Sunday, February 17, 2008

Trading Ideas: FBM30etf, Myetf DJIM25, iCapital closed-end fund.

Enough of investing philosophy, it is time to generate some ideas to make money. Since this is Jeet Kune Do investing, I have full freedom to achieve my objectives. I can hire brightest fund managers(open or closed end funds), copy the master, use leverage (warrants or margin), picking stocks, ETF, local equity or foreign equity exposure, commodities, REIT, different kind of weightage, etc. The combination is just endless. I can afford to have lumpy returns as long as I achieve my target over the long term.

This is a big contrast to fund managers restricted by the fund objectives, stay fully invested and force to deliver short term results relative to an index. The fund holders will punish the fund manager by redemptions if they are not happy over the short term results. Irony?

For a start, it will make sense to invest in ETFs and closed-end fund.

There are two ETFs listed on KLSE namely FBM30etf mimicking 30 largest listed companies based on market capitalization and MyETF Dow Jones Islamic Market Malaysia Titan 25(MyETF-DJIM25).

MyETF-DJIM25 is much more focussed. Plantation, energy and construction sector account for almost 80% of the fund’s NAV. Finance and gaming sectors are not included which carry an important weight in KLCI index. FBM30etf is better diversified, should track well on Malaysia economy.

Since MyETF-DJIM25 is skewed(focussed) towards three sectors, one better get big picture right!!! (i) How sustainable is the crude palm oil price? (ii) Are the current stock prices already priced in the future expectation of CPO prices? (iii) Will the energy related companies deliver the earnings? (iv) Are we sure the 9MP projects impact will flow through to these big capitalized construction stocks? Further research is required! Anyone care to comment? is the only listed closed end fund. The fund manager has long track records of beating the KLCI performance, his portfolio CAGR on his other portfolios generating between 17 to 23% CAGR more than 10 years. Chance of the fund doing well over the long time for is high, beating my 10% target? No sweat, the only issue now is price traded at 19% premium NAV. For now, NAV needs to catch up with price and how fast(implication: opportunity cost)?

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