Able to foresee and able to capitalize

It has been sometimes i did not update my blog, very sorry to all the viewers.For the past few months, thing has been stagnant until recently.

Yes i manage to foresee it is only the correction for stock market not the beginning of the bear market. However able to foresee and able to capitalize on it is a seperate issue. As i mentioned previously, i did not purchase any stock for past few months. Indeed my stock portfolio did not change for more than 1 year. My core holding - Hartalega, Public Bank and Allianz did not perform well in term of share prices, but their scorecard in term of financial results are satisfactory.In year 1929, Philip Fisher also managed to foresee the market was going to collapse however he did nothing. Instead he was looking for stock which was relatively cheap or stock that yet to go up. He was losing money, although he was rigth that market eventually collapsed few months after his prediction.I managed to foresee HLFG is going to be the winner of Hong Leong Bank - Eon Bank saga, but i failed to capitalize on it. I said Astro and Aeon Credit is attractive but i also failed to purchase any. I also made a few bad call like YTL Cement, and luckily i did not buy. All these are recorded down for me to review for my future investing decision making.Year to date i still barely making money but only dividend received.

In year 2008 i started to invest in property, and going aggresive by year 2010. What i want is to diversify my investment vehicle. I was lucky that the property market was booming starting from end 2009. Some of my investment still yet to see the result but what can said is property investing is profitable. You need to be selective and not over leverage.

Similar to my stock investment, although the result is not satisfactory currently but i still have confidence. This because i foresee my stocks holding going to make more money (business profit) than now for years to come.

Comment and Opinion

I did not manage to capitalize on the recent share price correction. Limited fund available at the moment and this fund also reserve for my property investment. I still of opinion that the sell off is only correction not the beginning of the bear market. I aware that many will think otherwise. Share market tend to correct every 3-5 years and this time should be also correction not recession. Some investors already feel the pain, especially those invested in the 2nd grade stocks. In order to survive in the stock market and make money always not an easy task. Over more than 10 years of investing experience tell me to only stick to really well managed companies is the way to weather through the market fluctuation. One should always take a long term perspective and prepared for the up and down of the market. If you ask me some of the stocks are quite attractive like CIMB and Aeon Credit. I sold one service apartment recently and reinvested into a terrace house. This is big investment for myself, hopefully i made a correct choice, instead of buying share i vested in property. Seldom people buy terrace house for renting purpose but i plan to do that. Recent property price hike make some of the landed sub-sale look attractive as compared to newly launched condo or landed.

Reporting season - comments

The reporting season is over. Quite sometimes i did not review my position, my share holding still the old ones, Hartalega, Public Bank and Allianz. Hartalega posted record quarterly profit of 55mil, the highest among glove players. What i foresee last year happened today as latex glove producers are all suffering but nitrile glove producer is enjoying. However, the market still fail to appreciate Hartalega....again. Although it had running a full capacity, people are blaming it lack of room to expand. For those are running at 60-70% capacity are regard as got room to improve. I really cannot understand the logic especially these arguments are from the so called "analyst". Hartalega had rolled out additional 2 lines at Plant 5 and is planning to build the capacity. After all these materialized, it would it capacity by 35% with the order is waiting to flow in immediately. Hartalega is not that kind of company able to grow by M&A due to its patented in-house production technology, which made them so efficient and lowest cost producer. If they decided to take more market share in future, it would kill off all competitor by lower its margin by a "few percent only". Yes.....is all its competitors. I truly not able to understand why Topglove is more pricier than Hartalega by close to market capital by almost 1 Billion. The market is so illogical!

Public Bank also posted wonderful results, it should be able to make EPS of 100sen this year. It is only trade at prospective PE of 13. Only PE of 13 for one of the best managed company. Once i joke with my friend, why he want to buy Well Fargo, since Public Bank is better? Growing profit quarter by quarter, some said "slow and steady" but i think it is not true. It is growing at the rate of mid teen and above for years you guys still called it slow and steady??

Allianz is making 70mil for 6 months ended 30 June 2011, it is now making more money than LPI, without taking into the account of any surplus transfer from life insurance. Which its market capital is also 1 Billion less than LPI. Is matter of time Allianz will fetch a comparable market capital with LPI.

Although the market is highly fluctuated currently, but i still confident that my share holding is able to withstand that and beat the market.

Owning Asset?

I am of opinion that the landscape of malaysia economy is evolving very fast. The wealth is transfer from the group of lower income to middle income, and from the middle income to group of rich. With asset (especially land and house) appreciated very high and fast, we may face the situation something like Hong Kong and Singapore, where lower income and middle income group struggle to own a shelter. While the rich enjoy the most as their asset being land, house or share appreciate substantially. If this situation persist for years, it is very dangerous to those did not own any asset. Keeping cash is something not wise, provided you are prepared to snatch some asset if prices corrected.

Some think that property market today is a bubble, i do agreed partially especially those recently launched high rises. However, material prices and land cost also increase recently although is not as high as the property prices. I will not surprise if Bank Negara implement more control on property purchase.

I am worrying for those do not own any asset being share or property. Asset free person going to lose the most as asset price keep on inflated. It is true that the market can move up and go down, but if you failed to capitalize, then how? Because property is trending up over long term. Similar to good stocks also, long term it is trending up.

I am of opinion owning asset is way to move ahead. At least you get hurt some and gain some.

The Market and Me

The market is highly fluctuated at the moment. Put it this way i am not well prepared at present. My cash level is not high enough to take advantage of it. I still not willing to lower further my cash level until that is really a big steal. If the steep drop of share market happen in September or October it would be better as my source of fund will flow in by then. To me this round of sell off is the correction at the bull market as the profitability of businesses is not affected, only the prices of share went down. It is an opportunity to be exploited.

Besides, i also need fund for my property investment. Although i decided to pull out one of the condo i booked earlier this year due to pricing issue, i am still looking for investment elsewhere. This year i still not buy any property yet as my decision is hold back by this earlier booking. Since this is off, i am prepared to move ahead. There are some similarity between share and property investment, there are only buy the good ones and hold until the market appreciate it. Although the selection criteria are different but the principles are the same.

Both Public Bank and Hartalega reported fabulous financial results but the market still did not appreciate them. As the market is not efficient, however it long term it will. I still believe in this if not i will out from share market long time ago. The price performance of Public Bank and Hartalega is nowhere close to the performance of GLIC companies. Some say they are vomit blood companies as their share prices barely move. I still long on both counters not because i want to prove them wrong but to make money. I wont sway my believe and strategy. As long as they deliver good financial result i am prepared to hold for long term.

I did not update my blog for months because i have nothing to say. Buying share is not day to day business, most of the time doing nothing is doing somethings. My family members and friends are also at the same boats, i rather being conservative to make sure the boats are safe.

YTL Cement

Construction materials are some of the items to be benifited from the ETP and to be specific Greater KL. If the above are successful implemented, Malaysia construction or infrastructure industry set to pick up or boom. My opinion is good time to buy YTL Cement with reasonable valuation. Talk in detail later

Patience and Time

Some of my closed friends had started grumbling on the share prices of Hartalega and Allianz, but not Public Bank as they dont own it. In fact, the share prices of Hartalega, Allianz and Public Bank are sideline for months, even though all of them reporting impressive financial results. Every time they grumble to me, i told them to be patient as once the share price go up it will not stop.

Moving of share prices is illogical and irrational in short term, as it purely depend on the "buying interest" of the mass investors, it had nothing to do with the financial performance of individual company. A company can produce a wonderful results but without "buying interest" their share price will be sidelined, until the mass investor realised its potential, then it will be traded at "fair value", after optimistic kicking in it will be traded at higher PE valuation, finally traded at premium when investor priced in the future prospect.

I have mentioned previously that the only advantage a tidy retail investor possess in order to outperform the market is time. To beat the market you need to have patience, if the companies you vested are good then time will be at your side. As Warren Buffett had said "time is friend to good company but foe to average or below average companies". So let time work for you, over a long duration, good company will make more and more money. A company that making more money year after year will "worth" more and more as time will work for it. Or time is money!

A closed check of the financial results is a must to ensure that the companies you vested is good or average only in order for the above principle can be applied. This is a separate issue, not in the discussion today.

A company that is unable to increase their profit over years, an example BAT, it share price hardly can move over years, as time is not working in its favour. Althought it still paying out good dividend, but please construct a discounted cash flow for BAT, it will not be a surprise if you noticed that the future value is lesser that today; even without considering the inflation.

Buy only company that able to grow over a long duration for "time" to work for you.

Add position to Public Bank & Hartalega

There is nothing happen to my portfolio for the past months. However received new source of fund recently, add position to Public Bank and Hartalega. Public Bank just announced a very Strong 1Qtr results yesterday, net profit up by 20%, look like it going to make EPS of 95sen for year 2011. At the current price, it deemed quite attractive, PE is less than 14 for a well managed company. Many may not like it but not me.

As for Hartalega, i am quite optimistic that it is going to announce another record net profit, EPS can be around 53sen easily. It is going to built its plant No. 6 to expand further. I like company that able to grow organically, Hartalega is one of that in Bursa Malaysia. As i mentioned previously that a company only can fetch a higher PE valuation if it able to grow (in term of net profit) and pay good dividend. I am still waiting for the market to appraise it as grow stock valuation.

For property, i booked one more condo, nothing conclusive yet. Able to know the outcome or selection by next month only.

Comments

In the latest Berkshire Hathaway annual report, Warren Buffett talk about conserving an emergency fund for rainy day. It is very true and it is able to pull you thru during bad economy or crisis. Indeed it should form part of our portfolio management and the level of cash should depend on our strategy. This is crucial when your capital base grew bigger and your monthly income is insignificant as compared to your capital. (I had talk about this previously)

Crisis will come in every different forms each time, only a few are able to foresee that. Layman like us, is better to have some strategy in placed. In year 97-98, i was badly hit. Luckily my capital is very very small, that is my pocket money during college days and i knew nothing about share. I bought share merely follow friends recommendation. In year 08-09 i am well prepared for the bad time, was able to snatch some stocks at steal price. Selecting stocks in bad times is easy because even good companies will traded at floor price, however buying is tough. You need to have gut to go ahead which is against the crowd.

In bad times, most of stocks appear to be not safe, you are worrying that they might drop further. In reality it is safe to bet, is all human nature make you feel that it is not safe. Everything appear to be not cheap.

However in good times like now, most people feel that a lot of stocks it very attractive at current prices. They feel that some stock traded a a single PE is undervalue, they assume that this group of stock should command a better valuation. What a turnaround! They start to talk about the future of the company, the balance sheet, cash per share, and etc.

Just wonder why the stock selection criterion has changed so fast!

Comment and opinion

CNY is over, have to back to business as usual. Vet through most of the analysts' top pick for the year of rabbit. Surprisingly only one research house has picked my favorite counter - Hartalega. Only one analyst in The Edge highlighted Allianz, none has pick Public Bank. Ha..ha... what can i say? Absolute nothing. Most of the analysts tried to pick a winner for a short period, they need to prove themselves in a short period to build up their reputation or so that they are able to come back next year telling what their buy list for the following year. Is all different strategy at all. My strategy is to pick up stocks that able to generate substantial profit increase for the coming years. Sometime the stock i bought does not "move" for more than a year, but i still stick to it. Eventually it did move up and achieve the return i wish.

So do i have the pick for this year? I also don't know, as i most probably will stick to my holding or add my position in Hartalega and Public Bank. If market presented a good buy, i will take the opportunity. There are nothing cast in stone. I also follow closely on the saga of Hong Leong Bank - Eon Capital, it look like the deal most probably go through at the expense of Primus. HLFG appear to be the eventual winner.

CPO price is close to its historical high, however the plantation stocks did not enjoy the rich valuation compare to 3 years ago. Maybe investor already aware that no matter what it is still a commodity and cyclical in nature. Besides, there are no value pick at the surface, as i seldom buy these kind of stocks.

The Greater KL unveiled by the PM is making its present, property stocks are rising. Soaring property prices is good for those already vested, bad for the awaiting to get into it. Maybe i will try to get one more for this year, as the prices of future years appear to be more scary. Of course there are so many argue that there is a bubble, i only partially agree on it at the selected locations. Soaring prices is not equivalent to bubble, affordability is the issue.

Review of Year 2010

For year 2010, i thought i am going to under perform the index, however the last minute "window dressing" by the market has help to improve my return to 21% as compared to index at 19.3%.

My biggest mistake for the year was add on position to Topglove, although i still not suffering any lose of capital based on average purchased price, however it has affected me on the opportunity cost. I failed to foresee the adverse future of latex glove which is diminishing and the outlook will remain unfavorable in foreseeable future. A bleak outlook of latex glove means bright outlook for nitrile glove as the market is not going to shrink. I still positive on Hartalega. Despite the fluctuation of share prices, surprisingly it still beat the market.

Public Bank is slow and steady. It make feel safe to charge ahead - means have buffer to pick relative smaller growth stock like Hartalega. As i mentioned previously, it not going to fly but it is a safe bet.

Allianz, surprisingly also align with market performance due to i was lucky to pick it quite low. Market will appreciate it after it might declare higher dividend. It still relatively cheap as compared to LPI.

My other blunder will be JCY, i should stick to my initial intention, which is to sell it after IPO. I applied the IPO with intention to make use of my idling money, but after that i shift my strategy because one of friend work at WD told me it might be a good bet since it was dominating the supply to WD and Seagate. Sometime in stock market even insider can't help much.

Based on the current market condition i am reluctant to commit more capital but also not thinking to reduce my exposure yet.