I think I am going to continue a series of GLC stocks in Malaysia. The previous post Government Linked Companies II gave me 6.2% gain back in April 12, 2013. How about now? How about post-election period?
I am a bit neutral about the performance though. BUT, as at June 04, 2013, my portfolio is more than double. It is 13.7%! Thanks to Maybank and Tenaga Nasional.
How is this possible? One word. Certainty. Financial institutions are very important component to fuel growth and development. +CIMB Malaysia and +Maybank portfolio are the biggest in the country.
+Tenaga Nasional Berhad is a defencive stock. The introduction of renewable energy fee somehow, in my opinion cemented, at least, the future plan for Tenaga Nasional. Again, oil and gas is a very important to Malaysia. I chose Petronas Gas and Petronas Chemical in the view that these subsector could outperform the players in the core upstream.
Well, there you go. The next question is when should I sell?
In reference to the previous Stock Screening: Government Linked Companies, I would like to share the screen of my back tested on Malaysia GLCs. I use one of the online local newspapers market watch function in which publicly available. Just a small free registration required though.
I bought each stock 10,000 unit on Sept 10, 2012 and Jan 13, 2013. The stocks are Axiata , +CIMB Malaysia, +Maybank, PCHEM, PETGAS, Sime Darby and +Tenaga Nasional Berhad
As you can see, until April 12, 2013 at 6.45pm, Axiata gains 10.9%, CIMB 4.2%, Maybank gains handsomely at 17.1% and Petronas Chemical and Petronas Gas sluggish around 4.4% and 2.6% respectively.
I should cut my losses if Sime Darby continues in red while +Tenaga Nasional Berhad settled at 14.5% gain.
Although by average, the total gain is about RM38,800 or 6.2% only, at least by conducting this exercise and back testing, you could easily establish favorable GLC stocks. These stocks could easily outperform Bursa Malaysia, if they are also top 30 of Bursa based on the market caps.
Perhaps, just within 6 months, my portfolio matched with the usual dividend rate given out by the government or institutional funds. If the scenario remains predictable and consistent, on annual basis, don't you think you might be able to get a double digit rate?
Nevertheless, given my testing period since September last year, you have to take into considerations the consolidation period during early and end of the year. Including the budget announcement, if it is significant.
Just give a try!
In my opinion, this is a must-have trading strategy for 2013 for medium-term traders or investors. This strategy is more or less emulate the big cap list strategy with a little twist. It would consume less of your time monitoring your portfolio on daily basis but could offer a fairly good return with a minimal risk.
I have been back-testing this strategy at The Star business 'My Portfolio' section.
Big Market Capital
Screen for listed companies on the Main Board that have more than RM 10 billion market capital. There are considered as blue chips companies with strong fundamental business and revenue streams. The FTSE Bursa Malaysia KLCI Index comprises of the largest 30 companies by full market capitalisation on Bursa Malaysia's Main Board. You may see stocks like PPB Group Berhad, YTL Power International, Axiata Group Berhad, Felda Global Ventures and Petronas Gas Berhad.
Government Linked Companies
From the largest 30 companies, identify companies that have government linked companies (GLC) status. GLC companies are controlled by Malaysian government via Federal Government-Linked Investment Companies. In addition, Malaysian government also has a power to appoint members of board of directors and senior management positions.
From that 30 companies, GLC are including Malayan Banking Berhad, Sime Darby Berhad, CIMB Group Holdings Berhad, Petronas Chemical Berhad and Axiata Group Berhad.
Dividend Yield
Again, a simple calculation of dividend yield would mark an ability of a company to pay out dividend each year. It may pay on quarterly or annually basis. However, the bottom line is it represents the return on investment for owning a stock. So hence, you should be interested to look for stocks that have high dividend yield.
On Bloomberg, the easiest indicator would be 'Dividend Indicated Gross Yield'. The yield range that we are looking for is between 2% - 7%.
Lowest Price
The last filter is to select probably five stocks with the lowest price. With no preference, now you have a top five big market caps government linked companies with a good dividend payout record at a bargain price.
At the beginning of the year, buy equal amount of each stock. The aim is to hold these stocks before liquidating them in the final quarter of the year. Check your position and stock performance perhaps once a month or a quarter. If the performance of the stocks went south for more than 5%, you should be selling it to cut your loss. However, it also depends on your risk tolerance.
Happy New Year and Happy Trading!
