BURSA top picks – Buy and keep in 2016?

Two research houses gave their outlook for 2016. Looks promising if what they are predicting comes true. They are CIMB Research and MIDF Research. As usual, not everything that the research houses predict will come true.The actual analyst doing the research may be someone slightly better qualified and has more information than us. The person may not however predict all the different circumstances which is beyond their analysis coverage. For example, another financial crisis originating from the west? Believe or not if up to individual but do take actions accordingly. Let’s summarise what they said.

CIMB Research: FBM KL Composite Index (FBM KLCI) to hit 1,900 points by end of 2016. It ended 2015 at 1,692.51. The potential is for it to grow around 12 percent more. Healthy double digit potential based on 12 months return.

MIDF Research: Target remains at 1,800 points and this is based on PER of 16.34 percent. Actually, PER of 16.34 percent is not low. I would personally not invest in any company whose PER is above 12. (Except for special cases).

CIMB Research is optimistic that a more promising year is coming, after the  numerous domestic and external headwinds. (yes, all of us know what are they…)

MIDF Research as that 2016 would see a resumption of corporate earnings upcycle. In brief, more companies should be reporting better results in 2016.

CIMB Research: “Foreign shareholding is relatively low and most foreign funds are very underweighted in Malaysia; the negative impact of GST (goods and services tax) on consumption should start to wane and companies that benefit from a weaker ringgit, including exporters, tourism and those with overseas earnings, could enjoy a windfall.”

MIDF Research: “The consensus 2016 FBM KLCI earnings growth is estimated to return to a healthy, and more normal, level of 9.1%. The anticipated forward-year performance is in stark contrast to the prevailing ‘earnings recession’ as attested by current year earnings growth estimate of -6.6% as well 2014 and 2013 growth figures of 1.9% and -5.1%, respectively.”

MIDF Research also said something which I personally agree fully. If the global money starts to return to emerging markets, Malaysia is definitely one of the better ones for them to park their money. It’s even cheap for them to do so.

MIDF loves the following sectors: aviation, construction, glove, healthcare, insurance, plantation, port, shipping, technology, power and oil and gas. (I love healthcare, technology if it’s the one I understand. The rest seldom appeal to me thus far)

CIMB loves these: banking, construction and small-cap stocks. (I personally love small-cap stocks too. Not banking or construction, I think they are many times quite fully valued) It gave a few names as follows: RHB Capital Bhd, Gamuda Bhd and Tenaga Nasional Bhd. For the small-caps, they are MyEG Services Bhd, Prestariang Bhd and Only World Group Holdings Bhd.

If you can read until here, I think you may have interest. There’s no need to park everything you have got into whatever these two research houses said. Just do a deeper analysis by ourselves and then decide. Reminder to only buy businesses that we understand. Else, it’s still just simply following.For that, then you need best wishes from me. Happy buying and keeping stocks for 2016.

written on 2 Jan 2016

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