A great start to the new year, lets hope its lasts!

Last week, Pigs (Peoples Food) did fly, Dragons (Trump Dragon) breathed fire, Bullet Proof vests came back into fashion (Ziwo)and Shipping (NOL) became the transportation of choice.

So far this year has been a good year, achieved the 10% return which I targeted and now looking at my new gem stocks with great interest. Let me give you a hint on one of my new targeted stocks. I was born in a fire element year and the stock I have been looking at is somewhat explosive in nature (no pun intended). The other is a property stock, but the properties are not located in our lovely tropical island. I believe I will be a little early on these calls but I have indicated before that safety is my first priority, so I have chosen companies that have little liquidity with strong anchor shareholders and trading below book value. So that they will be strongly supported should there be a correction. Yes Yes, its hard to see it coming but I really think safety first is important.

One thing I have learnt over the years is that dividend yields are not that great for defensiveness and it is severely over-rated. Take REITS for example, they were yielding around 5% before the crash, by the time the crash was over, we had some that yielded 20%, not because of higher divided payouts but due to prices dropping almost 75%. So much for being defensive. Moral of the story, do not listen to analysts or so called market watchers when they tell you that yields are good for defensive plays during corrections.

Take another example. When the market started to fall at the beginning of the crisis, the geniuses working for our beloved sovereign wealth funds came out with the brilliant plan of buying banks that were in the centre of the crisis. They felt the dividend yields would provide the support for the stock prices and they went two feet in after the stocks were down 20% (talk about conviction, or should I say misplaced faith), we all know what happened next. Down another 70-80% from those levels. Defensive huh? I think not!

So some will ask, what is the best way of playing defense. I used the 3 stocks which held up best during the 1.5 years of painful crash. Hsu Fu Chi, Tianjin Zhongxin and
Sihuan pharma. Just look at their charts, none of them fell more than 20%, in fact Tianjin actually went up over the 2 years. What do they have in common? Low liquidity, anchor owners and trading close or below their book value.

Well I have been in the tutoring mood these days, so this is another lesson.

Oh yeah, I wanted to write about Auric Pacific, but did not have time. LOOK AT IT.

Best,

SVI