Dow Jones have dropped nearly 2700 points (10%) and lost all the growth from December 17 and January 18. The Japan Nikkei index have lost more than 10%, Hong Kong Hang Seng has lost 11%, UK FTSE 100 lost about 9% at the end of the 10th February 2018 trading day. In this volatile market, personal investors with cash is king for buying up good quality discount stocks and shares. Besides disposable investment cash, a truly smart investors needs a marathon runner mindset to have steady pace to maintain the stamina for the duration of this volatile market. Most experience smart investors knows when to let go certain stocks by absorbing quick losses to ensure his/her portfolio endure the negative impact. Sometimes, a personal investor have to sell certain profitable holdings to top up the cash funds further for the duration of the bear market.
Bears make Profit. Bulls make Profits. Pigs get slaughtered!
Never be too greedy holding stocks stubbornly when you know they will drop. I personally have to sell my highly profitable Amazon, Tesla and Netflix Shares to make room for better valued stocks. From personal experience I know that these three stocks falls as fast as they rise. If my strategy is right, I can re-buy them at cheaper price with the right timing.
Now let me summarise my personal opinion and advice of good value areas to monitor and invest in this highly volatile market.
UK Index, Stocks and Funds
With the Asia and US sell off in the month of February 2019, I do not advise personal investors to go in fully with their deployable cash. The UK market is very ill and recovery is quite a distant period away until the BREXIT and political stability are established. I firmly believe that the UK economy are good value, but it’s hard to speculate how much lower they can go. With the pounds gaining value against other currency (interest rates hikes 2018), it’s far better for a UK investors to sell their pounds and invest in other economies like the favourable, US, Japan, China and India market.
With the interest rates hikes in the near horizon, I would try to avoid the UK financial markets as there will be a few more drops in 2018. Among the haystacks there are three gems I am focusing on which are dividend growth potential for long terms. Still at high risk and I would monitor and wait.
US Index, Stocks and Funds
US financial market have been very volatile market in the month of February losing all their December and January 2018 gains in less than 10 days. Highly recommend buying in stages as no one knows when and where the bottom of the barrel is. There are two key reasons for the sudden volatility in February 2018 despite the amazing earnings from the most of the US mega and large cap public companies.
- New replacement Jay Powell expecting to rise interest rates 3-4 times in 2018
- VIX indicator not stable.
With the US stock market still growing and heavily driven by various division of technology, I would monitor and personally invest in the following:-
- Dow Jones Index – below 24,000 points
- Apple [APPL] shares below $150
- Raytheon [RTN] – US military defense company under $190-$200
- MCdonald’s [MCD] – under $160
- Technology Index
- Disney [DIS] – under $102
- BRK-B – under $190
At times like this I only look for good quality companies at good value shares. There is a good potential they may hit lower than the above recommended cost if the market correction hits below 20% (currently at 10%). Remember to buy in stages as it goes down and focus on long term holdings.
Asia and Japan Market
The Hong Kong, Shanghai and Japan stock index have apparently suffered more sell off of stocks compared to the US and UK. Somehow these Asian markets are just mimicking the US market. With the North Korea drama calm down and everyone is focusing on the winter Olympics 2018, Kim may be holding off his military toys. Rather than stock picks I would rather go into funds for Asian markets.
- Lindsell Train Japanese equity – Nintendo and Kao!!!
- Baillie Gifford Emerging Markets – Tencents and AliBaba
I am looking forward to see how Tencents and Alibaba develop in Fintech in 2018. These two giants are starting to take on the banks and insurance companies. With their WeChat and Alipay widely used in China, these two companies have collected enormous amount of data from its user and developing credit rating systems via their AI crawlers. This way these two giants are capable of starting small loans and insurances to its users and trying to fight banks loans and credit card systems at minimal overhead cost (i.e no retail banks required).
Oil & Gas Companies to watch out for
Enquest [ENQ] is one small cap oil company whom are capitalizing on the high price of Oil with their aggressive cost cutting in 2017. With their Kraken project going well after a turbulent 2017, there were rumours that the field is capable of producing up to 70,000 barrels of oil a day which is about $4.5m pounds a day. This would help the debt management. Additional to that, the purchase of the ageing Magnus and Sullom Voe Terminal from BP, will soon start generating about 12-15k barrels of oil equivalent a day too. Shares hovering under 40p is simply too cheap if this company. A good potential to shoot through 100p or more.
Remember to run this volatility like a Marathon and don’t exhaust your cash too quickly. Don’t be afraid to sell and take profits from your long-term holdings to build up cash. Buy in stages and average the buying over a period. Only buy good quality companies. If too complex, just get into index and funds.
Family Finance Made Simple
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