Wednesday, November 30, 2011

It's now or much later.........

I've been wanted to capture my thoughts on plantation stocks over the weekend but there have been a lot of interruptions......some baby snails were literally ruining my plants so I've to harden my heart to get rid of them with a loaded pesticide water gun. Hasta la vista, baby!

The sector(plantation index) had a huge run prior to sub-prime collapsed and the Humpty Dumpty had a great fall. All were not lost, the market managed to stick back the pieces(with some help of all king's horses, all king's men and some luck of course). Since then it had a very successful recovery. The sector appeared to have been topped out in the early of 2011 and trapped in the downtrend for last 10-11 months.

The CRB index appears to have a similar pattern. It has been on the downtrend as well since the beginning of the year and the Baltic index is clearly looks like a Vietnam veteran having bad dreams, screaming at nights.

A main competing commodity to palm oil, soya beans, got hammered in September. They said they worry about global growth. They might be right, for once, I agreed with these traders. Damn! did I just shake my hand with them?????

Back to our KLSE, our top guns, i.e. heavyweight like Sime Darby, IOI Corp and KLK have been getting expensive. The valuation has caught up with price pretty fast. There are some issues and worries with these stocks(a story to be told in another day). Those market cap stocks between RM $ 5 - 10 B are also getting expensive. The valuation gap in fact had almost been eliminated. A lot of stocks with less RM 1 B had their days, justice had been served -- the valuation is also appear to be rich too. There are 2-3 more stocks like TDM is waiting for a handsome prince to kiss them. Don't let me stay like a frog forever, she said with her beautify winky eyes. Kiss me please.

Dividend yields are not that generous, on the average of 3+%, are indications of prices had surged too much. Some are even worse - less than 2% - telling us players are willing to go after capital gains only.

A few of the undervalued stocks have only a window of about 6 months, it's now or much later. The logic drives behind this premise is CPO price can still be firm due to the lower harvesting yields caused by heavy rainy seasons. When all stocks slide under water slides, pumping adrenalin will not equal to making money.

Take care all my friends.

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