Monday, December 27, 2010

Things an Employer Should Not Say

Not so long ago, I went for a job interview with a company located at Harbour Front. It was the second time I interviewed with the company, the first when I was a fresh graduate. There was the usual written tests and involving verbal and mathematical ability. It was followed by a panel interview of two – a director and the HR Manager.

Since leaving university two years ago, I consider myself a veteran when it comes to interview. For those leaving school soon, you should always do some research about the company you are interviewing with and try to establish connections. This tells the employer that you are interested in working for them.

But more importantly, you should be able to tell them about yourself. You should be able to tell them about your strengths and weakness, why you are here for the interview and how you feel you can contribute to the team. It would be best if you can give examples from your resume and life experiences.

The interview went on smoothly but the director was very keen on breaking me down. He wanted me to keep telling him what the “real” me would think about certain things and situation. He said he did not want me to give him the politically correct answer. The politically correct answers were answers to the questions I earlier raised, that I have rehearsed very often in front of the mirror.

Sunday, December 26, 2010

Will Ivory Coast Turmoil Affect Petra Foods?

Page 11 of Petra Foods third quarter FY2010 presentation will be useful for those following the company. For those who have not been following the news, Ivory Coast held its first election since 2002 and while a winner has been announced, a political stalemate has resulted as the incumbent refused to acknowledge the validity of the results. This has caused some problems to companies who get their raw materials from the African state. Ivory coast in the third largest producer of cocoa and this may impact the margins of Petra Foods as it is a manufacturer of cocoa ingredients. More analysis by the reader is of course needed as well as direct questions to Petra Food's investor relations.

Saturday, December 25, 2010

Week 51: More Bad News Pummels Portfolio

For some reason, I am not feeling well on Christmas Day. Could be some thing I ate over the past two days that is making my body feel weird. Anyway, Bad news from the Ivory Coast caused GMG Global to slump below the $0.30 mark. China Animal Healthcare also lost quite a bit as its shares in Hong Kong did not garner the hot response management was expecting. Sick out.

Wednesday, December 22, 2010

Reflecting on GMG Global and China Animal Healthcare

I'm sorry it's another GMG Global post. Are all political risks the same. Does it really matter.

For those who were young enough to watch the Matrix when it first screened in the cinemas, you will remember that there was one scene where the dialogue goes (you can find the scene here):

Oracle: I'd ask you to sit down, but, you're not going to anyway. And don't worry about the vase.

Neo: What vase?

[Neo turns to look for a vase, and as he does, he knocks over a vase of flowers, which shatters on the floor]

Oracle: That vase.

Neo: I'm sorry...

Oracle: I said don't worry about it. I'll get one of my kids to fix it.
Neo: How did you know?

Oracle: Ohh, what's really going to bake your noodle later on is, would you still have broken it if I hadn't said anything?

Unless you have been stuck in an airport in Europe due to the snow, you will most likely know that shares of GMG Global - China Animal Healthcare to a greater extent - have taken a beating, falling below the $0.30 mark with heavy volumes. The reason has been plastered in the papers, that the political turmoil in the Ivory Coast has affected GMG Global's operations there. This has affected its shipments of rubber out of the African country's ports.

The political strife in the Ivory Coast resulting from the elections was not entirely foreseen. If you read this article, GMG Global Poised For Big Things, written at the start of the year, you would have been informed of the possibility of turmoil buried all the way in the second last paragraph.
White, Grey and Black Swans

But the question is, would it have mattered at all? If you had not bought the stock at the start of the year because you were worried about the risks, you would have lost out on a 2-bagger up till this point in time. But if you did bought the stock only recently due to its proposed acquisition of Tek Bee Hang, you would have ended up losing a small fortune. There are just so many ifs in life.

The lesson learnt (on hindsight?) here for me is that if there are certain risks that are flagged from the beginning, the onus lies on the investor to keep track of the events that will cause downside. Already it was mentioned that the elections would be contentious. On my part, I could have and should have at least find out what are the latest developments with regards to the Ivory Coast elections.

I am sure that GMG Global is not the first and only SGX-listed company to be affected by political events. Banyan Tree Holdings, which runs resorts in the region, comes to my mind. It too had been affected by the political events in the kingdom which has since reach and uneasy stand still. Bangkok has only recently declared the lifting of martial law.

Factoring political risks in the long run

Political events have both upside and downside risks. If you have the appetite and ability to short, political events are golden opportunities for making loads of money. Just ask George Soros or any "special situations" or "event driven" fund manager.

But such events fall into a spectrum in terms of returns and probability and are very lumpy. Political events can be global or regional with the boundaries very blur. 9/11 can be considered a global event while the Ivory Coast election a micro one.

How should we factor these political risks when valuing the attractiveness of a stock? How would value-investors do it? I really have no answers to the question I posed. And to rephrase the Oracle, would you have not bought or sold the stock, even if someone no one told you that there will be conflict in Ivory Coast?

But there are things we can do to protect our portfolios. Diversification is the most common answer. Limit 10 percent of your portfolio in terms of total cost to any one stock, should dampen the downside. And by using percentage of cost to total portfolio cost, it does not force you to re-balance every year, something I find deleterious to performance.

Staying current is a more tiresome alternative. That would mean trawling the news everyday for developments that are linked to the political risks already defined for a particular stock. This is very demanding and further complicates the investing process, as the investor willingly gets bombarded by the noise in the media. Moreover, you can never really tell how an event will play out. Did you know that America would invade Iraq as a consequence of 9/11, even though Iraq had nothing to do with the whole incident?

I am not actively monitoring the happenings in Ivory Coast which are affecting GMKG Global's stock price negatively. I would preliminarily say that there will be another stalemate, since the incumbent which was voted out has refused to vacate the office. The light at the end of the tunnel won't be seen so early and blood will be shed. However, I am confident in the next 3 months that some sort of truce can be ironed out.

Tuesday, December 21, 2010

Reflecting on 2010

I reached a personal milestone in terms of investing this year by having invested a total $20,000 straight from my pocked into the stock market. This figure of excludes the amount of monies received as dividends as well as the sale of stock, which I have deliberately excluded as it confuses me and lowers my imagined portfolio performance.

For the portfolio, there was only buying and no selling.I started the year with the purchase of China Animal Healthcare and ended it with C&O Pharmaceutical.

In terms of personal achievement, the most significant highlight for the year would be my changing of jobs towards the second half of the year. My current job is much more specialized compared to the past and the knowledge gained has complemented my previous position. I also made some progress in my quest for the CFA Charter.

Goals and Outlook For 2011

Financially, I aim to save as much as I can to provide for my future wedding as well as housing purchase. To those ends, I am thinking of saving maybe $1,000 a month. I am not sure if I will put them aside as pure savings or have them invested. The time horizon for using this money is horribly short compared to my initial investment portfolio which is for retirement. This makes volatility and issue.

In terms of personal developments, I hope to be fitter (IPPT Gold?) and perhaps travel a bit more. I will leave the thoughts of pursuing a Masters education till after I take the CFA Level II examination. All these will have an effect on my financial planning for married life.

Just a short one, I am expecting 2011 to be a year where the stock market will go up a little. Look for yield stocks is my usual advice. I do not foresee any shock to the systems (if I can see it, it can’t be a shock can it?) as most of the bad news from America and Europe have been discounted in. America’s approach has been to print more money (QE2) and forcing its major trading partners to revalue their currency. Across the Atlantic, governments there have preferred the cutting of expenditure in the government sector. The series of austerity measures will bring hardship as the years of plenty are apparently over.

Taken together, the shock that will cause panic in the global financial market should be a mixture of the two very different responses to an economic recession. However, how this shock will manifest itself, is an unknown. A portfolio review will soon follow along with a more comprehensive outlook for 2011

Saturday, December 18, 2010

2010 Singapore Exchange Top 20 Year-to-date Performers

This is as table similar to an earlier one, but I have excluded those with market capitalization of less than USD 1 billion. There is nothing much I can value add to the discussion as most of these stocks are out of my reach and radar. What is noteworthy is that most of them are USD denominated. I am not sure if the weakening greenback has made the stock price appreciate, as investors can borrow Sing dollars in the current low interest rate environment and buy sound stocks.

Week 50: Portfolio Drifts Down As CAH, GMG Sold Down

Went for my company's Christmas dinner last night at the Mandarin Oriental's Melt The World cafe. We did not get the ala carte but chose the buffet menu which was very popular with everyone from the office. I remember going for a few rounds at the food station myself. However, I guess that the bill would be very expensive as it was close to a hundred dollars per person before the charges!

The portfolio was not as happy as I was last night. Compared to the previous week, the portfolio pared about $530 as a result of the sell down of several counters. China Animal Healthcare, which had fared so well last week, so a sell down of its shares from a high of 41.5 cents to close 39.5 cents, as investors took profit. GMG Global also lost 2 cents in trade.

The spotlight for the past few weeks have really been the stellar performance of Amtek Engineering and STX OSV. Despite critical comments from others and myself, the stock has performed much better than the first few days of listing, with the re-listing at $1.13 and the shipbuilder at $1.12. Interestingly, while their shares were initially falling - below a dollar for Amtek and 80 cents for STX OSV - due to poor sentiment, there was plenty of stabilisation trades.

From my limited understanding, stabilization trades are trades carried out to ensure that the IPO price does not fall too much due to open market selling. The opposite will be the over allotment option which allows the vendor or the issue manager to sell more shares, if they see that there is as strong demand for it.

Both Amtek and STX OSV have also recently posted good results. Amtek's earnings for the first quarter of its financial year doubled to $12 million on the back of a 11 per cent increase in revenue. STX OSV revenue was up by 6 per cent for the first nine months of its financial year, with the ship builder turing around to record a profit of NOK 740 million (approx SGD 162 million) from a loss of NOK 40 million.

2011 should see more IPO in the local market. This is contingent on how the proposed merger between ASX and SGX pans outs. In the unlikely event that the deal goes through, we could see more Australian companies list here to tap liquidity, Whether there will be anymore S-Chips coming to town is another question. But the lesson I have learned from my poor calls on IPOs, is that we should not under estimate the strong hands behind the scene. They have the ability to keep a stock from falling underwater through their sheer financial resources. Meanwhile, I will try my best to keep my mouth shut. Lol.

Thursday, December 16, 2010

Who Didn't Buy OSIM This Year

A new Straits Times journalist wrote "Bought Osim stocks this year?" as part of her review of the top performers in the local stock market in 2010. This got me thinking quite a bit. For those with good memory, you would also be aware that OSIM was also the best performer for 2009.

In this instance, if you had sold your house and bought shares in the massage chair maker, you would have become famous by now.The reason I say so and hence the title of the post, is that most of the people I come across, that are termed successful investors, have bought OSIM. I just so happen to flip an old copy of Pulses (soon to be discontinued) and the founders of Lumiere Capital said that OSIM was one of their best buys.

Not so long ago, a person appearing on Lorna Tan's column, said that he too leveraged on the strong performance of OSIM. Or was it Golden-Agri.

Yet I am curious, why did not anyone ask Ron Sim himself how it feels to see his wealth quadruple within 2 years immediately after the worst recession ever?

I believe I am ranting but I have a point. And that is OSIM is sure a hot stock but that does not make a person fully invested in that stock a good investor. I believe the term gambler - a derogatory epithet at poker tables - is more appropriate. Nonetheless, fortune favors the brave. OSIM for a hat trick in 2011 anyone?

Monday, December 13, 2010

Top 50 Stocks On Singapore Stock Exchange On 52 Weeks Basis

Just for kicks, I went to find the top performing stocks over a 52 weeks basis, using my stock screener courtesy of DBS Vickers. What is unsurprising was that almost all the stocks that tripled in price were under a dollar. The most expensive stock that made it to the top fifty list was OUE, which was just under a two dollars.

The Top 10
  1. Sim Siang Choon was that stock that gave its shareholders the best returns over the defined period. Previously a retail business selling toilet bowls, due to investment by Ezra Holdings-linked vehicle, it has become transformed into an offshore and marine play, with a slant towards India.
  2. OSIM International. For the second year in a row, the massage chair maker is one of the best performing stock on the local bourse. Last year, it was number one. Its phenomenal rise has been attributed to many things such as its write-off of Brookstone as well as its support by investment funds. OSIM has also a share buy back scheme and has been penetrating the Chinese market. Last heard, CEO Ron Sim said that the company is on the lookout for M&A targets.
  3. Sunvic Chemical. I totally know nothing about this company. But I understand that the stock made its climb up in terms of share price only within the past three months.
  4. Nobel Design. As above.
  5. Bright World. Stamping machine maker that whose revenue comes mainly overseas.
  6. SP Corp is a diversified industrial group whose interests spans from making tyres to even commodities trading.
  7. GMG Global. Enough has been said, can read more here.
  8. Juken Tech. No eye deer.
  9. Trek 2000 International. Maker of the thumb drive?
  10. UMS Holdings. Technology play.
I will go to the library and dig out an old edition of Shares Investment to see what valuations these top performers were trading at. Comments are appreciated as usual.


Unlike the IPO guru lurking in the forum of SI by the name of Palawan, I would have to say that I got it wrong with STX OSV. Since listing on the Singapore stock exchange earlier last month, while wobbling initially, it has gained 25 percent on the back of positive announcements such as contract wins.

Shortly after listing, it announced that it won contracts for the manufacture of 4 PSVs, Rolls-Royce design, worth a total of NOK1.3billion. It has also announced that it won a contract for one PSV under its on in house design.

Interestingly, Goldman Sachs bought close to 9 million shares as part of a stabilization exercise at prices raning from 78 to 79 cents.

STX OSV's third quarter results are posted on SGX website and it can be read for those interested here

Saturday, December 11, 2010

What Is Your Main Investing Indicator?

I have set up a poll on the right so do participate!

Retail investors use many indicators when deciding when to buy or sell. However, there is always one indicator that they will prefer over others, when faced with a tough investing decision. The most common indicator is the Price-to-Earnings ratio which is derived by dividing share price over the latest full year earnings per share (EPS). This is also know as the trailing PE. There is also a forward PE which is derived by dividing the share price over a predicted EPS, usually taken from a consensus of analysts' estimates.

Price-to-Book or PB ratio is derived by dividing the share price over the equity per share, or NAV per share. There have been extensive studies that argue that low PB stocks will give the best returns. But in most cases, retail investors use PB ratios to assess a "margin of safety". For example, if a stock is trading at $1.00 but its equity attributable to shareholders is $2.00, its PB is 0.5 times.If this company liquidates, it can sell its assets, payoff liabilities, and still in theory return shareholders $1.00 per share. Correct me if I am wrong.

Then there are the technical indicators. For those following this blog for a long time, I am quite an idiot when it comes to technical indicators. But I do know that it is the use of numbers derived from the averages of price and volume as well as other data points. The whole idea here is that the derived figures from price and volume offer insight to the direction of the market - hence oversold and overbought are some of the words used to describe a stock or market index.

The fourth choice of None might sound funny to some. Yet there are quite a few people who are part of this program unwittingly through their insurance plans. The idea behind investing at regular intervals - dollar cost averaging to some - is that the odds work in your favor eventually. It is like doubling up at the dice table. But in the stock market, you seldom lose all your capital and that you need not bet twice as much to recoup your losses. This is even a more unemotive form of investing when compared to technical indicators.

Gut feeling or spider senses as it implies, use intuition rather than any concrete number or logic. I believe that most traders and investors use this as their main indicator. Like me, they already know what they want to buy, but then to internalize the decision, they go on at lengths to write down their rationale for trading and investing, through some form of perspective or analytical lens.

How do you invest or trade?

Week 49: Portfolio Trends Higher Amid Interesting Times

The portfolio trended higher higher, this time due mainly to the announcement that China Animal Healthcare will finally carry out its proposed dual-listing on the Hong Kong Stock Exchange. The listing will be by introduction and a few batches of shares have been transferred to the Chinese territory, as part of its listing on 21 December.

I say that this week has been interesting times because while the heavy weights were losing steam, the penny plays have come into the spotlight. Apart from China Animal Healthcare, other small caps that saw plenty of shares traded were Bio-Treat, Consciencefood and for today Armada Group.

This is week 49 and there are 3 more weeks to go before the year comes to a close. The portfolio has gained 40 percent but that is not factoring the recent acquisition of C&O Pharma as well as dividends.

For 2011, it is very unlikely I will invest further as I will be bulking up on my savings account. Alternatively, once I get the critical mass, I will start investing again.

But it should not be soon as those who follow this blog know that I just changed jobs. As a result, I am not going to be entitled to a thirteenth month bonus or any increment. That is a downside but overall, work has been good.

Wednesday, December 8, 2010

Fuxing China Group : Some More Comments

Edit: For those who want to read about YKK, the largest zipper manufacturer, you can click here. Though dated, it gives alot of insight to the zipper industry and how the Chinese are playing catch up.

Some time back, a reader asked me what I thought about Fuxing China Group but I did not give a thorough response. I'm revisiting the question because I happened to read an old article (below) on the same issue.

My response will still be the same, in that Fuxing is in a very competitive industry, whereby profit margins will remain thing in the long run as zippers are a commoditized product, with little possibility of creating barriers to entry.It is unlikely that it can do to zippers what Nike did to sports shoes.

Of course promoters of the stock will argue that it is trading at a sharp discount to book value with a high cash to share price percentage. Moreover, compared to its China-listed peers, valuations are very attractive.

I agree that Fuxing has a strong cash pile, but like the article below points out, doubts will surface unless more is done. That said, Fuxing has been distributing dividends consistently for the past 4 years. It is a confidence booster  to already depressed valuations, as investors here have become averse to small cap S-Chips.

However, in my opinion, it is unlikely to trade at 20-30 times earnings as the equity conditions in China are much different than Singapore. There are still plenty of capital controls in China, giving their local investors no choice but to invest locally, regardless it being the better choice.

If Fuxing's management thinks that its valuation is too low, perhaps it could take the advice of Tan Chin Hwee of Apollo Management (Singapore) who said in the article:

He added that if a company tells him that it has lots of cash and that its stock is undervalued, he is likely to challenge the company: 'Why don't you then privatise your company? You can relist it another time, or somewhere else.'

Tuesday, December 7, 2010

Gridlock Is Good for Stocks?

Go check out Kenneth Fisher's latest article on Forbes This is an interesting quote:

"We haven't had a negative stock market return in either the 6 or 12 months following a midterm election since World War II."

Sunday, December 5, 2010

How Much Money Is Enough?

One of Leo Tolstoy's short story asked How much Land Does a Man need. This is a very fitting question to land-scarce Singapore and its citizens. The long-dead writer answers at the end of the story : Six feet from his head to his heels was all he needed.

I chanced upon a blog while searching for criticism of Warren Buffet and in it, a similar post asking How Much Money is Enough? Paul Polak, the blog owner says:

“What’s your number?”

“What do you mean? They ask.

“Your number is the amount of money you and your family needs to live comfortably.”   For example, if you need $100,000 a year, and expect to earn 5% each year on your assets your number is two million dollars. Once you’ve reached your number, you can start doing whatever you’ve always dreamt of doing all your life.”

 What's your number?

Some Stuff On About Your Mind To Read

Here are some interesting stuff to read from Singapore papers during the past week. The first one is by Andy Ho of The Straits Times on How Hypnosis can implant false memories, which he warns about the dangers unethical hypnotherapists. But what I find most interesting about the article was his highlighted quote:

"Should a false assertion be repeated often enough, the hearer will become increasingly familiar with it. Increasing familiarity tends to be interpreted as evidence of truth. This is why 'abductees' are convinced that they really were abducted." 

Wednesday, December 1, 2010

Updates On GMG Global and C&O Pharma

GMG Global recently announced that it would acquire slightly more that a majority stake in Thai rubber producer Teck Bee Hang for a nominal fee of USD 909. However, GMG Global will make out significant loans to Teck Bee Hang amounting to at least SGD62 million for the purpose of working capital as well as to finance outstanding debt. GMG Global says the move fits its expansion strategy and intends to turnaround the Thai rubber producer by 2011.

Meanwhile, C&O Pharma Tech announced that Japanese conglomerate Sumitomo Corp will acquire a 29% from Executive Chairman Gao Bin for $96 million. This is about 50 cents per share and will make the Japanese conglomerate the second largest shareholder after the company's Executive Chairman himself. The announcement was made after the company was halted from trading for two days since Tuesday.

SGX Stockpicker Says...