Asian markets have fallen quite a bit in the past one month. For example, Hang Seng has fallen close to 2,900 points since touching a high of 30,280 on 15 Apr to trade 27,391 which is the low last seen in January.
STI has fallen almost 250 points from an intraday high of 3,415 on 29 Apr to close 3,165 today.
Looking at the indices may be deceiving as many shares have fallen a lot. For example, based on Table 1 below, most stocks have fallen at least 10%, with Sembmarine tumbling almost 17% in less than a month.
Table 1: % fall since 29 Apr vis-à-vis indices
Source: Ernest’s compilations
Note: The calculation in the % chg does not exclude dividends distributed during the above comparison period. I.e. If UOB’s $0.70 / share dividend is included, the % chg will be lesser. It is noteworthy that 29 Apr is chosen as the intraday high as this is the day which STI hit its multi-month high record.
My personal view – I have increased equity exposure
With reference to my write-up two months ago (click HERE), I was around 5% invested in late March. I have been trading somewhat in and out for the past two months. However, the sharp fall in specific stocks seems to create some interesting opportunities and I have recently raised my percentage invested to more than 100%.
These are my thoughts
a) Hang Seng (26,868-27,200), STI (3,150-3,160) and S&P500 (2,800-2,816) are trading at some good support region thus it lends some confidence to me to buy some shares. Having said that, I will not know for sure whether the support will definitely hold. If the support area breaks, there may be more downside. Thus do exercise your own risk management and judgement call;
b) The stocks which I enter are either at multi year low prices, or they are trading at extremely oversold levels, or they are potential turnaround plays (clients are notified of my positions);
c) For myself, I intend to trade most of the positions which I have. In other words, I am cognisant that market is jittery now hence any potential upside (if any) may not be large;
d) I was not extremely invested going into May hence I have more leeway to deploy my funds;
e) It is noteworthy that should U.S. and China trade tensions worsen, or if the technology cold war worsens, markets are likely to weaken more. Thus, I emphasise the need to do careful risk management and utilise your own judgement calls.
I have generated two tables for readers’ reference
I have generated two tables below and have appended the top five stocks in each category for readers. Table 2 lists the top five stocks sorted by lowest RSI. (Clients will receive the entire list of stocks sorted by RSI with RSI <=30 as the main criteria.) The five most oversold stocks are Thomson Medical, AA Group, Banyan Tree, Tee International and GSS Energy. In fact, Thomson Medical has a RSI of 4 which is pretty rare for companies with no apparent negative news except for perhaps weaker than expected results; high valuations etc.
In addition, it is noteworthy that Thomson Medical and GSS Energy are trading at prices lower, or just around the prices before their major announcements. For example, Thomson Medical was also trading around S$0.05+ before its acquisition of Thomson Medical & TMC Life Sciences Berhad and GSS Energy was also trading around $0.07 before it was awarded the KSO for Trembul fields. Naturally, some readers may argue that their acquisitions, or their major announcements may not have added value to shareholders. This is a personal judgement call and I guess we can only tell over the long term.
Table 2: Most oversold stocks sorted by RSI
Source: Bloomberg 28 May 2019
Table 3 lists the Top 5 stocks by total potential return. (As usual, clients will receive the entire list of stocks) Sunpower, SIIC, OUE, Yoma Strategic and Banyan Tree rank as top 5 stocks sorted by total potential return. Please refer to Table 3 and the important notes below.
Table 3: Top 5 stocks by total potential return
Source: Bloomberg 28 May 2019
1. Presence of analyst target price and estimated dividend yield;
2. Market cap >=S$200m
1. This compilation is just a first level stock screening, sorted purely by my simple criteria above. It does not necessary mean that Sunpower is definitely better than SIIC or OUE in terms of stock selection.
2. Even though I put “ave analyst target price”, some stocks may only be covered by one analyst hence may be subject to sharp changes. Also, analysts may suddenly drop coverage;
3. Analyst target prices and estimated dividend yield may be subject to change anytime, especially after results announcement or after significant news announcements;
4. For Sunpower and Yoma Strategic, I noticed that the estimated dividend yields provided by Bloomberg do not seem to be accurate and I have used the previous full year dividend divided by the last price to derive estimated dividend yield.
Naturally, my market outlook and trading plan are subject to change as charts develop. My plan will likely not be suitable to most people as everybody is different. Do note that as I am a full time remisier, I can change my trading plan fast to capitalize on the markets’ movements (I am not the buy and hold kind). Furthermore, I wish to emphasise that I do not know whether markets will definitely rebound or continue to drop. However, I am acting according to my plans. In other words, my market outlook; portfolio management; actual actions are in-line with one other. Notwithstanding this, everybody is different hence readers / clients should exercise their independent judgement and carefully consider their percentage invested, returns expectation, risk profile, current market developments, personal market outlook etc. and make their own independent decisions.
Also, please note that at the time of this write-up, among the aforementioned stocks, I have positions in Sunpower, GSS Energy and Thomson Medical.
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Please refer to the disclaimer HERE