Tuesday, 28 August 2012

STI update

The market seemed to have come to a standstill and is in a 'neither here nor there' stance. The market seemed like it doesn't want to run up but at the same time it doesn't smell bearish either.

I am taking a view that the market is poised for a correction but trading sideways for now waiting for news. This is consistent with my earlier view

I am not taking any short term positions until the signs are clearer. The beauty of a small time player like me is that i decide when to play the market. Unlike a unit trust manager who has to long the market all the time, the small trader has the luxury to choose the timing as he or she can enter or exit the market pretty quickly.

Imagine the difference between managing a $100m portfolio versus a $1m portfolio. The one with the larger portfolio will not be as nimble and will probably has to take a long term view and position whereas the one with the smaller portfolio will be able to react quicker and faster. 

No position is a position

For a discretionary trader like myself who trades only when my work schedule permits, deciding when to trade is a right which i enjoy. I decide when to play the market at my terms, hence if i am unsure, i will just stay out of the market and watch from the sidelines. I don't have to trade everyday since i have a full time job. Unlike someone who is a full time trader, he or she may not enjoy such luxury but the good thing is he can watch the market all day long. haha. Anyway, always remember that no position is a position. :)  

In this instance, i will stay on the sidelines as my view of STI remained the same. It will trade sideways with downward bias.

Happy Trading.

China Minzhong - The analysts don't get it?

Let's talk about an interesting topic today. Analysts reports.

I share with you a real time classic case where reports by analysts may cause you more confusion than help!?. :)

China Minzhong released its 4th quarter results yesterday. Frankly I don't know how to play this stock. It can make you very rich but it can also make you very poor, depending on how you have traded it. It is pretty volatile vis-a-vis the market. If you don't have a strong heart, i suggest you watch from the sidelines. hahaha The weekly chart below for your reference.

Lets just read the different headlines of the analysts reports issued on this company this 2 days and you can get pretty confused.

Macquarie dated 27 Aug 2012

Macquarie continues to give an outperform rating and a $1.40 target price.

Maybank-KimEng 28 Aug 12

Kim Eng went one step further. Not only did it maintain its buy rating and its target price of $1.16, it also had a sexy header on its report suggesting a possible dividend payout since IPO.

Then someone more neutral decided to come into the picture.

CIMB 28 Aug 2012

CIMB downgraded the stock to Neutral and lower its target price to S$0.78.

I always have a hard time trying to understand exactly what "neutral" means in most reports. Does "neutral means sell?" or "does neutral means I don't know?" or "does it mean invest at your own risk?". Neutral is like sitting on a fence, refusing to take a position or stand....

and finally lagi best, we have one report at the other end of the spectrum, an "underweight" rating. Probably underweight means saying sell in a nice way.

JPM 27 Aug 12

JPM says underweight with a price target of $0.70. JPM says a re-rating in future will come via a meaningful dividend.

In case you don't know what China Minzhong do, it is a vegetable grower and the various vegetables are presented below for your consumption.(source from JPM report).

Well here you go. One company, 3 differing analysts' views. Read what you want to read and believe who you want to believe. Isn't this a beauty?!

Most importantly, i give you my view so that you have another view to choose from.

My View

If you have been following my blog, you already know my biased views with regards to companies from certain countries and certain industries such as agricultural and biological assets. sorry to disappoint you ah...my views remain consistent. hahaha

Lesson time - Analysts reports

Anyway, back to my lesson today - analyst reports.

It is good to read the analyst reports for a overview of what the company is doing but do read it with a huge pinch of salt for the following reasons.

Lesson 1 - Companies only invite analysts for site visits because they want them to issue a buy report. 
If you are the management, would you invite analysts to your company if you don't have a good story to share? By the same token, the management will only show the analysts what they want them to write about.

Lesson 2 - Some brokerage firms may have other business dealings with the company and the report is just one of the many dealings. 
It is not unheard of where the 'conclusion' is already given to the analysts by their bosses and analysts have to write the reports without compromising their integrity. Business dealings include corporate finance, share placements, etc. The better governed brokerage firms will usually declare their interest in the reports issued to address any perceived conflict of interest.

Lesson 3. Treat the target price and ratings for guidance only. 
If you are in the investment line, you probably know how financial modelling works. If you don't, here is the key word in financial modelling. Garbage in garbage out. In other words, the model is only as good as your assumptions. If the analyst made some wrong assumptions, then the forecast will be hay wire and you know what assume means right? Assume makes an ass out of you and me. Hence i guess the lesson here will be to follow the right analyst (for example the award winning starmine analysts?) instead. The most important attribute any analyst must have is consistency. As long as the analyst is consistently right or consistently wrong, they are good analysts. hahaha... you don't want to follow an analyst who is right some times and wrong some times, that makes it very difficult for us to profit from their calls.

Lesson 4. Valuation methodologies are subject to changes.
The best part to analysts issuing a target price is that there are many different valuation methodologies to choose from. You can use the Price Earning Ratio, you can use Discounted Cash Flow, you can use Price to Book or when you run out of ideas, use Sum-of-the-parts! In most cases, you can probably start with the target price you want to see and then works backwards to see which methodology meets your needs. hahaha..As such, treat all target prices (including those in my blogs) for reference only. If i am really so good, probably i won't be blogging?! :-P

Lesson 5.  How i use analyst reports
Don't get me wrong and think that analysts reports are useless. They are useful and there are probably some very good analysts out there but the key is to find out for yourself, who the better analysts are.

I primarily use analysts reports to generate investing and trading ideas. The reports help me know the companies better and whether i feel that the reports had been  written in an objective manner.

I also use analysts reports to determine if i should get into certain trading positions. I prefer to long stocks with favorable analysts recommendations primarily because they will re-issue the report every now and then and that will help create momentum and liquidity to the stocks i am trading.  Similarly, it is easier to short a stock that has sell recommendations from analysts.

For long term investing positions (such as those in my SRS account), i will usually read the reports just to keep myself updated on how the company is performing and watch out for any red flags raised. It is good if they agree with my analysis but if they don't it is fine with me as well. As you can see I bought starhub a few years back when most analysts had a sell call on it. Right now they are issuing 'sell calls' again but i am continuing to hold on to it.

That is it for today. 

Happy analyzing and if you like this posting, you follow me either on facebook or twitter.

Wednesday, 22 August 2012

Closing off Indoagri position and STI update

I closed off my Indoagri position yesterday and today at average of 1.44. Time to stay aside and watch again.

My "sell" signals are triggered for STI, and i think STI is due for some correction and consolidation.

CDL H Trust

It is interesting to note how 'stocks' are closely correlated. One case in example will be the listing of Far East Hospitality Trust which will be a direct competitor of CDL H Trust.

CDL H Trust has been under selling pressure in recent days after Far East Hospitality Trust announced its IPO and investors could be 'rebalancing' out of CDL H Trust into FEHT. The market is probably trying to find an equilibrium price where investors will be indifferent between holding this and FEHT. If FEHT had been priced way below 93c, the selling pressure on CDL HT might have been more intense as it will be more attractive to hold FEHT instead of CDL HT. 

In any case, the decline in CDL HT is not as bad as the decline in my "Facebook like" or the share price of Facebook itself. haha.
Can someone help me stem the decline? :-P

Tuesday, 14 August 2012

Ezra and Indoagri - Update

Ezra has a nice run up today from the time i first spotted it.

Unfortunately my lack of patience is terrible..  :-( This blog is my diary on how i should improve my trading...and no time to monitor the market shouldn't be my excuse..... :-) 

Lessons to take away:

1. Extend my time horizon and be more patient since the sell signals wasn't triggered on my chart yet.

2. Ride the profits of Sakari and Ezra using a trailing stop.

Ezra is probably heading towards 110, thus if am still holding it, i will probably take 1/2 off the table at around 105 and ride the rest using a trailing stop. I will move the stop of Ezra to around 102 from 94.

Indoagri moved up from my initial entry yesterday. Too bad it didn't close at its high today, probably some traders will not want to play with results announcements. Hopefully the results announced today will help give it a boost.... (fingers crossed)... 

First take on results of IFAR by GS

Monday, 13 August 2012

IndoAgri Chart

I thought the chart for Indoagri looks interesting.  Target around 1.48. Cut loss around 1.35. Vested.

The list of analyst coverage enclosed for information.

SMRT chart

The SMRT Chart actually looks pretty good. While the COI hearing is over (and the key beneficiaries are probably the lawyers), the support at 1.60 is protected. I was actually seriously contemplating buying this for my SRS fund if it drops further but was put off by the current price where the PE is > 20x and the yield is around 4.5%. With a potential overhaul in 'maintenance' regime, probably the operating costs will increase in the coming years but the smrt continues to be the main mode of transport for Singapore and is a 'legal monopoly'. Perhaps a high PE is somewhat justifiable?

A possible swing trade will be a cut loss below 1.60 and a target of 1.70 or higher. If 1.72 is taken out, then probably it will head towards 1.80 area.

Saturday, 11 August 2012

Time Frame

We had a lesson on "Knowing yourself" last Sunday. Today I want to share on the topic of Time Frame. (pardon me if you get multiple emails on this). 

Knowing one's time frame is very important. Do you intend to hold this position (be it any asset class) for years, months, weeks or days. For forex or day traders, it can even be hours or minutes. 

Knowing the time frame is important because it determines the position size and risk which you are willing to take. Let's just use the various asset classes as examples. When I invest in real estate properties, my time frame is in years. This is because I am prepared to ride the market cycles to fully maximise my returns. The quantum involved is large and the use of leverage is inevitable. In addition, I view properties as a natural inflation hedge, hence I am willing to be vested in at least one property at any time. As such I hold a pretty long term view on this asset class. My parents bought their house for only $160,000. After 26 years, the same house which they stay in should be worth at least $2.2 million. They rode through the various peaks and troughs during this period but it definitely served as a good inflation hedge for them. This is inevitably more so in land scarce Singapore. 

When I invest in SRS stocks, my time frame is also pretty long because I am looking to create a portfolio generating passive income. The time frame is years unless there are fundamental reasons that change my views on the portfolio companies. I have held stocks in my SRS portfolio such as Starhub, Starhill, SPH etc for years. (This is investing)

When i trade, i usually swing trade. Hence my time frame is between days and weeks. I seldom hold positions for too long because the positions size i take is much bigger than that of the SRS. Hence each position can be between $20-$50k and the cut loss is tight at around $1-2k. You can see that in my trades in Sakari and Ezra. I could have improved my trade in Sakari by using a 'trailing stop' instead of getting out when it hits my target of > $1.40. I acknowledged that riding the profits till the trend end is one key area I need to improve on.  Sometimes for trading positions, i will get out after a while if the trades did not pan out as what i envisaged it to do but I will not let a winning position turn into a losing one(This is trading). You can either be a discretionary trader or a system trader. I am more a discretionary trader than a systematic one but i am also trying to learn how to be less discretionary and more system based. As always i am still learning. Hence what i wrote here today may change as i gain more experience.

I will elaborate more on the differences between investing and trading next time. It is important that you know the differences for yourself. They are very different concepts and can cause you a lot of confusion if you mix them up and make you "走火入魔". :-) The worst thing that can happen to anyone is a person buying a stock with an intention to 'trade' it and hold it for a few days. The stock then fall below his or her purchase price and the short term trading position become a "long-term" investment holding...hahaha I have seen too many such incidents hor..

As for IPOs, you know how i feel about them. It is usually a hit and run for me unless the stock is so compelling. The time frame is usually between day and days. IPO punting is very sentimental driven and sentiments can change very quickly.

That is it for today as I am "celebrating" National Day (another excuse not to work). 

Have a good weekend! 

I welcome letters or emails from readers. :-) Feel free if you have questions and I will try to answer them via the blog or emails. 

Thursday, 9 August 2012

Sunday, 5 August 2012

Knowing yourself

There is an old Chinese saying "知己知彼, 百战百胜". Basically it means, know yourself, know your enemies, hundred battles fought hundred battles won. This saying can be applied to our pursuit for financial freedom, if you are able to know yourself, you will be able to win this battle.

What do i mean by knowing yourself? In the first few years of my working life, i spent quite a bit of time trying to know myself. You must wondering if I am crazy! "Don't you know yourself?".

It is very interesting to say that many people thought that they know themselves. Unfortunately, many of them only know themselves when they don't have positions in the market. The moment they have positions in the market or when their personal $ is at stake, they are no longer themselves. They can no longer view things objectively and start behaving irrationally. Their hearts and moods got sucked into the market and moved in tandem with them.

Do you know yourself? What kind of person are you? Can you tolerate unrealised loss? What is your tolerance level for unrealised losses before you call it quits? Can you cut losses? Do you dare to pull the trigger when everyone else beside you is saying "no"? Can you let your profits runs? Do you know the differences between investing, trading and speculating? Are you a system trader, discretionary trader or a value investor? hahaha there are 101 questions but there are no straightforward answers.

The above are just some of the questions you should ask yourself. I have asked myself many times in the past on what kind of person I am and I can assure you, I am still learning everyday and learning more about myself. Investing and trading is a lifelong journey. The earlier you start, the more headroom you get. I am happy to see from my facebook demographics that the majority are between 25-44. It is good to start young, I can assure you that you will get a headstart over others but the most important thing is you must never give up.

I receive quite a few questions about my "personal" data and many of you are interested to find out which age category I belong to. I am a pretty open person and for you to get the most out of my blogs, you should know some of my background. In fact, overtime, i may meet up with some of you who bother to keep in touch. The reasons why I am "media shy" is because i belong to the "earlier generation". Definitely not Generation Y or the Generation Strawberry. hahaha. So i don't like to stick my pictures all over the place and i do enjoy a little privacy.

Here are 3 simple questions which may help you understand a bit more about me in my pursuit for financial freedom.

Question 1: How old are you? I belong to the 35-44 category. I started my lifelong pursuit for financial freedom after i read "Rich Dad Poor Dad" when i was on my honeymoon many many years ago. It triggered me to sit down, think about my financial life and how i want to get out of the rat race.

Question 2:  Where and what do you work as? Let just keep it simple by saying that i work in the investment industry. I started my life as an auditor, auditing listed and unlisted companies and then move on to the investment side. I am allowed to print the words CPA and CFA on my name cards but to me, these are some nice titles to get the conversation going.

Question 3: What are your goals in life? My goal in life is to stop working and travel round the world. I believe in leading a balanced life and enjoy simple pleasures in life like travelling, good food, nice wine and a happy family.

Back to the topic today. Do you know yourself? Do you have a long term plan for yourself?

Your thoughts and views of life will change as you move to the different cycles in your life. When i was younger and just started out, i was looking for capital gains, but now i am looking to create multiple streams of  passive income. I know there will be a day where i cannot trade actively and work as fast as the younger one. That is when my portfolio of passive income will 'feed me' and let me travel round the world.

Start planning today. 

I shared with you that i use a personal finance software called moneydance. Get your own 'house' in order, start cleaning up your finances, thoughts and plan for your future. For a start, you need to know how much you have, where you are spending those money and where you can invest those money. If you don't have money, then the most basic step is start to work hard and save up. Without savings, you will never get out of the rat race. Remember it is not how much you earned but how much you saved that will give you a headstart in your pursuit for financial freedom.


Friday, 3 August 2012

Closing off remaining Sakari positions

Closed off my remaining position in Sakari today. It had a good run yesterday and hit my first target of $1.40. With Europe and US looking uncertain, probably a good idea to take money off the table since i am still vested with Ezra.

Will share "lessons" on how I pick stocks and the difference between investing and trading if i can find some time over the weekend :) Probably i could since IPO is now in a short term doldrums as Ascendas Hospitality Trust has 'closed' off the IPO window. hahaha

Some readers are facing issues with subscribing for my blogs initially. I have since repaired all the email links one-by-one and you shouldn't have any issues now. Please email me or drop a comment if you are still having difficulty.


Thursday, 2 August 2012

Update on Ezra and Sakari positions

Sakari - Taking half my position at 1.375 and moving the stop level for the other half to around 1.35

Ezra - still sleeping. haha...

News on F&N

     Aug. 2 (Bloomberg) -- Coca-Cola Co., the world's largest soft-drinks maker, is exploring a bid for the beverage business of Singapore's Fraser and Neave Ltd., according to several people with knowledge of the matter.
     The unit, including F&N's dairy and soft-drinks businesses, may be worth as much as $3 billion, said two of the people, who asked not to be named as the process is private. Coca-Cola hasn't made a decision and is waiting to see what other suitors do, said another person.
     The operations would give Coca-Cola, led by Chief Executive Officer Muhtar Kent, the biggest share of soft-drink sales in Malaysia and Singapore, according to data from Euromonitor International. Kirin Holdings Co., Japan's largest brewer by market value, is also exploring a bid for the F&N business, according to these people.
     F&N today requested a halt in trading of its shares pending an announcement, it said in a statement.
     Coca-Cola is deciding whether to find a partner to take F&N's line of mixers and tonics, and may drop its plans if it can't find one, another person said.
     Kent Landers, a spokesman for Coca-Cola, said he couldn't comment on market speculation. An e-mail to F&N's investor relations department wasn't immediately returned.
     Coca-Cola had two banks reviewing the F&N assets, said these people. While executives in Asia are interested, a final decision to bid will be made at Coca-Cola's headquarters in Atlanta, one person said.
                           APB Overtures

     F&N's soft-drinks unit includes bottled water, juice drinks, sports drinks, mixers and iced teas, according to its website. F&N also produces pasteurized milk, yogurt, and juices through its dairy business. Coca-Cola is more interested in the soft-drinks operations than dairy, said these people.
     F&N's stakes in food and beverage businesses with operations in Malaysia, Vietnam and Thailand have a market value of about S$2.7 billion ($2.2 billion), according to estimates by Nomura Holdings Inc.
     The Singapore-based property development, publishing and food and beverages company fell 0.4 percent to S$8.15 at the close of trading in the city yesterday, giving it a market value of about S$11.6 billion. Coca Cola gained 0.3 percent to $81.01 in New Yorking trading Aug. 1, while Kirin, which already owns
15 percent of F&N, rose 0.3 percent to 895 yen at the close in Tokyo yesterday.
     F&N also owns 40 percent of Asia Pacific Breweries Ltd., a joint venture with Heineken NV in Asia. Heineken, the world's third-biggest brewer, last month offered as much as S$7.5 billion to acquire a majority stake in APB, and has given F&N until Aug. 3 to respond.
     The Dutch brewer's July 20 bid came two days after Thai Beverage Pcl, the brewer of Chang Thai Beer, struck a deal to buy a 22 percent stake in F&N. At the same time, a company affiliated with ThaiBev's billionaire owner Charoen Sirivadhanabhakdi purchased almost 9 percent of APB.

Wednesday, 1 August 2012

STI Update - 1 Aug 2012

STI looked like it is going to have a National Day Rally! It broke above the key 3,035 resistance after 4 failed attempts that lasted since March this year. Usually, if a resistance breaks after 3 attempts, I would classify it as a significant break. This is somewhat surprising since the situation in Europe is still unclear but something you may want to bear in mind is that stock market usually moves 6-9 months ahead of fundamentals. Happy trading!

August 2012 Corporate Calendar

Quite a lot of corporate announcements this month!  (source: OCBC)

Ezra & Sakari

Sakari - I nibbled some shares yesterday and today. My cut loss below the green line and the target $1.40 and above. Disclaimer applies. Sakari is very volatile and has a very high beta.

Ezra - Again i nibbled some shares yesterday and today. Cut loss below 95 and target 105 or better. Not sure how the trades will turn out. As usual, do your own homework and please don't follow my trades as my costs are lower.

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