What To Invest In 2018

We will allocate at least 50% of portfolio into core using bonds,  REITs, unit trusts stated below:

For clients who have USD cash, we like investment bonds that have coupon reset feature:
• Heungkuk Life Insurance 4.475% 9Nov2047, yield to call: 4.54%
• Standard Life Aberdeen 4.25% 30Jun2048, yield to call: 4.11%
• Nippon Life Insurance 4% Perpetual, yield to call: 4.10%
• QBE Insurance 5.20% Perpetual, yield to call: 4.80%

For SGD investments, we like:
• Starhill Global REIT, pays 6.25% dividend yield
• ARA Asset Management 5.20% Perpetual, yield to call: 4.10%
• United Emerging Market Bond Fund, pays 5% dividend yield

For Euro investment using Euro loan at 1%, we like:
• ABN 4.75% coco Perpetual, yield to call: 4.00%
• Allianz Dynamic Asian High Yield Bond Fund, pays 6% dividend yield
• AB Global High Yield Bond Portfolio, pays 4.45% dividend yield
• Cromwell European REIT, pays > 7% dividend yield

For HK investment using HKD loan at 1.80%, we like:
• Bank of China paying > 5% dividend yield


To hedge portfolio from equity market crash, we like principal strip that is trading deeply below par:
• Principal strip 15Nov2046
Issuer of principal strip is US government


We will allocate a small allocation of the portfolio into tactical trades (growth stocks) below:

Statistics shows that earnings' trend drive share prices. Stocks are selected on the basis of strong growth potential at reasonable valuation. We like the stocks, not necessary we like to buy them at current price.

• Alibaba
- Alibaba is an investment in China's rising middle class consumption and Asia's growth prospects. These should drive its dominant e-commerce business.
- Alibaba has achieved astounding sales growth of 51% annually over the past 5 years.
- The company has a high ROE of 21%. Alibaba trades at high PE of 53x. Forward PE is 33x.
- 12 months return potential according to consensus: 27%

• Facebook
- Facebook has successful leveraged the network effect to *disrupt the traditional print media industry*.
- The revenue is mainly from digital advertisements. Facebook's sales are growing at 49% annually.
- It is best example of a company with no diminishing returns and almost zero supply constraints.
- Historical PE is 34x.  Forward PE is 27x. ROE is at 24%.
- 12 months return potential according to consensus: 18%

• Alphabet class A
- Alphabet depends heavily on advertising, which accounted for 86.5% of total revenue. But it it diversifying its business out of advertising.
- Buying Alphabet is perhaps the closest that retail investors like me can get to investing in a *venture capital firm*.
- Alphabet invested in long-term “moonshot” projects through its “X” division. One of these became Waymo, the self-driving car project. This includes Calico, a biotech venture. Calico hopes to extend the human lifespan. It also owns the artificial intelligence company DeepMind.
- You can get exposure to self-driving car technology at a lower valuation than some of its competitors in the space, including Tesla Inc and Nvidia Corporation.
- PE is at 31x. Forward PE at 24x.
- 12 months return potential according to consensus: 11%

• Walt Disney
- Disney's diversified business covers the media, entertainment and leisure industries. These will benefit from rising spending as the global economy improves.
- Disney owns resorts in US, France, Hong Kong and China.
- Recently Disney made an offer to acquire 21st Century Fox assets for USD66 billion using shares. This will add content to its direct to consumer offerings.
- Disney trades at undemanding PE of 19x. Forward PE is 17x. ROE is 21%.
- 12 months return potential according to consensus: 4%

• Celgene
- Shares currently trade at less than 12 times expected earnings.
- But Celgene fully expects to generate adjusted earnings-per-share growth over the next three years of 19.5%.
- That translates to a price-to-earnings-to-growth (PEG) ratio of less than 1.00 that's hard to beat, especially in the biopharmaceutical world. Don't expect this bargain price to last for too long.
- 12 months return potential according to consensus: 15%

• Berkshire Hathaway class B
- Berkshire Hathaway owns hundreds of businesses; each of these firms, if sold at auction, would be worth more than the current stock price would seem to reflect.
- If Buffett moved on and the company was broken up in a prudent manner over an extended period, Berkshire Hathaway investors would benefit greatly from such a process.
- The best part of Berkshire Hathaway is you get a quasi-mutual fund with a diversified group of holdings and no management fees.
- 12 months return potential according to consensus: 6%

• Softbank
- Softbank is much more than a telecom company.
- The real attraction is its $100 billion tech-focused Vision Fund, which is backed by $28 billion of Softbank's own cash, about $60 billion from Saudi Arabia and Abu Dhabi's wealth funds, and other big investors like Apple, Qualcomm, Foxconn, and Larry Ellison's family office.
- Softbank earns up to 1% in management fees from the fund, along with hefty performance-based fees. Analysts estimate that those fees could boost Softbank's annual operating profits by 7%.
- On its own, Softbank owns chip designer ARM Holdings (which the fund also holds a stake in), a 30% stake in Chinese e-commerce giant Alibaba, and a $5 billion stake in Didi Chuxing, China's top ride-hailing service. Softbank is also trying to buy a big stake in Uber at a steep discount.
- Simply put, Softbank is investing heavily in a wide range of future technologies, which throttles its short-term earnings growth but could pay off handsomely over the next few decades.
- That's why Bernstein analyst Chris Lane recently called Softbank a "tech-focused Berkshire Hathaway."
- 12 months return potential according to consensus: 42%


Clients can choose to enter the growth stocks via upside participation note or bonus enhanced note for better risk reward trade.


If you are interested to talk to a private banker, send email to metal.commodity@gmail.com.