Timed the Market

A lot of Warren Buffett followers argue that timing to buy stock is less important as compared to buying under value stock. According to this group of investors, they are prepared to ride through the ups and downs of the market. If a stock is brilliant, they don't mind to practice buy and hold strategy. To them finding a good stock is more fruitful as compared to trying to time market entry.

I am a big fan of Warren Buffett. Did Warren Buffett timed the market? I had asked myself this question previously. My conclusion is Warren Buffett did timed the market. He always bought stocks during down turn and practice buy and hold for long term investment afterward. So people saying Warren Buffet did not timed the market is not right. The different is he only timed the market during crisis. He seldom time for a minor correction because short term up and down is unpredictable. However major correction is unavoidable, that is why he is prepared with huge cash pile for big buy during crisis. He bought Washington Post in year 1974, Coca-cola in 1988 and most recent GE and Goldman Sachs in 2008. If he did not time the market then why he always purchased stock at downtime?

I did write a post regarding a sizable correction every 3-5 years and a major correction every 10-12 years. So should we take advantage of it or ignore it totally??

I sold 70% of my stocks at mid year of 2008 and start buying back from end 2008 until early 2009. Just purely luck. Good timing did help a lot.

Don't forget that we, small investor, don't have constant big cash flow to invest as compared to Warren Buffett. Your monthly saving might be negligible compared to your portfolio, how you going to rely on that? To me, portfolio management and applying appropriate strategy are very important. Especially when your portfolio is already sizable.

Therefore, don't time the "kacang putih" drop, but time for significant correction. Normal day just hold on to your good quality stock, preferred growth stocks or growing stock (mid teen is acceptable) with good dividend.

Value investing did not mean that you cannot time the market.

I wrote this because a question posted to me.

Glove Industry

Few days ago, Am Research issued a report on the glove industry. It raised its concern on the over expansion of the industry players like Topglove, Supermax, Kossan, Hartalega and others. Good job by Am Research, it pointed clearly that there might be margin squeeze due to the over expansion which may cause supply excessively more that demand, appreciation of Ringgit Malaysia and increase of raw material cost. It argues that the profit margin of these companies might be “normalized” to previous level before epidemic of H1N1.

A friend of mine call me, he said he intend to take this opportunity to buy more Topglove and Hartalega. I asked him, do you agree with the arguments of Am Research? I warned him that what Am Research pointed out make sense at surface. I said if you are no sure than what is the reason to buy more, then don’t buy? Then he asked for my opinion, my view will be as below:-

1. This industry still will grow (this market will never shrink – especially for disposable type). There are still huge potential from China and India market due to their level of awareness. The demand of latex glove from these market will increase substantially. While nitrile glove will gain more footings in developed country like US & Europe.

2. Over the past years, glove makers are growing under this so called ““normalized” period of time. So what is so special about the current state of demand over supply for the previous few months? Public Bank is growing year after year although margin is under squeezed, because the overall market is still growing; and it is able to eat into other players’ market share. Similar to glove industry, the most efficient player (latex glove – Topglove, nitrile glove – Hartalega) will grow more than the average growth rate of the industry. They are able to take market share of others. Stay away from inefficient players.

3. The business franchise of this industry still intact. There is no substitute for their product, it so simple. They also still able to pass the cost increase and the Ringgit appreciation to customers. Which business in Malaysia possesses these competitive advantages? Just let me know, sure I will bet big on that.

4. Trust the best captain of this industry instead of analyst. At no time an analyst will know the business better that the player. Analyst will remain as analyst; the businessman will make more money. As investor just applied business-like investment approach and strategy.

I definitely welcome the price dropped, and ready to buy more if the price is right.

两个知讯

经常放工回家的时候都会听 988 的 6点财经短讯，.....今天综合指数报 1300点，上升股有 275支，下跌股有 280支，380支股平盘，560支股没有交易......哼我到底有没有听错，有五百多支股没有交易？？ 现在是什么行情了，已是1300点了还有那么多股没有交易？

最近 bursa malaysia 刚刚一些交易数据，本地机构投资公司的交易共占了总交易量的 55％，外国基金占了25％，而本地散户只有15％。

看了以上两个知讯，你有何感想？

我的解读，
1. 股票流动量的确是个问题，可以说只有大概 20％ 的股票是 efficient罢了，不要以为买了冷门的 ＂价值股＂就一定会有钱赚。

2. 没有机构投资公司留意的股票是不会上的，尤其是小资本的公司，本地加上外国的机构投资公司已经占乐 80％ 的交易了。