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|