Previously on Sharpfokus
Buy 📈 Sharpfokus110
October 4th, 2019
⏰ 2 minute read
⏰ 2 minute read
Worry
Worry worry worry. Recently many people have been surprised that we remain so positive. There seems to be an air of worry around & of course there’s lots of things to worry about. One subscriber told us we were the only positive analysts he knew of at the moment. We’re not just a little positive, we are very very positive. Here’s 3 reasons why...
3Q
Holidays
The first reason is simply that we are now in October. That means we’ve passed through the awful 3Q & emerged out the other side. Some people fear October because it’s the Halloween month. But the 3Q is where the real problems lie. First in many places it’s the big holiday period. For example everyone in the UK has to go on holiday in the summer. That means less work is getting done.
Fires
Here in Indonesia & around SE Asia, the 3Q is the dry months & often ends up with land burning which without water is very difficult to put out. Normally end September is when the rains come again & the fire risk reduces. This has happened & hopefully we will continue to see low hotspots (2015 it did last until end Oct..).
Stocks
While October has a dreadful reputation as the month of stock market crashes like Black Monday, that also means October is the time to buy. It is in fact the 3Q which is the terrible one. Data on the JCI going back to 1996 has an average -3% return for the 3Q, the other 3 are similar & positive giving an average 18% return from 1 Oct to 30 June. If early Oct is negative then all the better.
Brexit
UK/ US
Averages are all very well but what makes us even more positive this year than average? Can you guess? After years of waiting, this month is Brexit on October 31st. As you may know from previous writings there are only 2 real economies according to us, the importers or buyers, the UK & US (India is coming up). But dragged up in the slow growth EU, the UK economy in $s is lower now than 2006, 0 growth.
Poll
While it’s still not a 💯 certainty your can see in the polls that since Boris became PM & took a (slightly) tougher stance, the Conservatives have rallied in the polls & built up a big % lead over Labor where support continues to weaken. This is giving more certainty to the UK leaving on the 31st & even if not, a landslide win at an election for the Cons.
Boom
The US has been advancing solo in recent years, no economy in the EU has grown at all since 2007 & the UK since 2006, 13 years. Out of the EU we would have the 2 allies back together to drive faster economic growth. 2 things can happen, short term interest rates are falling everywhere & a Brexit would lead to a dramatic increase in long term bond yields. A steeper yield curve & money can invest in equities, back to growth.
Indo
Rates
Here in Indonesia we see similar excitements. The 3 macro drivers for growth are interest rates, regulation & tax. Bank Indonesia has been quite active to cut rates even ahead of the Fed, but if we are right, then rates are going to come down much much further, with a stable rupiah, to levels we’ve never seen before.
Tax
This October we will finally get the new government team up & running. This should mean a lower corporate tax rate (they promised)... & regulations. Companies are starting to push back against some of the regulators (we just started to cover TRIM & in their financial statements you can see that while profits have doubled since 2014, regulators fees have gone up 7x).
Cash flow
From our Sharpfokus Saham research we also see a very clear pattern for most companies. Sales growth which fell to 0% last year has started to pick up or become less negative. Investments have slowed allowing cash flows to rise, which allows debt to fall. There’s also lots of negative working capital to reverse & that’s starting to happen too. Better cash flows from sales growth, less investment & better working capital means payments to shareholders.
Metals, palm oil, construction
The macro picture we see for October is simple. A dramatic jump in bond yields, higher commodity prices & a weaker $ which means our bond yields will go the opposite way & fall. We like lots of things, but for the more aggressive investors, the worst performing should become the best, metals, palm oil & construction. Our index target as ever is close to 17,000 until 3Q GDP when it will be higher.
Oh & by the way Sharpfokus Saham reached 50 companies this week...on the way to 💯
Be a great investor!
Sebastian
Worry worry worry. Recently many people have been surprised that we remain so positive. There seems to be an air of worry around & of course there’s lots of things to worry about. One subscriber told us we were the only positive analysts he knew of at the moment. We’re not just a little positive, we are very very positive. Here’s 3 reasons why...
3Q
Holidays
The first reason is simply that we are now in October. That means we’ve passed through the awful 3Q & emerged out the other side. Some people fear October because it’s the Halloween month. But the 3Q is where the real problems lie. First in many places it’s the big holiday period. For example everyone in the UK has to go on holiday in the summer. That means less work is getting done.
Fires
Here in Indonesia & around SE Asia, the 3Q is the dry months & often ends up with land burning which without water is very difficult to put out. Normally end September is when the rains come again & the fire risk reduces. This has happened & hopefully we will continue to see low hotspots (2015 it did last until end Oct..).
Stocks
While October has a dreadful reputation as the month of stock market crashes like Black Monday, that also means October is the time to buy. It is in fact the 3Q which is the terrible one. Data on the JCI going back to 1996 has an average -3% return for the 3Q, the other 3 are similar & positive giving an average 18% return from 1 Oct to 30 June. If early Oct is negative then all the better.
Brexit
UK/ US
Averages are all very well but what makes us even more positive this year than average? Can you guess? After years of waiting, this month is Brexit on October 31st. As you may know from previous writings there are only 2 real economies according to us, the importers or buyers, the UK & US (India is coming up). But dragged up in the slow growth EU, the UK economy in $s is lower now than 2006, 0 growth.
Poll
While it’s still not a 💯 certainty your can see in the polls that since Boris became PM & took a (slightly) tougher stance, the Conservatives have rallied in the polls & built up a big % lead over Labor where support continues to weaken. This is giving more certainty to the UK leaving on the 31st & even if not, a landslide win at an election for the Cons.
Boom
The US has been advancing solo in recent years, no economy in the EU has grown at all since 2007 & the UK since 2006, 13 years. Out of the EU we would have the 2 allies back together to drive faster economic growth. 2 things can happen, short term interest rates are falling everywhere & a Brexit would lead to a dramatic increase in long term bond yields. A steeper yield curve & money can invest in equities, back to growth.
Indo
Rates
Here in Indonesia we see similar excitements. The 3 macro drivers for growth are interest rates, regulation & tax. Bank Indonesia has been quite active to cut rates even ahead of the Fed, but if we are right, then rates are going to come down much much further, with a stable rupiah, to levels we’ve never seen before.
Tax
This October we will finally get the new government team up & running. This should mean a lower corporate tax rate (they promised)... & regulations. Companies are starting to push back against some of the regulators (we just started to cover TRIM & in their financial statements you can see that while profits have doubled since 2014, regulators fees have gone up 7x).
Cash flow
From our Sharpfokus Saham research we also see a very clear pattern for most companies. Sales growth which fell to 0% last year has started to pick up or become less negative. Investments have slowed allowing cash flows to rise, which allows debt to fall. There’s also lots of negative working capital to reverse & that’s starting to happen too. Better cash flows from sales growth, less investment & better working capital means payments to shareholders.
Metals, palm oil, construction
The macro picture we see for October is simple. A dramatic jump in bond yields, higher commodity prices & a weaker $ which means our bond yields will go the opposite way & fall. We like lots of things, but for the more aggressive investors, the worst performing should become the best, metals, palm oil & construction. Our index target as ever is close to 17,000 until 3Q GDP when it will be higher.
Oh & by the way Sharpfokus Saham reached 50 companies this week...on the way to 💯
Be a great investor!
Sebastian
