What’s next after trade wars?

My interpretation of the four strategies adopted by Trump:

1. Reduction of corporate taxes

2. Tariffs imposition

3. Tech war with Huawei

4. Infrastructure building

First one was done in 2018 and US stock market was bullish for a year but government deficits went up terribly without companies moving back from other countries to the US as calculated. This can be seen from the declining PMI. Reasons? Trump has been mercurial and he could change his rules pretty fast. It is logical for companies to adopt a wait-and-see stance instead of going headlong into expansion.

Imposing tariffs on so many countries will end up US importers having to incur some costs and US consumers the balance costs. How to make good profits? Can see that Fed Chair will be under siege on one hand from impending recession to reduce interest rates, but on the other hand from higher cost of imports to increase interest rates to combat self-inflicted inflation later. How to solve this dilemma?  Removing trade wars with all concerned countries.

The Tech war has already caused some US tech giants to retrench big numbers of workers due to the low production caused by losing the world second m/phone maker Huawei. The worries from US tech giants are increasing by the day after Xi Jinping announced the new Long March – 15-year battle plan with the US.

Infrastructure building seems to be a strategy that will not create enemies like trade wars. But where to get the money when there is more budget deficit due to the reduction in corporate taxes? Selling treasuries to other countries to raise funds? China and Japan have been the two biggest supporters of US treasuries. But when they were bullied by Trump so badly, do you think they will support the US to let Trump have more energy and resources to bully them further?

So, Trump should know by now that he has to stop his games of threatening faster than necessary as he has less time, compared to Xi's new Long March, on his side due to the preparation of his imminent presidential election campaign.

In conclusion, this can be a golden opportunity to make money if you can catch the timing of Trump's reversal of his trade wars, especially the huge one with China, and the tech war with Huawei.

Superphang
https://superphang.blogspot.sg

DuluxGroup (DLX) --- Wow! Taken over by Nippon Paint at $9.80!

If you have followed my three posts on DuluxGroup and acted on my advice, you would have made easily 35% within a short span of 2 months with this exciting news just released this morning, 17 April 2019:

https://superphang.blogspot.com/2019/04/duluxgroup-u-cant-miss-this-big-cup.html dated 10 April 2019

and

https://superphang.blogspot.com/2019/02/duluxgroup-dlx-gem-that-you-cannot-miss.html dated 23 Feb 2019

and

https://superphang.blogspot.com/2019/02/duluxgroup-ltd.html dated 19 Feb 2019.

Big surge of DLX on 17 Apr 19 after the announcement of Nippon Paint’s takeover bid

The takeover bid at $9.80, although it closed a tad lower at $9.75, is even better than the intrinsic value of $9.50 that I estimated. This is another BIG mission accomplished after my BIG SUCCESS with Best World! 

I somehow know that the BIG CUP & HANDLE must have been a result of a big event and thankfully it came after my due diligence and my action. So, my next year's bonus is also in my pocket. 

The BIG news has been out and I will take my time to try to sell the stock and move on to another gem that I have started my accumulation. Stay tuned!

Superphang
https://superphang.blogspot.sg

DuluxGroup --- U can’t miss this BIG Cup & Handle

Please read my two earlier posts on the fundamental analysis on DuluxGroup:

https://superphang.blogspot.com/2019/02/duluxgroup-dlx-gem-that-you-cannot-miss.html dated 23 Feb 2019

and

https://superphang.blogspot.com/2019/02/duluxgroup-ltd.html dated 19 Feb 2019.

Now, the technical analysis has given us the clear indication that it has to rocket up soon with this BIG CUP and HANDLE! The Fibonacci number of 0.618 suggests that it will surge fast and furious to hit the next resistance at $8.33!

I have been ready to reap the reward of my due diligence. What about you?

Superphang
https://superphang.blogspot.sg

Best World --- Mission accomplished

Best World daily chart on 7 Mar 19 at market close

This is a follow-up to my short position in Best World, following my earlier post “Expected Volatility on Best World Trading” that I shared on 24 Feb 2019:

http://superphang.blogspot.com/2019/02/expected-volatility-on-best-world.html

And pursuant to my earliest post “Best World will not survive the self-inflicted carnage” of 20 Feb 2019:

https://superphang.blogspot.com/2019/02/best-world-will-not-survive-self.html

I closed all my short position in Best World and gave myself a belated big angbao of close to $20k after CNY.

Until now I still maintain that:

• It is difficult for Best World to make more money in 2019 in China as Premier Li Keqiang just mentioned that China’s 2019 GDP will be further weakened to between 6 and 6.5%.
• The uncertainty of Best World franchise model in sustaining its revenue cannot be removed easily as franchisees may not be able to clear their inventory fast to take in new inventory and pay cash upfront on delivery to Best World.
• If Best World franchisees flout the China’s direct-selling regulations, the image of Best World will be tainted even though Best World has claimed that they will not bear any responsibility of the wrongdoings or misfortunes of their franchisees.

Why did I still close my short position then?

• The volume of transaction has shrunk drastically which means the panic has largely subsided.
• The price has stabilised which means I cannot expect any big fluctuations in my favour. 
• I am keeping more cash for another opportunity that will come my way soon. 

Superphang

http://superphang.blogspot.sg

Expected Volatility on Best World Trading

This is a follow-up to my earlier post of 20 Feb 2019 on Best World:
https://superphang.blogspot.com/2019/02/best-world-will-not-survive-self.html

Best World issued their clarification in relation to BT’s article over the weekend. It took them about 6 days to do so. This is not acceptable to me because I will have to pay interest to the shares which I have borrowed to short sell on every single day they procrastinate to come up with the clarification. They should have made this part clear long ago.

However, BT or Iceberg Research may follow up with another rebuttal or more queries. 

Trading will be volatile on Monday. The $1.90 target can be reached within two days of trading upon the opening bell of trading halt on 25 Feb, Monday, before the company announces their earnings after market closes on 26 Feb 2019.

This whole episode is to be expected. When a company expands so much faster than what the management are capable of managing, they will run into problems and if they are not able to smother small fire, a raging inferno will soon develop.

Their tardiness in preparing adequate information for investors and in response to BT's queries can be just the tip of an iceberg of financial and staff mismanagement.

Anyway, my due diligence on BW and my action to short sell BW before the BT’s article will help me to get a big belated angpao as CNY has been over.

Superphang
https://superphang.blogspot.sg

DuluxGroup (DLX) --- A gem that you cannot miss

This is a follow-up to my earlier post of 19 Feb 2019 on DuluxGroup (DLX):
https://superphang.blogspot.com/2019/02/duluxgroup-ltd.html

How good is the solid and consistent growth?

My calculation for the solid consistent compound annual growth rate (CAGR) for its revenue and EBIT:
CAGR for EBIT is 7.41%.
CAGR for its revenue is 4.29%.

This growth is compounded over the past 20 years. As it is so consistent, I will take it as not just a defensive stock, but an uber-defensive growth stock.

Historically Resilient Growth

The charts show that, for the past 20 years, the revenue growth had nothing to do with downturns caused by poor new housing completion and poor housing turnover. 

Steady growth in its share price

Conclusion

The confluence of positive factors culminates in the growth of its share price as shown in the chart. It has produced a CAGR of about 16% with dividends reinvested. I believe if Warren Buffett does his due diligence and spots this stock, he will join me in investing in this gem too.

With my strong conviction that this is a gem, I put in more money in DLX after my blogpost of 19 Feb 2019 and I intend to hold it for a long time until I can find a better gem.

Have you started your accumulation?

Superphang
https://superphang.blogspot.sg

Best World will not survive the self-inflicted carnage

Extension of Trading Halt
Best World requested a trading halt at 11.23 a.m. on 18 February 2019 in order to prepare, finalise and release a clarification announcement to address the matters discussed in the Business Times article entitled “Sales of DR’s Secret in China: Best World’s best-kept secret?” published on 18 February 2019 in a comprehensive manner.

https://links.sgx.com/1.0.0/corporate-announcements/YH082EVNCC34YTOU/e3eeb67d8d1b8cc9d4b469b57af2d7b0a333070825c5afe1cfe244048276dbe9

Now, they asked for an extension of the trading halt by up to two days and the trading halt is likely to be lifted no later than 8.30 a.m. on 25 February 2019 (Monday).

The lingering concerns regardless of the trading halt is lifted

Best World has not been giving clear reports in their earnings announcement as reported in the Business Times, letting serious investors try to independently verify the popularity of DR’s Secret to make sense of data points that suggest an unimpressive online and offline footprint for what is supposedly a fast-growing skincare brand.

It has also not updated shareholders regularly and timely on the development of its direct selling licence and franchise in China. I could see that their expansion could be just too fast for them to stomach and hence they could not have done their due diligence in ensuring that they cover all angles that are otherwise required of a good company. Many unseen problems must have been beneath the water level as has been evident from their tardiness to reply the questions posed by BT’s Marissa Lee.

Their tardiness in disclosing clear data must have given opportunities for BB to take advantage of and pump up the stock prices since the start of 2019 to the astronomical value of $3.30 on 12 and 13 Feb 2019, giving a crazy price-earnings ratio of 32.86 then.

“We are not worried about franchisees loading on inventory because they have to make cash payments, and there is (a) no return policy. They will not pay cash for inventories they can’t sell. So we have a good feel of the pulse of the market”, said Mr Huang Ban Chin, COO of Best World, when he was asked if Best World makes a point of tracking end-user demand. He is not worried but I think other shareholders will be very worried as they know if the company does not take care of, or work with, their franchisees, the company will not know the pulse of the market and thus cannot react in time should there be a need.

What goes up hard unjustifiably must come down hard logically. 

I have a short position on Best World before BT published the analysis on it and I think I will have a belated CNY Angpao coming soon.

Superphang
https://superphang.blogspot.com