Friday, December 31, 2010

Wrapping Up 2010

(Click on the image to see details)

Annualized compounded return for Turtle portfolio is about 10% or 0.857% per month. I don't take this result too seriously. It's just an indication that I have allocated the money in the right place in relative to our assets such as bond, money market, etc. Seeing how the seed money of 3,000 with diciplined monthly saving of 888(a few months were only 620) grow to almost 40,000 is coming from quite a long way.

I hope I can continue to head in the right direction in 2011 based the game plan that I have laid down(see my yesterday post). Cash level is quite close to 1/3. I am pretty much overweight China for whole of 2010. I am lucky that I have a few home runs to compensate for non performing Chinese related stocks or else I will be eating dust. I have no regrets and will need to continue to stay patient because the big cap Chinese stocks are cheap. It is selling for roughly 10X PE with double digit growth potential in the next few years.

I need to make some tough decisions to rebalance some of my holdings into high dividend stocks. Hmmmm ..... I have a few "dogs" that that I need to lighten up before 1H 2011 or I need to start buying high dividend stocks for whole of 2011.

I may have made a few wild swings but overall valuation and fundamentals approach have served me well.

I want to take this opportunity to wish everyone A Happy 2011 New Year. Take Care !

Thursday, December 30, 2010

Turtle's 2011 Investing Strategy

I was at first very tempted to start this review by citing all kind of fantastic charts with standard deviation, historical PE, length of bull runs and etc, etc, etc. Then I decided not include any of them because these charts are useful in stable environments. BUT they are useless in chaotic and confusing environments.

Two things will remain the same, the developed world is still undergoing deleveraging. Environments like these will force them to meddle with the markets -- i.e. either having more QE or devaluating their currencies.

In the ugly beauty contest, emerging markets appear to be prettier than their developed markets nieces. The cause and effect analysis is more QE or extended period of low interest rate in developed markets(cause) mean the higher the emerging markets/assets(effect) and volatile commodity prices(effect). Aha did I said volatile, yes, the only thing that I am very certain is this. 2011 is going to be a very more volatiles. Environments like these will be heavans for TRADERS. OMG, did I just say TRADER? Yes, you got to have gut to ride on momentum, take profit, cut losses ........ There will be time that people got scarce out of nothing. We all need to understand that LIQUIDITY can come very fast and intense but LIQUIDITY also can REVERSE very fast. At the point of they are thinking that they are going to die, SUPERMAN will come out of no where to rescue them. In other words, we will see Mr. Market a lot more active next year.

So, navigating through 2011 will be simple. I will make sure that I have three buckets: 1/3 of money in trading, 1/3 of cash to take advantage of Mr. Market 1/3 of cash in high dividend stocks. I will need to rebalance my portfolio soon.

High dividend stocks that I like are Maybank, Public Bank, LPI, BJ Toto, Amway, Alcom, BAT, PIE, PET GAS, Petronas Dagangan, UAC, DELEUM, NCB, The Star, TM, MPI, YTL Power, Mesin Niaga, Digi, Maxis and Bi Port and REITS except those with heavy office exposure.

Three of the dogs that have been unloved are Chinese(CIMBX25) and Japanese(Nikkei 225 index in Singapore Exchange) stocks and iCapital.

Wednesday, December 29, 2010

My best 2010 investment: Canon EOS 550D

Canon EOS 550D, Rebel T2i. Sounds pretty much like the Terminator. Scary it might sound but surprisingly, very friendly and intuitive for people who can be easily intimidated by gadgets. I picked up this camera from Gurney Plaze just a few days before we went for holidays. With less than 30 mins tutorial by the sales person and carrying a small manual, I managed to master the basic and shot some great pictures. This shows how intuitive it is. What I like the most is the sport mode. It can capture the actions of my daughter running around, cycling, giggling, etc --- perfectly. The quality of the pictures was superb. It's neither too static nor blurry. It captured the carefree spirit of the kid.

It cost me $ 2,899 with 8G of memory card, a tripod and micro fiber cloth. This is my first DSLR and I must confessed that this is my best 2010 investment pick. Between this camera and an iPad or my other shares pick, I must say this one win hands down. I am glad that I did not pick up the iPad and force to use my 5 Mega pixels hand phone(EOS 550D has got 18 Mega pixels) to capture the precious holidays moment.

See the video, you will know what I mean. Please understand that I am not endorsing the horse race gambling but this review just popped up on top when I Googled it. This review brings up the essence of what this camera can do for you. This is a medium end DSLR and not a very high end but good enough for amateur photographers.

By the way, going holiday the old fashion way was very satisfying. No computer and Internet, switched off the handphone, NO STOCK MARKETS, no TV, no newspaper, etc. This forces us to talk and listening to one another.

Now that I have a fresh mind, in the next few days I will try to tackle the question that many readers care a lot : What are my investment views for 2011? Stay tuned.

Thursday, December 23, 2010

In holidays mood

It's all time low. I have posted 7 postings only through December 23. In part, I was busy traveling in the last 2 months. The other reason is a lot of efforts needed now to uncover "undervalued" stocks. Since I am working on a very compressed schedule, it's time that I don't have.

It's Christmas time. It's time to slow things down a little and do a bit of reflection. I don't want to pretend to be religious and on and off you can see I am just an ordinary man -- capable of sinning or thinking/doing worldly things. But no matter what happen, I still have a duty to tell the world that God has given his only Son to the world. That is the greatest gift that mankind has ever received. I will remind myself constantly, instead of just sitting on the receiving end, we ought got to make some sacrifice, big or small, learn to give.

My family and I will take a few days off -- real time off. I asked my wife, what Christmas gift that will make her really happy yesterday. She told me, she will be very happy if I don't bring my notebook along during this Christmas break. My instant reaction was no way. I struggle a little bit, if that is what will make the whole family happy, why can't I sacrifice for them. After all, turning off the stock markets for a few days will have no material impact to my portfolio. If my work collapse by just turning off my notebook a few days, then I have not done my job as a manager. That mean I have not given enough time to coach my people year round. I know the stock market will not collapse, I know my portfolio will be OK, I know my people will be able to do things by themselves because I have spent enough time to coach them. So it's kind of irrational side of me wanting to feel in control. Well I suppose if I know the truth, the truth will set me free. Just learn to trust the One above, trust less on myself. Just give up wanting to control things. So, I told her that I will be gladly agree to her Christmas wish. I will not be bringing my notebook and business megazine and bring only Bible. They are so happy that I will give 100% of my time to them. I never see them this happy for a while. When I start giving, I am receiving as well. I am feeling very liberated.

To all bloggers out there, thank you for sharing your thoughts. I did benefited from some of the gossips, analysis, news curating, etc. I hope my sharing have benefited you all too.

It's time that I hit the pusblish post button, switch off my notebook and go holidays. Have a blessed Christmas.

Tuesday, December 21, 2010

DRB-Hicom inks collaboration agreement with VW to assemble CKD cars in M’sia

(The Edge) KUALA LUMPUR: DRB-HICOM BHD [] has entered into a collaboration and license agreement with Volkswagen AG (VW) and Volkswagen Group Malaysia Sdn Bhd (VGM) to collaborate in the assembly of Volkswagen vehicles in Malaysia.

Under the agreement, VW has granted DRB-Hicom the the exclusive, non- assignable and non-transferable right to assemble selected completely knocked down (CKD) VW models with VW’s specifications and quality requirements in Malaysia.

For its part, VW will supply CKD kits and provide relevant engineering and technical support to enable DRB-Hicom to assemble the CKD models and their parts.

DRB-Hicom will then sell the products exclusively to VGM’s subsidiary for onwards distribution and sales, and it will also import completely built-up VW brand passenger cars which in turn would be sold to VGM’s subsidiary.

DRB-Hicom said on Tuesday, Dec 21 that by becoming an exclusive assembler of selected models of VW brand passenger cars in Malaysia, the collaboration would allow it to expand its vehicle assembly and component manufacturing activities and further strengthen its position in the local automotive industry.

“The collaboration will also allow the group to participate in VW’s future export programme for certain Volkswagen brand passenger cars to the Asean market,” it said.

The company said the collaboration expenditure would be funded by internally generated funds and bank borrowings.

DRB-Hicom said the parties had agreed that the collaboration’s expenditure would not exceed €133.7 million.

When I was traveling in China, the streets were full of Volkswagen cars. Volkswagen has done a wonderful job there. Will it be able to duplicate the success in Malaysia or South East Asia?

Malaysian market is getting too crowded. For a start, they will bring in Jetta and Passat and aim to install capacity of 40-50,000 which is about 8% market share(tough to achieve this number overnight). It will not have immediate impact on Proton sales except may be Proton Perdana. They are more in direct competition with our so called "Proton" upgrader. It will have more impact on Vios, City, Camry, Accord, etc. To some extend it will give Naza a fight in Peugeot's CKD cars or Mercedes C class.

Volkswagen builds very solid quality car. However, they need to overcome some perception issue as most people still perceive European cars are not as reliable, fuel economy as Japanese car. Many also think the maintenance cost is high. You will be surprised if you talk to some of Volkswagen owners. If they give you 5 years guarantee. I will can tell you they are extremely competitive. If they can survive in China market, I can tell you that these guys are good.

They are very smart not to bring in Polo or Golf which they have to wrestle with perception of lower CC will be underpowered. What they have done with their TSI technology is wonderful. I think they have done a wonderful job and live up to what they claim frugal and fast. Need justification? Nevermind, I will tell you this story another day.

Wednesday, December 15, 2010

Is Lotus turnaround plan too risky for Proton?

You know that I have written quite a few companies that have investments in their subsidiaries that carry good brand names. You can unlock the value by breaking it up, take it private, spin it off, sell it, etc.... But I am not too sure about Proton investment in Lotus. For sure it worth more than 1 dollar(damn, I hope I didn't remind our leaders about MV Agusta)

When you mentioned Lotus and able to connect with its brand, I guess people will call you uncle when you go to a wet market. The famous car was featured in James Bond, the spy who loved me. Well that was released in 1977. Now you know what I mean.

To be in supercar business is tough. Really tough but a few succeeded after executing some very bold plans and the period of prosperity was in their favor.

As noted, the 2014 Lotus Esprit is part of a daring turnaround-and-growth plan that aims to emulate the recent success of Aston Martin, Ferrari, Lamborghini, and Maserati. Not so long ago, those four brands were small-scale money-losers as Lotus is today, and they prospered only because they came under the wings of mass-market automakers that were willing to lay down big bucks for improved products and production methods that each brand needed to achieve higher sales and solid profitability. Ford Motor Company turned Aston Martin around over a decade of ownership. Lamborghini went through several owners and financial crises before finding refuge at the Audi division of giant Volkswagen Group. Ferrari and Maserati have long been the crown jewels of Italy’s Fiat, which has committed to resuscitating long-troubled Chrysler.

We’ve mentioned that Lotus has its own deep-pockets protector, Malaysia’s Proton Holdings, which has promised over $1.2 billion to fund the British’s automaker’s expansion. But however impressive that sum may seem, $1.2 billion doesn’t go very far in the car business these days, and Proton has already invested untold millions to keep Lotus alive over the past 15 years. That means the bosses in Kuala Lampur will expect their “English Patient” to pay back this latest investment, and the sooner, the better--or else. But as many analysts have already opined, the odds of success are quite long, considering the still-fragile state of the global economic recovery and the fact that Lotus will be taking on much-stronger brands in a premium-price market where it has no experience. As Autocar’s Steve Cropley observed, “Lotus has been selling [far less expensive] cars and it hasn’t found enough customers for those. Its factories and people aren’t used to making high-value cars...and its [very few] dealers aren’t used to selling them…[T]his is one case where hopes and expectations are separate.”

For his part, CEO Dany Behar is confident, as he told Cropley, that Lotus can successfully grow itself “from a niche sports car company to a builder of a range of premium sports cars...We have the opportunity to change everything--to do things from a better position--and that’s what we’re going to do.” He terms Proton not only a “strong” financial backer but “fun to work with,” and claims a good many people “believe we can do this thing just as passionately as I do.” And he insists the plan is pragmatic and do-able. For example, “we’ll outsource things that aren’t our specialty--just like every other modern manufacturer does. That, and clever design, will help a lot with the quality thing.”

OK, fine. But the devil is in the details, and Lotus’ turnaround plan could be derailed before it reaches the station by factors beyond the company’s control. Or maybe not. For now, then, the only “buying advice” we can give is to stay tuned for further developments and, if you’re inclined, think good thoughts for Mr. Behar and company.

The original strategy of Lotus was to build a supercar competing against Ferrari, Lamboghini and Aston Martin at much cheaper price. I begin to see some advertisments when I was traveling in China. And the Chinese are crazy about owning some exotic cars. If they want to be sucessful, this is the sweet spot. If you miss it, that's it -- gulung tikar.

Let's look at the line up.
1. New Espirit

Launching year 2013.
Engine: Lexus-sourced V8/V10. 500 hp
Price: $ 110 k pounds

2. New Elan

Launching year: 2013
Engine: Evora's V6, 400 hp
Price : $ 75 k pounds

3. New Elite

Launching year: 2014
Engine : Lexus 2+2 V8, 500 hp
Price : ??

4. Eterne

Launching year: 2015
Engine: 5 litre V8, Lexus LS600h. 500 hp?
Price: $ 120 k pounds

5. New Elise

Launching year: 2015
Engine: Toyota 2.0 litre, 4 cylinders. 300 hp
Price: $ 40 k pounds

Looks like pretty much a complete line up here to target at Ferrari, Lamboghini, Aston Martin, Porsche, Japanese sport cars, etc. The man behind it seems to be from the right background. They also managed to attract some people from top supercar that willing to accept at much lower salary because of a sense of mission to rebel against establishment. The plan seems to be gutsy enough -- do or die kind of mission.

One question remains though, will it drain Proton resources? Proton bosses denied that(go to this link but foreign media said Lotus CEO said that they have at least 1.2 billion Proton backing over a period of 5years.

I was a little bit confused with Proton strategy here:

1. Are there any synergies or transferable technology to Proton? The platform and target market are so different. If you put in those great Lotus tuned handling and high end engine, can they sell at lower price? In other words, mass market and niche market are like water and oil --- can never mix well one.

2. Will Lotus success boost Proton sales? Ferrari success did not boost Fiat sales, why should there be an exception in this case?

3. Assuming Lotus is successful in their turnaround plan, should they just congratulate themselves and collect dividend? I am damn sure if that is the objective we have better options.

4. Is Proton chasing after their own shadow? They want other people's technology, they want regional expansion and the same time they want to be the boss and they want to retain their control. Where can like than one!

5. Will Proton has any multiplier effects on Malaysian economy? Seriously?

As a consumer and a tax payer, I am not happy at all. Good night.

Suvarnabhumi Airport – Fast becoming my favorite airport

I used to like Changi airport a lot. Free internet and reasonably price food. Clean and organized environment. But you are paying RM 800 plus for the airport tax. If you are transiting back-to-back, you are just paying a big sum of money for nothing.

We all know that the political turmoil in Thailand did affect their tourism quite a bit. I have no choice but ended up with very screw up connecting flight on Thai Airways. I have almost 7 hours of lay over in Suvarnabhumi Airport.

So I landed here at 8.40 am. After checking out from the plane, I proceeded to get my next boarding pass. Then checked into Louis’ Tavern dayrooms. Thai airlines surprised me with a complementary day room for my 7 hours transit. This is a great idea for traveler to refresh – shower and work.

I did some crazy thing after I checked into the room. Nice 3 star environment but much better than airport lounge, you can just put down all your luggage enjoying all the privacy privilege. I went for a Thai traditional massage, crazy thing I know. I have always skeptical to do that because I have always thought that they are not as good as those masseurs in down town and you get charge B 300 more. To my surprise again, she did a very good work out on my body. I feel like getting younger by 10 years after the massage. I was so satisfied that I tipped the masseur which you typically don’t do that when you get charged at higher price.

Went back to the room, I was not too sure whether my hunger play tricks on me. The complementary lunch was good. I got a very simple meal. Started with Zero Coke. Then they served me with really hot mushroom soup and a hot burn. Shortly after I whacked the starter, nice fragrant green curry chicken and steamy soft Thai rice arrived. Yummy.

Well it’s time to work but then……..there was this little problem. You have to go to the information counter to get your Wireless Internet Service. They only give you 15 minutes per voucher. Well, after having a great workout and filled up my stomach, I have nothing to complain. So I went back and forth between my room and information for 3 times to get that 45 minutes “free internet” access. But I have no complain because the receptionist was serving with big beautiful smiles (not too sure I was happy with the overall experience or the receptionist was really beautiful that playing tricks on me).

Can our KLIA be more creative instead of just giving away our income by reducing price? Changi will have to buck up too.

Got to go now! Sawadee Krup.

Monday, December 13, 2010

Merger and acquisition to fuel our market?

News and speculation of privatization, merger and acquisition across many industries looks like a "new normal" in our market. It is hard not to notice these activities if you are in the stock market. Whether it will deliver the kind of M&A it promises, only time will tell.

I made a list here based on rumors and announced deals with no particular chronology order(just based on what I can recalled here)

(1) Sunrise-UM Land (Property)
(2) IJM-MRCB(Property)
(3) Sunway-Suncity(Property)
(4) OSK-Maybank(Finance)Unconfirmed
(5) QSR, KFC - Kulim, Carlyle(Consumer).
(6) Petra Perdana - SapuraCrest(Oil and Gas). Unconfirmed
(7) Pan Malaysia Pool - Olympia(Consumer, gaming)
(8) Perodua - Proton ??(automotive). Unconfirmed
(9) Pacific and Orient - Prudential (Insurance)
(10) Manulife - Manulife Century (Insurance)
(11) Tanjong - taken private (Power, Gaming)
(12) DRB Hicom - privatise? (Conglomerate)
(13) Plus - EPF & UEM Group(Infrastructure)
(14) Puncak - Gamuda (Water, concessionaire)
(15) PT Niaga - CIMB (Bank). Cross borders
(16) PT BII - Maybank (Bank). Cross borders
(17) Eon Capital - Hong Leong(Bank). Cross borders
(18) PT Bank Ina Perdana - Affin(Bank). Cross borders
(19) Indon Bank - RHB Captial(Bank). Cross borders
(20) Borsig - KNM(Industrial). Cross borders
(21) Herlitz - Pelikan(Industrial). Cross borders
(22) Lay Hong - QL Resources(Industrial)
(23) Astro - Privatized(Media)
(24) NSTP - Privatized(Media)
(25) NV Multi -Privatize

The list is getting long. The common themes running through these news are to get bigger in size, regional expansion, restructuring assets, unlocking hidden values and growth. Will these kind of activities peaking soon or are we just warming up? Do they still have a lot of cash to acquire? Can they still leverage their balance sheet?

Here is an article for your reference.

M&A promise sparks shift in hedge fund strategy demand
Harriet Agnew

02 Mar 2010

Hedge funds that capitalise on share price fluctuation as a result of specific events have topped a list of strategies ranked by investors, who are expecting an increase in mergers and acquisitions.
The strategy type, known as ‘event-driven’, knocked global macro off its 12-month perch as the most sought after strategy globally, topping rankings of 15 core strategies produced by Credit Suisse Capital Services, the Swiss bank's prime brokerage unit.

Event-driven strategies typically take a position in a number of companies with special situations or impending events that are likely to impact on its share price. These situations include mergers, takeovers or big news stories.

Michael Browne, a portfolio manager at Sofaer Global Research in London, said that event-driven strategies suit investors who are reluctant to call the direction of the markets: "Nobody has any faith in the macro environment in any way or other. There's a lack of confidence in the economic outlook for the next 12 to 24 months".

On the investment side, economic fundamentals are showing a fertile environment for event-driven managers. Browne said that European companies have the lowest level of debt and the highest level of return on capital employed as the region emerges from recession.

Cyril Armleder, a partner at Limestone Advisors which manages the Northlight European fundamental credit fund, pointed out that the area where the events are occurring is changing. He said that most of the opportunities are in traditional M&A activity, as there are lots of cash rich companies looking to buy smaller companies.

Morten Spenner, chief executive at fund of funds firm International Asset Management, said he favours multi-strategy, event-driven funds rather than managers that exclusively play M&A or distressed trades.

Event-driven funds have enjoyed a marked turnaround from being at the bottom of Credit Suisse's ranking in early 2009. Global macro is now in second place, after a year at the top.

Spenner said: "I expect macro will stay up there for a while still". Economic uncertainty fuels the profit potential for global macro managers and investors are also attracted to its liquidity.

Event-driven funds have enjoyed strong performance, returning 20.38% last year, ahead of the average hedge fund which was up 18.57%, according to the Credit Suisse/Tremont hedge fund index. The strategy was up 1.39% on average in January.

Armleder expressed caution that investor interest may be a function of this good performance. He said: "Investors run the risk of buying into what has been performing in the past. Event driven may fall into that group and so manager selection is important".

– Write to:

Saturday, December 11, 2010

Charts of the day

I feel good to be back after got out from the country for a week especially to a place that is really cold. Feel good with lots of sunshine and humid weather here. My body feels so good with the natural moisturizer.

I picked up a few charts while on the plane. I am going to keep this post very short. I was shocked that within a short span of time, gold has became a favorite investment object. Though I think the price of gold may appreciate further in US $ or any other currencies that do not maintain fiscal discipline, it warrant some cautions.

First, the real demand has gone down. Second, people has been liquidating their gold, that tells you economic conditions have been tough(look at the scrap chart). Third, if the trend continues, demand from investment reaches 70-80%, then we will have a gold bubble. When that time comes, no matter how convincing is the argument of great store to preserve wealth. That argument will not hold.

Saturday, December 4, 2010

Alcom($0.93) - It's time to revert!

Alcom has been in existence for 50 years in local aluminum industry. It has almost one-third of the local market share. After they disposed their extrusion business in 2003 due to persistent losses, now they offer only two main products – sheets & foils and finstocks.

The products/end markets are as follow:

Sheets – construction
Films – cable, food industries, etc
Fin-stocks – air conditioners.

Investment attractions
(1) Below trend P/BV
This stock has fallen enough to be considered good value. P/BV is 0.65 which is a typical valuation at the beginning of economic recovery cycle. The stock can be sold at the extremely low of 0.45X of P/BV (1997/98, 2001, 2008/2009) or extremely high 1.27 P/BV(2004). Typical fair trading range is around P/BV of 0.8 – 0.9X. At this kind of range, potential price recovery will be in the range of $ 1.12 - $ 1.27 (20-36% price appreciation potential, dividend not included).

Note: I prefer P/BV metrics over PE for cyclical stocks.

(2) Consistent dividend paymaster

Despite of very volatile earnings, you can see the company is able to generate strong FCF for the last 10 years. The company has paid almost 120 million dividend over a period of 10 years or average 12 million/year. Almost 2/3 of the dividend was paid in the last 5 years. They managed their capital very carefully to weather through all kind of up and down cycles. A company in 50 years of business certainly has enough experience to manage the economic cycles.

If you punch in the numbers, assuming a flat growth, fair value based on DCF model will be around $ 1.12/share(discounted at 7%). At 3% growth, the fair value will be around $ 1.43. I leave it to you to pick a number based on your risk tolerance though I think 3% growth is very doable(see point 4).

(3) Twin tail winds

During the up cycle, you normally get twin tail winds – improving price will translate into better selling price and higher demand. (See below table how the revenue has grown from 300 mln(FY2005) to 500 mln(FY2008)).That will drive people to go ga ga over its stock price given the right market roasting temperature. Year 2004 was one of them, the stock price doubled by getting way ahead of itself. There is exception though. 2004-2008 cycle was an exception, the stock price was on a long downward slide after the stock price peaked. I have no scientific explanation. It is either kind of reminding us that past performance has no guarantee for future performance. Or Aluminium price has stopped rocketing after the sharp increase and consolidating. After the stock price have gotten depressed for so long, has the spring stored tremendous pent up energy to waiting rocket? The divergence needs to narrow.

(4) Some growth potential

They plan to increase their rolling mill’s production capacity from 35,000 tons to 50,000 tones over a period of 5 years. This will translate into potential 9% growth per year.

I was tempted to make a buy call when it hit around $ 0.80 at P/BV of 0.57 but I was afraid to make a fool of myself in public then. Now that it has shown some strengths of bouncing back, it is still not too late to buy.

Disclosure: The author has long position.

Thursday, December 2, 2010

Turtle Portfolio Update - December 2010

Updated Turtle portfolio after receiving $ 888 saving for December 2010. Cash level is still high, stood at 38%.

In case you are wondering why am I not putting some other bigger cap or REIT with almost 8 - 10% yield in this portfolio. Two reasons, if you look at the chart, the stock(Alcom) is on the downtrend for a very long period of time. If you go back to 2009 Annual Report, you will notice that Capital Dynamics Fund was owning the stock but that name disappeared in 2010 Annual Report. Even most patient investors jumped ship, I concluded that if people have been selling, do they have more things to sell?

There is this guy by the name of Yeoh Ah Tu who has been accumulating iCapital shares gradually between 2009 to 2010. I don't know who is this guy but holding almost 1.2 million share in iCapital is certainly a rich guy and financially very savvy. While people were dumping Alcom stock, again he was accumulating slowly within 2009 - 2010 period. He has 317 k as at 30 June 2010. This guy certainly walk the talk as a value investor.

I am betting on reversion to mean and collecting checks while waiting for the tide to turn.

Second reason, I do own those big names that pay handsome dividend. But I thought of putting so called "risky" stock in my Turtle Portfolio so that I will eat my own cooking.

MUI seems to turnaround. Laura Ashley brand is pretty resilient to survive this tough condition. Unfortunately, sentiment has turned south and again it is a good time to accumulate a few more shares.

Wednesday, December 1, 2010

Quick Update on Alcom

The operating results is not so good as expected. Their cash level has increased substantially due to better working capital management and tax recovery. At this level of cash, dividend payment of $0.10 should not be a problem. They typically will pay it out in the middle of the year. Should be a good time to buy a few more shares during this correction period.

Tuesday, November 30, 2010

Simple thesis of Turtle bought Alcom

I discovered this stock while I was researching dividend yield strategy. This was part of my preparation in case the market start to move sideways. The reason of sideways movement is to allow earnings to catch up with prices. If you look at the big cap stocks many of them already selling at fair price(neither too expensive nor too cheap).

Dividend stocks on the other hand had been ignored. BJ Toto for example is giving almost 10% yield despite of all the bad news of tax increase or being removed from FBM-KLCI 30. Digi, TM, etc are also providing attracting dividend yield in excess of 7%.

Back to Alcom, this company has almost $ 46 million cash plus. It has outstanding shares of 132 million. They have been paying dividend consistently between 10-15 sen per year. They have to fork out like $ 13 to 20 million. But I think $ 13 mln dividend a year is very sustainable. The operations churns out about $ 12-13 mln cash/year. At $ 0.91, this translate into almost 11% dividend yield. 10% price recovery in one year time will give a potential return of 20%.

Monday, November 29, 2010

Turtle bought 3,000 shares Alcom @ $ 0.91

Write up to follow over the weekend.

RCE purchase will be delayed until the clear picture is formed or unless somebody will want to sell at irrational price.

Thursday, November 25, 2010

The man behind Penang’s economic transformation

Dr. Lim, your contributions will never be forgotten.

GEORGE TOWN: Tun Dr Lim Chong Eu, 91, who served as Penang Chief Minister for 21 years, was a towering leader who presided over the remarkable economic transformation of the state.

He led a simple life despite a political career spanning 39 years, shunning awards and titles, and only accepting a Tunship after retirement from politics.

When he took over as Penang’s second chief minister in May 1969, the state was going through a difficult period after the withdrawal of its free port status, with unemployment rising to 16.4%.

He implemented the Free Trade Zone concept in Penang – the first state to do so – wooed foreign investments and built one of the largest electronics manufacturing bases in Asia, earning Penang the tag as Silicon Valley of the East.

Dr Lim also presided over Batu Ferringhi’s transformation into a tourism belt, cleared pre-war houses to build the iconic 65-storey Komtar and built the Penang Bridge.

Born in Penang, Dr Lim attended Penang Free School. In 1937, he was a King’s scholar at Edinburgh University in Scotland and graduated in 1944 with a medical degree.

Formerly a medical officer with the Chinese Armed Forces, he founded the Radical Party in 1951 which won the first municipal council elections in George Town.

In 1954, he joined MCA and was a member of the Razak Commission for Education.

Despite defeating the late Tun Tan Cheng Lock for party presidency in 1958, he quit MCA a year later following differences with Umno over the allocation of parliamentary seats in the 1959 general election.

He formed the United Democratic Party in 1962 and co-founded Gerakan in 1968, which swept the Alliance ruling coalition out of office in the 1969 general election, leading to his appointment as Chief Minister.

However, in 1973, Gerakan, together with the Alliance Party, formed a coalition called Barisan Nasional.

In 1980, Dr Lim stepped down as party president, saying there were “many young and promising leaders in the party just as capable to hold the post”, and was succeeded by (Tun) Dr Lim Keng Yaik in 1980.

He continued as Chief Minister but retired after losing the Padang Kota state seat in the 1990 general election. He was succeeded by his former political secretary, Tan Sri Dr Koh Tsu Koon, as chief minister.

His message to the party then was to “always remember its roots and humble beginnings”.

After retiring from politics, he became a passionate horse breeder and turned his attention to business as chairman and adviser to several large corporations.

In 2007, he was named founding chancellor of Wawasan Open University in Penang.

Lim’s legacy will not be forgotten, especially by Penangites.

Tuesday, November 23, 2010

The longer the corrections, the stronger the bounce

I was anticipating the corrections to last longer, 2 - 3 weeks will be better. The sentiments were very firm making you believe that the reverse direction is not possible. It has taken a number of bad news to water the markets down, even that I still feel it has not corrected enough.

The market was trying to look for clues whether the liquidity will be mopped out. Naturally they look for signs whether the Chinese government will raise interest rate or order banks to increase their reserves and etc. The implication was a slowing down Chinese economy is bad because eventually demand for commodities and etc will be softened. This in turn will eventually affect its trading partners.

Then came the Euro-zone bank bailouts. Bailout of Ireland banks will probably require a strict fiscal diet that normally will force them to clean up the system -- we will expect contraction for a while. If Spain is the next target then I think the situation will turn even more bearish.

Then Thailand was reported to be in a technical recession because of two consecutive quarters of contraction. A number of Asia countries like China, South Korea, Taiwan, Malaysia, Singapore, Indonesia and etc are pointing towards a slow down. I can assure you that Q4 will be even slower than Q3, let's see how the market will price this in at beginning of next year.

Then I received a SMS alerted me that there is a conflict between the North and South and Korea that may trigger instability in the regions. War ? come on-lah.

Despite of all these negative news, the big white wash out is still not here yet. When that moment arrives(another 3-5% drop), I shall not be gun shy -- buy on dip on liquid stocks will give a decent chance to make some money. Need some justifications? December typically has less news flow because the reporting season has ended and not many economic announcements as well. Given enough bad news, absent of bad news can be good news. It is also time for fund managers to do window dressing so that they can keep their jobs.

Let's change subject, if you ask me why I did not rush into buy RCE Capital. The logic is simple, my general observation over years of investing experience, rushing to buy a stock after a good news being announced is not a good idea, we tend to over-pay(buying panic). Two, if the big boys are not buying yet, retail investors don't have that kind of gun fire to create a strong breakout. So, let's other people to settle down with their emotions first.

Why am I still like to buy CIMBX25? Hang Seng Index itself has not done badly since it bottomed out in March 2009 but Chinese related stocks have not caught up and still cheap historically. It's also one of the worst performers in the world and I like to buy when they are out of favor. So I just put in some small amount of money at regular intervals.

I will be taking a few days off going holidays with my family. Ciao!

Monday, November 22, 2010

RCE Capital -- In valuation I trust ?

Outstanding shares : 710 mln.
Market Capitalization : 444 mln(710 mln x $0.625/share)

What is RCE Capital doing?
RCE is involved in the provision of personal loans and consumer-financing services to public and private sector employees, factoring and investment in a real-estate trust.

Business Model
RCE Capital has a solid business model. If you are able to deduct from a person with a steady income, it is easy to understand why their business model is solid. It is also easy to understand why they are granted by RAM a AAA asset backed security to keep their funding cost low.

The following is extracted from Maybank Securities way back in 2005 in their initial coverage report.

RCEM provides financing for KOBENA, KSB and KOWAJA to disburse to their members, who are government servants, in the form of consumer financing and personal loans. RCEM is currently increasing its focus on its portfolio of personal loans. Previously, RCEM disbursed mainly consumer financing to the cooperative members. With increase in competition from other cooperatives and companies, such as MOCCIS, Courts Mammoth and Berjaya Singer, RCEM began giving out personal loans, offered by KOBENA, KSB and KOWAJA under the Skim Pembiayaan Peribadi (SPP).

The repayment for the loans provided is done by way of direct salary deductions to be deposited directly into the Trust Account opened in the name of the various cooperatives. The deduction of the salary is undertaken by a centralized body, Angkatan Koperasi Kebangsaan Malaysia Berhad (ANGKASA).

The cooperatives offer financing and loan schemes for their members based of specified eligibility criteria. Deductions under the schemes do not exceed 60% of the individual’s basic pay.

RCEM administers and monitors collections from ANGKASA. The monthly salary deduction is remitted to the respective Trust Accounts jointly controlled by the cooperatives and RCEM. RCEM has direct assignment over Receivables and direct control over funds in the Trust Accounts. Service fees are paid to the cooperatives based on the supply arrangements with RCEM.


I am going to skip all the textbook reasons (durable competitive advantage, low PE, okay dividend yield (2.4%), reputable management team especially major shareholder is Azman Hashim of AMCORP)….. bla …. Bla…..

I am also going to skip the usual reasons of low liquidity, lack of research house coverage or slower growth to talk down the stock.

I will put my money on the line simply because I think

(i) downside is limited after the major shareholders exhausted selling.

I am sure they have depressed the share for 2.5 years with perpetual selling and finally this company is under-owned by institutional funds.

(ii) The sector as a whole is out-of-favor. If you truly believe that you like to buy things out-of-favor, this is it. Somehow, some day – the market sentiments turn hot, people will take notice or if the share price frustrates the major owners long enough, they will take it private. At the rate they are growing their book, it will soon selling less than 1X P/BV in 2 – 3 years time.

You can see in this chart that despite of all the reasons of lack of coverage, why would Goldman or Public Mutual managed to spot this gem in 2007?

(iii) Reversion to mean(let's say sentiments turn from 5X PE to 7X PE, potential price appreciation will be up to 0.98 on the conservative side). If we get superhot market, it may rocket to $X.XX(you have to use your imagination to fill it up based on PER band)

(Please click on any images to see detail)

Disclosure: The author has no position yet.

Friday, November 19, 2010

Turtle bought 2,000 shares CIMBX25

Bought 2,000 shares of CIMBX25 at $ 1.09.

Monday, November 15, 2010

Why So Quiet?

In case you are wondering why I am so quiet - not talking about stock markets or general topics. I have been busy of late fixing my house. Market correction is good because it allow me to spend time on some other things that are equally as important making money out of stock markets.

As school holidays are approaching, I plan to take some time off with family or doing something for them. So blogging will be very light.

The correction that I have been waiting is finall here. Based on a general rule of thumb, it will normally last 7 - 9 trading days. Based on the market momentum that I observe, the players seem to be quite smart and did not sell indicriminately. I see players picking up stuffs.

For the whole of 2010 year-to-date, we never have any corrections more than 100 points. The most severe was around 80 - 90 + points and most of them are in the region of 30 - 50 points. Projecting where the market will stop falling based on this data is as good as flipping a coin.

I have just taken out a 50 sen coin from my drawer. I am going to toss it: head drop 50 points and tail drop 95 points.

The coin had finally stopped spinning. The result is

The coin has spoken, so forget all the moving average, etc..........

Thursday, November 11, 2010

Some really old updates (PPB and WIlmar)

I featured PPB and Wilmar three times way back in 2008/2009. Here are the old links if you need to refresh your memory:

There were 5 risks that I talked about, I re-produce them here

1. Collapse of crude oil bring about collapse in soft commodities. It's a low margin business. Net income %: 2003 -- 0.9%; 2004 -- 1.2%; 2005 -- 1.25%; 2006 -- 3.07%; 2007 -- 3.5%. Profitability improvement is due to better economies of scale and also favorable commodity sector.

2. If you trade, the risk of screw up always exist -- involving future, options and etc.

3. Change in government regulations like price control or taxes. Sold down of stock earlier of this year when China government requires them to submit for approval prior to price increase on cooking oil.

4. Weather and natural disasters.

5. Much slower growth ahead via organic growth."

True enough, after smooth sailing of 2.5 years, the got hit in the last quarter. Here is the announcement.

If they trade, I know they will get hit one of these days. Just look at this chart on the volatility of the margin especially in the oilseed and grains segment(this was the culprit of the shocking loss in the last quarter).

When I made a buy call at that time because the risk was low due to the extremely depressed price(RM 9/share). When it has almost doubled, the risk rises tremendously when I have hard times to understand their income statement and balance sheet.

I don't understand the losses on $ 141 million on cash flow hedges.

When you look at their Balance Sheet, you will see $ 300 million Derrivatives here and there. It will make you really headache when you are trying to evaluate the company.

I am not sure how the market will react to this but it is time to take profit and to re-enter again around $ 15 / share.

Tuesday, November 9, 2010

Corrections coming?

If we look at the volume traded at KLSE, it has more than 1 billion shares change hand for most of the trading days since September 2010. KLCI keeps making new highs with sustained volume may be able to convince a few newbies to believe there is a strong underlying demands. Can the wind direction change? The sectors rotation are getting narrower with exception of Finance and Plantation. Most other "hot" sectors like property, trading and services, small-cap, construction are getting a little bit cooler -- declining volume. Cyclical stocks like technology have been in very bearish territory.

This rally is driven by liquidity. The foreign fund flows have been strong since September.

That has to do with US $ investors selling dollar and buy emerging markets. Malaysia is one of the beneficiaries. They need some reasons to buy something, the story like Economic Transformation Program, etc are just to fall into the right place.

But US $ tide can turn, at least for the short-term. When the tide turns, rally can quickly fizzle out and you can see penny stocks will suffer the same sympathy selling.

If you visit prominent and savvy blogs -- all of them are turning cautious. Many of them are in wait-and-see mode. Some of them are calling for smaller bets and waiting for corrections. With most people are cautious, that means they have a lot dry powder left, therefore I don't think the bull market is over but I am anticipating corrections before the markets are ready to move higher.

Friday, November 5, 2010

Priced in ?

About two weeks ago, I felt that I need to take a break from the markets. That will allow sufficient time for a few issues to play out. I normally do not care so much for issues like that because stock markets are normally forward looking trying to price in most of the issues like Republican will wallop Democrats, QE 2, earnings, etc.......

Dow managed to make a new high yesterday at 11, 434. Bullishness among investors and traders are quite high The market went higher because it has converted more bulls especially those people has been waiting for a market setback hoping some of the traders to sell on news. The sell off did not materialize. March Faber for example was waiting for market to sell off if QE announcement was less than $ 1 trillion. The market did not sell-off though the quantum was only US $ 600 billion. Luckily I did not have any shorts or else I will be hurting like crazy.

The retail investors are in the driver seats now. Since they have just joined the party less than 1 month, I think the KLSE party will go on for a while. The usual year end rally and Chinese New Year rally will make a lot people smile.

I will make a few personal trades(I won't be sharing these trades because these trades are from popular blogs and newspapers and broker tips) but I will keep Turtle portfolio original mission to generate 10% return per year slow and steady(so expect very little action on Turtle portfolio). Despite of strong momentum ahead, I will still want to wait for a reaction before jumping into actions.

Wishes all Happy Deepavali.

Saturday, October 30, 2010

Turtle Portfolio Update - November 2010

(Click on the image to see details)

As usual, received $ 888 saving for the month of November 2010. Portfolio gains 22% since its inception. Sitting on almost 50% cash. Getting increasingly difficult to find places to deploy cash. I am neither bullish nor bearish. KLCI is valued above historical average. Now is selling at almost 19.XX times and pushing it above PE 20-22X will be very susceptible to reversion to mean.

Options that available to Turtle to deploy money:

1. Do nothing - put all money into FD 2.85% and wait for corrections

2. Deploy dividend yield strategy - REIT 8% and some other high dividend yield counters 4-6%.

3. Trade on lower liner/small cap - allocate up to 15% book value to this strategy. Retail participation seems to be at a healthy level. 27 - 35% of retail investor will spice up the market a bit.

I still have not decided yet.

Sunday, October 24, 2010

The Art of War and Investing --- Part II, god of Gamblers

If you watch this short clip before enter the trading floor everyday, I'm pretty sure that you can pysho yourself -- convince yourself that you are the god of Stock Markets. It will make you feel very confident to make a swing of 5-10% intra-day profits everyday.

I probably may NOT be very qualified to make a lot of comments because I do not have many actual experiences to share. Most of the following are from my brief venture into this approach(I quit because I don't feel the money I won justified my efforts and stress that I went through), imaginations, readings and also knowing a few people are who are from this school. By the way, instead of calling them gamblers, day traders, speculators and etc, I prefer to call them The Street Fighters(;-.

1. Street smart, these guys are smart but just don't expect them to be a 1st class honor in Accounting -- instead of looking into IS and BS(Balance Sheet and Bull Shit) numbers, they can read your face like a book. They are the master of crowd psychology. They know who they can "eat" who they got to stay out.

2. Chart reading skill is in their blood. They have good trading system. In and out based on a system. Trust no one but computer(especially the Quant).

3. They react very quickly to news, breakout, trend-line, support, resistance, moving average, convergence, divergence, price-volume, correlation, etc.........It's all part of their system.

4. They know they are playing with fire, a lot of stuffs they bought are back by nothing. All they care is PRICE ACTION. It's price action that make them money, period!. The modus operandi is: You can make money in bull or bear markets but only pigs and sheeps got slaughtered.

5. If you can't tell what is the probability of moon will show up tomorrow, you are disqualified to be a street fighter. These guys are master of calculating odds, they only take odds in their favor. Real Street Fighter only care pay-off and the odds of winning.

6. Strong discipline of cutting losses and also taking profits.

7. Strong risk and money management. They know that they can be wrong, don't put all eggs into 1 basket.

8. Very comfortable with uncertainty. Love for thrills and speeds.

9. Be like a machine -- never fall in love with stocks. They focus on batting average. Natural sportsmanship, they can handle victory and defeat very graciously.

10. These SOBs are tough. They have very strong mental toughness. They will keep fighting and never give up.

11. Wide contacts and probably have some informer networks.


1. If you believe EMH(Efficient Market Hypothesis), for most of the time, price already reflecting the known facts. You are probably too late to catch after a long white bar shot up by 10%. For most of the time, if we are lucky we may have the last 2 puffs before things roll over.

2. For most of the average retail investors, picking and reading the charts, news feed, trading system is easy. However, trusting the SYSTEM without questioning them even though they are counter-intuitive for most of the time. The right golf grip actual feel very odds, so it's trading system. Trending system for example is very easy and simple to follow but taking emotions out and trusting the system is difficult. That's how 95% of people fail.

3. Riding on trends too long is dangerous because it can breed over-confidence, excessive leverage that bring most people down to their knees. I prefer young investors to lose 10 - 20 k at the beginning their Street Fighting career than winning 50 k. A guy or a gal winning 50 k will probably will start to play with margin - leveraging up in a big way. They can destroy what they build in 10 years in 10 days.

4. Forecasting future by looking at past price action? A librarian is probably the best Street Fighter on earth, just to borrow from W. Buffett.

5. Here is the catch-22. First you need to trust the machine 100% and allow no human intervention. If you intervene, then you are not trusting your machine 100%. If you allow machine and human intervention to co-exist then there is a possibility of machine or human emotions can betray you. Things will be very ugly if you know what I mean........

6. Too obsessed with tools will be no difference from Graham purist. Just numbers and charts and news feed, rumors, etc ...... without understanding business, reasoning, cause and effects are not sustainable for a long period of time.

7. Large amount of money requires a lot of trading ideas, a lot of trading ideas will lead to two possibilities (a) over-diversification (b) over-trading. I have my doubts that one can beat the market by this approach without leveraging or taking concentrated bets. Taking concentrated bets and not back by anything solid is not for the faint heart.

Saturday, October 23, 2010

Mean Machine Exhibition, AutoCity Juru

I am doing my part as a Penangnite to promote Penang a bit. This is a big exhibition displaying a lot of exotic cars commonly seen in Kuala Lumpur such as Lamborghini, Ferrari, Porshe, etc.....but not so common to be seen in Penang. That shows how Giam Siap(kedekut) Penangnites are.

The organizer is expecting 60,000 people will turn out today Oct 23 and tomorrow Oct 24. Perhaps the old fashion persuasion will work........Girls.......

These pictures were taken in 2008(I had better reveal the source in order not to get into trouble.

The Art of War and Investing ---- Part 1

It's has been a while I did not touch on the investment philosophy.

Sun Tzu said:

Know [the] other, know [the] self, hundred battles without danger; not knowing [the] other but know [the] self, one win one loss; not knowing [the] other, not knowing [the] self, every battle must [be] lost.

The obvious that everyone knows is know the enemy and know yourself, hundred battles fought hundred wins. But what is less obvious is this

Not knowing the enemy but know yourself, the winning rate is only 50%. In his words, One Win One loss.

Translating this into practical investing. We must know what kind of investors out there just like knowing major martial arts out there. What are the strengths and weaknesses of each school? I like what Bruce Lee said you have to balance between instinct and control. Too much of control then you are too scientific then you are turning yourself into a mechanical man. If you push yourself to the other extreme on instinct then you are just too unscientific.

We ought to know that each type of investing school has its own strengths and weaknesses.

Let's start with Value Investing.


1. Attention to details especially on accounting(quantitative side)
2. Analysis driven
3. Value rationality rather than emotions
4. Patience
5. Strong discipline sticking to a set of principles
6. Self knowledge
7. Generally introvert allow them to be away from crowd to be independent thinker
8. More interested in the thinking process rathar than answers/solutions
9. Hands on -- going to the source rather than depending on secondary analysis


1. Too theoretical
2. Unable to connect theoretical numbers with business reality. Lack of qualitative analysis.
3. Could miss big pictures especially on macro development will affect micro events
3. Too rigid and sometimes miss big opportunistic profits
4. Patience sometimes come at a very high opportunity cost
5. Poor market timing due to buying and selling based on valuation
6. Too focus or specialized give birth to blind spots -- missing a large new trend.
7. Buying too many stocks without knowing the business intimately especially Graham purist(buy whatever fit your screening criteria)
8. Too skeptical of everything ended up buying nothing

Friday, October 22, 2010

Value stocks re-rating

It's nice to see so many value stocks are being re-rate now. It's also imply that rational investors find that many stocks are stretching the limit, based on a number of valuation metrics.

One of the biggest mistakes of retail investors is selling out too fast because they have been sitting on losses or non-performing for too long. If we have some value stocks in our portfolio, we should hang on to the ride for a while -- either to maximize gains or minimize losses.

But we also need to pay attention not letting too much greed getting in our way because a big move in value stocks tends to attract momentum players. At some point of time, this group of players will know how to cash out based on their technical assessments. A savvy value investor will need to know when to cash out. I missed twice 25% cash out opportunities on my MUI since 2008. I am going learn to be smarter this time round. Have a nice weekend.

Thursday, October 21, 2010

A confused and desperate market

The market is getting confused.

(The Edge Malaysia, Oct 20) NEW YORK: World stocks and commodity prices fell sharply on Tuesday, Oct 19 after China, the engine of growth in an anemic global recovery, raised interest rates for the first time since 2007 to curb its booming economy.

Wall Street also was hit by fears that U.S. banks might be on the hook for billions of dollars in souring mortgage bonds, driving stocks to post their biggest loss in two months.

The dollar rallied broadly on China's unexpected 25-basis-point rate increase, a move that could mark the start of a more aggressive phase of monetary tightening in the world's fastest-growing major economy.

First the markets condemned China for not taking strong actions to tackle property bubble. When China got serious and raised interest(unexpectedly), the market got scared thinking that would slow down the emerging economies.

Then the market got desperate buying back stocks, find an excuse that the Fed is reaffirming that the US economy will have a modest growth.

They got panic again this morning when they saw this headline which was in-line with what the expected yesterday.

(Bloomberg, Oct 21)Asian stocks fell for a fifth day, the benchmark index’s longest losing streak since May, after China’s economy grew at the slowest pace in a year. The dollar strengthened against 11 of 16 major counterparts.

The MSCI Asia Pacific Index lost 0.4 percent to 129.22 as of 1 p.m. in Tokyo. China’s Shanghai Composite Index slumped 1.3 percent. Standard & Poor’s 500 Index futures were little changed. The dollar surged to 81.83 yen in Tokyo before paring gains to 81.09 yen, unchanged from late yesterday in New York. The dollar was at $1.3918 per euro from $1.3964.

Stocks fell as data from China’s statistics bureau showed the country’s economy expanded 9.6 percent in the third quarter, the slowest pace from the same period a year earlier. The dollar appreciated after the Wall Street Journal reported that U.S. Treasury Secretary Timothy F. Geithner said the major currencies are “roughly in alignment,” suggesting there’s no need for further weakness in the greenback.

The US dollar begins to rebound, a sign of fear is coming back a little bit.

When I said 2 days ago I will take a break until the first week of November, there were 3 reasons I do that :-

1. Risk and reward is not attractive at this level. Anyone buying KLCI at 1,500 will have an expectation that it will go up to 1,700 or 15% earning growth for 2011. I would expect that we will have some growth in 2011 but the rate of growth will be slower than 2010 for sure.

2. After making a new high, I want to see how strong is the support when the market pull back a little bit. If the market is able to absorb about 5-7% pull back without much problem, then taking some fun trades will be fun.

3. It's very difficult to make money when we markets are volatiles. When winners and losers are canceling each other, the nett gain will be very limited. Sometimes we have to let go some gains in order to avoid many losses(unnecessarily).

I probably still have not answered why after first or second week of November? Volatility should reduce quite a bit:-

1. market strategies will project strong Q3 into 2011. I believe Q3 '10 will have best ever quarterly results for 2010. The real sell-off will be in Q1 2011 when they see Q4 results of which I think will be a lot weaker than Q3 '10.

2. political uncertainty will be resolved.

3. Last 2 months of the year are typically more favorable to equities.

Tuesday, October 19, 2010

What if Obama losses control in mid term election?

(Click on the image to see details)

Market research firm Birinyi Associates went back to 1945 to take a look at how the market reacted to different mid-term elections. What the market research firm found was that, yes, stocks do tend to rise in the months just before and right after midterm elections. But, surprise, surprise, what actually happens in the elections, not just the fact that they are held, does make a difference.

In general, Birinyi found that going back to 1962 stocks jumped nearly 10% in the two months before and three months after midterm elections. But in elections when there was a change in the majority in either the House or the Senate, the market did considerably worse. In the six midterms going back to 1945 where there was a switch in the party in power in Congress stocks rose just 6% in the five months around the election. What's more, when the majority switched from Democrats to Republicans, the stock market did even worse. Take a look at the chart at the top of the post. When the donkeys became elephants, stocks tended to fall. The market lost 6% when Republicans took power during Truman's presidency, and 4% when Republicans took over the majority in 2002. The Gringrich-lead 1994 Republican take-over of Washington produced a lackluster 3% stock market return.

So will this happen again? I think it might. A lot of strategists have been explaining past positive midterm results and why Republicans are a good thing for the market by saying that gridlock is good. Markets and companies perform best when Washington gets out of the way. And a do-nothing-Washington might be the best when the economy is good. But at a time when we have lackluster economic growth, and a ballooning budget deficit to deal with, we need all the help we can get, even if that help comes from Washington.

Read more:

My comment
I generally do not like to predict market direction based on stuff like this. But I know it will have some impacts on the market because they hate uncertainty, especially whenever there is a major change of control.

If you look at the chart, 2002 was the only year that market losses since 1945. Why? The market fears that Democrat is blocking whatever market friendly programs by Bush.

Coming to this time round, there are two ways of looking at it. If Republican wins, the market may perceive that they can stop some of Obama ambitious and crazy programs, that may boost the market confidence further. Quite a number of people really dislike Obama now.

However, if the economy is truly weak and intervention is necessary and Democrat is losing influence, recovery will be a lot weaker. Hence a weaker stock market later. Me? I will be taking a break from the market until the first week of November if you know what I mean -- sitting on the fence. Historical data has no meaning to me now.

Saturday, October 16, 2010

It's time to put MUI on a trial stand

If you looked at my Turtle portfolio, MUI is the only stock that I am losing money. The stock depreciated by 36%. I pick up this stock on Feb 28, 2008. If I include the 8% p.a. opportunity cost, I am sitting on 56% loss. KCLI benchmark was at 1,368 when this stock was bought. Yesterday KLCI closed at 1,489, the difference of Index gain is 8%. That makes me feel better but it is still a 44% loss.

However, assuming I was capitulated in March 2009, sell it for 0.14, take a 50% loss(RM 1,416) and reinvest in FBMKLCI-EA(KLCI ETF), 1,416 would have turned into $ 2,124. I would still won't be able to recover my losses. My original allocated capital will still be 25% lesser(2,800-2,124) than what I put in.

From opportunity cost, not cutting losses when it hit 20%, relative to benchmark return, I am guilty on all three counts.

Now, let's turn turn to my original thesis of the investment. You can view my original entry here:

I listed 5 catalysts:

1. Make it less complicated. Looking at revenue, it has three core businesses: Retail, Financial Services, Hotel. Not too bad.

2. Get rid of their debts. Then was 873 mln debts, 778 mln cash. Now 549 mln debts and 557 mln cash. Not too bad.

3. Expected earnings was around 112 mln net income or $ 0.058/share. Today is $ 0.002/share(based on ICUL dilution). I'm way off the mark here. The share price is experiencing overhang due to this issue. I can blame it on weak economy and etc but hey, since this stock is under-owned by smart money, the simplest way a retail investor will value the stock is PE ratio. They will go straight to this line x 4 and estimate what the stock worth. Boo....booo.....

4. Property was at cost and not at market price that worth more than $ 1.1 billion or 0.38 on diluted basis. Okay

5. 34% Laura Ashley controlling interest. The stock depreciated by 25% from the day I valued MUI. With the dilution effects, 34% interest worth probably around $ 0.09/share today. Could have been better.

(Click on the chart to see Laura Ashley price movement. You can get it from Yahoo with ALY.L ticker)

The stock is still undervalued from asset stand points but it doesn't move because the catalysts were not obvious to smart money and ICUL conversion over-hang. Undiscovered gem is good if I want to buy a big block of illiquid stock that allow me to accumulate for a long period of time.

Overall, I would rate myself C- or D for this pick. Let me leave this stock alone in my portfolio as a reminder: nobody is perfect. Admitting that I have a lemon will not depreciate who I am.

Friday, October 15, 2010

Behavioral Finance Summarized

Whitney Tilson is a respected fund manager. He is one of the few who shorted and made money out of the 2008 crisis. I found his public presentation that I thought that will benefit many of new and "old" comers.(Click on any of the following images(17 altogether) to see details)