2009's Loser Stocks

I have used my DBS Vickers screener and compiled a list of "losers"- stocks that had you put money at the start of the year, you would still have ended up losing money despite the magnificent bull run. Just take note that the list is correct as of yesterday and I am not sure how DBS Vickers calculates the price change.

On a side note, there are 13  IPOs and 15 suspended stocks. this shows that buying IPO and holding is one of the most terrible way of investing. no prizes for guessing that most of the suspended stocks were S-chips with few exceptions. There were also some Preference Shares so do read carefully.

Will they be next year's winners?

2009 Review

2009 Review

Stocks that I have sold
Singapore Petroleum Company
China Milk Products
Genting Singapore

Original Purpose of the blog
To see if my portfolio can beat the STI (even though it is not the appropriate benchmark)
To see if I can double my investible capital $10,000 by end 2009, excluding dividend, after deducting brokerage

New Mission for the New Year
To track the growth in market value as at 31Dec-09 to 31 Dec-10
To see when is the exact date that the $14,000 grows into $28,000 after deducting for brokerage.

Stocks that I am currently holding not, in chronological order 

Action Asia
Small Malaysian company manufacturing the entertainment sets you see in most cars. I bought it because I has attractive valuations. It has the combination of low PE and good earnings growth. To bump it up, it has applied for TDRs and I think that is positive step even though the new shares issued is dilutive.

Review
Its share price has held up well and will have to wait for its TDRs to start trading in Taiwan as well as for its FY results to be out before doing a more thorough review.

Asiatic Group
I love the idea that it is generating electricity in Cambodia. It will take some time to figure out the real contribution of power generation to its top and bottom line. Financing is also an issue. Nonetheless, it has secured good partnership and it is a stock worth one year's wait to see if its potential is revealed.

Review
Share price has held up well and has heavy trading on some days which make me wonder a bit due to the small public float. Financial performance wise it is slightly below expectation but I will wait for a new set of results before deciding to do anything else.

Biosensor's
One of my speculative stocks. I think it is the only bio tech stock in Singapore. i am not certain that it is worth investing. my judgment tells me that its presence in china and its superior trial data makes it a good bet, till at least when there is a better drug eluting stent to siphon earnings from its cash machine. please note that it has bonds due to refinance in November. 
Review
One of the first few stocks that I have bought. I still like it and although I do not see the possibility that the company will declare dividends, it will be profitable for the coming full year. It has managed to avoid financing issues by issuing new set of convertible bonds.

Elite KSB
Very thinly traded stock. I like it because it is one of those boring stocks. heck, it is the only listed chicken processor that i know off. nonetheless, i know that the upside might be very limited. I see 26cents as the upper threshold. good management with clever acquisition.

Review
Still remains very thinly traded and its share price has hardly moved anywhere. I think I will get some more lots in this company so that I can make it 10 lots in case anything, possibly good happens.

Etika International
Should have seen it earlier. took notice when i realised that Wilmar linked PPB group has a 5% stake in the company. thinly traded is also an issue but its revenue and bottom line look to grow exponentially as it tries to enter new markets.

Review
I have a feeling that this will be a multi bagger despite having risen so much in the past year. But the funny thing is that the company has yet to announce the book closure date for its dividends. Will remain vested in this company for a long time.

FJ Benjamin
I borrowed $500 from my friend to buy 4 lots. I bought it blindly to follow cramer's advice of getting a retailer. in my opinion, its fortune traces the general stock market. i wish i had bought more of it but what it has done for me is sufficient.

Review
After a brief jump in its share price somewhere in the middle of the year, it has rested at its current price for a while. I am keeping it till it gives me the signal that the economy will collapse again as I believe that this retail stock is a leading indicator.

GMG Global
this is my cyclical story. i like it for the fact that it has presence in Africa. it has had a rights issue and its share price seems to be stuck at $0.105-0.110 range. My guess is that it is a stock that will have many cycles and hence opportunities to get in and out.

Review
Mildly disappointed with this stock and I think it could have been a mistake to pump in my money when I could have gotten out. I worked out my calculation and it seems to show that unless it can figure a way to double its earnings despite only a brief recovery in rubber prices, then its existing EPS might not be justified.

Stratech
Another speculative stock. It is less cyclical now and has that certain vibe around it. this recent acquisition will be held on for a year as well. its technology is good. it might not be the best but due to the fact that defence agencies do not like to change the platforms, should mean repeat customers for its intelligent vision technologies.

Review
This stock taught me the lesson not to buy a stock just because you read it on the news etc. I had the chance to unload it but my personality does not allow me to hold a stock for a short period. As such, now I am holding on to a stock that does not really move. Will have to wait to the new year and hope (which is not the correct thing to do) that it might be bought over.

TPV Tech
manufacturing LCD monitor and television. I hope it does not become another RCA. will have to watch and monitor the trends in television sales. the challenge from plasma is not there but LED becoming cheaper might give it a run for its money.

Review
I am sitting on a paper gain on this counter. It had to one point risen to $1 then dropped back down when news that its supply chain my encounter some snags. I am keeping it because I cannot see an economic recovery without people getting more LCD TV.

UOB-KH
I had only the money to buy this financial. I think im going to keep it for a while for its attractive dividend yield.

Review
I really wonder why this stock does not appreciate in price like its peer Kim Eng. However, I sense that there will be a handsome dividend payout come the February.

Christmas Day

I will post my 2009 review and mission statements in Janaury, when i see how much goes to my bank account. Right now, i am very focused on putting only $4000 in the market for 2010 and i have already used $1478 for Action Asia so that means i have about $2500 left..

Apparently, i was very lucky and then my subsequent purchases have not risen. i will conclude albeit prematurely that buying stratech was the worst investment. not only has it not declared dividends, the day after its article was published on the Edge, it has since not touch $0.06 in trading.

Understanding Our Own Humanity

taken from http://www.sharesinvestment.com/articles/505276/

Are we our own worst enemies when it comes to investing? The answer seems to be a resounding “Yes”, if we are to believe the work done by psychologists in the field of behavioural finance. To put it very briefly, people and as a result investors, tend to exhibit cognitive biases such as over confidence, biased judgements, herd mentality and loss aversion, that impair their ability to make sound investment decisions.

Do check out the article by clicking on the link.

Personally, I think that it is good to understand why we make so much investment mistakes. By cutting down the mistakes, we increase our odds of making money in the long run. Remember, making mistakes are alright as long as you learn from it.

Also, costs are very important. If you factor in the investment that you could have made from the transaction fees incurred, it will make a significant difference in the long run.

i will talk more about long run investing when i do a review for stocks for the long run book again, in case you missed it the first time.

Portfolio Blindness

the portfolio did not move much. i am contemplating getting 13 lots of elite ksb... but the stock has not move much and this will be my third buy in, increasing my total transaction costs. However, finding the funds for that 13 lots will be a problem for me.... to be continued

Bought Action Asia

Bought 10 lots of Action Asia at $0.145. I think that will screw up my calculations for a while. so for prudence, i will still talk about the portfolio but ex-Action Asia. Will do a separate brief on this company later.

with that purchase, i think i will have lesser ammo for my next year portfolio. I am looking at $4,000 injection for 2010 and I have used up $1450. I am also considering getting some Elite KSB even though i know the transaction costs have come 3 time. maybe i should get 13 to make it 20 lots in total.

meanwhile you guys can check out sharesinvestment.com . There is a post on KS Energy, Novo group as well as China XLX. The write up on the 3 companies warrant a closer look.

It's been a while

so sorry guys as it has been a while since i last posted. was flooded with work and also was out of the country for a short getaway.

from the screen shot above, the STI rose by 2.3%, more than my portfolio's 0.1%. it seems like it is going to take forever for the portfolio to reach $20,000. the bright side is that etika has declared a $0.01 dividend, which i will use it in the coming year to add on the my stock holdings.

i will do a thorough review of the portfolio by the end of the year and possibly suggest themes for next year. right now, i do hope that you guys have stayed invested since like who knows when.

i read that activity is the worst thing you can do to your portfolio due to the transaction costs involved.

on an unrelated note, i bought teh hooi ling's remaining volumes for "show me the money". after a careful reading, i realise that there are some things that need to be critically examined. for instance, when she looks at short term trading strategy, she always assume 1% transaction costs. however i believe that that amount understates real transaction costs for trades of smaller nominal quantity.

also, her favourite low P/B method stock strategy is benchmarked incorrectly in my opinion because some of the stocks are not STI component stocks. however it should be noted that there is a recent piece where her focus was on the component stocks and i feel that the returns benchmarked were more justifiable.

nonetheless, i still think that she makes a lot of sense but just becareful of anyone, yours truly included. because ultimately, we can only suggest and not hold responsibility for your end action.

Ask Me Any Question

Running out of ideas what to write, I will be glad to entertain any questions about stock investing at my email sgxstockpicker@gmail.com. Please do not ask me anything about technical analysis because i am not good with it.

My outlook for the remainder of the year, with 1 plus month left is that there is, I think 2.5% upside maximum (low probability), with higher chances of swings within a tight range as the fund managers try to make small change so that they can answer to their clients. I'm looking at the 2,850 being breached this year, but it is not sustainable.

For those who like me are sticking for the long term, you can start accumulating now as i strongly believe that there will be a bull run that will see the 3,000 mark breached by 30 June 2009. This is the extremely bullish scenario.

The good money is that next year will be most likely up a little year, hence dividend plays are a must if you want good returns as corporate earnings are most likely to return to pre-crisis levels with the exception of shipping and small cap manufacturing. Sectors that are likely to disappoint next year will be the vaguely defined "Green Energy" stocks. Traditional companies in the energy sector such as AusGroup and Rotary Engineering should benefit from the return of investments into the resource sector.

Do email me as i would like to help you improve your stock picking process.

Week 8: Etika, Biosensor Shine; Stratech Disappoints

Most of the results for the quarter are out. Etika and Biosensor shone with their good set of results. Etika's earnings has beat analyst forecast by 5-10% while Biosensors has shown excellent qoq performance. UOB-KayHian has also shown a very positive 9M09 but its shares have remained level around $1.40 plus. I am waiting for that CNY cheer when it should propose a good final dividend of at least 4.5 cents.

Stratech has on the other hand disappointed, with its very poor earnings. This stock has not have any good news flow since appearing on The Edge. Maybe the guy is just tooting his own horn. GMG Global has also struggled. It is a classic case of too many shares not enough earnings.

Elsewhere, Genting and ChinaMilk have also failed to perform. Genting shares have now moved past $1.10 mark as the opening of the casino looms nearer. ChinaMilk has on the other handplunged to the $0.31 mark but there are people betting on a turnaround and have started to accumulate.

2 stocks that you should look out for if you have a 3 months horizon are Yongnam Holdings and Oceanus. No doubt they are punter's favourite, but they also have good fundamentals. Yongnam will recognise more revenue from its IR project and the dividends should come in next year.

Oceanus' TDRs is its catalyst. No doubt that the market might have priced it in, there is still some potential in guessing whether the TDR will be listed at a premium or a discount. Due to its specualtive nature, small bets are in order.

Week 7: More Results Out

Was busy again at work having had to go out of office to followup on people. it was nonetheless a slightly fruitful week as i was kept busy and thus not having to look at stock quotes with the usual frequency.

STI 2,700 looks like a barrier that is in need of a convincing breakthrough. Overall portfolio looked anemic with TPV the only stock shining, breaching the $1.00 mark against the run of play. FJ Benjamin also got sold down to $0.30 level having released a set of 1Q10 results that can is expected of a retailer during these recessionary times.

China Milk is one stock i am glad that i have sold so much earlier. it is now slightly under $0.40 after posting a terrible quarter. it is neither doing well in the high margin bull semen nor the OEM milk. take profit if possible.

Week 6

Well. The STI corrected to below the 2,700 mark. I shan't talk about the portfolio at the moment, maybe next week when more results are out.

I am not sure if it is a good thing, but one of the counters I used to hold, China Milk Products, does not seem to have a good quarter again. Those still invested should try to look at its report quarterly. It seems that there has been further downwards adjustment to its inventories. Also the sales of milk are still facing teething problems. I guess with the shift to producing raw milk rather than semen, the high margins will slowly fade away. Interestingly, there is little discussion why there is a shift towards milk.

October ended slightly lower than the previous month. Against the previous three months, the index also ended slightly lower in October. With October out of the way, I think we can look forward to a decent rally through the end of the year.

GMG Global: All Spin No Action (yet?)

GMG Global, which i have 20 lots in, announced its 3Q09 results. it is in the favourite colour of Ris Low - red - for 9M09. this is unsurprising as the price of rubber has remained deflated compared to last year despite the slight rebound.

The stock price has been staying at 10-10.5 cents for the longest times. it is not that i think GMG is a lousy company. I think with sinochem as its substantial shareholder, there should not be any problem getting into markets in PRC or Africa, or for the matter the grander scheme of the PRC government resource grab.

what irks me is that the m&a has been touted as a buying point of the company to its literal death. if you do notice, companies that actually issue rights will say that it is for acquisition purposes only one time - the time when it issues the cash call. GMG on the other hand has reminded us again that it is still on the acquisition trail in its latest financial result.

I am not saying that such acquisitions won't happen. but by touting the fact that it might acquire some company twice in a row might show that it has a weak hand. Anecdotally, companies are usually hush when it comes to m&a. they tend to the let the share price do the talking and maybe let SGX query.

Either GMG's PR firm has run out of material to write for the press release or that the company is really negotiating to acquire a company, the smart money is that the cash call was meant to shore up balance sheet.

All the cash in GMG coffers comes mainly from the rights issue. for the same reason, i highly doubt that the company will announce any dividend for the coming full year. it will be a really long time for rubber prices to revert to last year high's. use oil prices as a guide in general. if you cannot stay with GMG for the long run, it is time to start looking elsewhere.

Stuck!

The STI rose 0.27%, one of the smallest gains so far. the portfolio did worse falling 1.37%. Wall Street suffered a correction on Friday and this might mean a less than ideal start to next week. 2,700 seem like the resting place in the meanwhile. i hope i don't speak too soon though.

my cousin asked me what i thought about Ezra Holding because she is considering of getting following there contract wins. i did not tell her much except show her the 5-year chart and told her that they have that "Ice Maiden" project which they acquired at distressed levels. the latter might contribute to the earnings but when, i do not know.

my dad was perhaps very wise. he said that how much higher can it go considering everyone has heard about it. a watched takes some time to rise and there is always the risk that you are the greater fool. hence, when you buy a stock because it is in the mainstream press, there is that chance you are over paying for it, making inferior returns. try to do your own stock scans looking out for great businesses to hold for 1-year out.

Also, I tried my best not to look at the stock quotes but instead kept my eyes peeled on filings on the SGX website. I feel better not looking at the prices because i get less angsty or excited. i think i will try to do that for the whole of next week, looking only at the end of friday so to update. you should try to do that too.

i think i might to suss out any good ideas.

Coming Soon

will post my portfolio update tomorrow because the brokerage is undergoing maintenance till then. and so the dust has settled on transcu and the price is close to $0.14 cents. with the notes now cancelled, dilution as a result of conversion seems likely as hopefully the company can find better sources of financing.

I think jamie from the business times wrote a followup on the company last friday and there, she said that the volatility of the stock has not led to a query on trading by the SGX. you might think the question she asked was naive, but i think she meant to say it ironically. so it is always a case of buyer beware in the marker when it comes to anything. remember, similar to the casino, the banker runs the gambling tables so that so one makes money of another person but not the banker. in the long run, the house always wins.

transcu has also stated that it makes money from cosmetics and green energy. but the last i checked, the two segments are not able to provide the necessary income to offset the research and development expenses. moreover, I am also unconvinced transcu can implement a successful sales strategy for its lidocaine patch. mind you, this product is still in the midst of testing and it has not begun the rigorous phase three yet. that is going to be more money burning. how it will keep afloat do make a guess. you have been warned.

Some Negative Comments

I have been trying my best not to log into my online brokerage and look at stock quotes. Now, i am relying wholly on the noise coming out of the forum as well as the filings on the SGX. i believe this will free up more time as opposed to constantly staring at the screen.

the negative comments i would like to make first is about Transcu Group. i had indirect interest in the company but i told my friend to sell it off because of the notes conversion. the main problem with Transcu is its $80m equity linked notes.

i have posted something on it in the forum and the gist is that Transcu is obligated to issue shares to the subscriber Advance Opportunities Fund (the person who loan transcu money) shares at a deep discount. for the past few weeks the fund has been converting those notes.

things changed recently when transcu announce that it is appointing DMG & Partners to find a subscriber for 320m placement shares. witness from the day of that announcement, the shares crept steadily from $0.115 to $0.20. that was till tomorrow.

My guess is as good as yours. but i think once placement shares are out and the 2nd sell down has commenced. The first sell down was from 23.5 cents to 11.5cents. However, it is important to note that Transcu has made amendments to the terms of the notes. mainly, Transcu has allowed itself some leeway in deciding whether to issue notes for the monies own. and in the even that transcu does not issue those notes, does note constitute a default in payment.

there are those lucky to have caught it on its way down and on the rise up to make a lot of money. however, i would advise those new to this counter to avoid it and not touch it even with a barge pole. its finances are in terrible shape as you can see it is trying all manner to obtain financing. Furthermore, it is still in the midst of obtaining approval for its products and the bottom line impact will not be obvious till maybe 2011. This is a stock where the retail investor is severely disadvantaged and even one brokerage placed it on its restricted list due to its huge volatility. do not pick pennies in front of a steam roller. you have been warned.

Dear Sumiko Tan

I read about your plight on your latest Sunday Times column. Sometimes it is terrible when your company tells you that there is a pay cut due to the "recession" and the next moment you realize that they are declaring a special dividend of 9 cents for their stock.

I would advise you to find your colleague at the Business Times and talk to them about investing in shares. Teh Hooi Ling is a good source of information cause after all she did write 4 books on how to invest called "show me the money". I am pretty sure you can get heavily discounted copies of her book which is published by Rank Books. if you think that buying her book is not a meaningful investment, you could access the company's data base and print all her previous columns. i mean, if SPH cut your pay, that does not mean you can't print enough of her columns and bind it into a book and label it "research expenses".

Also, if you wait a while more, maybe SPH would have developed the free retail portal, as part of their collaboration with SGX. Hopefully, by developing SGX's website to incorporate exisitng SPH portals such as AsiaOne and ShareInvestor, does not mean more work for the people over there at BT (those cunning bosses).

Personally, is ShareInvestor working out? Because I read that SPH put in $19m to buy it from The Lexicon Group and Michael Leong. The last i heard, the lexicon group is going into the korean disco business while michael leong went on to write a book about making $1,000,000 from stocks. maybe you can ask him for a copy of the book too.

the STI has hit 2,700 recently, maybe you could try to buy into DBS's STI ETF rather than individual stocks. if the market goes on right this year, you could be looking at returns on your capital better than fixed deposits of lehman minibonds. the latter required class actions and spending sometime at the hot and humid hong lim park before getting the returns.

but if you do intend to buy stocks the same way you select your wardrobe then there is still upside for many of the local stocks. as for stock ideas, you can visit Steven Lim's website, where the very talented gentleman has a segment dedicated to stock picks. maybe you can find out where is he going to talent scout or pluck eyebrows. but i pray that he does not strip into his yellow trunks and do that act he so oftens pulls out.

wishing you pleasant week ahead.

a follower of your column.

Maybe Sometimes Love Just Aint Enough

Went to Smart Expo at Suntec last weekend. I heard some get rich stories about how poor people made it good through property investment and it made me sick. Nonetheless, I took the opportunity to grab some books as MPH had a booth there and had a 20% discount. Bought close to $100 worth of books. Teh Hooi Ling's "Show Me The Money Vol 1. & 2.", Peter Lynch's "One Up On Wall Street" and Jeremy Seigel's "Stocks For The Long Run" are on my book shelf now.

The STI broke through the 2,700 levels along with Dow breaking 10,000 and the HSI surmounting 22,000. The STI gained 2.09% while my portfolio gained 4.74%. Most of the portfoliogains were due to Biosensors crazy surge on Friday, while Asiatic edged up slightly on news that it was venturing into green energy.

Read some crazy but true things on the CNA forum. There was this one guy who shared how he lost and gained back his fortune from the stock market. More importantly, he said this, "in the bull run, TA is always correct." In fact, buy and hold can help you make more money than through a short term trading system, due to transaction costs. However I would like to clarify is that most of the studies advising against short term strategies come from the US where transaction costs are minimal but there are taxes on capital gains.

Another significant difference is that the studies done by Jeremy Seigel, support the case that stocks are good for the long run provided that the dividends are reinvested. In Singapore, I am aware that there is a share builder programme but that is mainly reserved for blue chip stocks. otherwise, i am not sure if there is a way whereby dividends can be reinvested meaningfully in Singapore.

One thing I also want to share with people who still believe in the "buy and hold" strategy, something I read from the "Stocks for the Long Run" book. That while you might be able to reap in great returns if you sell at peaks and bought in at bottoms, it is close to impossible to do so because professionals have tried to do so and fail. Rather, it is better to buy and hold, with additional buying in when the market is at the bottom, as bottoms can be roughly approximated. As a rough guide, you can start buying starts which have been battered but are fundamentally good, about 18 months after the peak.

The second half of October looks menancing as history's greatest falls occur there. If you are worried, you can start doing you homework now and create a shortlist of stocks you wish to buy in Novemeber when things get clearer. While the upside is not as great as 4 months back, current media headlines suggest that the strength of the stock market has yet to permeate the general population. People are still fearful and thats a good sign.

All That Glitters. Is It Gold (ETF)?

Very often, things have to be written on what is fashionable to stay on the radars of "netizens". And so, without being an exception, this writer concerns himself with the movement of gold prices, which have reach record highs in recent months.

As you can see, on a 1-month basis, the price of gold, as tracked by the Gold ETF, outperformed, the US Dollar, S&P500 and the FTSE All Shares.

On a 3-month basis however, Gold ETF lags behind both the local and the American stock market. What becomes clear at this point is that the US dollar has been weaking vis-a-vis Stocks and Gold (in the form of ETF).

As we know and have read, the weakening of the US dollar can be attributed to the de facto printing of money by the US Treasury, which has been issuing bonds to help stimulate the economy.

But wait. 1 year since the financial crisis unravelled in full force starting with the collapse of the Lehman Brothers, the STI outperformed the dollar, US stocks and Gold ETF.

From the chart, it can be seen that Singapore's stock market, started to over take the other 3 references from the start of May this year. This was also just after the time, on hind sight, that the stock market hit a bottom in March-April.


What I would like to talk about more in detail is the 5 year chart. It shows Gold ETF convincingly beating Singapore and American stocks as well as the US Dollar.

A writer in his article on The Economist argues that the weakening of the US$ explains the shine in Gold ETF. He supports that arguments by showing that both the supply (which has been increasing) and demand (which has been weakening) for physical gold. This should actually show a downward trend in physical gold prices.

He elaborated further, saying that the weakening confidence in paper currencies can been in a rumour that OPEC will de-peg the price of crude oil from the dollar. Much earlier, there was also a rumour that Beijing was proposing an alternative to the dollar as the international reserve curreny. These are rumours which have since been dismissed. But the fact that they caused jolts to dollar on the days these rumours surfaced, suggests skittish investors.

What does it mean for the ordinary stock investor? I would suggest avoiding chasing "heat", that is, moving entirely to Gold ETFs. My suggestion is supported by the fact that short term gains from Gold ETF are not obvious. The winners riding on the Gold Bull have been those bitten by the gold bug a few years earlier.

This leads to the next question, should you buy US shares or US$? US shares you can buy, but be aware of the tax implications as well as the currency risks, which will eat into your gains.

For the US dollar, I really do not know and my best guess is as good as yours. What I think can happen is that the US$ will stay in a prolonged slumped till when the real economy recovers. There is an excessive debt in the US system, which it is trying to purge itself of. I am not saying debt is bad. What I am saying is that the debt and credit created from the sub-prime mess will take a long time to sort itself out and it is going to be a complicated process. 2011 will be a good time to believe that the sub-prime mess has cleared up.

Our conclusion brings us back to Singapore. Try not to worry and stay invested (if you are already in). As can be seen, the US Dollar has been underperforming compared to the Singapore stock market. You should only worry about the falling US dollar if you are and American on holiday or studying in Singapore. Otherwise, try to enjoy your weekend.

Week 3

While week-on-week the STI rose 1.84%, the portfolio rose only paltry 0.55%. This highlights one of the weakness of a portfolio that does not weight accordingly to the benchmark. Nonetheless, if you are a fan of stock picking, periods of lagging the index should not stop you from feeling disheartened.

In case you have not been reading the news, Li Heng's proposed restructuring was rejected by the SGX. The move would have seen a Newco list in Hong Kong, with the Singaporean counterpart being a shell company. This would be in effect a delisting. Li Heng has been in fact, most creative in its effort to dual list, unlike other S-Chips, which have a straightforward formula.

Also, Australia's central bank raised its interest rates, becoming the first G-20 nation to do so since the onslaught of the financial crisis. Ina Bloomberg report, singapore is believed to have managed gains to its GDP. Gold prices have also hit new highs with spot prices climbing past the US$1,000/oz mark convincingly.

Reporting season for third quarter is near for Singapore stocks, it would be good to see how have some of the heavy weights like SPH and Keppel will perform. A good exercise during this period is to see how analyst earnings projections for those index company measure up against the real earnings.

How To Be Rich 2!

Once again this is a book review on a book by Kenneth Fisher. He offers you 10 ways to be rich, but not all the ways are suitable to everyone. Here is the list

1. Start a successful business. This could be something simple from a blog shop or giving tuition over the weekends. But remember not to splurge on the added income.

2. Become CEO of an existing firm and juice it.

3. Hitch your wagon to a star. You might not be wealthy, but try to network or work with people who are. It’s not who you are but who you know that matters.

4. Turn celebrity into wealth. Just go Google Steven Lim, Xiaxue for more information how to get rich this way.

5. Marry well – really, really well. Either you marry someone rich, or you marry someone who does not cause you financial ruin.

6. Steal it, legally. Be a lawyer if you are still young and have yet to enter into university.

7. Use other people’s money. Be a money manager.

8. Invent an endless future revenue stream. This could be writing a book, a play or even writing songs for famous people. Use your talent!

9. Monetize unrealized real estate wealth.

10. Take the Road More Traveled. Save early and invest prudently.

How To Be Rich!

I'm sorry, but the title was meant to mislead you. The graph charts a scaled down STI with information from Yahoo Finance besides day-on-day changes in the index (the red colour blades of "grass").

First, did you know that if you invested at 30, with a lump sum of $10,000 and you average 15% compounded till you are 65, you will have become a millionaire when you retire then? I know that is a random fact, but it shows that if you start early, even with a modest sum initially can turn into some thing big.

But what is the purpose of the graph? On on hand, if you managed to ride all the Bulls (represented by the green line) and avoid all the Bears (red lines), an old timer would have probably become a millionaire by now. But that is besides the point.

The learning point here is that the end of any bear market is marked by extreme volatility. If you observe carefully, the "tall blades of grass" tend to cluster towards the tail end of a bear market and the start of a bull run. I am not sure why is that so. During most of the bull run, all the short blades of grass start to cluster as well.

At the moment, if I were to plot the same thing using information of the Dow or the S&P500, my MS excel might crash as there are too many data points. But preliminary, I would say that during the periods of currency fluctuations and bear markets, there are extreme stock market volatility. During the short American recession in 00/01 (a result of the Dot.com crash), there was not the clustering of very tall grass seen in the 97 Asian Financial Crisis or the recent sub-prime melt down.

The other observation is that volatility comes in spits and spurts. This point has been explored by Mandelbrot, a very famous scientist who conceived of the notion of fractals. It can be seen that in a bull run, there is not a regular wild price increase or decrease. Coincidentally, during the current phase of the stock market, we have also witness wild movements in the STI and Dow.

What is for the retail investor who is you and me? I think that there are ways to get out the market to minimise the damage done to the portfolio. You can read Fisher's books for how he does it. Briefly, when the general stock market declines more than 2% monthly, and that the market has fallen from its peak by more than 20% 3 months ago, you can turn to cash for safety.

However, you must systematically enter the stock market to re-equitise your portfolio. The point of the post is to show you that the ends of bear markets are really scary. There are enormous intra-day swings and day-on-day swings for the matter. Therefore you must discipline yourself to get into the market between 18-24 months after the peak. This is a rough guideline because so far, bear markets last this long on average. Do no try to bottom fish because very often, it is the fisherman that gets hooked.

What are your thoughts? Do you find what I have posted drivel or banal? Drop your comments or you can email me at sgxstockpicker@gmail.com if you prefer a more private discussion.

Financial Ratios You should Try To Learn

This is a very good resource to learn more about ratios. If you have the basic understanding of accounting terms, you can skip right to sections 6. If you have got alot of time, paper and ink, you can download it in PDF and read in on the train, bus, or when you wife, girlfriend is doing her nails.

Does knowing the ratios guarantee wealth? No. There are many many ways to cover up the weakness of a company through creative accounting. These tricks are very often undiscernible to the untrained eye.

But if you apply the ratios sensibly with your common sense, you can reduce making bad investments. Remember in the earlier posts, Kenneth Fisher talked about using multiple ratios such as price-to-sales, price-to-book, price-to-earnings?

With the knowledge gleamed from Investopedia's short tutorial, you can look at a company with a sense of coherency. When you read the annual report sent to you, as practice, you can try to derive some of the ratios to do little analyst work.

Reading Analyst Reports

There are 3 kinds of people. Those that like the stock analyst, those whose hate them and those who do not know what’s going on in a report. Here’s the deal, a stock analyst works for a securities firm (your brokerage) and almost all of them are linked to a bank. The more independent lot are like NRA Capital and CLSA.

I am not the first one to say this, but local analysts seldom give a "Sell" call on any company. Most of the sell calls I have seen come from the American firms such as Morgan Stanley and Goldman Sachs. "Sell" calls are issued sparingly because, I guess, that if an analyst "offends" a company with his report, his bank might not be included in any financing deals. These deals make more money than any research report issued.

Nonetheless, I have posted a link to research reports at the Society of Remisiers website. The Rating of the company is usually irrelevant to your stock buying decision. Usually when a company has a "Sell" call in place, it usually means it is a gone case. I have seen one such company and that is COSCO Corp.

Target prices are also problematic because it is close to impossible to predict earnings beyond one year. No amount of financial modelling can be so accurate to project earnings within 5% standard deviation.

What you should look out for in reports is the background to the industry. Going through the reports saves you a lot of time doing checks on the industry your stock is in. Some of the companies are already in the market very long, and reading their old prospectus might not yield any utility.

You should also read any SWOT analysis or qualitative analysis that is given. Should you be sharp enough, you will be able to pick up important trends within the industry or any potential risks to investing in the company. Usually risks relating to the company are toned down. You should keep in mind if the general tone of the report seems "bullish" or paints a "blue skies" scenario. Always think carefully and reflect. Ultimately, who pays the securities analyst to do what?

Week 2

Week on week, the STI fell 2.19% while my portfolio saw 4.23% whittling away. The biggest losers were my position in financials UOB-KH and retailer FJ Benjamin. Etika showed some promise this week surging to $0.445 at some point midweek, but returned back to $0.39 in line with the blood bath. During the week, penny stocks like Advanced Holdings, Yong Xin saw their roller coaster rides.

Other notable events were Singtel clinching the rights to the BPL. This has caused upset to existing StarHub subscribers who now might have to get a new decoder box.

My friend asked me for a reason for the blood letting on Wall Street on Thursday. I told him that there were no reasons for the 200 points drop in the DJIA. What I did tell him is that there is plenty of volatility in the market as the markets try to grapple with excessive liquidity in the system, moribund economies and a weakening of the US dollar. I will post my research on volatility in the market soon, once I have meditated over it. I also told him to read the Kenneth Fisher book.

Looking ahead, nothing is expected to change. I hope you mustered some courage to buy in today’s market and have the holding power to last 3 years. Obama will need some time to work with the G-20 leaders to fix the financial systems Stay invested for the long term. Meanwhile, be prepared for swings to the up and down, as punters gamble in the market, along with the “buy-and-hold”gang.

Save Time, Save Money

Taken from Michael Maiello of Forbes 5 Investments You Don't Need

I think that he has hit the nail on the spot. It is good to know that such alternative investments exist. But remember, even stock picking with a buy and hold mentality is a time consuming task. Monitoring stocks takes up at least 1-2 hours a week, ploughing through the relevant SGX filings (You can cut this time if you have newsletter service).

If you intend to be a full-time trader, these financial instruments are fine. But if you are a normal retail investor, I recommend you read up on these instruments rather than attend a course. A lot of the information is available in books at the library. While the courses do teach you the tools and the basic, the amount you have to pay is sometimes exorbitant.

A lot of people get blinded by the marketing promise that there are loads of money to be made within the shortest time. Scalability is their catch-phrase. It is not impossible. But I rather you go to the library and do some read up before signing up for the course. It is always important to have the right expectations. That way, you won’t end up going to the small claims tribunal.

These are the 5

Sensible Forum Comments

On top is an example of good discussion on a the Share Junction forum board. Question is, can both sides be right.

I agree with Jeremyow, who agrees with Hulumas that a portfolio should comprise 70% core stocks that you hold for very long, and the remaining 30% be on speculative trades.

I do agree that

Reasons Why You Should Try To Read Business Times

I have a subscription of Business Times at the office which I get to read. A columnist that you should look out for is Teh Hooi Ling (left). She is a CFA charterholder as well as the writer of the "Show Me The Money" series of books. It's actually one of the rare few books on the Singapore stock market that is not trash. There is so much trash on the book shelves that I wonder why does not Ms Teh's book get sold out.

Her column on the Business Times is primarily on portfolio strategy, show casing portfolios of various constructs premise on different formulas. There are a wide range of investing ideas like investing in the biggest lossers, highest yield, etc. She tracks her portfolio fortnightly if I am not wrong and it is definitely worth a look. Borrow from your friend if you don't have a subscription.

Nonetheless, I believe that Business Times is not a value read like the Straits Times. I still believe that the Straits Times plus your checking of the SGX filings should suffice when tracking your portfolio. But Business Times does have very insightful opinion and commentary. Sometimes, very aggressive pieces get to print, raising questions at the financial regulation authorities for perceived lack of oversight.

A Thoughtful Column

Here is a very thoughtful piece from Kenneth Fisher (You can find the link at the side). What follows is extracted for your reading pleasure. Nonetheless, I will endeavour to comeup with 2 good pieces a week starting next week. One will focus on my portfolio monitor (Saturday Morning/Evening). The other will be general market thoughts. So do subscribe to my blog and let your friends know about it. I do appreciate comments!

Quarter-Century Mark

Ken Fisher, 06.24.09, 06:00 PM EDT
Forbes Magazine dated July 13, 2009

To avoid overpaying, use multiple metrics--not just price-to-earnings but price-to-sales and price-to-book.

This issue marks the 25th anniversary of my column. That's a long run in columnland. It's been a blast. Thanks for your attention. Reviewing my first year's columns, I pondered: What would I still say? What would I say now that I didn't then?

Reversion To The Mean

I happened to briefly glance through the book "Bogle's Guide to Common Sense Investing" and it raises a serious issue for me and to every stock picking individual. The underlying thread is that you should forget about selecting a good mutual fund, but rather invest passively and through the use of an Index Fund.

Reversion To The Mean

Why invest passively through an Index Fund? To do injustice to the book, he says that in the long run, no one style (value, dividend, sectoral) can beat the broad market in general. Every style that gains in one particular year will suffer eventually. Something called reversion to the mean. And due to cost efficiency and the ability to buy the broad market (S&P500), he recommends buying Index Fund.

Can I Beat The Market?

Investment Advice

1. Invest with money you do not need for the next five years. This includes setting aside some savings for emergencies (1 month minimum), unemployment (3-6 months worth). This are basically money you cannot afford to lose. Put them in a high interest deposits or money market funds so that they do not get eroded by inflation, a very real phenomenon.

2. Where you end depends on where you begin. Right now, with markets slowly

The Five Rules for Successful Stock Investing: Morningstar's Guide to Building Wealth and Winning in the Market

You can read about the book here.

If you did not do any finance, I think this book is a close as it gets to a textbook. A very useful book in the sense that it teaches you how to read a financial statement. Costs close to $30.00 but it is hard to find at the library.

The approach to stock picking is even more metric laden than Peter Lynch and it is little wonder due to them being from MorningStar. Morningstar has an impressive portfolio analyser and stock screener for American citizens.

What I like about the book

The only three questions that count: investing by knowing what others don't

This is the book I recommend reading by Kenneth Fisher, "The only three questions that count: investing by knowing what others don't", costs about $33.00 but you can get it from the library.

Kenneth Fisher is the son of the later Philip Fisher. The elder Fisher was famous for the book "Common Stocks, Uncommon Profits". Kenneth Fisher's contribution has been the Price to Sales ratio, which he claims is no longer useful.

What I learnt from the book

1. Time in the market counts.

A look a the Portfolio

I will try to post a screen shot every week and add some comments. At the moment, I am up by more than 80% and that includes all the dividends from FY08 and the current FY. This is a simple number because theoretically, I should calculate on an IRR basis to factor in the money I added at various times.

Time to Buy and Hold

Stock Picks Explained

As explained in my education post, I adopt an eclectic approach towards stock investing. it will sound a bit incoherent when i explain my stock picks at first cut. but remember the following:

Diversify but not too much, 9-12 stocks in your portfolio should be manageable

Some Books To You Must Read

most retail investors try to look for the way when it comes to investing. my way is a mix between fundamentals and market timing. i will admit upfront that i am not adept at technical analysis. i prefer to look at general economic signs as well as look at the stock in the particular.

there are three books which i deem to be the cornerstone of my stock picking.

1. Kenneth Fisher's

$10,000 Fully In Stocks

Following a rumor (something which you shouldn't do!) I bought 21 lots of Stratech, this brings my portfolio to $10,000 (plus a little spare change) fully into stocks.

My $10,000 portfolio now looks like this:

5 Asiatic

My Investment Objective

I will refocus my blog to trek my stock investing.

My objective: To reach $700,000 in stock investment by 55, excluding CPF and House.

Learning Objective: To show people that you can build wealth for retirement even if you start off with a small amount of capital.

Start Point: I have invested close to $10,000 in capital as end Sep-09, buildup earlier in Feb-09.

Strategy: While putting some money for my life neccesities, annually I will inject at least $4,000 into the portfolio.

My 1st 6 months holdings in order of acquisition:

August Recap; Will I wake up when September ends.

Sorry for the belated postings. I have been flooded at work.

A quick recap of August.

The most notable has been the wild fluctuations in the the stock market. Notable stocks that have been steadily appreciating in price are: Sinotel, Genting Singapore and RTO Seroja Investments.

Going forward, there is one stock you should keep a look out for, Falmac.

It is also another RTO target this time by Peter Choo who might want to inject his mining assets into this troubled textile machine making company. I am suggesting only a small bet on the day it is lifted from suspension. This would take place after its EOGM at the end of Sept.

Before it got suspended, its last done price was $0.06. Also, Peter Choo and his associates own a large chunk of the company, despite its accounting iiregularities. What I dare hazard a guess as, would be that you should make a bid within 10 bids of this price ($0.06-0.11).

I do not know how they are going to solve the financial problems, but if they do, it would make Falmac at least worth $0.20.

you have been told.

Most of Life is about showing up

Woody Allen said that 70 per cent of life is just showing up. The same applies to investing in stocks. "Bears" waiting for the STI to plunge to 1200 and below are still in denial saying that it is just a suckers' rally. What should a retail investor do?

As mentioned before, buy on dips with money that you do not need for the next 5 years. If the world financial system were to collapse, life must still go on. People must still buy stuff.

There is the concern that the market is close to being fully valued and will trade in tight bands as it awaits or real signs of recovery. Heck! In Singapore, people are back to lining up for condo launches as if the worst was over?

What should you buy? I can't tell you explicitly as it is dependent on how you want to construct you portfolio. If you want something for 5 years out, put 50% money on the highest yielding stocks with market cap greater $1billion. Singpost and SMRT are not high yielding but their dividend consistency is something to look out for.

A small bet can be placed on Genting Singapore. This will be another one for at least 5 years. Remember, it makes money from both its Singapore operations and UK casinos, of which the latter has been under performing.

Lastly, small caps like FJ Benjamin can be considered to ride the economic recovery wave that is waiting to be unleashed in the shortest time of 6 months.

Good portfolio construction comes with good stock picking.

Taking a Breather

The weekend is always a welcome. Take your mind off stock market and do leisurely activities like cycling, reading a book or a walk along the beach. Life is not always about watching your stock price rise. Appreciate the people around you. Stocks cannot talk to you or be your friend when you have troubles. Enjoy the weekend.