Sunday, 20 December 2015
I received the following question from Vincent recently.
Hi Unclez, I have been following your blog for quite a long time, and I am impressed with your long term value investment. I have bought Presbhd before Bonus Issue and I sold it during last year December sell down in the view that the earning was reducing and PE was quite high as well. I then told myself to buy back when the price back to the reasonable PE, which might be around 20. But since then the price has gone up until now PE around 90. I missed the boat along the road, or perhaps I should not sell at first place. Can you enlighten me what strategy should be implemented when we are seeing high PE stock, why some stocks already traded at high PE still can go up, whereas some like Gadang before went up recently has Low PE last time but the share price didn't move much. I believe both Presbhd and Gadang have bright future growth, and I can categories Gadang was undervalued share with Low PE. But how about Presbhd and Dsonic? Hope to hear from you and appreciate your views very much as I am still learning in stock market. Thank you.
What attracted me is the question of PE. Many people had asked me this similar question and they are looking for a sensible answer. PE is a ratio number. Simply, price of stock divides by earnings per share. The P, we usually take current price while the E, we take last year full year earnings. That lies the problem. PE ratio become "history" number. Thus, it is not a very good yardstick to determine whether a particular stock is pricey or otherwise. I prefer to use prospective PE, meaning base on future earnings rather than last year earnings. And that is the challenge. Everyone can have last year earning numbers but no one can be 100% sure of further earning numbers. So how. you may ask? Well, let's put it this way. Stock market is not a fair game. The person who makes the most money is the one who knows the pulse of the company. Sadly, ordinary retail players have this disadvantage. They mostly rely on analyst's report.
My friend, a chief fund manager, had described the characteristic of PE in a more academic but plain way. He said if the earnings of a stock is expected to improve next year, for example, the market would have priced this in and hence, the stock would starts to run. But since the earnings of the stock has yet to be delivered, naturally the P component of the PE ratio would rise first, making the PE number high. Subsequently, when the earnings are really delivered, the E component goes up, thus reducing the PE valuation. However, and this is the most important part, if there is another round of earnings growth, the P goes up again, raising valuations. UncleZ always looking out for this "another round of earnings growth" with the help of knowing the pulse of the company.
PEs are about long term averages and made up of extreme highs and lows. Low PE stock does not guarantee for good price action but does give certain comfort level than high PE stock. Stock market works in mysterious way. To be successful in stock market, PE is just one of the tool to use but not and cannot be the only tool to use to decide your investment action.
Anyway, you had sold stocks and made profits, that is good and fine. Atleast you have won the market, not losing to it. And that's the goal. What you have missed out is probably the question of big win or small win. But it is still a win. Well done.
So, Vincent, I hope this enlighten you.
Friday, 18 December 2015
I have the privilege to be invited to accompany an entourage to a fast growing ASEAN country of 3 times bigger its population than Malaysia. It has vast land and huge human head counts. For the seasoned businessman, he will see there is huge business opportunities to grab. This country needs technology and financial muscles from outsiders to bring up its economy and social development. The government is doing what they can and could afford by easing or relaxing many of the rules. One company that has benefited from this open policy by the government and that was where I had the opportunity to join this trip to the country to see myself first hand how things are doing.
Of course going there without a punt or two at their golf course will not complete the trip, be it for leisure or business trip. It is on the golf course that conversations are more relax and candid. The conversation with one of the entourage member, which happened to be a strategic fund manager, went something like below.
A : How is thing went on so far?
Z : On stock portfolio front, very good. On personal health front, not so good. Doctor advised me to take extra caution on my diet and exercise more. When one getting older, this is to be expected.
A : Don't worry Z. Come here more often. Nice golf course, nice food and so many more.
Z : Yes. At least get away from the daily dose of politics that are happening in kl. Benefit no people except politicians. You see. Not every singly day goes by without mentioning about politic.
A : Agree. You just mentioned this very moment too.
Z : Ahh yes. I did. Just cut the crap of politic and talk about.... golf game.
A : He finally managed to pull this deal through.
Z : Yes. If not, we won't be here sitting and enjoying this view.
A: Will you ride on this company stock?
Z: Yes. This is will be my first for year 2016's stock selection. Just like Gadang is for year 2015.
A: That is telling. I will take up your recommendation.
Z: I know you already make up your mind the moment you join this trip.
A: You are right. Talk about Gadang. 2.10 last Friday right? We have a good buy on this. Over 30 percent since you told me early of this year.
Z: Did I tell you specifically?
A: Not directly. Remember we were having breakfast with the bunch of us together with your teenage grandson. Your stock-wise grandson. He was so young and yet his knows of all these technical jargons.
Z: Yes. I think I remember. Yes. One by one contract is now surfacing. For your fund, I believe 30% is a good number for you to boast to your unit holders.
A: And that thanks to you, Z.
I am working on a project partly to help my teenage grandson to have a good footing in this real world. All this while he has been helping me to cut, paste, write, extract newspaper cutting, typing and whatnot and help me to run it on this blogspot. There were time I did it myself but it is taxing for an old person like me. So, most of the time he helps me to tidy up the loose ends especially on the computing part. I am a person believe in no free lunch. People will value the things more when they themselves paid for it. It is not that I need it but atleast people will not take things for granted. The proceeds will go to him as a token of his hardwork and also for helping me to run this blog. I will update you via email on a specific stock to invest for long term with a brief write-up. Just USD10. If that stock did not perform within a year, I will refund in full together with an apology. Those who is interested to know more, could email me at email@example.com
Photos do the talking
|Home Ministry secretary-general Datuk Seri Alwi Ibrahim who represented Deputy Prime Minister and Home Minister Datuk Seri Dr Ahmad Zahid Hamidi, witnessed the exchange of agreement document between the Immigration Department and Prestariang|
|Home Ministry secretary-general Datuk Seri Alwi Ibrahim witnessed the signing of an agreement between the Immigration Department and Prestariang|
|Immigration director-general Datuk Seri Mustafa Ibrahim and Prestariang chief executive officer Dr Abu Hasan Ismail were the signatories|
|These bigwigs won't be there just for show photo session, will they?|
|The main CPU brain behind Prestariang|
The National Immigration Control System (SKIN), which will modernise the services of the Immigration Department will be able to detect the entry of individuals blacklisted by the international authorities.
Home Ministry secretary general Datuk Seri Alwi Ibrahim said SKIN, which would be fully operational by January next year, will also improve the effectiveness of the immigration's delivery system.
"A competent and efficient system is needed in addressing the issue of security, especially arrangements to enter and exit out of the country and the introduction of SKIN helps to ensure that it can be undertaken in a more systematic and effective way."
"This system is also to support the government's efforts in the United States Visa Waiver Programme (US VWP) and Preventing and Combating Serious Crime (PCSC) agreement that was sealed yesterday between Malaysia and the US," he said.
On Thursday Malaysia and the US signed an agreement to enhance cooperation in the PCSC, one of two vital documents that is an important precondition for Malaysia's participation in US VWP.
Alwi said SKIN would be installed in all immigration offices, including offices that operated in all the country's entry points and attache offices abroad.
I hope these photos will settle down some of my ever unsatisfied investor-friends. That is the problem. But on the good side, I always get free golf games from them. Not that I need it but it is good sign they are on the right track on stock investment. Good for them, and well, good for me too... get to learn one or two golfing skills from them.
Thursday, 17 December 2015
The Federal Reserve is expected to raise interest rates on today Wednesday 3.00pm NY Time [Thursday 3.00am Malaysian Time], exactly seven years after the central bank cut them to almost zero in response to the deepest recession in the post-World War II era. As this unprecedented era of easy monetary policy closes, here's a walk through seven years at zero to highlight the obstacles that policy makers navigated to restore labour-market health and enable liftoff.
1. Rates Cut to Zero - December 16, 2008
Fed officials lowered the federal funds rate into a 0 to 0.25 percent range in December 2008 as the nation's economic state deteriorated and the collapse of Lehman Brothers sent shock-waves through global financial markets. The Fed "will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," officials said in their post-meeting statement.
2. Unemployment Peaks - October 2009
By 2009, the Fed was staring down a different kind of crisis: one of joblessness. America hemorrhaged an average of 424,000 jobs a month that year, and by October unemployment had reached 10 percent, its highest level since 1983. The broader underemployment index was even higher at 17.1 percent.
3. Easy the World Over - 2010
By 2010, reverberations from the financial crisis were being felt around the world and central bankers were striving to mitigate the fallout. The Bank of England cut rates to 50 basis points in March 2009, where they've remained ever since, having descended from 5.75 percent in late 2007. The European Central Bank slashed its deposit facility rate to 25 basis points (it would go on to raise that rate in 2011 only to cut it again later that year). The Bank of Japan cut interest rates for the first time in seven years in 2008, among other measures. Even bigger Japanese policy changes would come in 2013 in the form of an explicit 2 percent inflation target and open-ended monetary easing commitment.
Monetary policy easing abroad aids the U.S. by supporting global growth, but lower interest rates overseas can also encourage capital to flow into higher-yielding U.S. assets, pushing up the dollar and hurting U.S. exports by making them more expensive.
4. Debt Ceiling Debacle - July 2011
Several times during the Fed's expansionary era, fiscal policy — or fiscal inaction — has gotten in the way of the recovery. Congressional lawmakers in July 2011 allowed the nation to tiptoe to the brink of default on debt that it had already incurred by failing to agree on a higher borrowing cap for the nation. Congress ultimately came to a deal. But the spectacle shook confidence and Standard & Poor's downgraded the U.S. credit rating, dealing a blow to the stock market and probably hurting growth. Cuts to government spending that followed added to the economic headwinds.
5. Taper Tantrum - Summer 2013
In May 2013, then-Chairman Ben Bernanke testified to Congress that the Fed could start slowing the pace of its bond purchases later in the year, conditional on continuing good economic news. Markets went haywire at the prospect of less stimulus, with the yield on 10-year Treasury note shooting up as investors fled to safety.
6. Dollar Ascends - Summer 2014
The greenback, which has strengthened by around 21 percent since mid-2014, has become a focal point for Fed officials as liftoff approaches. Weak growth and easy monetary policies abroad are pushing money into dollar-denominated debt, and when the U.S. lifts rates that could intensify pressure on the currency to appreciate. Even if that risk doesn't stop the Fed from raising rates, currency strength will likely cause policy makers to take their time in tightening. The dollar is one factor that "means that monetary policy for the U.S. is more likely to follow a gradual path," Chair Janet Yellen told a congressional committee on Dec. 3
7. Yuan Devaluation - August 2015
U.S. officials have had to contend with a series of international developments over the past seven years, including China's surprise yuan devaluation in August. The world's second-largest economy allowed its currency to fall as its growth slackened, roiling global markets and inflicting massive losses on domestic stock prices. The decision and its fallout was seen by many as the grounds for the Fed's decision to delay liftoff in September.
8. Slow Recovery
One more reason why the Fed has held rates near zero for seven years: growth just hasn't been very good. The U.S. suffered a deep contraction that wasn't matched by a robust rebound, and credit standards remained tight throughout — hindering the transmission of easy money to the real economy. The tepid pace of growth, while better than the outright recessions experienced in Europe and Japan during the last seven years, meant it took a lot longer to recover what the U.S. had lost in the crisis.
The above is one interest piece of analyst that reminds us why and where all these things started. We will know this morning 3.00am Malaysian Time whether the much waited news of interest rate hike will happen. And not to miss is the subsequent press conference by Janet Yellen at 3.30am.
Wednesday, 16 December 2015
RM1.403 billion market capitalization on the back of 484 million no. of shares issued. Yes. Presbhd is a billion-ringgit company. No small fly anymore.
Recalling my earlier post on 11.06.2014, here, the company's CEO had laid out his ambition to have his company's capitalization reaches RM1.5 billion in 2017. Can he achieves that? Let's wait and see, if you have the patience of course.
Some historical facts
On 30.04.2014, one and half year ago, the company declared 1 to 1 bonus issue and price changed from RM3.95 to RM1.99 upon ex-date. Since then, its price went roller coaster and at one point dipped to RM1.31 low for a brief period. Now, the price back to its full steam. Hitting new high RM2.96 on 09.12.2015. I dare to say very little people will ride on this stock for so long. If you have, you have make a lot of money.
Its price closed at RM2.90 on 15.12.2015
P/s: By the way, something very positive from DSonic after a long quiet period. More on that later.
Wednesday, 9 December 2015
I must admit i failed in my expectation to achieve atleast 50% gain from this stock before this year is out. I deserved to be teased by my associates on this one. My response to them was I dropped my crystal ball on the floor and broke it and that's why my expectation did not materialised.
|A successful businessman and most important, a happy father with two capable daughters supporting him|
But I persevere. I throw a challenge to them that it will achieve my expectation and this time not 50% but 100% in two years' time before year 2017 is out ! I higher the stake and throw my hat onto the table. Any taker ?
The story started in Feb this year. Here.
Its price closed at RM2.10 on 09.12.2015
Monday, 7 December 2015
After taken 8 months rest, it is indeed exciting to continue with this title again. Today the stock price was up 16 cents to break its all-time old high RM2.73 registered on 02.04.2015 to close at yet again another new record close RM2.85.
It is a good experience for those who have been patient and truly subscribe to the notion of long term investment. If you have been with me with this stock, I think by now you understand it is no so much of just earning the extra few cents each time the stock price hits new high but it is the discipline that you have developed to stay on course and not sway away unnecessary by the sentiments in the market place. If you are for earning for the extra few cents, you might survive this round but there is no guarantee you will survive the next storm. Investing in stock market is about long term survival when most people are knocked out halfway through. Presbhd is one example and it is a good example and making huge profit on top of it.
One may argue it takes a person with steel heart to do nothing but holding stocks when the entire market was affected by political turbulence not too long ago. Well, if it is not due to politic, it will be something else. As long as there is no serious catastrophe like 9/11, political turbulence is just part and parcel of stock market risk and you have to know how to manage it.
On the side note, year 2015 is coming to a close. I am looking out for a new stock opportunity for the new year 2016. I am confident this one will do well for next year 2016. Once everything is given go-ahead by my team (on technical aspects of course), I will share with my investing circle and later to this blog space.
Its price closed at RM2.85 on 07.12.2015
Thursday, 12 November 2015
It has been awhile since my last posting. For those who follow my posting, Gadang was my first stock selection for this year in February. Here.
With the price closed at RM1.73 yesterday, a decent paper gain of 13% was achieved within 9 months. I must admit that if the timing of the purchase was made in August, the gain would have been very much better. Heck, if I could foresee that, I would be extremely wealthy as though I have a crystal ball with me. But no, certainly not crystal ball but patience and trust that are the keys for better stock investment management.
Its price closed at RM1.73 on 11.11.2015.
Tuesday, 28 April 2015
It has been exactly one year since ah Boy holding this stock. He is really happy with his first stock investment. Rightly so. Most importantly, he started to learn the wisdom in stock investing particularly value investing. Had he been in and out from the market he would have got slaughtered during the Q4 mayhem last year. And I believe not only him, many inexperience stock players got slaughtered as well. His initial investment capital of only RM10,000 does not account much but the patience and wisdom that he learned goes a long way. With current price at RM0.53, he would have make a tidy 40% paper profit, in one year. How's that. Very much better than FD rate.
The Stories here and here.
Its price closed at RM0.535 on 27.04.2015.
Thursday, 26 March 2015
Yes. The last time this title was carried was on 06.07.2014 when its price hit new high close at RM2.16. Today, just like any stock after experienced few roller coaster rides, again its price hit another all-time high close at RM2.48. Those who have invested thus long will feel the sentiment behind this new-high events story. If you are newcomer to this story, you would probably think it is just another story of lucky stock that managed to record new high. But no. This new high is unprecedented. Many stocks have yet to recover from the mayday that happened to the stock market during last year Q4 period. Presbhd not only breaks new barrier but against all odds when technical indicator pointing at different direction.
My associate called me to ask what is my take on today new high record and asked the usual question like many will ask - why going higher and higher without any news flow? My reply is a simple one liner - look beyond the technical indicator but look within the core of the company. And subsequent question is - can buy now? My immediate response was - Not for you because you have doubt when i told you in January this year. There is no reason your doubt has cleared just because the price has shoot up. Investment decision is made based on confidence in the company and not based on price movement. But it is different story if it is about trading decision. And I don't advocate trading in stock.
|Notice the high buying volume to suppress any selling attempt|
I repeat again. Stock trading is not suitable for retail player. If you know the real inside working of stock trading by the big brothers, then you will know what I mean. Learn long term survival in stock market is the way to go for retail player or shall I say, retail investor.
Its price closed at RM2.48 on 25.03.2015.
Wednesday, 25 March 2015
Some say they involve in stock market is for investment. Is it true? Ask yourself these questions:-
1) Why I buy stock?
a) because i want to make pocket money
b) because i want to make a lot of money
c) because i heard my friend makes money from stock market
d) because i have enough money to invest in stock market
e) because i want to learn to make money from stock market
f) because i want to join in the fun
g) because i dont know where to invest my money
h) because i just dont know why i love the stock market
i) because i love the excitement
j) because i read analyst reports recommending this stock is good
k) because my friend recommended this stock is good
l) because i have hot tips
m) because buying a 30 cents stock is very cheap. won't die one.
Is any of the answers above is yours?
2) Do I understand how the stock market works?
a) Yes. Buy low sell high. simple
b) Yes. I read reports and books. Lots of them
c) Yes. I know PE, RSI, DY, NTA
d) Yes. I know about shooting star, hammer, doji, white marubozu, hanging man, morning star, three white soldier, three inside up and whatnot
e) Yes. Buy on rumour sell on fact
f) Yes. Pick the phone and call my broker when I get tips
g) Yes. Buy good company and sell when price up 10%, 20% or 30%
h) Yes. Buy when everyone is fearful and sell when everyone is greedy
i) No. But I will learn along the way
My personal experience to the first question is all the answers above. That was when I first started in stock market. That's why i failed big time in my very first endeavor in stock market. I learned and really learned the hard way. And my personal experience to the second question is all the answers above. Again, that's why i failed big time. I paid my tuition fee as some like to say.
So, what is the real meaning of making AN investment in stock market?
Lets start off with : there is no such thing as investment in stock market which many of us like to believe if we give our self a target price for a particular stock that you have invested in. This is doing a trading mindset. Trading mindset is not an investing mindset. Sounded unorthodox. Yes, it is. UncleZ never a compliance to the norm beliefs. Put your money in a stock for 3 months is not a good investment but still can consider an investment if you exit because of company fundamental has changed so drastically in the span of 3 months. But what the heck with this investment that you have chosen in the first place if the company fundamental could changed so drastically in just 3 months?! So it is not a good investment but still an investment nonetheless. On the other hand, put your money in a stock is not an investment if you set a target price and on top of that with 3 months timeframe. This is doing a stock trading. You trade because you expect the profit will come in 3 months. You don't invest because you expect your target price will profit you in 3 months timeframe. You invest because you know the company will grow over time and that your investment in the company will grow in value. Another thought. You won't call it an investment for targetting RM30 for every RM1,000 you deposited in FD account after the timeframe of 1 year period, don't you?
Stock price move up and down because of human emotion. For example, when a company announces a 100% increase in revenue in its quarterly report. Everyone gets excited. Excitement is emotion. Investment is not a function of emotion. It is a function of the health and future prospects of the company.
Each time people talks about their investment in stock market, I would tell them that they are not doing AN investment if everyday they are watching the computer screen tracking their stocks every minutes. Shouting in excitement when the stock when up 1 cent or 2. Not that shouting in excitement is a bad thing itself, but the mindset behind such action is. I too would be shouting in excitement if my stock went up RM1 in an hour !
So, when to learn the very real meaning of making AN investment in stock market? Probably the best time to learn the real meaning of investment is during bull market. During such time, one does not need much persuasion to draw into the bandwagon of excited crowd. However, the learning doesn't really start when one joined the bull market crowd. The learning starts when the market turns for worse. Believe me, you will learn what really is AN investment from that point. Learning from the hardest way is the best lesson you could ever get.
The next time you are about to click buy, ask your self this, am i doing an investment or trading? If your heart say target price is 30 cents in 3 months and then run. That's good and fine. Atleast you know what you are in for.
I had done all that trading mindset, punting mindset, chasing after stock, tips, contra and whatnot. At the end of the day, you would probably get back to square one from where you have started. The only thing you get is .... heart attack.
Wednesday, 11 March 2015
Presbhd price has recovered. From the most scary moment at RM1.33 to now at RM2.32. What a ride indeed.
All-time high close (post ex-bonus) : RM2.36 on 22.07.2014
All-time low close (post ex-bonus) : RM1.33 on 17.12.2014
Ex-bonus on 30.04.2014
Has anyone keep their cool and did nothing during the bash-down period between September 2014 and December 2014? Even if you have stayed cool but did you remain stay cool during the recovering period between January 2015 and until recently? I believe many have exited during the bash-down period but some have waited until the recovering period but subsequently exited totally as well. This observation of mine is based on a small sample of investors which I am acquaintance with. But I believe it is the general scenario.
Some of my associates asked whether I am still "in-love" with Presbhd. Well, the following is my answer to their curious question.
I did sold 5% of my total holding during the recovering period in January. As can see above, there are only 2 sales activities of Presbhd since 2012 in this particular investment account ! So for those who think UncleZ never sell stock after he made his purchase is far from the truth. I do sell stock but for specific reason. Certainly not because of the usual knee-jerk reaction that many investors did.
Mind to calculate what is the profit per unit share based on yesterday closing price for those purchases made in early 2012.
If you have invested one unit of Presbhd on 09.12.2013 when its price was traded at RM2.68, which was the day I first mentioned this darling stock in this blog, one would have make 196% gain. This is for a short 1 year plus 3 months investment horizon.
Make it more interest. If one have invested one unit of Presbhd since Feb 2012 at RM0.96, imagine the profit one is getting. Ofcourse for that you need to keep for more than 3 years. But think again. If one could make 383% profit, would one willing to consider to invest for 3 years?
Its price closed at RM2.32 on 10.03.2015.
Monday, 23 February 2015
Not too long ago many experts screamed of high oil price above USD100 is here to stay. Some even went further to say it is new normal for oil price. Now we know how wrong these experts were. When oil price went up above the magical number USD100, everyone got worry and rightly so. This is because price of goods will follow suit. Pump petrol went up. Transportation fee went up. Construction cost went up. But the good thing is kangkong price went down. Much to the relief of some people. Joke aside. But what surprise me is when oil price tumbling down, the same fear is being re-play again. Ain't we suppose to rejoice when oil price coming down. Construction industry will be the first to benefit from lower oil price. Contractors who have secured construction works way before the drop of oil price will enjoy substantial saving when they carry out the construction works.
This situation is quite the similar during the shortage of mild steel bar crisis in 2007/08. Contractors submitted their tender based on prevailing steel price and because of the uncertainty of steel price was so bad that property developers had to share the risk of price fluctuation with the contractors, or else no contractor is willing to take up the job. Eventually steel price came down. Many savvy contractors were laughing to the bank when the price of steel bar dropped from high above RM4,000 per tonne to round RM2,000 plus because their tender price was pegged at high steel bar price of RM4,000 per tonne. The situation now is like a re-play of 2007/08 crisis but this time is on different commodity. Oil. This time around though, I hardly heard construction package being pegged to oil price. So, if you have tendered and secured any construction works way before the tumbling of oil price, you will certainly enjoy certain savings.
With this in mind, we have been monitoring construction companies for some time now especially those that have secured jobs way before the plunge of oil price. The drop in oil price has not spare the KLSE and it was badly hit since September last year. Due to the negative sentiment, almost all stocks were hit including those that are fundamentally strong. However, not all are gloomy. With stock price battered, this makes it more compelling to re-look at some these construction companies. As the word goes, when people is fearful, you must be greedy. With oil price seems to have stabilised or atleast does not seem will go back to USD100 level and coupled with market sentiment has somewhat improved, it is opportune time to re-look into some construction stocks. One that is particularly stands out is Gadang.
This is my first stock selection for this year for another long journey that we called - long term investment.
Its price closed at RM1.52 on 23.02.2015.
This is my first stock selection for this year for another long journey that we called - long term investment.