(Icon) 2017 Arrived Early. Time To Reshuffle Portfolio

1. Portfolio Management

When I looked back, it seemed that I churned my portfolio on a yearly basis. Namely, I bought something at the beginning of the year and sold them after an approximate 12 months holding.

This is not something cast in stone. However, by coincidence, that was how things worked out at least in the past two years.

In 2015, I started the year with export stocks. Many of those stocks did well. By early 2016, I cashed out after the Ringgit started showing signs of strengthening.

After that, I tried my luck on various other stocks but did not have much success. In March 2016, opportunity presented itself. Air Asia reported a sterling set of results. I put a substantial portion of my money in that stock at about RM1.80 (average). And the rest is history - the stock rose all the way to RM3.30 (has since retraced). It helped to make 2016 another year of satisfactory return. 

2. Looking For An Enduring Theme

How did I make decisions on what to put into my portfolio ? As much as I dislike Uncle Koon (nothing personal, I am just not a big fan of how he conducts himself), I picked stocks based on his guiding principle - buy stocks that this year's earning is likely higher than last year.

To fulfill the above condition, I look for an enduring theme everytime I reshuffle my portfolio. I have mentioned this before in my 24 June 2016 article "Predicting Future Earning" :-

I applied this principle in 2015 by betting on export stocks. With a bit of luck, the method worked.

I applied the same principle in 2016 by betting on Air Asia. So far, it is working. I am still holding on to some Air Asia shares, waiting for the fat lady to sing. However, as 2017 draws closer, I am looking ahead pondering about life after Air Asia.... "What should I buy in 2017 ?"

3. Donald Came To Town

Well, it seemed that I didn't need to wait long for an answer - on 9 November 2016, Donald Trump was elected the 45th President of the United States. Shortly after that, he released a policy paper detailing some of its plans for the US economy :-

(a) Yearly Infrastructure Spending To The Tune of USD100 billion  This will generate economic activities and create substantial demand for construction materials. 

(b) A USD1 Trillion Tax Cut  Americans will have extra cash to spend.

(c) Kick Out Illegal Immgirants  Labour cost will go up. Businesses will pass on the cost to consumers.

All the things mentioned above will lead to higher inflation. This increases the chance of rate hike by Federal Reserve. USD is expected to be strong going forward.

As though this is not enough, Donald is pouring oil on fire by proposing to reduce overseas repatriation tax from 35% to 10%. Many large US corporations hold vast amount of money overseas. According to news articles, three companies alone (Apple, Microsoft and Pfizer) hold more than USD500 billion cash overseas. I believe the total amount held by all companies could easily exceed USD1 trillion. If all these cash are sent back to US, we can expect USD to strengthen even further.

4. Export Stocks Back In Vogue

In view of the latest development, naturally I will have to identify export play as one of the major theme for 2017. In the past few days, I reshuffle my portfolio by adding various export stocks. They are the usual suspects : Geshen, Hevea, Jayatiasa, Latitud, Poh Huat, Prolexus, Supermax, Thong Guan, WTK.    
After the reshuffle, my portoflio now comprises 1/3 Air Asia, 1/3 export stocks and the remaining construction, consumer and banking stocks.
5. Concluding Remarks
Different people have different way of managing their portfolio. As discussed in this article, I try to buy stocks that have potential to perform within a period of 12 months. This is very different from what was taught in business schools and by prominent investors such as Warren Buffet, Benjamin Graham, etc who advocate taking a longer term view. 
I am not saying that it is not good to follow those Gurus. All I am saying is that my method suits me. It has worked well for me at least in the past two years. I would like to give it another shot in 2017. 
As for my latest bet on export stocks, will it be successful ? Nobody knows. Things are rarely smooth sailing when comes to stock market. One potential risk that I can think of is that Donald The Bird indeed goes rogue by turning protectionist. To honour his campaign promise, he actually imposes hefty tariff on imports, not only on China, but on all other export countries. (In any event, we are all doomed even if he only zeroes in on China - a China in trouble will drag all of us down with it).  
As a result, I would like to caution my readers not to blindly follow my method. I am just an ordinary chap trying to do things based on rationality. Investing is 50% about skill, 50% about luck. Only time can tell whether my latest round of reshuffling is a right thing to do.