Tuesday, September 30, 2008

HDFIV Report Card @ 30 Sept 08

Performance:
HDFIV extended its run on outperforming KLCI by 8.90% (22 Sept 08: 8.39%) at a loss of 14.54% (22 Sept 08: 14.40%) while KLCI suffered a loss of 23.44% (22 Sept 08: 22.79%. The outperformance is partly contributed by the additional capital of RM6,600 for month of Oct 08, demonstrating the power of cost of averaging and continuous investment on constant basis. I have added a new bar graph for "cash position over net asset value" with reading on the right axis.

I was watching CNBC yesterday night on the debate by the House of Representatives in US over the pros and cons of the financial-rescue plan of USD700 billion. However, I was too tired and fell asleep, only to discover that the rescue plan has been voted down at vote of 228 to 205. Investors in US became jittery and as a result Dow Jones dropped by 777 points, apparently a historical record. This morning, our KLCI followed negatively by dropping by more than 20 points but recovered at the end of the day.

Portfolio:
We talked about incorporating short term trading strategy in our portfolio strategy last week. To reiterate, this short term trading strategy ("STTS") is basically to take advatange of choppy price movements but SUBJECT to (a) our fund size which has been relatively big in view of the 8th period; and (b) prices we go in for the trading has to make sense in terms of fundamental (a price that we are prepared to hold or can cost average our current investment).

This week, as part of the SSTS, we have bought 1,600 units of IOI Corporation Berhad at RM4.20 with targeted short term selling price at RM4.50-RM4.60 within contra period. As mentioned, the price we enter into has to make sense in terms of value. By buying 1,600 units at RM4.20, we have also averaged out our cost per share to RM5.05 from RM6.40 (21% lower). So, we have flexibilities in terms of make small and quick gain or continue to hold for longer term with lower cost per share.

During the week, we have also acquired 3,500 units of Lion Industries Berhad at RM1.38 per unit. Lion Industries Berhad is a steel player in Malaysia and a valuation done by OSK Investment Bank Berhad has build my interest in the stock. Will talk about the counter in another article but very quickly, here is an extraction of the valuation:

Profit from steel business for year ended June 2008 (price earnings of 4.8 times) = RM3,463 million
Total investment in Lion Forest Industries, Parkson Holdings Berhad, Lion Diversified Holdings Berhad = RM1102 million and by putting a conservative discount of 40%, the total investment in these listed companies are worth RM661 million.
By adding the profit from steel business and investments in listed companies, the company is worth RM4,124 million or RM5.75 per share.






Asset Allocation:
Comfortable level of cash at 21% after acquisition of IOI and Lion Industries.



Strategy:
Will await for next financial plan by US. I am of the view that that the USD700 billion plan which has been voted down will be finetuned as the US financial market can't afford to continue to be in the dire situation it is in now.

1 comment:

rhoong said...

I thought they have agreed with the bailout plan.

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