Monday, February 28, 2011

Sold 1,000 Faber shares

Sold 1,000 Faber shares at $ 1.97. At one glance, the results were disappointing but excluding one off charges, it is not as bad as it seems. However, I have to raise cash bit, so selling down some stocks that don't have very positive sentiments is not a bad idea.

Friday, February 25, 2011

What a week!

I was away in China whole of this week so I did not got a chance to follow what was going on in the market. I had a lot of meetings and got exhausted, collapsed every nights before I can finish a count of 3. In that sense I was glad that I was spared from anxieties.

When I was on the plane, that was the first time I got connected to the outside world, picking up a copy of Financial Times. I will not want to bore you with all the details that you already well informed. Yes, Libya rattled the world, whether it was just an excuse or something else is not that important. What counts is this, people did sell when they saw this headline though they were not necessary right.

What is more important is when to reenter the market. Some smart guys will certainly sell first, ask question later. However, these smarts guy also know when to buy back when it has fallen enough. On the other hand, the majority of poor retail investors will not buy back and miss the next upturn.

Back to Libya, the catalyst of the sell-off. If you look at the chart below, they are not a very big producer. The question on everybody's mind is will this spread to other unstable countries. Or what if the unthinkable scenario like Saudi Arabia caught this disease?

I mentioned inflation was the trigger of the recent unrests in Egypt but I did not elaborate it a lot. Now that I got a bit of time, I will expand it a little bit further. Unrest in Libya, Egypt and etc have a few commonalities. First these countries have been controlled by dictators. They sucked out all the money from people. Though they are rich with oils but prosperity was not shared with their people. Youth unemployment was high. While their stomachs were not taken of and further compounded by high commodity prices, especially food - how long more can you expect them tolerate? So what do you expect these people to do? So, theoretically, this can spread but I believe either the demand will soften with high price or other big producers will try to cover for the short falls.

Saudi announced a US $ 35 billion "royal gift" to tackle social, unemployment and housing benefits. This was a swift action to address the stomachs so that people will not take their dissatisfactions to the streets. They may take it on-line though.

(Financial Times)Saudi Arabia’s $35bn “royal gift” in social, unemployment and housing benefits – aimed at averting the spread of popular dissent that felled the Egyptian and Tunisian leaders – has failed to satisfy activists’ demands for reform.

The kingdom’s state media said the decision proved that King Abdullah “is not isolated from his people, unlike most leaders of third world countries”.

Activists’ hopes had been raised by a text message sent from Saudi-owned Al-Arabiya television, which said “King Abdullah approves a number of reforms and developments”, fostering the impression that big political reforms had been announced.

But when the promised reforms failed to materialise and democratic changes were not part of the king’s package, activists voiced their anger online.

“King Abdullah is our last hope of true reforms. However, I was disappointed when I heard the decisions,” said Bander Alno­gaithan, a Harvard-educated lawyer who often chronicles his dissatisfaction with the country’s judiciary on Twitter.

So what am I saying? Don't let this issue or any other issue that will come out along the way to shake out some weak hands in order to make make ways for the bull to run.

BTW, China already talking about sustainable economic growth, i.e sacrifice high growth for sustainability. In my opinion, China does need to cool off as the wage inflation has been terrible. Most companies suffer double digits wage raise last year. What is worse, the management will have to treat their workers like gods, begging them to work. Productivity will suffer very quickly if they don't engineer a soft landing. I believe this is a good news while most people with shallow analysis will again call for sell again..............

Wednesday, February 23, 2011

Sector Rotation Strategy

31 million hits, Volkswagen Commercial: The Force

Sunday, February 20, 2011

Sarawak Oil Palm(SOP), more upsides ahead?

OSK research on the overall is not quite bullish on plantation sector. They maintain a neutral call even in their recent sector update, despite of the sector has a very good run in the last 6 months. They believe that we are in the phase of PE compression period -- firm CPO price but the market does not want to take the bite. Also, there are factors that could throw a spanner in the works creating headwinds for this sector namely

(1) The La Nina may return normal level by mid 2011
(2) Favorable weather condition may boost soya bean production

But there is one stock that they are quite bullish makes me to take notice again. They found that SOP is relatively cheap.

So I started off checking its performance. The good news is this stock outperformed KLCI, Plantation Index also outperformed IOI.

Hmmm....that makes thing interesting because that implies the market is not stupid and did not condemned the whole sector indiscriminatingly. The market will recognize good value stocks.

Then I checked further on the shareholders list. Well it did not disappoint me so far because the list is not dominated by small shareholders. Institution funds do own the stocks.

So far, so good. Then I continue to listen to their arguments which think are good arguments.

Since they are not that bullish about the sector, I find their assumptions are reasonable and also conservative enough put a tag of RM 5.22 target price to be realized within 12 months.

1. Their assumption of CPO of RM 3,200/MT is conservative enough.
2. Their aggressive replanting in the last few years and also having high young trees will boost its production for the next few years.

3. Reversion to mean as SOP is unjustifiably cheap compared to peers.

They argued that

In terms of SOP’s planted area is 68% higher than that of IJMP’s and yet has a market cap that is 33% lower than the latter. Compared to GENP, SOP’s planted area is 71% of GENP’s while its market cap is 26% of GENP’s. All three are net cash companies.

In short, either this stock is truly undervalued and undiscovered yet or it will remain as value trap.

Looking at the stock price movement and out-performance, I do not think this stock will remain cheap especially there are a few stocks like (R Sawit, Tradewinds, Hap Seng, TH Plantation etc) already have a good run. I think this correction period is an excellent time to pick up some of SOP shares.

Disclosure : The author has been trading in and out of this stock and currently is having a long position.

Thursday, February 17, 2011

Mom, Turtle is talking about technical stuffs again!

Mom, help, idiot Turtle is talking about technical stuffs again!

Technically speaking, nothing significant to talk about. Yes, it's hanging around 100-MA. So what? There is no guarantee that it will not go nearer to 200-MA. Going nearer to 200-MA is normally associated with a bear market. So do you believe we are going into a bear market? No way many will surely scream!

Okay, then some will draw some idiot parallel lines - that would be 1440 - 1460 if we see a new low after failing to make a new high!

If foreigners are selling why Ringgit is still so strong?

So what are you saying? There are still too much optimisms out there. Small cap index has hardly corrected, has not even retraced to 50 MA. Not enough blood yet!

So what are you saying again? Technically speaking, we should not buy until 1544 is taken out or sell if 1425 is violated.

Wednesday, February 16, 2011

How the middle class became the underclass
Interesting read. If the income inequality continues to rise, will we have unstable society. Does that means higher taxes ahead? Does that means consumerism model will break down one of these days? Does that means .............. Just something to think about.

Monday, February 14, 2011

How big is the threat of rising commodity prices?

I was a bit surprise. Food prices have been on the rise. Gasoline price at the pump has been going up. In emerging countries, people toppled their government because they got tired of their government of unable to solve rising food prices. Egypt is the latest the example. The level of intensity coverage by media and blog, however, is far lesser compared to 2008. During that time, many accused hedge fund managers were the evil doers. Some screamed about US $ 150 per barrel oil again recently but nobody seems to pay attention. It's like a new normal or a non-event to people.


If you look at this chart, we are still way off from 2008 peak. Advanced economies CPI is only 1/3 of 2008 while emerging economies is only half. So why worry?

China, one of the largest commodity consumers, has been very concern about inflation and firing a few shorts of interest hike. But interest rate and inflation are still not as high as 2008 when both of them were at the vicinity of 7-8%.

So is inflation fear overblown? Yes based on today's data. However, investing is about looking beyond today. 12 - 18 months from today, this will be a big problem. This also tells us commodity and equity still have some more legs to run. For now.

Saturday, February 12, 2011

Turtle's Portfolio Turns 3

I did not realize that I did not post anything on my Turtle Portfolio update for the month of February. When I started to update the records, I just realized that Turtle portfolio had turned 3 years old today. When I first started to blog, I had done some serious blogging strategy thinking. As a conservative person, I naturally looking at how this blog can die rather that thinking of the glory and glamor that Turtle can get. There are many ways a blog can die, I am just showing you a few here:

1. Running out of things to say. I started to look around, most of us started with fire of baptism and trying to convert every people out there to be students of WB(Warren Buffett), Ben Gram, etc......... sure we all admire these giants but after a while, you will surely running out of words.

2. Keep firing dry facts. I suspect that one cycle of economic boom and bust will also cause you to run out of things to say.

3. Self centered blog. Keep boosting how good you are will certainly pick-up a lot tail winds to blog-hell-land faster than you can wink your eye lashes.

4. Lack of credibility. Say all you want, business blogging is a materialistic subject. Failing to show people the money will cause your blog to die very fast too.

5. Curating news. People are so well read that average investors probably know more that you do.

So after knowing how I can die, I laid out a few blogging strategies to improve my longevity

1. Core subjects - (1) company analysis, (2) current market sentiment analysis (3) big pictures (4) situational analysis based on market conditions, (5) lighter side of life topics should give me enough things to talk about when this blog will draw its final curtain on 2023. You must Begin with the End in mind.

2. I love to show a lot of charts and facts. Facts will kill readers but creative explanation with good points will captivate their attentions. More importantly, show how to monetize the implication of the charts and facts.

3. I hope I did not trying to throw my weight around throughout the blogging period and stay humble and low profile.

4. I know putting up a real money portfolio will add a lot of credibility and following. It's bottom line that counts in this result oriented society. Also, when you start to measure something, it will start to change your behavior. Making it public, it will make it more likely to stick to your commitments and also reinforce your value system that you wish to build. In my case, I did not do this for behavior modification but just to demonstrate my points - (1) building and compounding wealth in a slow and steady is possible (2) In life, its very difficult to stick to one style(buy and hold), keeping churniway ng the money, TA, FA, bottom-up, etc... though I have a blend of buy and hold and do a bit of trading when I feel that I need to rotate the money and decide asset allocation.

5. I did not know how to blog when I first started. After banging my head here and there, I find that that I am quite a talkative person. I can start talking non-stop when I am in a mood. Always speak your mind, this is a venue to voice how strong you feel about a particular issue. However, I must learn to respect my readers --- say something when you have something worthwhile to say. Say it in a way that you it is coming from head and not ass. Say it economically, keep it short and sweet and not beating around the bush.

Just a little bit of sharing and good luck to those who are thinking of starting to blog soon.

Tuesday, February 8, 2011

Temptation is getting higher

Temptation is getting higher. Non fundamental stocks are going up. I would be cautions and will not compromise my principles of fundamental investing. It's better to pass up some good opportunities to make "easy" money rather than get addicted and losses everything at the end. I have seen it, making sizable return based on sound investing over a long period of time but losses it within 3 days when got sucked into the black hole.

Wednesday, February 2, 2011

Happy Chinese New Year

Turtle wishes all readers a Happy Chinese New Year. To those who have done well, may the "force" continue to be with them. To those who are lagging, it's certainly possible to beat the hare provided they continue to keep walking.

Don't forget to drive safely. Lastly eat and drink in moderation. Cheers.

Tuesday, February 1, 2011

Cheap but no one wants to make the first move

(Blommberg)Chinese stock valuations have tumbled to a record low compared with Hong Kong, a sign to investors that mainland equities are poised to rally even as the government cracks down on inflation.

The MSCI China Index’s 9.2 percent slump since November has left it trading at 11.7 times estimated profit for 2011, data compiled by Bloomberg show. The MSCI Hong Kong Index rallied 26 percent between July and December, beating China shares by the most in nine years and pushing its valuation to 17.5 times earnings, the highest ever compared with shares on the mainland.

Prudential Financial Inc. and USAA Investment Management Co. say the gap will close because economic growth may average 9.6 percent over the next two years, double the global figure in International Monetary Fund data. Premium valuations in Hong Kong, the route to China for most investors, signal that seven increases in bank reserves and two interest rate boosts by Wen Jiabao’s government since 2010 won’t derail growth, they say.

“Things will be all right even as China takes steps to tighten,” said John Praveen, the Newark, New Jersey-based chief investment strategist at Prudential International Investments Advisers, which oversees $750 billion. “Chinese growth will still be good.”

The global recovery is boosting demand for Chinese goods even as the nation takes steps to cool expansion in what likely became the world’s second-largest economy last year. China exported $283.3 billion to the U.S. in 2010, according to customs bureau figures released on Jan. 10. Gross domestic product in the U.S. grew at a 3.2 percent annual rate in the fourth quarter, up from 2.6 percent during the previous three months, the Commerce Department said Jan. 28.

Fivefold Surge

The last time Chinese stocks were this cheap relative to Hong Kong, in June 2004, the MSCI China Index was almost two months into a 3 1/2-year bull market. The measure increased fivefold and the earnings multiple climbed to 31 from 12.5, data compiled by Bloomberg show. At the time, the U.S. Federal Reserve was preparing to raise interest rates from 1 percent, a record low until policy makers cut their target for overnight loans between banks to near-zero at the end of 2008.

The MSCI China, a measure of mainland companies available to foreign investors, has retreated since Nov. 8 as regulators stepped up efforts to reduce inflation. The country’s policy makers increased the minimum down payment for second-home purchases and told local governments to set price targets on new properties, according to a Jan. 27 State Council statement.

The MSCI China fell for a third day, losing 0.2 percent to 66.43, while the index of Hong Kong shares slumped 1.2 percent to 11,412.12 for the biggest decline in more than a month.

Consumer Prices

Chinese consumer prices increased 5.1 percent in November, the fastest pace in 28 months, and 4.6 percent in December compared with the previous year, according to data from the statistics bureau.

“We have to wait and see what will happen to inflation,” said Terrace Chum, the Hong Kong-based managing director of greater China equities for Manulife Asset Management, which oversees $118 billion. “The Chinese companies look very cheap to me, but nobody wants to be the first to get in.”

Global investors are bracing for a financial crisis in China, with 45 percent saying they expect one within five years and another 40 percent anticipating a meltdown after 2016, according to a quarterly poll of 1,000 Bloomberg customers who are investors, traders or analysts. Only 7 percent said China will indefinitely escape turmoil, based on the survey that was conducted Jan. 21-24.

China Stocks Lagging

Hong Kong companies are beating Chinese equities again this year. The city’s shares have climbed 3.2 percent, while the MSCI China is unchanged for 2011. Speculation that Beijing policy makers will boost interest rates again drove the MSCI Hong Kong down 0.9 percent to 11,549.30 last week and the China gauge to a 1.2 percent loss to 66.59.

The MSCI All-Country World Index fell for a second week, dropping 0.2 percent to 334.54, as Egyptian protesters clashed with police. The gauge has rallied 94 percent since March 9, 2009, as the global economy recovered from the U.S. mortgage crisis that caused $1.98 trillion in bank losses and writedowns. Annual increases of 32 percent in 2009 and 10 percent last year were the biggest since gains of 32 percent and 13 percent in 2003 and 2004, data compiled by Bloomberg show.

“Global growth is fine,” said Madelynn Matlock, who helps oversee $13.8 billion at Huntington Asset Advisors in Cincinnati. “The liquidity from developed countries is helpful. The test that the Chinese policy makers face is probably a little tough. They have to find a way to keep the economy growing, without overheating. The good news is that they’ve done a good job so far.”

Less Than India

Consumer prices rose less in China than India last year, increasing 3.3 percent versus 10.8 percent, as both economies expanded at similar rates, according to data compiled by Bloomberg. GDP grew 10.3 percent last year in China and more than 8 percent in each of the first three quarters in India, according to government data. China’s GDP probably exceeded Japan’s last year, Economic and Fiscal Policy Minister Kaoru Yosano told reporters in Tokyo on Jan. 20.

PetroChina Co., the nation’s biggest energy producer, has risen 17 percent in the past six months as the Beijing-based company benefited from the 15 percent increase in crude oil prices last year. Its price-earnings ratio using 2010 income was 13.3 at the end of last week, compared with 13.9 for Irving, Texas-based Exxon Mobil Corp.

China Petroleum & Chemical Corp. of Beijing, the nation’s biggest oil refiner, advanced 33 percent since July 27. Energy stocks in the MSCI China trade at an average of 12.1 times estimated earnings, the lowest among 10 industries.

Biggest Gains

Companies that benefit from global growth are posting the biggest gains. Rising demand from emerging and developed nations led the IMF to raise its forecast for worldwide economic growth this year to 4.4 percent from 4.2 percent, according to a Jan. 25 report from the Washington-based lender.

Hutchison Whampoa Ltd., the world’s biggest container- terminal operator, has rallied 84 percent, leading industrial shares to the biggest gain among 10 groups in the MSCI Hong Kong in the past six months as rising exports helped drive expansion. The valuation for the company controlled by Li Ka-shing, Hong Kong’s richest person, has more than doubled from a two-year low of 13.7 times annual earnings in July to 26.8, according to Bloomberg data.

While the pace of China’s growth will slow in the next five years, the economy need not contract, said Aaron Gurwitz, chief investment officer at Barclays Wealth, which oversees about $244 billion. Gurwitz, who spoke in a Bloomberg Television interview, is bullish on Asian shares, including China, Korea and Taiwan.

Discounted Valuations

The MSCI China trades at 11.7 times estimated profits, below the average of 14.9, according to data compiled by Bloomberg since 2006. Among the 10 biggest global equity markets, only France, the U.K. and Germany have lower valuations. Gross domestic product in the European Union is estimated to rise 1.6 percent this year, the median estimate from 20 economists surveyed by Bloomberg. GDP in China will climb 9.6 percent this year and 9.5 percent in 2012, according to the IMF.

“The valuation disparity will probably return to normal,” said Wasif Latif, vice president of equity investments at USAA Investment Management Co., which oversees $47 billion in San Antonio. Chinese regulators “are trying to engineer a soft landing-type of situation and they will probably be able to manage that,” he said. “That would make for a decent buying opportunity.”

My very short commnents
I know that we have a lot of concerns out there, property bubble, inflation, macro-slow down, etc...... but if 10-11X PE(market as a whole) have not discounted all these bad news, what else will?