Of Syariah-approved Stocks

Upon thorough checkings and verification, The Partnership in the first week of January 2012 had just sold an entire holdings in Stock F based on the sole reason that it is not a Syariah-approved stocks as deemed by the Securities Commission. That aside, I still think that Stock F has the potential of upward earnings in years to come, as the company gain more rights to act as agents and distributors in Peninsular Malaysia, apart from their presently admirable position as a major distributor of many FMCG brands in East Malaysia.

Alas, as long as a stock of a listed company in Bursa Malaysia is not deeemed as a Syariah-compliant stock, the Partnership will refrain from employing its capital in the stocks of the company.

The Partnership Portfolio

I have explained in earlier post a brief history on the origin of AIN Partnership portfolio and where it stands now. Please take a look:

Stocks of Company	Gross Investment	Market Value	% Profit & Loss	Portfolio Percentage
A	4,300.00	5,360.00	24.65%	22.62%
B	2,562.00	2,820.00	10.07%	11.90%
C	2,660.00	2,725.00	2.44%	11.50%
D	2,552.00	2,640.00	3.45%	11.14%
E	2,453.10	2,509.00	2.28%	10.59%
F	2,384.20	2,429.00	1.88%	10.25%
Others	4,172.50	5,105.00	22.35%	21.54%
Cash	109.42	109.42	-	0.46%
Total Portfolio Value	21,193.22	23,697.42	11.82%	100.00%

* Figures in Ringgit Malaysia (RM)

** Cash includes dividends received and realized gains before being utilized for stocks purchase in the beginning of the year.

Stock A belongs to one of the senior citizens of Bursa Malaysia whom primary business is car distribution and property management. I bought them when the stock price is exactly the same as the amount of cash per share (a staggering RM4.30 per share). I should have bought more instead of placing a restriction of “maximum 25% of portfolio in one stock”. Lesson here – if you did all your research well and you have full conviction that your reasons to buy a stock are right, by all means load up at a fair if not cheap price.

A savings and loans company partly owned by Employees Provident Fund (EPF) is represented as Stock B. They made it big in personal financing in the public sector. I lived in Putrajaya and one can clearly see how these personal financing schemes boomed by the number of leaflets in the mailbox.

Stock C is a clothing brand company with exceptional growth for the past ten years in a competitive retailing industry. I like them so much that I made sure I only buy my working pants from them since I started working. What more can you do to make sure they returned the money to you as dividends?

Stock D is a Sarawak-based infrastructure company who has recorded above 20% ROE for the past five years with above 15% NPM consistently. I find no other reason to own part of the company except for how fair they are selling now relative to their growth and strong balance sheet. And oh, they started their business with swamp land reclamation.

Stock E is a vessel builder company operating out of Sabah. I have been in oil & gas industry for few years with direct exposure to offshore supply vessel (OSV) operations, and I can see the tremendous potential in it. The number of companies entering the business grew, and more Datuks than not tried to get into it. You ought to know who can profit from their ventures – the builder of the vessel that the Datuks buy.

Stock F represented a company whose chief business it acting as agents to their principal in product distribution. In East Malaysia they conquer everything from FMCG products to building materials. I’ve been a salesperson before (still am) and I can appreciate the fact that if you cannot get high margin, seek volumes. The company’s NPM was historically below near 5%, ROE was so-so at 8 – 10%. But look at the East Malaysia map – just how many more consumers can there be? Next stop – Peninsular Malaysia.

The ‘Others’ is collection of stocks that individually does not reach 10% threshold of total portfolio size, so I find it less compelling to share. Most of them were companies whose financial statements I deemed attractive, but not enough studies were made to warrant a bigger position in their stocks.

In total, there were 12 stocks that the Partnership owned as of 30^th December 2011.

A Brief History

The AIN Partnership (the Partnership) current portfolio is a continuity of my initial foray into stocks eight years ago as an undergraduate student captivated by businesses. Upon graduation I ventured into real estate investments, at the same time I placed my cash in the Amanah Saham Bumiputera (ASB) fund.  One fine day I thought “why not investing directly in Malaysian stocks?” since I already had prior experience at that, rather than letting someone else doing it for me. Yes, the ASB dividends return were satisfactory, and I have no complains at all compared to the mediocre returns by many more unit trusts fund out there. But I yearn for higher yields, as well as capital appreciation.  The realization came when the Malaysian stock market suffered in 2008. As an active buyer, the timing couldn’t come better or sooner for me, a budding investor looking to buy stocks on the cheap. By 2010, some of stocks actually gained by more than 100%, some of them lose up to 15% of its value at time of liquidation. I sold off most of my holdings from 2008 in mid-2011. Overall, I gained (I do not have proper record of these so please take it with a pinch of salt).

I revived my stocks investment in Q3 2011 via AIN Partnership, with initial capital of RM21,200 that came from myself as the Majority Partner and others. The aim of the fund is to achieve higher return that what the same amount will earn if invested in the ASB fund over a year. For guidance, in 2011, ASB yield is 8.80 sen (7.65 sen dividend + 1.15 sen bonus). The Partnership return by 30^th December 2011 is 11.8%. To give an example, a RM21,200 subscribed to ASB fund as of 1^st January 2011 with no additional units bought the whole year will see its value at 30^th December 2011 at RM22,850 (about 7.8%. ASB calculation of returns is not simple interest calculation. For more information go Google “asb calculator”). A RM21,200 placed in trust account of the Partnership in 1^st January 2011, but only utilized to purchased stocks in Q3 2011, will see its value at RM23,700 on 30^th December 2011. The Partnership met its ‘objective’ in 2011, so to speak.

However, for proper comparative and investment principles reason, I feel three years (at minimum) would be a better time frame for the Partnership to start comparing its return to others. I reckon in three years we would have enough bear and bull market with violent and mild swings to really justify the Partnership decision to manage its own funds and compare it to the performances of ASB fund. Else, we might as well liquidate and return our money to ASB fund to manage it for us. For the time being, we shall strive, and would be content with beating the ASB in terms of absolute returns between first day to the last day of a given calendar year, with no minimum commitment.