Tuesday, September 28, 2010

Bought C&O Pharm

Due to access problems in the office, I had to key the order well before the market opened. Got 5 lots of C&O Pharm at $0.505 each.

Rationale: Although it is not cheap in terms of valuations (12 times trailing earnings but 3 times book), the company has been steady in terms of revenue growth as well as dividend payout. my theory is that there is a possibility it will turnout to be a Sihuan Pharm - overlooked and will eventually de-list at a premium (fingers crossed).

Sidenote, I decided on the stock after only some research, which included just reading the income statement and prospects. C&O will not be included for the upcoming review.

FYI: I can be reached via email namely sgxstockpicker@gmail.com

Sunday, September 26, 2010

Sing When You're Winning : How do you know if you are successful in investing?

This has been a familiar theme for those who trawl investment blogs: how many years must it take for you to be a "successful investor". This question came after someone in the forums quipped that it is very easy to achieve strong gains during the V-shaped recovery. One even mentioned another blogger, who for a time kept regular posts on his portfolio. I did a quick check and found that this blogger's stock holdings was worth more than $500,000 prior to the great crash, with his portfolio cost at around $270,000. His last update was 8 May 2008 and has not been heard since. Maybe he forgot his password?

For those who have been reading, this blog is not to showoff. While it might massage my ego if I made strong gains, the main purpose is to track how the journey towards wealth creation has been. Going forward, as a result of the change of work scope, I may post only monthly updates.

To answer the question "how do you know if you are successful at investing?", it really depends on the parameters that you have set for yourself. But usually, that means consistently outperforming the appropriate benchmark selected.

I will be honest and say that I have been deceiving myself by comparing my portfolio performance with that of the STI. This is inappropriate because the STI comprise mainly of large market capitalization companies, whereas my portfolio comprise mainly small caps. Nonetheless, it is useful for some illustrative purposes.

So for most investors in the Singapore stock market, if you cannot beat the STI when you include transaction costs and exclude dividends, it might mean having to read up more to refine your strategy.

For myself, I have stated in one of my earlier posts, that I would like "to reach $700,000 in stock investment by 55, excluding CPF and House." To achieve it, I mentioned that I would regularly invest in the stock market.

Choose your finishing line. Run your own race.

Friday, September 24, 2010

Portfolio Up 4% More YTD On BIG, GMG

the portfolio rose sharply this week due to strong gains posted by Biosensors and GMG Global. The latter has slightly retreated and how its proposed M&A plays out remains to be seen.

Next week will be a monthly review.

Wednesday, September 22, 2010

GMG Global Tops Active List

How long must an investor wait before the stock he buys,carries out what was promised? About a year if GMG Global is to be a case in point. Refer to my earlier post, where I had griped that GMG Global was mostly stagnant in terms of share price, despite promising M&A action after a cash call.

Well, the M&A has finally come, albeit still in the discussion phase and 11 months late. On a cosy Wednesday, GMG Global almost touched $0.30 after news that it was in preliminary talks of an Africa project as well as buying up a SEA rubber producer, seeped into the market. GMG Global also said in response to an SGX query, that the share price spike could have been due to a Bloomberg report that natural rubber prices may surge.

These are very positive developments for the company nonetheless. In my opinion, GMG Global has developed into an extension of the Chinese economy, having access to strategic rubber assets in the world. The move to place Sinochem-linked people at the top position was the writing on the wall.

However, rather than chase a hot stock, there is still a need to look long-term. I believe that while the Group has cautioned that the developments may not happen, it is just a statement placed to indemnify them. That said, it will still take time for GMG Global to materialize such talks and the impact on earnings will not be seen at least till FY11.

Saturday, September 18, 2010

Rich Friend, Poor Friend - What Matters In Investing

I had lunch with a junior college friend. Apart from being better looking than him and more articulate in English, he is considered more "superior" in most personal traits than I am. Apart from being coming from a better family background than me, he is very humble and not quick to anger. It is the latter two qualities that I feel, I should work on as I often find myself lacking a good head on my shoulders.

Lunch topic revolved around stocks and when I had to be back to the office. He asked me what I thought about Etika and as usual, I was very positive on the stock and told him that there are risks nonetheless.

What prompted this post was that his attitude towards investing is similar to mine. He articulated it while nibbling on some fries, saying that a good proportion of this stocks are high yielding and of good quality - DBS Group and Suntec Reit to name a few.

The balance of his money, he uses to chase a few speculative stocks. He made a handsome profit on Sound Global - he bought in at $0.40 and sold it close to a dollar. However, he also bought China Animal Healthcare after I alerted him of its prospects but has since considered disposing given its stagnant price movement.

But the rich are always different. He puts in at least $10,000 when he longs a stock, a sharp contrast to the paltry $500 that I put in for some counters. His edge is that he can grow his money more meaningfully than me, because the brokerage costs eats up a big proportion of percentage gains, when you buy less than say $5,000.

This brings to the point how much money should you begin with. In my opinion, if you are confident that you will be healthy and employed, with all emergency funding covered, $5,000 per stock is the minimum efficient scale. $56 being the round trip brokerage as well as other costs, this works out to slightly more than 1% hair cut, compared to 10% if you buy only $500 worth of stock.

With diversification of 10 stocks, a good portfolio to start with should be $50,000.

Of course, if you do not have so much money to begin with, you best bet is to try to be like me - go for long shots and hope that you land multi-baggers.

Weekly Portfolio Update

The portfolio was lifted by strong gains from FJ Benjamin and Biosensors. The latter chalked up strong gains on the release of a positive report by DBS Vickers, saying that it is a likely candidate for takeover.

Side note, I am thinking of doing braces. Had a discussion with my siblings and they say that the benefits outweigh the material costs. After all, with straighter teeth, it would be easier to maintain as the normal toothbrush and flossing would suffice.

However, they forgot to include the physical discomfort involved with fitting braces. Furthermore, as I play a slightly contact sports, I may have to wear a mouth guard. I tend to get disturbing images of blooding flowing from bleeding lips, after receiving a hit at the mouth from an offending elbow.

I will just post a screen shot next week. After which, I will do a slightly thorough review of the portfolio for the month of September.

Friday, September 17, 2010

Biosensors Surges Close To $1 On DBSV Report

Today saw Biosensors International Group chalk up crazy gains after DBS Vickers issued a positive report. The stock re-entered the top volume with shares changing hands furiously. Report summary follows.

BIG returns from stent
16 Sep 2010

• BioMatrix, its leading product, is the first biodegradable polymer drug eluting stent in the world with a global market share of 1.3%.
• Earnings will continue to soar on market share gains, after a solid turnaround in FY10.
• Potential earnings upside on securing approvals for BioMatrix’s sale in new markets - Japan and China, with a combined market size of US$800m – US$1bn.
• A prime target for take-over, coupled with upcoming MicroPort’s HK IPO, serves as re-rating catalyst
• Initiate with BUY, TP of S$1.20, a 43% upside

Thursday, September 16, 2010

Buy-And-Hold In The Age Of High Frequency

How valid is 'buy and hold' maxim today?


IS THERE really such a thing as a 'long-term' investor who buys stocks to hold them for years and years, riding out the inevitable volatility in the interim because he buys the conventional wisdom which says that over the long term, say 10 years or so, the returns from stocks will always be better than bonds?

For small investors, 'buy and hold' is getting to be an increasingly difficult strategy to justify in today's modern, computer-driven and volatile markets in which equities may be losing their original appeal.

Or is such a creature today nothing more than a romantic anachronism in a market where algorithmic or high-frequency trading (HFT) dominates everyday life and millions can be made in the blink of an eye?
For believers in the 'buy and hold' maxim, one of the more interesting broking reports released in the past fortnight was Citi Investment Research's 1 Sep Global Equity Strategist titled 'The End of a Cult'. Its thesis is that for Western investors, equities have lost a lot of their lustre over the past decade because of two debilitating bear markets (the dotcom bust of 2000 and the sub-prime scam of 2008) and this has resulted in large, disillusioned pension funds shifting their money into bonds.

Citi traced the start of the 'cult' of equities to the late 1950s, possibly because it was around this time that Harry Markowitz developed the idea of an 'efficient frontier' that led to the belief that a well-diversified portfolio could achieve superior returns while minimising risk and so laid the foundations for modern portfolio theory - and of course, the 'buy and hold' rule of thumb.

The broker also pointed out that the equity cult then benefited from a self-fulfilling prophecy - initial outperformance meant pension funds bought more and more stocks because they were outperforming and this in turn led to more outperformance.

However, although stocks lived up to expectations in the 1960s to the 1990s, since the end of 1999, Citi found that global equities have returned just 4 per cent in total.
On top of this weak showing, investors have had to cope with brutal volatility which has severely tested their patience (and undoubtedly, their nerve). The conclusion is that 'just as strong returns helped build the cult of the equity in the 1950s, so weak returns are tearing it down now'.

Local investors will probably find this has a familiar ring to it. Since 1998 they have had to endure not two large-scale bear markets but four - the 1997/98 Asian/Clob International crisis, the 2000 dot-com crash, the 2003 Sars/Gulf War and the 2008 sub-prime fiasco. In all cases, losses were at least 50 per cent (much more for the 1998 bear market).

Of related interest was a report that ran in a recent issue of International Economy magazine titled 'The Marginalising of the Individual Investor'. As the name implies, its authors, who were highly critical of HFT, argued that small investors will probably become more and more marginalised as HFT gains increasing importance in today's marketplace.

The report was also very critical of the means adopted by HFT players, implying that market manipulation could also be a worry as fundamentals are relegated to secondary importance.

Leaving aside a discussion of the pros and cons of HFT for now, the implication of all this as far as small investors are concerned has to be that 'buy and hold' is getting to be an increasingly difficult strategy to justify in today's modern, computer-driven and volatile markets in which equities may be losing their original appeal. How to adapt is of course the $64,000 question (as is the issue of how to regulate such trading) but maybe for now it's enough to recognise that the notions of an efficient market and investing for the long term have their appeal but both are probably nothing more than stylized ideals - just like the 'buy and hold' investor.

Monday, September 13, 2010

Property Cooling Measures Should Work

My maiden poll showed that all 8 that vote, believe that the recent property cooling measures will work. As it is, today's Straits Times wrote that recent launches have met with lukewarm response. Again remember, these measures are not retrospective and so any effects should be seen in the coming 6 months.

Sunday, September 12, 2010

Keep it simple in the Golden Tiger Year

Here is something written by long time ST journalist Goh Eng Yeow. He has a very convincing case for the buy-and-hold strategy in stock investing. Nonetheless, I believe that it would have been better if he told his story from a portfolio perspective. The key points to this piece is that you should go for quality stocks and also use the dividends and distribution for reinvestment purposes.

By Goh Eng Yeow

Past Tiger Years have marked milestones in my life and it is with anticipation - and some trepidation - that I await the arrival of the Golden Tiger Year next Sunday and what it might hold for me.

I started working in a Tiger Year - 1986 - just as Singapore was fighting off what was then its worst economic slowdown since it achieved independence 21 years before.

Singapore Transport - The Problem Of Moving In

Read today that one of the Straits Times' reporter, Jamie Ee, took some time off to be a service ambassador. She lamented that even though she tried to coaxed people to move towards the center of the carriage so that more people can come in, these people refused. In fact, most people clutter near the exits because they can alight easier.

Simply put, our infrastructure is being pushed to its limits. When the train system was put in place, I believe that it did not envision the rapid growth of Singapore's population, due largely to immigration. No doubt the train system has now extensive coverage of Singapore bar most of the western parts, its loading is ineffectual when it comes to peak hours.

Saturday, September 11, 2010

Are Female Bosses That Bad?



Read the above. There was apparently a survey of 3,000 people living in the UK and it turns out that employees prefer male to female bosses. In my opinion, given the subjective-ness of the question as well as cultural differences, there is still some room for doubt as to the validity of its conclusion. It is a bit like saying women are bad drivers, but figures actually show that men cause the most incidents. Maybe those who encountered bad female drivers live to talk about it, but not those that met with male drivers who actually caused fatal accidents.

On a related note, there should be a survey of gender relations at work. I was shocked cause once at an interview, the person at the other end asked me how comfortable I was working with women.


I added another link to a piece by Kenneth Fisher, who some readers should know, form part of my investment philosophy. Take a read too, it is very relevant to almost everyone who thinks they are too clever for the market.

Thursday, September 9, 2010

Etika $1.00 - Boosts Portfolio

The STI ended the week above the 3,000 mark but was largely directionless as traders here were hesitant holding positions over the Hari Raya weekend.

Etika and Biosensors were the main drivers of my portfolio. Etika closed at $1.00 as it had recently announced the book closure date for the proposed 1-for-1 bonus issue. Biosensors trended higher on sentiment. Outlook ahead remains positive for me.

Wednesday, September 8, 2010

September and October as Worst Months For Stocks

I saw this on somebody's blog,

"Historically, September and October are the two worst months for stocks in the US. Some of the biggest declines occurred around this time of the year. They include the crashes of 1929,1966,1973,1987 and 2008 (vividly etched on our minds)."

Earlier, I predicted that the stock market will rise for the month of September. I am not trying to defend my forecast. Rather, things tend to be the case until they do not occur. After which, we call it a surprise. The same applies for "sell in May and go away".

For those who want to know more of related predictions, you will find that most military coups in Thailand occur in October and November. Then of course there are years when they do not.

Tuesday, September 7, 2010

Abterra - Before You Get Sucked In...

I saw some pretty positive write-ups on Abterra on Next Insight as well as The Edge. Seems like the Indonesian miner has built up good rapport with the media to the extent that one of them even said it may have a "Noble-esque future". One of the things I have learnt from Peter Lynch is to be careful of the "Next Something" and that comes awfully close.

Yes, Abterra is executing a 25-for-1 stock consolidation. Based on today's closing price, the ex-consolidation price would be $1.00. For the group, it will have about 200 million shares outstanding, from a 5 billion (thats a lot) previously.

Yes, the stock has a sexy story. It has mines here and there. But there is always something about companies that have Indonesian connections that I cannot quite put my finger to. Oh yes, Seroja Investments (formerly L&M).

The latter has also had a stock consolidation and touted an Indonesian growth story since coming out from Judicial Management. The last I checked, even after the its stock consolidation, Seroja has caused its shareholders some grief. It has sank to almost half the price its consolidated shares were trading when it just returned from suspension.

Question is, will Abterra cause its shareholders much hurt? In my opinion, it is very logical that Abterra embark on a charm offensive to get more people into it. But based on my limited experience, not so long after, you can be more or less certain of either share placements or rights issue. This will further dilute those who were already inside pre-consolidation.

Business model-wise, let us just say that many try but how many do become the next Noble? Just take a look at Novo Group. Yes it is in the meaner steel business where margins are really thin. But then, Novo already has units up and down the supply chain and that did not stop it from issuing a profit warnings.

Be careful when a company has too much positive press prior to something as rotten as a stock consolidation.

Saturday, September 4, 2010

Property Cooling Measures - Weaker Hands Lose Out

After reading through the past week's The Edge as well as Business Times, I came to a conclusion that leveraged property investments observe the same rules as leveraged equity investments - the weaker hand always lose. The weaker hand refers to investors without the holding power. 

In the case of stocks, the individual might be utilizing margin facilities or "contra-ing". Things are fine when prices do not fall too much or better still, rising. But when stocks fall sharply, those long and leveraged, with have to sell at a loss and even risk financial ruin. For those with the money to hold on to their purchases, by settling with cash or topping up their margin accounts, things are slightly better.

What has happened is that the Singapore Government, through the Ministry of National Development, announced a slew of measures on Monday, aimed at cooling the property market. Without going through the measures in detail, it suffice to say that these calibrated measures are aimed at weeding out "specuvestors" - a new term I learned while combing through property market commentaries. For instance, the minimum occupation period has been increased while the loan-to-value ratio has been decreased.

Prima facie, those who are living in a private property with borrowed money, while renting out their fully-paid HDBs (most presumably to PRs who need a place) to enjoy the rental yield, will be the first to be purged. As noted by newspaper editorials, they would have to sell their private property to maintain ownership of the HDBs. Likewise in a stock market crash, these specuvestors would very likely cash out their positions at a loss.

The lesson learnt here is that stick to stocks and bonds (CPF SA?) while not being leveraged if you want to build you wealth without having nightmares. The game of borrowing to stay in private property, while paying it off with the rental income from the HDB flat, has just increased a difficulty level.

Despite a strong start to the month of September, the Straits Times Index failed to stay above the 3,000 mark, despite a strong rally on Wall Street.

I decided to add FJ Benjamin to the portfolio to account for the gains in my portfolio. Although I have kept a spreadsheet of my transactions, I may need to re-calculate my portfolio gains when I have the time.

Thursday, September 2, 2010

A Sign The Emerging Markets Will Submerge

"This Time It's Different" - the four most dangerous words.


Investing In Stocks - The 10 Steps Version

Here is a very simplified guide to investing in stocks for a minimum 10-20 years out. Feel free to add your comments!
  1. Invest in money you can afford to lose, or at least locked up for more than 3 years. That means having set aside money in case of unemployment, emergencies and even leisure. These monies can and should be kept in "safe instruments" such as your Special Account or Fixed Deposits.
  2. Have at least a 8 stock portfolio with a minimum of $5,000 in each stock if possible. This is to reduce the brokerage costs as well as the time spent on following the developments of each company.
  3. Read stock investment books. The bare minimum, you should read books written by Jeremy Siegel "The Future For Investors". Subsequently, you should go to the library and borrow books by Teh Hooi Ling, namely the "Show Me The Money" series.
  4. Assuming that you intend to keep an 8-stock portfolio initially. 60-70% of your money should be in stable blue chips that have dividends. Somethings that I like very much are Singapore Post  and SMRT as well as the smaller finance companies in Singapore.

FJ Benjamin Boosted By Postive BT Piece

Shares of FJ Benjamin received a boost yesterday after a gleaming article was published by the Business Times on the first day of September. The stock surged past the 40 cents mark on heavy volumes, signaling possibly strong hands in the back ground, capitalizing on the opportunity.

For 2 September 2010, despite a strong overnight rally on Wall Street, the Straits Times Index closed only slightly higher at 2,986, despite trading above the psychologically important 3,000 mark for the early part of the day. Top 5 most active stocks were Genting Singapore, Adventus Holdings, Vallianz, United Fiber System and Noble Group.

Business Times article follows.

FJB pins its hopes on Raoul in China


GOING international may be the ultimate goal of many 'made-in-Singapore' fashion brand owners, but breaking into markets like China is definitely no cakewalk.

Riding on the back of a sharp earnings turnaround in fiscal 2010 and a robust recovery in Asia, fashion retailer FJ Benjamin (FJB) appears to now have the ballast to launch its premium house brand Raoul in China - a market it has been trying to get into for several years.

Wednesday, September 1, 2010

Morning Call - Edgy September For STI

The Dow Jones Industrial Index closed about 5 points up to close 10014.70 on Tuesday. The local stock market meanwhile closed 6.73 points lower to 2950.33 for the last day of August.