When Bear Stampedes: Value Investing Versus Rumour Investing kcchongnz

Systemic risk. When bear stampedes, all counters will be affected with those relatively better managed counters drop in lesser magnitude than those not so properly managed counters.

In relation to this micro perspective on systemic risk, should we time the market in share investment to maximize return?

2014-12-09 09:41

wwwcomment

I feel disappointed with the performance of mfcb. Should i average down?

2014-12-09 10:54

sbg3106

KC, how do you determine amount to avg down and frequency?

2014-12-09 10:59

andychucky28

I would say those support by the gov institutional fund counters drop lesser.

2014-12-09 11:00

NOBY

Posted by andychucky28 > Dec 9, 2014 11:00 AM | Report Abuse

I would say those support by the gov institutional fund counters drop lesser.

Agree. What those 3 stocks that in positive territory have in common is decent market cap and support by either local or foreign institutions.

2014-12-09 11:02

andychucky28

I see the oil crush might be coming to an end very soon. Oil will be around USD63 per barrel. Very comfortable for all.

2014-12-09 11:14

Posted by walau2u > Dec 8, 2014 11:24 PM | Report Abuse

Thanks for sharing, will u sell ur Perak Corp? Thanks.

I have nothing to sell. But at this price I am contemplating to buy. I like to invest in a way where there is little downside but plenty of upside potential.

2014-12-09 12:28

Posted by bsngpg > Dec 9, 2014 09:41 AM | Report Abuse

Systemic risk. When bear stampedes, all counters will be affected with those relatively better managed counters drop in lesser magnitude than those not so properly managed counters.

In relation to this micro perspective on systemic risk, should we time the market in share investment to maximize return?

Of course it is good to time the market that way; buy when it is near the bottom, sell near the high. That is provided you have a Holy Grail investing strategy.

I for sure am unable to do that.

2014-12-09 12:30

Posted by wwwcomment > Dec 9, 2014 10:54 AM | Report Abuse

I feel disappointed with the performance of mfcb. Should i average down?

Posted by sbg3106 > Dec 9, 2014 10:59 AM | Report Abuse

KC, how do you determine amount to avg down and frequency?

I practice diversification as I think I can never be like Buffett. So I seldom average down as I could be wrong in my assessment.

If I don't own any of those shares, and I have amply cash which I don't need to use for the next few years, I may consider to buy some.

2014-12-09 12:52

Regarding timing the market, I agree with you that no one has crystal ball in predicting the movement of the market else there would not have beggar in the street already. Nevertheless I believe in quote that history may not repeat itself but it does rhyme. Base on the my limited experience in the market, I choose to time the market this time that it is going down south further, therefore I have lately disposed lot of counters with some profit and some loss. Most importantly, I want to prepare war chest to catch bear if it really comes at last. If my prediction goes wrong and the market rebounds strongly herewith, I am willing to lose the opportunity.

Sometimes, we just have to take a bet. This is also tally with the saying that Share Market is a mix of science (calculate value) and art (emotion bet).

2014-12-09 16:48

Staying fully invested or at least almost fully invested at all times, could be as rewarding as trying to time/outsmart mart's tops and bottoms. At least for sure, it's so much less stressful!
I also believe most $billionaire investors advisesagainst mart timing and dodging in and out of stocks, as it's futile and foolhardy to believe anyone could possibly consistently and correctly outwit marts.
So long term investors should not bother to...it's more for the shorter termers or speculators!

2014-12-09 20:29

I have been a long term investor for the last couple cycles. The results proved that it does not practically work well for me. When the bull roars, I saw paper profit escalated (shiok sekali); while bear stampedes, I saw the paper profit went away and then the capital shrunk. The profit and loss just swing up and down, and there is no real gain in long term.

Long term investment may work well for others but definitely not me. Just quote the latest examples where few blue chips such as CIMB, GENT, GENM, MBB were held for many years( ha long term), the return is not rewarding at all. You can work out the % return by yourself if you want to. Long term investment is also very stressful when bear stampedes where your value of investment shrinks each day along with the bear.

In this perspective, I definitely do not advocate short term speculation which I think is very risky and is not my cup of tea.

My point is that one should not trade shares according to short waves(periodical fluctuation), but if the wave is obviously big, it is wiser to follow the wave instead of confronting it. Certainly, big or small wave is purely dependent on your experience.

Good luck. Thank you and it is nice to meet you again, Mr. Wong.

2014-12-09 21:46

optimuss

longterm investing does not apply to emerging mkt. get it right!

why do u think it is called emerging mkt? as in developing/ulu mkt.

compared to developed, Advance mkt like wallst.

2014-12-09 21:49

lcwin

Ok my 1 sen worth so far I cut down aggressively when I feel mrkt about to correct usually when stock holding goes negative more than 10 to 15%. Another thing is when you find trying to get cheap and good stock very difficult and stock forum talk only talk huat huat!! Time to reduce exposure gradually. So far this 2 years I have cut down to less than 10 to 20% exposure a few times and buy back again later, well just say returns is very good!! Now I am looking for sei kai in the blood laden stock streets with cash ah.
Do you know if you gamble in genting sitting down and bet non stop I garentee you bankrap in less than 1 year. This bcos banker have unlimited fund to play with you. BUT if you only play when you estimate the banker is running out luck you will likely make a bit of cash.
Kong hee fatt choy!!! and happy hunting in this emotional times

2014-12-09 21:55

stockoperator

You cant be doing Right thing at the Right time all the Time. Better learn to do the Right thing first. And let time to prove it Right.

Investment is Acting on your Belief system. Love and Patience is an investment joy.

2014-12-10 02:57

Yes it's nice to meet you again Mr bsngpg. If you had been fully invested since 1999 in those 4 counters, plus Pb Bank, Misc, KLKNestle, DLady and even MAS - you should be able to keep and forget about 'em till today, thusenduring much less stress than those mart outsmarters.
I'm fully invested in stocks since 2010. I'm essentially a 'eclectic' investor using many of Livermore methods to pick and sell stocks, and i wonder why many call me a speculator - lol!

2014-12-10 07:43

optimuss, now we know why 'king' of emerging markets M Mobius and Sir John Templeton got it so wrong!

2014-12-10 07:51

Good luck to you too bsngpg, also to optimuss and everybody else!

2014-12-10 10:18

JT Yeo

Long term investing of course applies to emerging market. The only difference is that developed market is more efficient and perhaps less mispriced stocks during normal economic cycle compare to emerging. Emerging market will be less efficient and has more mispriced stocks, in saying that, less efficient also might means it takes longer for stocks to reflect the underlying economic of the business. But then again, long term investing still works. Imagine cold eye has been investing since 70-80s, back then malaysia share market is many more times more ulu then now, yet his annual compound rate is still very satisfactory and i think that is a very important indication that long term investing of buying business for less than it's worth is still alive.

2014-12-10 10:32

Up_down

Bsngpg. A true long term investor tend to more concern on the future prospect of a company few years latter. They don’t care much short term fluctuation in securities prices or a company suffering loss in short term. They don’t even wasting of time here chi-chat here exchanging information. We are traders or season trader. kikiki

2014-12-10 11:17

"Just quote the latest examples where few blue chips such as CIMB, GENT, GENM, MBB were held for many years( ha long term), the return is not rewarding at all. You can work out the % return by yourself if you want to."

When you buy the Blue chips in Bursa, your return will be about the market return. But when you buy value stocks, and generally value stocks are small market capitalization stocks selling at certain value.

Take for example this article below and its conclusions after holding for five years.

http://klse.i3investor.com/blogs/kcchongnz/62822.jsp

"The broad KLCI index has increased from 1260 to 1819 at the close on 24/10/2014. The total return (with the assumption of 3% dividend every year) is 51%, or a compounded annual return (CAR) of the market is 10.6% as shown in Table 1 in the Appendix. The total return of the portfolio of 104 stocks is an average of 181%, or a CAR of 17.6% with a very high standard deviation of 17%. The cumulative average return of the portfolio is hence 3.5 times that of KLCI of 51% and the CAR 70% more than the market return of 10.6%."

The above return is based on a basket of low PE ratio stocks. What if one can do further filtering as described in the above article? The return will be even higher.

So buying blue chip stocks can only give you market return because every funds will try to hold those stocks and hence you can't buy it cheap and hence get higher return.

2014-12-10 14:16

Even if one had bought a basket of high dividend stocks, he will still get a higher total return than the broad market. And if he can filter off some lemons there, the return will be much better as shown in the following link and its conclusions followed.

http://klse.i3investor.com/blogs/kcchongnz/62033.jsp

"Hence if you had bought a basket of high dividend stocks 5 years ago using the farmer’s method, you are likely to have made a small alpha now as you have seen from the median total return of 12.2%, 1.4% higher than KLCI. However, if you had done a thorough financial statement analysis and valuation to hunt for those high dividend stocks then, you would most probably have chosen the right stocks such as Pintaras Jaya, Wellcall, Dayang, TDM, Willoglen. With those analysis, you would also most probably have avoided investing in the other high DY stocks such as Maybulk, CNI and Eurospan which have negative CAR for the last 5 years. As a result, you would have obtained handsome extra-ordinary return 5 years later which is now."

2014-12-10 14:31

walau2u

Hi KC, will u consider CIMB or Pchem at the moment, both blue chip look attractive at current price?

2014-12-10 14:32

Posted by walau2u > Dec 10, 2014 02:32 PM | Report Abuse

Hi KC, will u consider CIMB or Pchem at the moment, both blue chip look attractive at current price?

First you got to tell me why do you think their prices are attractive as I never follow these two stocks. What valuation metrics do you use?

2014-12-10 15:00

NOBY

When you say you dont average down your counters, do you put a cap on the maximum exposure of your portfolio to a certain stock ? I m sure that in practice, you are not equally weighted in all the stocks above ?

2014-12-10 15:25

Posted by NOBY > Dec 10, 2014 03:25 PM | Report Abuse

When you say you dont average down your counters, do you put a cap on the maximum exposure of your portfolio to a certain stock ? I m sure that in practice, you are not equally weighted in all the stocks above ?

I once had a stock with 25% weightage. But that was averaging up, not down, and I was very confident with that stock at that time.

But I think it is good to cap it at 20% for a portfolio of 10-15 stocks.

2014-12-10 15:45

NOBY

I think it is good to reserve some cash for momentum play to combine with value investing, as some of these value stocks take a very long time to get discovered. Perhaps invest 50%-70% first of the intended allocation and put the rest in to average up once the momentum builds up.

Also, when you look at the portfolio, it tends to be 1 or 2 winners that make the difference to outperformance vs underperformance which underlines the importance of diversification. But this may only be the case, if you hold on to the winners. Sometimes, if strictly following value investing, you tend to sell out too early and buy other undervalued counters causing the portfolio to suffer. I suffer this fate for KSL when I sold too early to switch to Plenitude which appeared to be a better bargain. But I underestimated the qualitative factors that propelled KSL share price higher such as bonus issue, DRP and increased openess by the management. The result of this decision cost me dearly at least in the short term.

Frankly speaking, I feel that number crunching alone, tons of analysis looking at financial statements etc is important but not enough to earn above average returns. Combining this knowledge with momentum can enhance the portfolio returns.

http://www.investingdaily.com/16052/the-holy-grail-of-investing-combining-value-and-momentum/

2014-12-10 16:06

stockoperator

Noted the respective Industry Leader such as Scientex and Pintaras continue to outperform broad market by wide margin.

The economy moat,market share and company size is giving the free lunch and are main factors of outstanding performance.

2014-12-10 19:15

goldenluck16

Avoiding high fliers is the safest strategy. Buying at the right price is not as important as exiting at the right time. Always take profit to average down your holding cost is a very important strategy. Never borrow to buy shares. It's a jungle out there, one greedy move will cause a severe financial loss. It's not that easy as it seems..i.e getting extra income from the share market. I believe most of you have been losing money for the last three months and overall less than 5% of investors make money this year. If you are in the 5% ..I salute you!!

2014-12-10 21:09

lcwin

I see good tips here but I don't believe in investing for long term in Bursa Malaysia just look at most stock price over the years it actually look more like zero sum game to me. My strategy follows momentum with fundamentally sound but NOT large institutionally own stocks. Run when you sense danger as I outline earlier. You may not realised this but I multiply my returns many folds this 2 years just following my new strategy ( refer my earlier posting). Last time I follow fundemental lah, news ah market report lah let just say no it dosen't work.When market become emotional thats when we can make money.

2014-12-10 21:51

Great article always attracts great comments as those of KC's article. Thank you very much for the high quality opinions and views. You have positively contributed for a better community. Thks.

2014-12-10 22:02

ccdev

@bsngpg

nice comments man, although i am less experienced than you in the market i can relate to your experience. thanks for sharing your thoughts so clearly. yes, science + art, and imo, your 'wave' theory works well for someone of my particular emotional mode. i hope your bets work out. let us know when you see a wave that is good to surf. peace.

also kcc, lcwin and yeah, this thread is good.

2014-12-11 12:29

gungho92

you are very honest. thanks for being transparent. in moments like this, when the tide is gone, you will no which company is swimming naked in the ocean.

2014-12-21 19:36