Senate, it would be a frustrating Presidency for Biden. Although some are worried that a Democrat is bad for business, economy and corporate due to higher taxes / wealth tax etc, on the contrary, I think Democrats in the course of their history, they have always managed to salvage the economy and bring the nation out of troubling times such as Franklin. D. Roosevelt during the Great Depression with the New Deal and World War 2, Barrack Obama during the Great Recession and I believe Joe Biden may do well navigating the Great Pandemic. At the very least, he would do better than Donald Trump. 

Many said, the stock market would collapse if Donald Trump loses. It has proven to be untrue. Probably the typical fear mongering rhetoric by the GOP and right wing extremist. Similarly this time, a Blue Sweep by Democrats is not an apocalypse. 4 years of damage control requires a strong mandate. I believe this is exactly what US needs at this juncture. This is to restore public confidence in US domestically and globally.  




With regards to KLCI, the selloff is not likely due to US but rather the increasingly serious Covid-19 cases as it would appear the infection has spread into the community with the healthcare system at the brink of capacity. Additionally, locally the politics are not stable again with the potential implosion in PN as we move towards 1 year anniversary of the infamous "Sheraton Move" 

My view - any selloff off in good blue chip fundamentals stocks is not a bad thing. Do not be  overly pessimistic as the market is presenting a great opportunity for investors with sectors such as Banking, Insurance, Utilities starting to look attractive again. In addition, glove stocks have came to life with the increasing worry on the pandemic front. While it is too early to tell if the rally of glove would be sustained, as a strong fundamentalist, I have always believe in the quality of stocks lie in the fundamental value. A stock cannot be trading below its true value perpetually regardless of the noises. I think our earlier patience is paying off and I will be a little bit more patient before looking to collect these good blue chip stocks for 2021's play.

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Thursday, 31 December 2020

(Tradeview 2020) - Year-To-Date Portfolio Return 56.3% as at 31st December 2020

 



Dear fellow Readers,

2020 which was supposed to be a fresh start of new decade has brought about a rude awakening for all due to the pandemic that swept across the globe. Global economies pummelled, unemployment piled up and importantly many lives were loss. This was no ordinary war. It was a war against a lasting pandemic. Looking back, it is truly a difficult year for everyone. As a natural optimist, I believe there is a silver lining to everything. Looking on to 2021, may it be a better year for all be it in life or investments in the stock market.

As in the past years practice (5 consecutive years now), I have always shared my performance with the sole purpose for transparency and accountability. This is the updated results as of end of December 2020 for my personal record purposes. 
This is just a simple periodical report to keep track of the progress of my write up. Feel free to cross check my public comments or article posting date as reference. 
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*When it was written YTD ending 31st December 2020 : (Gains exclude dividend) 

1. Oriental Holdings Berhad - On 6th May @ RM 5.03 vs Present RM 5.47 (8.74% Gain) 

2. Riverstone Holdings Ltd - On 5th March @ 43.5 sens (post bonus issue adjustment) vs Present $1.11  (255% Gain) 

3. Sri Trang Agro - On 16th August  @ $ 1.21 vs Present $ 1.16 (-4.2% Loss) 

4. MFCB - On 16th March @ RM3.40 & 22nd August @ RM 7.35 (combined both) vs Present RM 6.90 (28.4% Gain) 

5. Hartalega  - On 19th September @ RM 14.16 vs Present RM 12.14 (-14.2% Loss) 

6. Peterlabs Holdings Bhd  - On 10th December @ 24 sens vs Present 23.5 (-2.08% Loss) 

7. DKSH Bhd - On 5th March @ 2.55 vs Present RM3.39 (32.9% Gain) 

8. CCK Bhd - On 5th March @ 47 sens vs Present 62.5 sens (32.9% Gain)

9. OCK Holdings Bhd - On 5th March @ 53 sens vs Present 45 sens (-15.1% Losses) 

10. RCE Capital Bhd - On 5th March @ RM 1.64 vs Present RM 2.75 (67.6% Gain) 

11. GCB Bhd - On 12th March @ RM 1.85 vs Present RM 2.67 (44.3% Gain) 

11. Pintaras Jaya Bhd - On 12th March @ RM 2.50 vs Present RM 2.70 (8% Gain) 

12. Scicom Bhd - On 19th March @ 52 sens vs Present 93 sens (78.8% Gain) 

13. RHB Bank Bhd - On 19th March @ RM 4.40 vs Present RM 5.45 (23.8% Gain) 

14. Pentamaster Bhd - On 19th March @ RM 1.85 (Post Bonus Issue adjustment) vs Present Post Bonus Issue RM 5.05 (272.9% Gain) 

15. Public Bank Bhd - On 19th March @ RM 13.10 vs Present RM 20.60 (57.3% Gain) 

16. QL Resources Bhd - On 19th March @ RM 4.60 (Post Bonus Issue adjustment) vs Present Post Bonus Issue RM 5.80 (26% Gain) 

The Average Portfolio Gain Year-To-Date 31st December (Based on equal shareholding weightage but excluding dividend gain which means actual return would be higher) : 56.3% Gain beating the KLCI Index YTD Return of 2.42% Gain  

To date, it is 12/16 winners against losers. Should you are keen to follow my writings, there are 4 ways to do so. I usually share my writings :

If you are keen to learn how to invest the right way and navigate the stock market, feel free to contact me at [email protected] to sign up. Please note, I am a fundamentalist, not a short term speculator or punter. If you are looking for a quick trade, I do not provide such services. However, if you would like exposure to a sound investment education to build a sustainable long term investment portfolio, feel free to reach out. Thank you. 

Regards, 

Tradeview 

**Please note this is not a recommendation to buy or sell. It is also not an investment opinion or advice. Please seek professional advice when considering risk and making investment decision. I am not a "Guru" but I am a passionate financial writer who enjoy fundamental investing including the joys and sorrows that the stock market brings. The above mentioned stocks' price were based on the prevailing market price during my first mention in my writings. The record above is based on the assumption of a full YTD portfolio returns on a fundamental investing strategy of buy and hold.

Thursday, 24 December 2020

Tradeview Commentaries - To Glove With Love, Merry Christmas

     



Dear all, it has been difficult year for most. It is especially tough for the B40 and those who have lost their job or had to undergo a salary cut / VSS. In these trying times, many struggled to get by and provide for the family. Even those with emergency funds set aside (The rule is minimum 6 - 9 months saved for rainy days) would probably have dried up by now in the event one is not able to find a job or for business to return to normalcy. Such is the state of the economy in the face of adverse pandemic circumstances. This is truly a shocking start to a new decade. 

During the height of the pandemic, I was having a meeting with one of the listed Singapore glove makers. It was a work meeting but I had the chance to ask him "how do you feel that glove stocks are now deemed beneficiary of Covid-19". He said "no money in the world, can replace the lost of loved one or having to see your love one suffer due to sickness, if I had a choice, I would like to see the pandemic end yesterday." 

In another interview with the IR present, my close friend who is a research analyst had a management meeting with one of the big 4 glove makers' son. During the management interview, my research analyst friend asked "why is your company increasing the ASP for gloves at much slower pace than your competitors?" The answer given simply "Gloves are PPE, which is meant to protect front liners and end users against this deadly pandemic. If we were to hike ASP of Gloves too arbitrarily, and in turn our distributors do the same, the one that suffer would be the end consumer. Those who can afford, it is ok. Those who cant afford, will then switched to alternative self-made PPE which are not effective against this fight."  

Both of these true stories was a humbling experience to me. It made me respect both glove makers entrepreneurs more and learnt that not all business was about profiteering or bottom line. There are entrepreneurs and owners who cares. This is probably due to the fact both of these founders did not come from money and build their business from ground up through hardship of life and poverty. They are rare but they do exist and they placed the importance of the welfare of their employees, end users far above even that of shareholders or investors like me. Ironically, my investment philosophy being a fundamentalist is choosing companies like this which has management that values employees, customer relationship as part of my investment portfolio. I always tell my readers, I rather pay a premium for wonderful management of good companies than pay cheap price for ordinary companies. 

It has been a whirlwind year for those who invested in the stock market be it out of passion, interest, need, desire or simply opportunity. I believe with the record high retail participation rate, many who invested in the market is because of the glove makers. I also know many institutional funds, retail investors and foreign funds have many a handsome profit from investing in glove stocks. EPF too, recorded commendable investment income from equities which would definitely go to help towards those who need early withdrawal from iSinar & i-Lestari programmes. 

I did mention I have written too much on the sector even though Glove stocks are only part of my all weather diversified portfolio. There are 2 reasons I am writing this article today : 

1. To give my gratitude to the glove sector as I did benefit from the stellar performance in share price like most others through 2020 and also the lessons learned from the glove sector be it in life and investment. I am actually very proud as a Malaysian that the glove sector can play a role putting Malaysia in international limelight in the fight against Covid-19. For once, not everything used by global population was manufactured in China or Vietnam or India but Malaysia.

2. Is to correct a misconception in today's news article below by the Executive Editor of Focus Malaysia, Mr Cheah Chor Sooi, who selectively highlighted one paragraph from my 14th December 2020 commentaries, calling it "Deceitful". I do not know you Mr Cheah, and I have nothing against you. But if you had the chance to read my blog, and all my past posting be it glove or non-glove related (I think there is no less than 50 articles in 2020 alone), you would probably realise I built my reputation over the past 6 years on transparency, accountability and objectivity. I am not some fly by night writer. My belief is not very much different from you who was an award winning Writer of the Year by Minority Shareholders Watchdog Group’s (MSWG). Of course, I am no where as successful as you, I am just a financial blogger.  

You probably did not like the fact that my "Friendly Advice" came across as a generalisation that there is a concerted effort by various parties including the media to witch hunt the glove sector. I actually do not think there is a concerted effort by anyone. I only seek fairness, objectivity and no double standard in scrutinising across all industries. I cannot blame you as you probably didn't read my past writings. If you did, you would know I have been critical of Top Glove handling of labour issue and Covid-19 outbreak. If you did you would know that my favourite glove stocks are Hartalega and Riverstone which are my Long Term Value Picks who are true champions of ESG. If you did you would have read my letter published in Nayang calling out Koon Yew Yin's call on Dayang in view of protecting the small retail investors. If you did read my writing properly, you would know I am not absolving any law breakers of responsibility but if scrutiny is imposed it should be fair across industries like plantation, construction, steel, agriculture. 

I am an independent, objective writer who have firmly said NO to offers by syndicates to "goreng" stocks for pump & dump operations because I care very much about the little guys (retail investors) and hope the stock market can be an avenue for the pursuit of happiness just as it has been to me. I believe you are a reasonable man. Just as you do not like media being called out as bias or sensationalising news on the glove sector, I do not like being called "Deceitful" by you. It is a wrong choice of word unsubstantiated by facts. I would like to put it to you, personally, I have utmost respect for journalist, nurses and teachers who have the most underpaid but noble profession in the world. However, if having an objective, independent and differing view from you is regarded as "Deceitful" in your context, I would gladly stand firm in my belief and take it on over and over again. 

Merry Christmas and May 2021 be a better year for us all.  


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