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Investment Strategy Report – November 2022: WAITING FOR A SUDDEN RAIN

Information risks and liquidity pressure in the capital market made the liquidity in the stock market has been decline session by session in October. In the short term, we believe that the above problems will not be removed. Given the limitation of cash flow, we do not expect a simultaneous increase of sectors or stocks. There will be faster and shorter rotation of cash flow among industries and stocks. We expect VNIndex to fluctuation in the range of 940 – 1050.

In such circumstance, we believe that it will be difficult for short-term investors to find profits. Therefore, we maintain a defensive portfolio with a balanced cash-to-stock ratio. For short-term investors, we believe that trading on existed stocks in their portfolio will offer them the advantage of time (T+). We think that patient investors will generate a better performance than those who try to buy in the rally session.

With a drop of more than 30% from the peak of 1500 points, VNIndex's valuation has gone to a multi-year low, therefore, we believe that investors holding cash/high cash proportion can still allocate part of the portfolio to accumulate stocks with good fundamentals for long-term horizon.

In the current circumstance, we think highly leveraged and cyclical businesses will be hit harder than the other sectors. Besides, after the pandemic, the economy continued to show a divergence in health among industries as well as companies in the same industry. As such, investors can pick stocks for your long-term portfolio based on following criteria (1) Valuation P/E, P/B lower than the 3-year average (2017 – 2019). We exclude data in 2020 – 21 to remove the impact of the “Covid” factor; (2) Are good enterprises in healthy industries and healthy enterprises in difficult industries; (3) Using low financial leverage and higher operating efficiency than interest expense; (4) High return on capital and ability to pay dividends.