Unable to unloading illiquid stocks

I currently am holding on to Colex, Hong Leong Finance, Delfi and F&N. The latter two are held at a loss. I am pretty much a buy-and-hold kind of investor because trading stocks is too much for me. Given that I am expecting a not so good second half of the year, I am looking to unload my stocks. However, the trading volumes on the above four stocks are so thin. For example, for Delfi, for pretty much the entire trading day, there are only bids for 2,000 shares. This is probably placed by the market maker.

This always bring us to the problem of buying stocks that have "deep value". Often these stocks trade at low PE and PB or any other conventional valuation metrics. They trade at "deep value" in part because no one really is picking them up. Imagine, every quarter, you collect say 5,000 shares. Over time, you build up a sizeable holdings. If for some reason, you need to liquidate your position because you need the money, who can and who do you sell to?

The best case scenario for buying "deep value" stocks has always been their value will be discovered by the market. When this discovery occurs, the interest generated will always bring up the price. Another fantasy outcome of this discovery is, should the stock continue to post growth in earnings, that a stock split or bonus issue occurs. Some examples are Etika International and Breadtalk. They have rewarded their long suffering shareholders handsomely when a small base of shares gets multiplied. There will be more people to sell to.

In my case, except for Colex, the other three companies relatively big and mature companies trading on the stock exchange for sometime. Their shares are illiquid at the moment, because I think that no one really wants to sell, even if the stock's fundamentals are not so positive. Likewise, no one really wants to buy because they know there are difficulties flipping the shares for a quick buck. Well, I just have to be patient and look for that window of opportunity in the coming weeks.

GMG Global: Is Something Brewing?

The share price of GMG Global touched $0.16 yesterday a level it has not seen for sometime. With the fundamentals of the company relatively unchanged, the huge number of shares changing hands suggests two possibilities.

First, it could be that GMG Global is a beneficiary of the shift in interest to penny stocks given the relative lull in the broader market, with retail investors more interested in property (still) and Jack Neo/Ris Low/Random Incidents@RWS news articles.

Second, it could be that as some of the sensible forum posters have suggested, that people behind the scenes are accumulating shares so that they can be used for a future M&A deal. In this case, shares bought back (but they have to be declared don't they!?) will be used as part of the deal to the target, offsetting some degree of cash consideration.

But first, it is not impossible that GMG Global's recent rally was driven by fundamental reasons, most obvious being the climb in natural rubber prices. The price of natural rubber is affected namely by the automotive industry as more cars mean the need for more tires. And recent evidence suggests that with the return of consumer spending in China, GMG Global will be well poised to capture that geographical market as SinoChem International, a PRC SOE, has a strong network in the country.

What Is Likely

Singapore Petroleum Company: My Best Buy To-Date

For those who follow my blog, you can ignore this entry.

For those who are new, the first stock I bought in my life was Singapore Petroleum Company (SPC). That was almost a year ago in February 2009, when I just started my new job. I had to borrow money from my mother and my brother to fund the purchase. Not only that, I had to use my mother's account because the people at my online brokerage did not want to revise my limits!

Well, if you click on the link on the sides, you will know that I made alot from this first purchase because it was subsequently bought over by PetroChina and then de-listed.

One Reason To Sell

I will talk about my other disposals in future posts. But here, I want to tell you that this is one of the main reasons for a buy-and-hold guy to sell a stock - that is when the takeover offer is there and you can get a very good price selling in the open market because the market has factored a discount.

To be sure, it will be worthless if you do not accept the General Offer and then the stock gets de-listed. Hence if you want to save on the brokerage, at least fill up the letter and return in promptly

Made Money. But it is a pity.

Despite the premium recieved, it was a pity to have to sell away this wonderful company because SPC is really the only O&G company on SGX. Almost every other stock on the SGX is serves the downstream, or is engaged in the highly risky upstream. Hence, without the takeover, SPC would be a very rewarding stock for investors because of its dividends and the reality that we live in a fossil fueled world.

Going Forward
With the delisting of SPC, I think that there are very few long term stocks worth holding, even if they are part of the Straits Times Index. The sector that I am very partial to as a long run sector is the consumer staples. I have not done any research, but I think companies like QAF and Auric Pacific make for stable plays in any portfolio.

Yes, talking about my portfolio. I realised that it is indeed very hard to do anything meaningful in terms of research for a portfolio as big as mine. I think I can let them run nonetheless while just monitoring for SGX filings and other industry trends (which is tough as my portfolio spans industry). Almost remember to walk the dog and not let the dog walk you. Will update tomorrow for portfolio values. Biosensors is taking quite a hit by the news.

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.

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.