28 October 2011

Buy Low and Sell High - Short Term Trading Method

Normally I encourage my clients to have At Least two strategies, one is the short term trading strategy, another one is long term investment. Most of the time, Long Term Investment is meant for "BUY ONLY WHEN MARKET CRASHED A LOT", and Short Term Trading is meant for "PORTFOLIO REBALANCING - BUY STOCK A AT LOWER PRICE AND SELL STOCK B AT HIGHER PRICE". Hope this can help you too.

Try to find out undervalued stock and buy it. Sell it when it near to the intrinsic value or when you find out another undervalued stock. But how to find out undervalued stock? And how to know whether it is near to the intrinsic value? Frankly speaking, I am still learning on finding a more accurate way to do so. So far, I only know that:

- If the company keeps on 'Shares-Buy-Back', means that it is giving confidence to the investors that the stock is considered as 'Undervalued'
- If there are a lot of privatization activities in the market, means that there are more companies are currently undervalued
- If there is no company willing to IPO or extand the date to IPO, means that the market is actually 'Undervalued'

How to find out whether the market/company is Overvalued? So far I only know that:

- If the company keeps on issuing right issues to get money from the investors
- If the company management starts selling their shares to the market
- If the company management over confident on their business and Trade Receivables and Inventory Levels keeps on moving up very fast

20 October 2011

You are The One who Decide the Return Performance Ultimately

I have spoken to a lot of my friends who are also very enthutiastic in their investment in equity as well as property. All of us share the common identity, which is believe in our decision to make the investment as well as the self-discipline that we uphold ourselves from preventing ourselves to be hit from the recent market downturn.

I always asked them a question, "Why do some people earn money but some people lose money from the same investment project?' Different people gave me different answer. Some answers are "Because these fellows are lucky", "Because these people did a lot of good things so they were able to earn money from the market", "Because they are skillful" & "Because they entered in the right timing" etc.

To me, I just realized that actually "YOU" are the CORE reason to decide the return performance of the invested project that you invested into. Your mind already controls how much you could earn without you notice. Let me give you example, if your mind telling you that must cut loss before the price dropped too much lower and buy it back when the price goes up, then your whole body and brain will function as a trading machine, telling you to keep on monitoring the whole market to wait for a very good opportunities to do so. If your mind telling you that Investing is Gambling, then your brain and body will function as a gambling machine, keep on searching the good bet to put.

Only you understand who 'YOU' are, then only 'YOU' can achieve a better result. That is why I keep on telling my friends that, 'Investing' is not finding the best counter/project/real estate to invest in, but to find out the real 'YOU'.

Happy Trading/Investing/Gambling. And wish me happy birthday. :)

19 October 2011

Some Personal Suggestions to SGX

Singapore Stock Exchange is aggressively promoting itself to be a regional financial hub, in the bid of competing with Hong Kong to lure more companies to listed in it. As an Independent Dealer in Singapore, there is some suggestions that I think I can contribute to it:

  • Continue to lure more Europe companies to get listed in Singapore Stock Exchange. Given the weaken market of Europe and US, there is no point for them to get listed there. Maybe we are able to get other companies to get dual-listings here, as it will benefit the companies to see their intrinsic value to match with market value. 
  • With more wealth management activities going on in Singapore, we should also encourage wealth management firms to get listed in SGX. This would generate more profits in the whole market.
  • Be more stringent in rules & regulations. It will give more confidence to the public investors that the companies that listed in SGX are compliance with the listing rules and also up to the financial reporting standard. 
  • Create more innovative products and services but also providing education services to the public, for instance, not many retail investors understand how CFD and ADR work. With better understanding as well a skill needed to master a product, then only investors will participate in the market.
Disclaimer: I do not hold SGX in my portfolio. I am Independent Dealer working in Singapore.

18 October 2011

Sino Grandness - A China Company that Grows in Its Fruit Juice Business

Just a couple of days ago, Sino Grandness hold a briefing with us ( a group of remisier in Kim Eng). There were two main officers came to our office. One was the IR Head and another was CFO. From the name card, I roughly knew that CFO background was Financial Controller and IR Head were Malaysian and head hunted by the China man.

One thing that made me curious was that, what was the purpose that they came to our office for the briefing and what can we learn from there? As a remisier, my duty is not to fully understand the underlying business model as well as its intrinsic value so that everyone can buy or sell based on my research report. However, I can judge a company based on what he told us.

First of all, the IR head told us that CEO 黄总 was formally ex-AGM from China Government Department that related to Exporting. So when he first stated his own private business after the China Government opened up the opportunities to its people, he was able to get the connection to export to the famous Supermarket / Hypermarket in U.S.A and Europe. As what he assured us, the quality of the canned food are qualified under Europe and U.S.A standard. Their canned food business is now expanding to Australia.

As you would be able to see from research report from various research houses, that this company is still expanding very aggressively for its fruit juice 鲜绿园 brand in China. They worked very hard for the past 1 year to get the fruit juices sold in 1st tier city in a few province. So their plan is to get more invested capital through convertible bond for their fruit juice subsidiary shares to grow their fruit juice business and get its division listed one day.

As what I can see is that, if you are a big investor, then your choice of investment is widen, as you would be able to get private placement or convertible bonds from the investment bank, that retail investor normally hard to get through.

Now come to the questions, why are they coming to our company for the briefing? I believe that it is due to the liquidity issues. If a company that is illiquid and hard to fulfill the minimum spread of number of the investors, then they have to have more activities to lure more new investors. Ok, then another question is, why there are not many investors in this company?  As you are aware of, a lot of S-Chip shares are now dropping a lot from its previous high, as there are a lot of bad news coming out from the market, such as Chaoda.

So I asked the IR head, how would he re-assure the investors that it is safe to invest in his company. He replied me that, "to know whether a company has problem in its financial statement, you should look at his Cash Flow as well as the reason behind on why the company still issue a lot of right issues and other corporate action while it showed a lot of cash in the balance sheet statement."

He also said that the CEO was well trained to manage a group of people, and he was able to hire a Taiwanese to be the Research & Development Head in his Co, which is not easily be done by other China businessmen. CEO was also willing to pay higher to lure other senior managers from competitors to join him. And this is why they are able to grow the new division so fast.

So, above are the reasons why I hold a little shares of Sino Grandness. If you look at the balance sheet, it is quite normal. Now it is time for me to focus more on its management especially the CEO (He is still around 50, so there is still a long way for him to fight). The CEO promised not to sell his shares within 2 years of listed in Singapore Shares Market. So let us see whether he will sell his shares next year. :) It will prompt alert to us.

Disclaimer: I hold Sino Grandness. Please consult your remisier or dealer before making any investment decision.

17 October 2011

Human Factor in Running a Business

I am a self-employed person under Kim Eng Securities Pte. Ltd. Previously I was with Bursa Malaysia and Phillip Securities Pte. Ltd and I was learning how to run a trading business especially in Equities and Unit Trusts as a programmer, business analyst as well as business development executive.

The ways of doing business, are not more than communicating with other people in your daily life. When you wake up from the morning, you will watch the TV program and the news reporter will tell you the market movement in the market. After that you might want to read the research articles written by various research team from different broking firm. You may also wish to make the investment decision when the market is open.

When you read from the news or research articles, you may also wish to do some homework yourself, by reading through the charts (Technical Analysis) as well as its fundamentals (Fundamental Analysis). You may use about 1-2 hours to make a decision on buying a financial products such as CFD, Equities, Unit Trusts as well as others.

Of course, when you are not in a very sure position to make a decision, you may consult your remisier as well as your wealth manager. For those trained in financial products, they may give you financial advices based on your risk & return appetite. You have to understand the underlying risk and potential return before you start a brand new investment. The more sophisticated investor you are, the more risk that you can undertake, as you would be able to go through the downturn as well as upturn in the market.

Let me give you an example on how to evaluate a company:

DBS is a Singapore Local bank that similar to Maybank in Malaysia. Besides that Asset and Liabilities in the Balance Sheet, you may also wonder why the Price / Book Ratio is higher than its peers. What makes it superior than its peers when they are running the same business?

Intangible Asset that makes a different. From here, we may not know how to evaluate the intangible asset in a company. We have to understand how the company runs its business before we can determine how much the intangible asset is. I would take 'Management' as one of the intangible asset - an asset that makes a company different from its peers. You would be able to notice that a company stock price is dropping (for example Steve Jobs from Apple) when he stepped down as a CEO of a company. Besides that "Management", "Company Culture" & "Business Model" are those intangible assets that make a company different from another. Some company that good in 'R&D' may enhance its leadership in creating a better products or some company that good in 'managing cost effeciently' may also enlarge its business scale so that it can achieve economy of scale.

If you read the book titled 'Good to Great' or 'Built to Last', you may understand why some industry leaders are able to extain its leadership for a certain period of time (e.g. means that they are able to enjoy higher and consistent ROE for a period of long time). For the industry followers, they would find their niche to achieve better  than average result in the industry. If you are able to find it from the market, then it is good that you can hold it for a longer period until you find another undervalued company that worth to switch to.

Trust me, that investing is an art. You would never able to judge a company stock price just based on graph or fundamental figures. The more you understand the business model the company has, the better potential result you may get.

Good luck in your investing. :)

13 October 2011

Singapore Commercial Property Market View

According to Kim Eng Research Team, we as a Singaporean/Singapore PR are not able to buy the new commercial shop lot as the price is too expensive, unless you are targeting for those old building, such as Adelphi etc. So what I can predict is that, with the next few more years, there will be more REITs coming out in the Singapore Market. Try to target those REITs that are being well managed by a group of people as they may acquire more commercial buildings under their management and thus increase your future dividend income. You may also leverage on the number of REITs that you are holding, but please be reminded that there will be a margin call when the REITs price drops a lot. However, I believe that bank will also call you to ask you to pay for more loan payment when there is any incident coming out such as SARS.

There is one website which is quite consistently update on REITs - www.reitdata.com. Please do your homework or call your remisier before you make any investment decision.

Good luck in your investing! :)

06 October 2011

Path to Financial Freedom

A Simple Way Towards Financial Freedom is to Get Your Mind Free first. Try not to frame you in traditional way of thinking. Always think out of box, and you will get another way to reach it.

My Formula of Path to Financial Freedom:

Total Asset * Annual Return Rate > Annual Expenses.

Total Asset - The more asset you have, the more income you will receive. Sometime, Intangible Asset is more valuable than Tangible Asset, such as "Professional Knowledge" and "Capability to handle Incident" or "Capability to grow up a business" etc. Those intangible assets will increase the annual return rate in future. 

Sometime, we can treat annual expenses as total asset (capitalize it) so that we can always reach the destination of become financial freedom.

04 October 2011

Contrarian Thinking

Today is 4 October 2011, which is near to my birthday. I still remembered that many people were saying that October traditionally is not a good month, as there are several issues happened on October. By the way, I treat it as my lucky month because of my birthday falls into this month.

So what do I think about the Contrarian?

A contrarian must accept that he/she is different from other people, at least as compared to the majority. It means that you should do opposed to your fear and greed. If you are not greedy people, then only you can earn money from your investment. Similar to the fear, if you are a fearful person, then you can also earn money from your investment.

There are too many short term traders in the market, hope to earn a big bulk of money from the market. So to be a contrarian, you should be a long term investor, with the hope that to earn money when the market is the bear market instead of bull market.

How to do that?

Keep on doing the things that against your mind. Sometime, we will feel fearful when the stock price keeps on dropping, as we would have a lot of unrealized losses. If we cut loss at 50%, I do not think that it is a good idea, as I would think that it is a silly thing of just selling off your investment base on the sole reason that the stock price is dropping.

Always stay away from the market. The more rational you are, the higher chance you will get the profit from your investment. I still believe that, as long as you can purchase 1 dollar worth of asset by paying 50cents or less than that, you will sure earn the money in near future.

Above article is my own humble opinion to encourage myself to stay investing in this uncertainty.
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