2017 started on a great foot with icings of presidential scares. The Dow Jones Industrial Average (DJIA) measuring the price performance of top 30 American companies hit a recent high of 20000. Time to cash in?
[What is the DJIA: https://en.wikipedia.org/wiki/Dow_Jones_Industrial_Average ]
Well, if you have short term horizons and your stocks/shares have done well and, if you can find a better stock, one would recommend selling.
The prices of stocks are tied eventually to its business performance & more so its value per share. Hence, say if you valued a stock to be a bargain at $130 and is now at $175, this does not mean the business is still only a bargain at $130. The stock of the business you have purchased could have much fewer outstanding shares, delivering a higher percentage ownership per share, hence higher value, all only from share buybacks for instance. The stock referred to is IBM which we believe is still valuable at current price level. Companies could have also grown in size, profits, sales, etc by the time it has reached a price you previously had set to sell at.
Sadly valuation per share basis and proper price discoveries are still developing themes in Malaysia.
Lets look at history. The DJIA have closed thereabouts 878 points and 875 points both respectively on 31/12/1964 and 31/12/1981. That is a 3 points difference over a span of 17 years.
However, at the same time the GDP of U.S. (business done in the country) rose 5x or by 370% and the sales of Fortune 500 increased more then 6x.
[ The above are references from an amazing article by Fortune Magazine, 1999, by Warren Buffett; Carol Loomis. This article summarises a bundle of wisdom surrounding business reality, behavioural finance and investment.
Full Article: http://archive.fortune.com/magazines/fortune/fortune_archive/1999/11/22/269071/index.htm ]
In short, the stock market can go up or down, regardless. However, look out for severe political climate changes. The Trans Pacific Partnership which is seen to be highly beneficial for the States has now been rejected by President Trump and Mexico that produces and supplies a good deal of factors of production is now in a state of dubiousness besides other happenings.
Without doubt these things will pan out eventually. The biggest fear one may have are more drastic executive orders. Hopefully congress and others maintains some form of checks and balances.
Malaysian COMPANIES ACT 2016
Some major changes for Private Companies will be seen coming into effect today, 31/1/2017;
- Single director and single member Sdn. Bhd. allowed
- No mandatory AA & MA, replaced by a Constitution for newly forming companies. Pre-incorporation contracts are allowed. (AA=Articles of Association, MA=Memorandum of Association)
- Company Registration can be done online via MyCoID portal found at https://mycoid2016.ssm.com.my
- AGM not required. Written resolution with easier majority rule to pass resolutions
- Solvency test with higher director accountabilities & liabilities.
How or how much of the new law will apply specifically to cases will develop with future guidelines and case law.
Stocks In View
An interesting list of stocks:
NATIONAL BEVERAGE CORP.
Sells La Croix, their most interesting product. The stock currently appears pricey at a P/E of 27 with a high price to book ratio being common with more successful consumer goods companies. However, more research is recommended as water products typically exist in high competition markets.
Happy investing until next time.
The writer is contemplating ceasing updates as we have included rich resources surrounding stocks and alternative investments since our first post, meant to help investors in understanding investments, specifically in Value Investing.
We strongly recommend to read through our previous posts which are meant to be timeless whilst discussing major occurrences of the month in view.
Secondly, we have numerous current stock ideas that unfortunately cannot be shared due to conflict of interests.
Regardless, we wish all traders & investors much luck & prosperity ahead.
The writer is contemplating ceasing updates as we have included rich resources surrounding stocks and alternative investments since our first post, meant to help investors in understanding investments, specifically in Value Investing.
We strongly recommend to read through our previous posts which are meant to be timeless whilst discussing major occurrences of the month in view.
Secondly, we have numerous current stock ideas that unfortunately cannot be shared due to conflict of interests.
Regardless, we wish all traders & investors much luck & prosperity ahead.
[DISCLOSURE: The writer currently does not own any minority stake among the mentioned stocks as of 31/01/2017 under his personal account. JR Capital LLP has minority interest in IBM among mentioned stock as of mentioned date.]
[DISCLAIMER: Everything stated in this blog is purely the opinion of the writer and any decision taken should be based on sound judgement with risks fully born by the decision maker. The writer shall bear no responsibility for any losses due to adherence of advices blogged by the writer or any commenters. Informational discrepancies are possible and will be corrected if any.]
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