Our Dec 21 portfolio outperformed the FBMKLCI (+13.4% vs +3.5%), mainly driven by our SELL call on Sapura Energy and inclusion of VS Industry in our BUY picks. Alpha Picks for Jan 22: CIMB, GENM, Mr DIY, MyEG, Sentral REIT and VSI. We remove Sapura Energy and add BUY-rated Mr DIY and Sentral REIT. Most of our Alpha Picks are high beta stocks that would gain when investors shrug off concerns over the Omicron variant and refocus on the economic reopening.
WHAT’S NEW
• Market review: Lifted by window dressing. While the underlying sentiment was negative, the FBMKLCI gained 3.5% in December, as selected window dressing activities overcame foreign equity fund outflows (RM1.1b outflow) after four months of inflows. Key negative events were dominated by the US Federal Reserve finally announcing that it would accelerate its QE tapering programme and significantly raise interest rates in 2022, and the emergence of the COVID-19 Omicron variant. Within the electrical and electronics (E&E) industry, a few stocks fell prey again to activist Andy Hall’s accusations and scrutiny of
foreign worker mismanagement.
• Alpha Picks outperformed the FBMKLCI. Our portfolio gained 13.4% mom in Dec 21 (FBMKLCI: +3.5%), led by SELL-rated Sapura Energy (-37.5%) and BUY-rated VS Industry (VSI) (+19.1%). All our BUY-rated alpha picks delivered positive gains in that month.
ACTION
• Jan 22 Alpha Picks: BUY CIMB, Genting Malaysia (GENM), Mr DIY, MyEG, Sentral REIT and VSI. We dropped Sapura Energy as our sole SELL call (share price has significantly plunged) and added to our BUY list Mr DIY and Sentral REIT. Catalysts for our picks are elaborated below and overleaf.
• Upcoming results season an important catalyst for selected stocks. In the upcoming results season in Feb 22, we expect Mr. DIY to post significantly stronger results, and Sentral REIT’s half-yearly dividend announcement (expected yield of >4%) will be uplifting to its stock price (as typically observed during its half-yearly results announcements).
• Besides this, other stocks which could deliver alpha returns during the reporting season include export-oriented commodity stocks and 2022’s prominent growth stocks in the electrical and electronics (E&E) and medical component manufacturing.