It has been more than 2 months since i posted any blogs. Within this short period of 2 months, a much anticipated correction has occurred. Even before the correction, I was closely monitoring Centillion and i was very disappointed when it issue the new option shares to Equation and Oei Hong Leong. Each subscribed for 948,742,172 shares at $0.008485.
I wondered what was the management thinking. To raise funds, why would they give such a steep discount to these 2 investors? The price was at about $0.20. If any of these 2 investors were to dump their shares even at a discount of 50% of the $0.20 price, they would still have made >1000% of their investment in this deal. It seems too shady to me.
So when the price was slowly falling with weak supports and volumes, I cut my losses at $0.175 about one month after i bought the shares. I was relieve to see that the shares did indeed plunge to $0.10 within the next month(Aug 07).
Saturday, September 15, 2007
Wednesday, July 4, 2007
Centillion the Waste Recycling Turnaround (B)
I vested in this company Citiraya for quite a while before the CIPB came knocking on their doors. It was a darling stock at that time. After the dust settle, the new management changed the name to Centillion and revamped the structure. It is now slowly coming back.
Ever since it was "re listed" in Oct06, it was mostly hovering at $0.15, once going down to $0.11. From early Jun 07, it raised to a high of $0.22. To me, the business model is a sound one and most importantly, a profitable one. Basically, Centillion clears waste from PCB and IT manufacturers. From the PCB boards, they retrieve the gold treads and sells the gold.
Anyway, I believe this is a good company with a new management. Moreover, Temasek and Oei Hong Leong also vested in this company. Thus, when Centillion slowly drops to $0.195, I see that as a resistance and bought 10 lots. Till now, it has been hovering at $0.195-0.21. I see the potential of this stock to go to $0.3 in a couple of months time. My stop loss is $0.16(~20%). So lets see how it goes. I will be back to close this when I finally sells this stock.
Ever since it was "re listed" in Oct06, it was mostly hovering at $0.15, once going down to $0.11. From early Jun 07, it raised to a high of $0.22. To me, the business model is a sound one and most importantly, a profitable one. Basically, Centillion clears waste from PCB and IT manufacturers. From the PCB boards, they retrieve the gold treads and sells the gold.
Anyway, I believe this is a good company with a new management. Moreover, Temasek and Oei Hong Leong also vested in this company. Thus, when Centillion slowly drops to $0.195, I see that as a resistance and bought 10 lots. Till now, it has been hovering at $0.195-0.21. I see the potential of this stock to go to $0.3 in a couple of months time. My stop loss is $0.16(~20%). So lets see how it goes. I will be back to close this when I finally sells this stock.
My Jasper Investment Trade
I started looking at Jasper Investment when it remained in the top volume for many days. Though it hovered around $0.025-0.035 for quite some time, the volume transacted each day was still significant.
Fundamentally, I must admit i did not do a lot of research but I do know that its earning has increased and the company's plans is blossoming.
There is not much TA to be done as the price is quite stagnant. Thus, when the price dropped to $0.025, I bought 50lots. I intend this purchase to be a short one as I hope and believe it will behave like what it has been behaving for the last 1-2weeks. My target is just $0.03 and my stop loss is $0.02.
I was rather disappointed as even thought the price is at $0.03 some of the days, the sell queue was too hugh and I never got the the start of the queue for each time. But to my relieve, my sell trade was transacted, making me a small profit of $190+. Though this is a small amount, it is a 15% return for 2 weeks of waiting. I have traded a small amount for this stock as I have not gained enough knowledge about this company and was only basing on the volume and the small trading band.
Overall, though I have made a good choice in trading this stock, I will not be doing such trades much as I believe in trading in good quality companies.
Fundamentally, I must admit i did not do a lot of research but I do know that its earning has increased and the company's plans is blossoming.
There is not much TA to be done as the price is quite stagnant. Thus, when the price dropped to $0.025, I bought 50lots. I intend this purchase to be a short one as I hope and believe it will behave like what it has been behaving for the last 1-2weeks. My target is just $0.03 and my stop loss is $0.02.
I was rather disappointed as even thought the price is at $0.03 some of the days, the sell queue was too hugh and I never got the the start of the queue for each time. But to my relieve, my sell trade was transacted, making me a small profit of $190+. Though this is a small amount, it is a 15% return for 2 weeks of waiting. I have traded a small amount for this stock as I have not gained enough knowledge about this company and was only basing on the volume and the small trading band.
Overall, though I have made a good choice in trading this stock, I will not be doing such trades much as I believe in trading in good quality companies.
Tuesday, June 5, 2007
Pay Yourself First
I am reading the book The Automatic Millionaire just 1/3 through and I am already pretty impressed with the contents. In this article, I will just summarised the most important method in getting rich: Pay yourself first.
For every dollar you earn, a percentage of it goes to your income tax, a percentage goes to your home installment, your car installment, your insurance, your utilities bills, your mobile phone bills, your daily meals and what have you. What is left, if any, you will try to save. But very often, even if there is anything left, you will spend it on impulse buys.
Pay yourself first basically says that you should save a portion of your earned money into a account first before you do any other things, like paying bills etc.
Maybe you are saying it is impossible to save. Let me do a breakdown for you, or rather let you see it in a different light. Say for example you earn $2500/mth. If you divide it out for the full 30 days, it means you earn $83.33/day. Do you think saving $5 out of the $83.33 earned is a lot? That is only 6%. See it another way, $83.33/day is equivalent to earning $9.25/hour(assuming you work 9 hours a day). $5 thus is just slightly more than half an hour of work for you.
Let's see what is the effect of saving this $5/day. In one week, you would saved $35 and in a month, $150. If this money is put in an investment which can give you 10% per annum return, you would have $1,885 after your first year, $30,727 in 10 years and $339,073 in 30 years.
From $5 to >$300k, do you see the effect of just $5?
Be sure to look for my review of this marvellous book in my reading tots blog.
http://myreadingtots.blogspot.com/2007/06/automatic-millionaire.html
For every dollar you earn, a percentage of it goes to your income tax, a percentage goes to your home installment, your car installment, your insurance, your utilities bills, your mobile phone bills, your daily meals and what have you. What is left, if any, you will try to save. But very often, even if there is anything left, you will spend it on impulse buys.
Pay yourself first basically says that you should save a portion of your earned money into a account first before you do any other things, like paying bills etc.
Maybe you are saying it is impossible to save. Let me do a breakdown for you, or rather let you see it in a different light. Say for example you earn $2500/mth. If you divide it out for the full 30 days, it means you earn $83.33/day. Do you think saving $5 out of the $83.33 earned is a lot? That is only 6%. See it another way, $83.33/day is equivalent to earning $9.25/hour(assuming you work 9 hours a day). $5 thus is just slightly more than half an hour of work for you.
Let's see what is the effect of saving this $5/day. In one week, you would saved $35 and in a month, $150. If this money is put in an investment which can give you 10% per annum return, you would have $1,885 after your first year, $30,727 in 10 years and $339,073 in 30 years.
From $5 to >$300k, do you see the effect of just $5?
Be sure to look for my review of this marvellous book in my reading tots blog.
http://myreadingtots.blogspot.com/2007/06/automatic-millionaire.html
Friday, May 18, 2007
Investment Instruments Series - Property
In property, people normally invest in it for 2 aims; either to collect rent or for capital returns.
If you are going for capital returns, just follow the rule, buy low sell high. Property prices goes in cycles. In Singapore, if you take the last property boom(1994-1997), and the current booming market, its about 12 years apart(start of both booms). So for example, if you buy a 5 room HDB flat in Bishan at the low, it would be around $350k. It can easily fetch $450-500k during the boom period. Or if you are cash rich, get a district 10 property and a tidy profit of $400k-$1m is not unusual. During my father's time(1970-80s), he bought the flat for <$100k and now, its going for $350-400k. Nowadays, you will have to buy a new flat for $200-300k and the profit, if any is only at most $50k. Buying and selling flats is no longer as profitable.
If you have read or attended any renowned real estate experts / gurus talks such as Robert Kiyosaki or his advisor, Dolf de Roos, you will know that rental returns is better than the capital gains as you will be using other people's money(OPM) to pay your property. Take for example a property worth $500k. You pay a minimum sum of maybe 10%, and takes a loan of $450k, the monthly installments would work out to be about $1500 for 30 years. If you rent it out for $1800, you will have a positive cashflow of $300/mth. This $300/mth would be your passive income no matter if you work or not. And the tenant would also be paying for your installments of $1500.
But in Singapore, it is very difficult to find a cashflow positive property as the government controls the market very tightly. Furthermore, when you rent a property, the government would impose on you a tax. So all in all, you will not be getting much from your rental income. This scenario has an exception though. From my understanding, only the commercial properties could command a positive cashflow. The only problem is that to buy a commercial property, you would have to pay cash and a good commercial property costs >$1m. Not a lot of people has that type of money in Singapore.
For me, I prefer overseas properties. Depending on which country, advantages being that it is relatively cheaper to buy a property overseas, overseas rental is higher as compared to Singapore, not needing to pay rental tax and no stamp duty. Of course the downside would be not being to see if the property is well managed. That is why due diligence has to be done before one buys an overseas property. The reputation of the property manager, type of tenants, location, possibility of long term lease, country's property law are just a few of the issues to be researched before plunging into the overseas property market.
If you read the Saturday's newspapers, there are bound to be some companies advertising on overseas properties. The cheaper properties are usually from our region, such as Malaysia, Thailand, Australia and New Zealand. I am not comfortable with the Malaysian and Thai government. Malaysian government has changed their property laws several times and this has brought great inconvenience to Singaporean property investors. As for Thailand, I feel that the government is too instable. Maybe I enjoyed my Aussie and NZ trips, I do prefer the people and the environment there. The more expensive properties are usually the UK ones. As a rough reference, Aussie and NA properties ranges between S$150-$500k. UK ones are normally at least $800k. The rental yield for Aussie and NZ properties is usually around 5-10%. But beware of the loan interest rate. It is around 7-9%. So this high interest rates do eat into your rental income.
If you are interested in going into any overseas property market, go to any of the "no obligation" seminars/sales talks advertised in the newspapers. Learn more about the different companies.
If you are going for capital returns, just follow the rule, buy low sell high. Property prices goes in cycles. In Singapore, if you take the last property boom(1994-1997), and the current booming market, its about 12 years apart(start of both booms). So for example, if you buy a 5 room HDB flat in Bishan at the low, it would be around $350k. It can easily fetch $450-500k during the boom period. Or if you are cash rich, get a district 10 property and a tidy profit of $400k-$1m is not unusual. During my father's time(1970-80s), he bought the flat for <$100k and now, its going for $350-400k. Nowadays, you will have to buy a new flat for $200-300k and the profit, if any is only at most $50k. Buying and selling flats is no longer as profitable.
If you have read or attended any renowned real estate experts / gurus talks such as Robert Kiyosaki or his advisor, Dolf de Roos, you will know that rental returns is better than the capital gains as you will be using other people's money(OPM) to pay your property. Take for example a property worth $500k. You pay a minimum sum of maybe 10%, and takes a loan of $450k, the monthly installments would work out to be about $1500 for 30 years. If you rent it out for $1800, you will have a positive cashflow of $300/mth. This $300/mth would be your passive income no matter if you work or not. And the tenant would also be paying for your installments of $1500.
But in Singapore, it is very difficult to find a cashflow positive property as the government controls the market very tightly. Furthermore, when you rent a property, the government would impose on you a tax. So all in all, you will not be getting much from your rental income. This scenario has an exception though. From my understanding, only the commercial properties could command a positive cashflow. The only problem is that to buy a commercial property, you would have to pay cash and a good commercial property costs >$1m. Not a lot of people has that type of money in Singapore.
For me, I prefer overseas properties. Depending on which country, advantages being that it is relatively cheaper to buy a property overseas, overseas rental is higher as compared to Singapore, not needing to pay rental tax and no stamp duty. Of course the downside would be not being to see if the property is well managed. That is why due diligence has to be done before one buys an overseas property. The reputation of the property manager, type of tenants, location, possibility of long term lease, country's property law are just a few of the issues to be researched before plunging into the overseas property market.
If you read the Saturday's newspapers, there are bound to be some companies advertising on overseas properties. The cheaper properties are usually from our region, such as Malaysia, Thailand, Australia and New Zealand. I am not comfortable with the Malaysian and Thai government. Malaysian government has changed their property laws several times and this has brought great inconvenience to Singaporean property investors. As for Thailand, I feel that the government is too instable. Maybe I enjoyed my Aussie and NZ trips, I do prefer the people and the environment there. The more expensive properties are usually the UK ones. As a rough reference, Aussie and NA properties ranges between S$150-$500k. UK ones are normally at least $800k. The rental yield for Aussie and NZ properties is usually around 5-10%. But beware of the loan interest rate. It is around 7-9%. So this high interest rates do eat into your rental income.
If you are interested in going into any overseas property market, go to any of the "no obligation" seminars/sales talks advertised in the newspapers. Learn more about the different companies.
Monday, May 14, 2007
The Invisible Hand
This is a post from the Share Investor forum. It's a bit lengthy but has very good information about the big boys, who "runs" the market.
Postings by Mossie first, followed by posting by Warren *********************************************************************
A bit of introduction.In my previous postings, I have often referred to the work of "the invisible hand". It's important to understand who they are; their thinking which prompts them to buy when others are selling; and their motivation.Their buying action is often revealed in charts, displayed in such formations that are collectively called bottoming out or reversal patterns. Some if these individual formations are called Inverse Head and Shoulders, Cup and Saucers, Double Bottoms or "w" shape, extended bottoms or "u" shape, falling wedges etc.If you are not certain what they mean, I have linked to a glossary of technical terms http://www.asiachart.com/glossary.html. If you want fuller explanations, there are many good books around.
Why do prices gradually stop falling? Invariably, when the market has fallen a great deal, the stock becomes attractive to the "invisible hand". They are people who can see tomorrow's values TODAY!They step in to buy and absorb the selling and hence, arrest the fall of the share price. Over time (six months or more), their buying action creates bottoming out formations that I have mentioned above.Who are they? They are insiders, deal makers, fund managers; people who can see VALUE in the down and out company that nobody else can.Collectively, I also call such people SMART MONEY (as opposed to dumb money). They are legions of deal makers who have made their piles and now become players. They fund projects. They know balance sheets and they know how to restructure businesses. They know how to restructure debt, create holding companies to place their debt etc.They are the brains behind every operation. They employ lawyers,stock-brokers, bankers, accountants to do their legwork and due diligencebefore any action is taken.Now that the introduction to the "invisble hand" is done, I will begin my segment to "stalking the prey" using some life examples like Pertama.Do look out for them.
Continuing my thread, in order for the "invisible hand" to stalk his prey (stock), the stalker (buyer) has to think like the prey(the stock).Before I begin proper, all I am doing is share some thoughts of the stalker. But please, I don't claim to know the answers and I value all of your contributions.
In this instance, I am stalking Pertama. To think like the prey, it's important to understand J Harvey, the business-man. What makes him tick? Isn't he aware of the risks? Isn't he aware that S'pore is renowned for high rents? What is he going to do to preserve margins?Isn't he aware K mart failed in the past? Isn't he aware that there is competiton in Courts, Safe, Pennslyvania House, IKEA etc etc? How does he intend to create his own comparative advantage against the others.How what he do to survive against stiff competition in Australia? Was it by pricing competitively, or raising service levels, or a combination of both? What did he do to compound 30% in his share price over six years? What MARGIN of SAFETY do I the stalker have, if I catch my prey and realise that it's not exactly what I caught (that is, got it wrong). Is there intrinsic value in the prey? Is the cash of $27million sufficient as a buffer? What does George Goh of Ossia know?? He is, after all, a FELLOW STALKER!I am not disputing your concerns on Pertama. But I feel that if I can answer those questions and put myself in Jerry Harvey's shoes, I know what are the pitfalls and, therefore, prepared to ride out the business risks with him.
You see, the stalker may be monitoring SI and all our postings.After all, SI is becoming one of the main financial portals. It is all part of the stalker's game to drive up the share price, entice ALL THE SHORT TERM PLAYERS INTO THE FRAY AND then DUMP the shares to you.Please remember prices condition people's minds. If a stock price goes SOUTH, people say "get me out". But if prices go NORTH, everybody, house traders etc will shout "Blood" and go into a feeding frenzy.(Remember, most of the time, the stalker spends most of his/her time waiting, studying, seeking information about the prey before he pounces). Again, I profess not to know much about the retail industry and I value your feedback. Your input have provided gaps in information that I need to bridge with people who are in-the-know.
However, my sources in Australia have told me that HN practices an innovative franchise arrangement that allows staff to share in the profits of a store. Unlike a traditonal franchisee relationship, staff are encourage to enrol as franchisees without the need of coming out with their own capital. This instantly gives the potential franchisee a sense of ownership without capital being a restrictive factor.In Australia, HN's staff are legendary in their service commitment. Why? Because they NO longer see themselves as staff but as OWNERS of their own businesses.Next, they are coming with an innovative financing scheme that allows the customer to pay the same price for products regardless of whether the purchase was made by cash or hire purchase.
These innovative schemes have been practised in Australia for years but, I guess, have not been followed in Asia.Also, my friends in Australia told me that HN's staff practice a motto: do all you can to get the customer back into your shop. What do I mean by that? If you had purchased a phone from vendor A (somebody other than Pertama), and if that phone breaks down, they are prepared to take in that phone for repairs at no cost. How about that for service? Suggest that to Singtel or M1? They will flip!!My point for sharing is this: competition is everywhere and in every industry. You and I are in business and we know competition is a given. But it takes somebody who thinks totally "out of the box" to rock the very foundations of that industry. The person who keeps questioning the assumptions and is an out-of-box thinker constantly innovates and keeps the customer coming back into the shop.Jerry Harvey is one such visionary who I feel comfortable to bet on. He has the track record to back it up.Frankly, I am looking forward to their arrival because I am quite tired of the poor service quality that I have been receiving. Service level in S'pore needs to raised. One way of raising service level is to make employees feel like owners through options, franchise arrangements that do not require them to come up with capital etc.
Since I am on this topic, let me cite another example. Today, I went to Funan looking for some software. The chap who served gave me smiles and took pains to answer all my questions. I thought that was great. But the moment the sale was made and he left me to the cashier, the cashier's rudness undid all the good impressions created. My guess is that the salesperson is incented by commissions but the cashier wasn't. And it really showed.
In this posting, I will be introducing another strategy that is the favourite of "the Invisible Hand".This strategy can best be described as using "Other People's Money" or OPM. OPM is centred around the principle of LEVERAGE, making your money work hardest for you, doing more with less, getting more returns from $1 of capital.If you are in business, you will be familiar with leverage. The most successful businessman use OPM and, I daresay, your success or failure as a businessman would depend on whether you mastered the art of using OPM. The most basic form is borrowing from banks for capital to start a business, mortage to buy a house etc. Seldom do you buy a house with 100% of your capital. To get the "maximum" return possible, you use a combination of your own capital and other people's money (in this case, bank debt).
The more advanced form of using OPM is practised in the stock market. How is this so, you may ask?Well,when you list your company, you add another currency. That currency is the stock price. Having a company listed and having that new currency (stock price) is equivalent to adding another weapon to the stalker's arsernal to negotiate deals, issue derivatives (like warrants), serve as collateral to banks for addtional debt and so on. Also, having a public listing allows a stalker to "borrow" from the public by issuing rights issues to the public, enticing them with warrants and other freebies. What I have stated above is nothing new to most of us. What I have done is encapsulated the principal of leverage.
However, understanding how the stalker uses OPM (leverage) in the stock-market will, hopefully, prevent you from falling into one of the stalker's schemes. This is one of the hardest concepts to explain in a forum such as this. So please ask me to explain any concepts that are unclear. I look forward to learning from one another. Yes, we need constant reminding of the workings of the "invisible hands". Remember, money is always made on the way down. "Invisible hands' are not charitable organisations. They will not buy and chase prices up. Why? Because that will only benfit every one else. They BUY only when prices fall. Why? They are buying somebody else's losses (or cut losses). "Invisible hands" understand the psychological effect of what prices do to people. They know that prices condition people's minds. They know when punters are disinterested when prices fall and how punters will chase and get all excited when prices move up. They know how to use this info to amke $$ for themselves.I make no apologies for repeating this message again and again. Forumers must be made aware how the Mr Market robs those who was disinformed!!A monumental posting on the IH written by sifu Warren. Reproducing here for archival purpose.
***********************************************************************
Price & Volume studies
Elle,I thought I'd add my 2.5c worth of how I use price and volume studies to detact the action of IH. I use the charting system by Bridge Information Services where they have many different programmes that allow the manipulation of data to show whatever configuration I might want. Be it intra-day charts for 1 day to 21 days, daily charts with price feeds for one year, weekly charts for price feeds over 5 years and monthly charts for upto 12 years, or howsoever much data there exists for that particular stock. All these price data is accompanied by volume figures which get charted at the bottom. They also have the ability to chart volumes (and this one I like the best of all) , along various price bands that gets displayed on the lefthand side of the chart.Armed with that capability, I go hunting in the market, hoping to stalk the path taken by IH.My reckoning is if IH is active at a particular stock, his presence will be felt by the amount of volume that changes hands along a price band. You see, whenever collection/distribution takes place, it is done based on price, not time. If one decides to collect millions of shares one will naturally do it in within specified price limits, and continue to do so (of course taking market sentiment into account) irregardless of time taken.
Now, for the collection campaign to be successful, there must be enough volume passing through within those price limits. Not enough and the campaign maybe just a minor exercise. Plenty of volume changing hands and the campaign is usually a prelude to some future price assault.What I'm looking for in the chart is to find price congestion bands where large volumes have changed hands. Now if the price bands are near the top of the chart and volumes are high, you can bet that active DISTRIBUTION is taking place. Naturally, for that to have occurred, some previous collection must have taken place some time back. The result will be market peaks which could take the form of head-and-shoulder, double tops, triangles etc, collectively known as rounding tops. After sufficient stock has passed from strong to weak hands, price breakdowns occur, and the sheer weight of all that stock passed at the highs will cause prices to weaken once the bear market begins.The converse is ACCUMULATION. Look for price congestion bands near the bottom of chart and where prices, after a long and deep plunge, begin levelling off and seem to meander along a somewhat sideways pattern. The price ranges are tighter and volumes, while not especially high, are significant. There will even be occassions when the chart 'breaks' and prices drop down to new lows for a while, but only to come back within the observed price congestions.
The result will be market bottoms which could take the form of head-and-shoulder, double bottoms, rectangles etc, collectively known as rounding bottoms. After sufficient stock has passed from weak to strong hands, price breakouts or bull flurries occur as IH triggers the start of a new uptrend. With sufficient stock firmly tucked away in firm hands, the upside thrusts (initially on high volumes), will continue as IH walks the stock to whatever level desired.So large volume at the highs means distribution, while large volumes at the lows signify collection. That simple? Not really. There are many other tricks they employ (Carol had highlighted some of these in this thread earlier on) to throw the scent off and hide their tracks. What I use then is the weekly and monthly price/volume tables to determine their actions. Bear in mind that action is being taken around price limits, so you can spot that clearly when the price ranges start getting narrower and narrower such that theprice range between highs and lows on the monthly table tighten.
I look for a clear stretch of time when this occur and add up the volume figures, and if these add up to significant %age of the total issued capital of the stock, I start getting excited. For I know that the IH had been active, and I better be on guard for a new (and unexpected) trend will emerge.Naturally, if congestion price ranges were near the lows and large volumes had changed hands, the next trend will be upwards. I investigate more of the stock, conducting other TA studies like MACDs, RSI, Stochastics to determine if the timing is ripe for the planned move. What usually is the missing piece from this jigsaw puzzle is the TRIGGER. That is where, with the benefit of FA and an active imagination I set about scenario planning likely outcomes. I map out what sort of corporate actions would set up the stock for a market re-rating. Oddly enough, these usually produce outcomes that eventually become the subject of market rumours. Once done, I plan my entry into the stock and await the IH to show his hand.
Folks, there you have it, my personal method to track and spot winners and losers in the market. I hope it could be of use to you, for it has worked well for me. Thanks for the patience in reading this posting.Warren.
Postings by Mossie first, followed by posting by Warren *********************************************************************
A bit of introduction.In my previous postings, I have often referred to the work of "the invisible hand". It's important to understand who they are; their thinking which prompts them to buy when others are selling; and their motivation.Their buying action is often revealed in charts, displayed in such formations that are collectively called bottoming out or reversal patterns. Some if these individual formations are called Inverse Head and Shoulders, Cup and Saucers, Double Bottoms or "w" shape, extended bottoms or "u" shape, falling wedges etc.If you are not certain what they mean, I have linked to a glossary of technical terms http://www.asiachart.com/glossary.html. If you want fuller explanations, there are many good books around.
Why do prices gradually stop falling? Invariably, when the market has fallen a great deal, the stock becomes attractive to the "invisible hand". They are people who can see tomorrow's values TODAY!They step in to buy and absorb the selling and hence, arrest the fall of the share price. Over time (six months or more), their buying action creates bottoming out formations that I have mentioned above.Who are they? They are insiders, deal makers, fund managers; people who can see VALUE in the down and out company that nobody else can.Collectively, I also call such people SMART MONEY (as opposed to dumb money). They are legions of deal makers who have made their piles and now become players. They fund projects. They know balance sheets and they know how to restructure businesses. They know how to restructure debt, create holding companies to place their debt etc.They are the brains behind every operation. They employ lawyers,stock-brokers, bankers, accountants to do their legwork and due diligencebefore any action is taken.Now that the introduction to the "invisble hand" is done, I will begin my segment to "stalking the prey" using some life examples like Pertama.Do look out for them.
Continuing my thread, in order for the "invisible hand" to stalk his prey (stock), the stalker (buyer) has to think like the prey(the stock).Before I begin proper, all I am doing is share some thoughts of the stalker. But please, I don't claim to know the answers and I value all of your contributions.
In this instance, I am stalking Pertama. To think like the prey, it's important to understand J Harvey, the business-man. What makes him tick? Isn't he aware of the risks? Isn't he aware that S'pore is renowned for high rents? What is he going to do to preserve margins?Isn't he aware K mart failed in the past? Isn't he aware that there is competiton in Courts, Safe, Pennslyvania House, IKEA etc etc? How does he intend to create his own comparative advantage against the others.How what he do to survive against stiff competition in Australia? Was it by pricing competitively, or raising service levels, or a combination of both? What did he do to compound 30% in his share price over six years? What MARGIN of SAFETY do I the stalker have, if I catch my prey and realise that it's not exactly what I caught (that is, got it wrong). Is there intrinsic value in the prey? Is the cash of $27million sufficient as a buffer? What does George Goh of Ossia know?? He is, after all, a FELLOW STALKER!I am not disputing your concerns on Pertama. But I feel that if I can answer those questions and put myself in Jerry Harvey's shoes, I know what are the pitfalls and, therefore, prepared to ride out the business risks with him.
You see, the stalker may be monitoring SI and all our postings.After all, SI is becoming one of the main financial portals. It is all part of the stalker's game to drive up the share price, entice ALL THE SHORT TERM PLAYERS INTO THE FRAY AND then DUMP the shares to you.Please remember prices condition people's minds. If a stock price goes SOUTH, people say "get me out". But if prices go NORTH, everybody, house traders etc will shout "Blood" and go into a feeding frenzy.(Remember, most of the time, the stalker spends most of his/her time waiting, studying, seeking information about the prey before he pounces). Again, I profess not to know much about the retail industry and I value your feedback. Your input have provided gaps in information that I need to bridge with people who are in-the-know.
However, my sources in Australia have told me that HN practices an innovative franchise arrangement that allows staff to share in the profits of a store. Unlike a traditonal franchisee relationship, staff are encourage to enrol as franchisees without the need of coming out with their own capital. This instantly gives the potential franchisee a sense of ownership without capital being a restrictive factor.In Australia, HN's staff are legendary in their service commitment. Why? Because they NO longer see themselves as staff but as OWNERS of their own businesses.Next, they are coming with an innovative financing scheme that allows the customer to pay the same price for products regardless of whether the purchase was made by cash or hire purchase.
These innovative schemes have been practised in Australia for years but, I guess, have not been followed in Asia.Also, my friends in Australia told me that HN's staff practice a motto: do all you can to get the customer back into your shop. What do I mean by that? If you had purchased a phone from vendor A (somebody other than Pertama), and if that phone breaks down, they are prepared to take in that phone for repairs at no cost. How about that for service? Suggest that to Singtel or M1? They will flip!!My point for sharing is this: competition is everywhere and in every industry. You and I are in business and we know competition is a given. But it takes somebody who thinks totally "out of the box" to rock the very foundations of that industry. The person who keeps questioning the assumptions and is an out-of-box thinker constantly innovates and keeps the customer coming back into the shop.Jerry Harvey is one such visionary who I feel comfortable to bet on. He has the track record to back it up.Frankly, I am looking forward to their arrival because I am quite tired of the poor service quality that I have been receiving. Service level in S'pore needs to raised. One way of raising service level is to make employees feel like owners through options, franchise arrangements that do not require them to come up with capital etc.
Since I am on this topic, let me cite another example. Today, I went to Funan looking for some software. The chap who served gave me smiles and took pains to answer all my questions. I thought that was great. But the moment the sale was made and he left me to the cashier, the cashier's rudness undid all the good impressions created. My guess is that the salesperson is incented by commissions but the cashier wasn't. And it really showed.
In this posting, I will be introducing another strategy that is the favourite of "the Invisible Hand".This strategy can best be described as using "Other People's Money" or OPM. OPM is centred around the principle of LEVERAGE, making your money work hardest for you, doing more with less, getting more returns from $1 of capital.If you are in business, you will be familiar with leverage. The most successful businessman use OPM and, I daresay, your success or failure as a businessman would depend on whether you mastered the art of using OPM. The most basic form is borrowing from banks for capital to start a business, mortage to buy a house etc. Seldom do you buy a house with 100% of your capital. To get the "maximum" return possible, you use a combination of your own capital and other people's money (in this case, bank debt).
The more advanced form of using OPM is practised in the stock market. How is this so, you may ask?Well,when you list your company, you add another currency. That currency is the stock price. Having a company listed and having that new currency (stock price) is equivalent to adding another weapon to the stalker's arsernal to negotiate deals, issue derivatives (like warrants), serve as collateral to banks for addtional debt and so on. Also, having a public listing allows a stalker to "borrow" from the public by issuing rights issues to the public, enticing them with warrants and other freebies. What I have stated above is nothing new to most of us. What I have done is encapsulated the principal of leverage.
However, understanding how the stalker uses OPM (leverage) in the stock-market will, hopefully, prevent you from falling into one of the stalker's schemes. This is one of the hardest concepts to explain in a forum such as this. So please ask me to explain any concepts that are unclear. I look forward to learning from one another. Yes, we need constant reminding of the workings of the "invisible hands". Remember, money is always made on the way down. "Invisible hands' are not charitable organisations. They will not buy and chase prices up. Why? Because that will only benfit every one else. They BUY only when prices fall. Why? They are buying somebody else's losses (or cut losses). "Invisible hands" understand the psychological effect of what prices do to people. They know that prices condition people's minds. They know when punters are disinterested when prices fall and how punters will chase and get all excited when prices move up. They know how to use this info to amke $$ for themselves.I make no apologies for repeating this message again and again. Forumers must be made aware how the Mr Market robs those who was disinformed!!A monumental posting on the IH written by sifu Warren. Reproducing here for archival purpose.
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Price & Volume studies
Elle,I thought I'd add my 2.5c worth of how I use price and volume studies to detact the action of IH. I use the charting system by Bridge Information Services where they have many different programmes that allow the manipulation of data to show whatever configuration I might want. Be it intra-day charts for 1 day to 21 days, daily charts with price feeds for one year, weekly charts for price feeds over 5 years and monthly charts for upto 12 years, or howsoever much data there exists for that particular stock. All these price data is accompanied by volume figures which get charted at the bottom. They also have the ability to chart volumes (and this one I like the best of all) , along various price bands that gets displayed on the lefthand side of the chart.Armed with that capability, I go hunting in the market, hoping to stalk the path taken by IH.My reckoning is if IH is active at a particular stock, his presence will be felt by the amount of volume that changes hands along a price band. You see, whenever collection/distribution takes place, it is done based on price, not time. If one decides to collect millions of shares one will naturally do it in within specified price limits, and continue to do so (of course taking market sentiment into account) irregardless of time taken.
Now, for the collection campaign to be successful, there must be enough volume passing through within those price limits. Not enough and the campaign maybe just a minor exercise. Plenty of volume changing hands and the campaign is usually a prelude to some future price assault.What I'm looking for in the chart is to find price congestion bands where large volumes have changed hands. Now if the price bands are near the top of the chart and volumes are high, you can bet that active DISTRIBUTION is taking place. Naturally, for that to have occurred, some previous collection must have taken place some time back. The result will be market peaks which could take the form of head-and-shoulder, double tops, triangles etc, collectively known as rounding tops. After sufficient stock has passed from strong to weak hands, price breakdowns occur, and the sheer weight of all that stock passed at the highs will cause prices to weaken once the bear market begins.The converse is ACCUMULATION. Look for price congestion bands near the bottom of chart and where prices, after a long and deep plunge, begin levelling off and seem to meander along a somewhat sideways pattern. The price ranges are tighter and volumes, while not especially high, are significant. There will even be occassions when the chart 'breaks' and prices drop down to new lows for a while, but only to come back within the observed price congestions.
The result will be market bottoms which could take the form of head-and-shoulder, double bottoms, rectangles etc, collectively known as rounding bottoms. After sufficient stock has passed from weak to strong hands, price breakouts or bull flurries occur as IH triggers the start of a new uptrend. With sufficient stock firmly tucked away in firm hands, the upside thrusts (initially on high volumes), will continue as IH walks the stock to whatever level desired.So large volume at the highs means distribution, while large volumes at the lows signify collection. That simple? Not really. There are many other tricks they employ (Carol had highlighted some of these in this thread earlier on) to throw the scent off and hide their tracks. What I use then is the weekly and monthly price/volume tables to determine their actions. Bear in mind that action is being taken around price limits, so you can spot that clearly when the price ranges start getting narrower and narrower such that theprice range between highs and lows on the monthly table tighten.
I look for a clear stretch of time when this occur and add up the volume figures, and if these add up to significant %age of the total issued capital of the stock, I start getting excited. For I know that the IH had been active, and I better be on guard for a new (and unexpected) trend will emerge.Naturally, if congestion price ranges were near the lows and large volumes had changed hands, the next trend will be upwards. I investigate more of the stock, conducting other TA studies like MACDs, RSI, Stochastics to determine if the timing is ripe for the planned move. What usually is the missing piece from this jigsaw puzzle is the TRIGGER. That is where, with the benefit of FA and an active imagination I set about scenario planning likely outcomes. I map out what sort of corporate actions would set up the stock for a market re-rating. Oddly enough, these usually produce outcomes that eventually become the subject of market rumours. Once done, I plan my entry into the stock and await the IH to show his hand.
Folks, there you have it, my personal method to track and spot winners and losers in the market. I hope it could be of use to you, for it has worked well for me. Thanks for the patience in reading this posting.Warren.
Sunday, May 13, 2007
Schroder's BRIC fund
Schroder's BRIC is all about emerging markets. BRIC stands for Brazil, Russia, India and China. All 4 markets are considered at a very fast pace and the potential is great.
I bought BRIC a little while after its inception early last year. To be more exact, I bought it in late Apr 06. It is now a little more than one year and with its present return of 21%, I am more than satisfied. It's a pity that this investment was not with my money. Anyway, I have sold all my BRIC units.
I again bought BRIC using my CPF in late Jan 07. My rational then was to get as much returns as possible in a very short term (2-3 months), hopefully before the expected correction. Unfortunately, the correction came before I could realised the profits. When the correction came, my returns was about 4% and after the correction, it was minus 10%. The fund basically lost about 14% within that 1-2weeks. Luckily, it quickly rebounded within the last 2 months. Though it has yet to reach its peak(before the correction), it has given me 3+% within the last 3+ months. Though it might not look much, for one, if you compare to the CPF interest, 3+% is definitely better than 2.5%. Furthermore, this 3+% was achieved within 3+ months. Annualised it and you will get 10+% pa.
For now, I am clearing all China related funds, as i still strongly believe China will trigger the coming correction.
I am thinking of exiting from my Henderson Asia Pacific Property fund, but as it gave dividends on the 15 Nov 06, I am thinking of holding on for a few more days to see if they give another round of dividends on 15 May 07.
I bought BRIC a little while after its inception early last year. To be more exact, I bought it in late Apr 06. It is now a little more than one year and with its present return of 21%, I am more than satisfied. It's a pity that this investment was not with my money. Anyway, I have sold all my BRIC units.
I again bought BRIC using my CPF in late Jan 07. My rational then was to get as much returns as possible in a very short term (2-3 months), hopefully before the expected correction. Unfortunately, the correction came before I could realised the profits. When the correction came, my returns was about 4% and after the correction, it was minus 10%. The fund basically lost about 14% within that 1-2weeks. Luckily, it quickly rebounded within the last 2 months. Though it has yet to reach its peak(before the correction), it has given me 3+% within the last 3+ months. Though it might not look much, for one, if you compare to the CPF interest, 3+% is definitely better than 2.5%. Furthermore, this 3+% was achieved within 3+ months. Annualised it and you will get 10+% pa.
For now, I am clearing all China related funds, as i still strongly believe China will trigger the coming correction.
I am thinking of exiting from my Henderson Asia Pacific Property fund, but as it gave dividends on the 15 Nov 06, I am thinking of holding on for a few more days to see if they give another round of dividends on 15 May 07.
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