The US Election 2016 is another event that could have a profound impact on the global stock market. Similar to BREXIT, there is a known date for its occurrence. The US Election 2016 is set to take place on 8 November 2016 (US Time), and the results will probably start to filter in by 9 November late afternoon. (Singapore time) Given the latest FBI probe, Hilary Clinton is no longer seen as a clear front runner. As chances of a Donald Trump victory increases with each passing day, the stock market has reacted by tumbling steadily the past week. The stock market can no longer predict how the US election will affect the economy. Given the significance of the US Election, Heartland Boy has reviewed his public portfolio in the past month. Here is his investment strategy for US Election 2016.
Investment Strategy For US Election 2016
Heartland Boy does not like uncertainty and neither does Mr Market. However, he is certain that the Singapore Stock market will experience a turbulent trading day on 9 November. Therefore, he made an effort to devise a simple 2-step investment strategy for US Election 2016.
Step 1: Review Your Investment Portfolio
During the month of October, Heartland Boy spent considerable time analyzing his investment portfolio. He read his initial investment thesis and checked all the performance indicators that would help to give a glimpse into the near-term earnings of his stocks. These were the following decisions that he has made in the month of October:
In this post, readers would have realized that Heartland Boy buys stocks when they are on an uptrend. Conversely, he would sell stocks when they are on a downtrend. Unfortunately, Sarine has embarked on a downtrend lately. Furthermore, the industrial indicators also reveal a rather gloomy outlook. Prices of rough diamond have been rising while prices of polished diamonds have been dropping. Given that Sarine sits in the middle of the value chain, it may experience pressure on its revenue. As such, Heartland Boy has made the decision to take profit on Sarine and divested it completely. This is a contrarian call against what Maybank thinks though. Heartland Boy maintains that Sarine is a very solid stock but the industry headwinds may be too strong for it to bear at this moment.
Similarly, Heartland Boy has decided to take profit on Dutech. Steel, which forms a significant portion of Dutech’s cost of production, has been trending up during 3Q2016. Further, given that it is a S-Chip stock, Heartland Boy is afraid that it will be more sensitive to panic selling. However, given that Dutech is a critical supplier to Diebold and Wincor Nixdorf, it is still a good stock. Heartland Boy is simply taking a super conservative stance here.
Selling Sunningdale was an easy decision to make. It has fallen considerably since it hit a high of $1.20 in the earlier part of the year. Heartland Boy thought that Sunningdale would be more susceptible to panic selling and decided to reduce his holding. Even with a creditable 3Q16 results, its share price continues to languish around $1.05.
This REIT has appreciated over 15% since Heartland Boy’s first purchase in May 2016. Heartland Boy is not selling Lippo Mall Trust because the Indonesia retail sales index for July and August are relatively positive. Further, Rupiah has appreciated significantly the past quarter owing to the success of the Tax Amnesty programme. Heartland Boy is looking forward to a good set of results this quarter.
Similarly, there are a lot of positives going for Croesus Retail Trust. The Yen has surged over 12% compared to the quarter in the preceding year and it will also benefit from a full-quarter contribution of its yield-accretive purchases. (Mallage Saga, Feeeal Asahikawa, Internalisation of Manager)
Heartland Boy is keeping QAF simply for the fact that it is solid and boring. Further, AUD has appreciated against SGD during 3Q16 and range between 1.01 to 1.04. This compares favourably to the range of 0.99 to 1.01 experienced in 3Q15.
It just released a creditable set of results despite the difficult conditions in the semiconductor industry. Further, Heartland Boy suspects that this stock is too illiquid to be affected by panic selling.
Of all the stocks in Heartland Boy’s portfolio, CNMC Goldmine is probably the only stock that would rise in tandem with a surprise Donald Trump victory. He considers this an election stock on a Trump’s victory. As such, Heartland Boy is glad to have this counter in his portfolio as it provides some natural hedge against uncertain hedge.
Step 2: Prepare Your Shopping List
In his previous investment strategy for BREXIT, Heartland Boy bought QAF, Lippo Mall Trust and Dutech from his shopping list. That the stocks appear in this shopping list could also give readers an insight into the future stocks that might be initiated on Heartland Boy.
Conclusion of Investment Strategy for US Election 2016
Whatever the outcome of the US Election 2016, it will be a bumpy ride on 9 November at the SGX. Given the very diverse policies of the 2 candidates, the effect of the presidential election on the economy could be quite pronounced. Heartland Boy is very risk adverse, he has taken some conservative steps by selling some of his stocks to hoard on more cash. Currently, Heartland Boy’s portfolio is segmented into 39% cash, 48% equities and 13% insurance. He is looking to deploy up to a further 14% of his cash into equities. Given that there are also several SRS promotions around year end, he may look to max out the contribution limit if the STI ETF falls to a very tempting level. So, what is your investment strategy for US Election 2016?