1. Introduction
One thing I pity stock market Newbies is that there are so many noises around. You simply don't know who to listen to.
When come to matters of law (for example), the lawyer speaks, and everybody keeps quiet.
However, in the stock market, EVERYBODY is an Expert. Ask the taxi driver, he will tell you his version. Ask the fishmonger in the wet market, it is another version.
So, who is right, who is wrong ?
The fact is that when come to investing, nobody has monopoly of wisdom.
There are many ways to skin the Stock MarCat.
I am not familiar with Technical Analysis. I am also not good at speculating. I only know a bit about fundamental investing. According to my version, there are three ways you can punt the market - be an Angler, Driftwood or Surf Rider.
2. Angler
(Angler identifies a place that it thinks has potential for fishes. It places its hook in the water and patiently waits for the big fish to bite)
Angling is a method of fishing by means of an "angle" (fish hook).
In the world of investing, Angler scours the market to try to identify stocks that can benefit from certain catalytic events in the future.
Angler craves visibility, it is not interested in things that it cannot see.
Angler notices that a particular stock is not undervalued now, but in the not too distant future (usually 6 to 18 months), there is potential for dramatic earnings growth when certain productive factors fall into place.
An Angler is mathematically oriented. It painstakingly puts together a quantitative model to try to predict future earnings of a company (or at least its direction).
To understand an Angler's state of mind, please refer to example below.
In 2012, Angler looked at Company B, it saw a company with reasonable balance sheet, profitability and cashflow. However, it is trading at 10 times PER. Company B is not overvalued, but it is not undervalued either. Angler does not see any good reason to gain exposure.
In 2014, Company B announced that it is investing RM100 mil to beef up production. Angler reacted to the news and pressed the Buy button.
In 2015, Company B's investment in new machines started to bear fruits. Net profit up by more than 20%. As a result, share price is up 60%.
Angler is happy. Usually, it will take profit when it thinks the stock is toppish.
Examples of stocks that will appeal to an Angler
By placing big bets on potential earnings upside, Angler will reap mouth watering return if things work well.
The best part of this method is that the converse is not necessarily true. As long as the stocks have good fundamentals, even if predictions fail to materialise, Angler will not necessarily incur huge losses. Most of the time, the penalty is the opportunity cost of waiting and the corresponding frustration.
3. Driftwood
Just in case you wonder what a Driftwood is, this is how it looks like.
Driftwood as per its name, is wood that drifts in the water. It stays afloat and moves around with the water irregardless of high or low tide. A passive existence, but good probability of surviving (very relaxing also, just follow the flow).
As mentioned above, Angler painstakingly puts together a mathematical model to try to predict future share price. Driftwood likes visibility also, but it can live with the unknown.
To understand how Driftwood operates, please refer to example below.
In 2012, Driftwood looked at Company B, it saw a company with reasonable balance sheet, profitability and cashflow. It is trading at 10 times PER. Company B is not overvalued, but it is not undervalued either.
Driftwood is of the view that if you cannot see certain things in the future, that doesn't mean that they will not be there. It found the company's fundamentals reasonable, it likes the management, it is ok with the industry. It pressed the Buy button and mentally prepared to hold long term, real long term.
In 2014, Company B announced that it is investing RM100 mil to beef up production. Driftwood didn't need to do anything. It just smiled.
In 2015, Company B's investment in new machines started to bear fruits. Net profit up by more than 20%. As a result, share price is up 60%.
Driftwood is happy. It can sell the stock or it can hold on.
(Laissez faire)
Unlike Angler that bets big on several stocks, Driftwood doesn't have that luxury. Due to lack of visibility, Driftwood needs to diversify. Its portfolio usually comprises small positions of many stocks (each stock makes up lets's say 5% of portfolio).
Example of a Driftwood Stock
The chart above shows KPS Consortium's share price from January 2011 until now. This could be a stock that Driftwood might buy.
Let's go back to January 2011. KPSCB was trading at 25 sen. It was profitable, has resonable balance sheets. But it lacks a compelling growth story. It doesn't seem to have moat. It does not possess the earnings visibility that Angler craves.
But Driftwood didn't mind taking position. Afterall, it will only be a small stake, THERE IS NO NEED TO THINK TOO HARD.
Few years passed by, Ding Dong Ding Dong, KPSCB stumbled along.
It still lacks a compelling growth story, it still does not have moat.
However, if you study the chart carefully, you will notice that KPSCB has moved on to a higher trading band. It is no more in the 35 sen band, it is now trading at the 45 sen band.
Not a big deal, but I think beats putting money in FD (the stock crossed 60 sen in several instances). Afterall, this is not the end of the story yet, maybe in the not too distant future, major shareholder will privatize the company at 80 sen ?
(Pros) As Driftwood is not particular about short term visibility and does not aim for mouth watering return (doesn't mean that it won't get mouth watering return), it has a wider range of stocks to choose from.
(Note : this doesn't mean that Driftwood "apa pun sapu". They only buy stocks with reasonable gearing, cashflow and PER).
Due to diversification, Driftwood experiences less stress. Even if a company announces a lousy set of result, Driftwood will not feel the pinch as much as Angler (as it only affects a small part of its portfolio). It just sits it out.
(Cons) By placing big bets on several stocks, Angler will sometime reap delighting financial return if things work out well.
Due to diversification, Driftwood is unlikely to enjoy the kick of huge portfolio upside in a particular year, even though beating FD is usually not a problem.
4. Surf Rider
Angler tries to look into the future. Driftwood is of the view that it can thrive without knowing too much about the future (take care of the downside and the upside will take care of itself).
Surf Rider does not predict the future. For them, THE FUTURE IS ALREADY HERE.
In my opinion, there are several famous Surf Riders in i3 - Ooi Teik Bee, Rosmah, Er Kong Seng (list not exhaustive).
Surf Riders buy stocks based on fundamentals (usually PER). However, they don't waste time trying to discover hidden gems. They go for stocks that have proven profit track record. They are comfortable jumping in even though the stock's price had gone up quite a fair bit.
They are not interested to sit there waiting for fish to bite, they prefer to jump into the ocean to ride the waves.
Many of these Surf Riders had done well. I hope one day I can become a professional Surf Rider as well.
Examples of Surf Riders Stocks
Poh Huat, Latitude, Lii Hen, Focus Lumber, Heng Huat Resources, SAM Engineering, and many many others.
(Pros) Shorter waiting period and less risk of disappointment as the companies are already thriving.
(Cons) Misses out on the first cut typically enjoyed by early bird Angler.
5. Concluding Remarks
Of all the three methods discussed above, which one is the most superior ?
It is actually a false choice. None of the three is more superior than the others.
You have to decide which one is suitable for you based on your own comfort level.
As a matter of fact, it is not a bad idea to have a combination of three. I am more inclined towards being an Angler. I enjoy the thrill of discovery and the rewards that it brings.
However, occassionally I surf as well, trading Poh Huat and SAM when they are going strong.
There are no best method. Black cat, white cat, can catch mice is good cat.
Created by Icon8888 | May 01, 2020
Created by Icon8888 | Mar 10, 2020
Created by Icon8888 | Mar 01, 2020
Created by Icon8888 | Nov 13, 2019
Was about to double confirm it's TILAPIA merah?
next month if I free I do one write up about stock market Fortune Teller interview.... recently I interviewed several heavy weight Fortune Tellers ........ I think almost agak-agak possible kalau tak silap can write a blog ad.....
U wan to read? make sure U don't laugh.
2015-12-01 16:09
ICON...I think among all the forumers here, I think you may turn out to be the only one who has a 'normal logical sound mind' and with an inherent 'good likeable persona'.
I think majority already become cracked pot...Hope you don't get corrupted by the others...
Just be the same...even one day you are as rich as KYY.
2015-12-01 16:09
Probability...
In real Icon8888 is multi-multi millionaire.... His net network somehow just 1 million lesser than Dato' Lee Chong Wei...
AH Wei Kor has RM 52 million while sifu Icon8888 achieve his RM 51 million jz month ago when Johotin and Melakatin recorded new high at RM2.XXX.
He is a healthy man every nite eat steamed fish only.... jarang eat steamed prawn....
2015-12-01 16:12
Icon8888 thanks for this article..... coz just remind me to go buy SAM.... as it's throw till dirt cheap now like last 2 week latitude situation.... ha...ha....
2015-12-01 16:15
No la....
Icon8888..the most also we kongsi money and sewa one perahu kecil and kayaking at Titiwangsa Lake before proceed to our outdoor fake candle light Steamed Tilapia dinner only.... promise tis time I will pour some lime juice..... make it tasty........ U wanna join???? I will use my brand new Sang Kancil 0.750 Cc car to give U a ride...
2015-12-01 16:20
one info....
lately Subaru and Range Rover give fantastic discount...
Next year U will see lot of Jaguar and McLaren on town esp in town area......... Both giving impressive package....... the brand new Jaguar look stylish now.
2015-12-01 16:22
Icon8888...
Have U get permission from abang Optimusprime to use his name... Later he come and claim itu apa loyalty apa itu copyright dan lain lain IP from you...... he sue until semua Tilapia milik dia...
Mana dia lately??? Miss him ad...
2015-12-01 16:23
halo icon .. duit !! wah i saw my name so i peeped :) icon, great article .. had a glance but will certainly digest top bottom left right after closing ! thanks for sharing
2015-12-01 16:24
I am in HHGROUP at RM0.640 today!@
Strong support at RM0.555...........
don't buy MAKA no loss later
2015-12-01 16:24
hahahahaha
AH CONN>...........terpijak line ad...... Ini Icon8888 neighbourhood..... hahahaha.... U smell Tilapia Ikan is it???
2015-12-01 16:25
duit .. i told icon i will switch from salmon to red tilapia :) truth be told, i am getting bored of salmon already :(
2015-12-01 16:26
wao...AH CONN>.
U different Taman also can smell Icon's steamed Tilapia fish???
2015-12-01 16:27
good read on angler, driftwood and surf rider. nonetheless, there is no single way to invest. entirely relies on your risk outlook and your holding power. always do your homework and research . since on the topic. any quick take on the new listing KTC ? would appreciate any valuable comments. IPO price 15cents. post listing 27- 34 cents. established in 1938. conservative run. second generation helming the company
2015-12-01 16:29
hahahahah
U wanna grill Pandan Tilapia??? Or Red Sea Salty Tilapia? Or Pineapple Tilapia.....or Bangkok Style Sour Fat Tilapia???
Posted by connie > Dec 1, 2015 04:26 PM | Report Abuse
duit .. i told icon i will switch from salmon to red tilapia :) truth be told, i am getting bored of salmon already :(
2015-12-01 16:31
Icon8888, I think many gua......
Perhaps U can solicit Connie... she is wonderful chef..... macam macam kind of salmon she also can deco one....
2015-12-01 16:47
wah so black heart ar??
ppl playing HangSeng and China stocks still hope people in front of flashing "GREEN" lights ar???? wakakakaakkakaka
Posted by Icon8888 > Dec 1, 2015 04:48 PM | Report Abuse
"Read in detail after market closing"... Of course, Market is hot. I can visualise Connie frantically pressing buy sell buttons in front of a computer screen flashing green lights.
2015-12-01 16:49
lol icon :) so me not an angler or drifter or surfer but a PRESSER ??? mad woman in frantic mode pressing buttons :):)
2015-12-01 16:53
hahahaha........PRESSER?
U wan me kena bunuh lagi kut??? U see me whole body parang scar not enough ar? scared la.....
Tot wan to do a blog name "How to divest"
2015-12-01 16:57
Icon8888,I buy in CheeWah today at RM1.47.
What is the tp u calculated?
2015-12-01 18:52
Nice written. Totally agree with the surf riders method. It is a good method. But sadly no people appreciated these method.
2015-12-01 20:45
wa, ur writing so Jaejun one.
I think im all three, coz im polygamy mah.
All 3 hv made money for me
2015-12-01 23:26
Kakashit.....
I like ur article esp to the B.O.D................ like it
2015-12-01 23:40
Haha... Icon888, I really enjoyed reading your different versions of investors.. I must say I m probably a driftwood and comfortable being that.,,,
2015-12-02 09:17
whatever method or strategy, wishing everybody happy & fruitful investing/trading
2015-12-02 13:55
good article... like the way you categorize investors into three major types
2015-12-02 15:10
Thanks for the thought provoking article. Please keep more coming and share yr thoughts a ideas. You loose nothing by sharing
2015-12-02 22:14
Icon8888, you got it so wrong in your article on PBA. The dividend is NOT 7.5sen. It is 7.5%. It is such a big difference. Please correct it !
2015-12-03 22:48
where got ? I mentioned 3.75 sen in Section 3 of Part 1
please refer below
=============
3. Dividend
Over the past three years, PBA paid out DPS of 3.75 sen. Based on average EPS of 8.2 sen, payout ratio is 45%.
2015-12-03 23:24
Hehe ..Such a big white board but usually ppl only focus on the black dot !
2015-12-05 11:38
duitkwspkita
thanks sifu Icon8888...
Like ur angle (fish hook) 水墨画。。。。。
2015-12-01 15:51