Stock Pick Challenge 2013 2H - kcchongnz

My new portfolio return

One would notice that all stocks in my portfolio are small to medium capitalized stocks. but why?

I am a value investor trying to find good companies trading at cheap price. It is hard to find them in the large capitalized stocks which I classify as good companies by the metrics of high return of equity and return of capitals. These stocks are closely followed and owned by local and foreign funds and hence would likely to be fully or overvalued. Furthermore a large company is hard to have high growth. A 50m increase in profit is 50% growth for a 100m revenue company, but just a 5% growth for a 1b revenue company.

Kenneth French, a Dartmouth College finance professor found that a single dollar invested in the small capitalized stocks in US market grew to $5522 in a period of 74 years from the year 1926 to 2000, as compared to $2128 for investing in large company stocks. His findings in the UK, Japan and several MSCI countries yield unambiguous results, with the small capitalized stocks returned an average of 2.6% better than the large caps per year.

The small caps are indeed the hidden gems in the stock market, including Bursa. Those selected by me generally have the following attributes:

1. Their business is durable and likely to last for many more years to come.
2. They have good financial position with little debts, or if with significant debts, their profit and cash flow can easily cover many times interest payment.
3. They have good quality and consistent earnings. Cash flow from operations is equal or above net profit on average.
4. They generally have positive free cash flow. Often FCF is abundant at more than 10% of revenue and invested capital.
5. They have high return of equity and invested capital, at least more than 10%.
6. Most of all, they are trading at low multiples such as PE ratio, P/B, enterprise value/Ebit, EV/Ebitda, EV/Sales etc.
7. There is little or even none analyst coverage.
8. Scant institutional ownership.

So far what is the return of the portfolio since three weeks ago? Table 1 below shows the detail return of each stock and the average return of the portfolio.

Table 1
New 23/08/2013
Pintaras 4.99 5.75 0.000 0.760 15.2%
Kfima 2.060 2.030 0.000 -0.030 -1.5%
MFCB 1.700 1.810 0.000 0.110 6.5%
Haio 2.670 2.640 0.000 -0.030 -1.1%
Fibon 0.330 0.355 0.000 0.025 7.6%
CBIP 2.830 2.740 0.000 -0.090 -3.2%
Tien Wah 2.510 2.470 0.000 -0.040 -1.6%
Homeritz 0.430 0.435 0.000 0.005 1.2%

Average 2.89%
KLSE 1785 1721 -64.000 -3.59%
Alpha 6.5%

The average return of the portfolio is 2.9% from the three week period. Nothing spectacular. However it is still 6.5% better than the market return of minus 3.6%. Actually the return of a 3-week period is not a representation of the long term return of a portfolio. We will have to wait for a period of 1 year, or even 5 years for judge the true performance of the portfolio.

2013-08-25 19:59

kcchong, I trust that your stock picks will outperform the market over a longer period, say at least 3 years.

2013-08-25 20:06

TanKW, this will be my apportionment.

Company Industry % holding
Pintaras Construction 15%
Kfima Trading/Services 20%
MFCB Trading/Services 10%
Haio Consumer 10%
Fibon Industrial 5%
CBIP Industrial 10%
Tien Wah Industrial 10%
Homeritz Consumer 5%
Willow Technology 5%
Daiman Property 10%
100%

2013-09-02 13:09

I have already bought the stocks before I posted them, some of them long time ago. This is not just talk only, but with conviction.

No, I don't use timing. All purchases were based on fundamentals; ie investing in great companies at a margin of safety.

Oh yeah, all valuation of intrinsic value was solely done by myself. I have never referred to any analysts reports. So these are all non-professional analysis and views.

2013-09-02 14:06

“三梯次買進法” is something like dollar cost averaging. It is a popular investing strategy but make sure those you buy are good stocks like what is mentioned in the article. Never dollar cost averaging on lap sap.

Notice this strategy is the opposite of buy high sell higher used in TA. However, this $ cost averaging method is more of a risk reduction strategy to me. Although you can buy more with this method if the market is going down, but if the stock price is rising, you pay higher and higher price. In general stock price moves higher as time goes by. there is an upward drift in stock price.

In academic, dollar cost averaging has been debunked.

2013-09-02 14:52

kcchongnz, now that you have added Dsonic as the 11th counter, are you going to revise your percentage allocation as earlier 100% has been fully used up for the first 10 picks.

2013-09-02 15:15

inwest88, this is my suggested proportion. Just a suggestion. I am actually heavy on Kfima and Pintaras which I think is not so balanced.

Company Industry % holding
Pintaras Construction 15%
Kfima Trading/Services 20%
MFCB Trading/Services 5%
Haio Consumer 10%
Fibon Industrial 5%
CBIP Industrial 5%
Tien Wah Industrial 10%
Homeritz Consumer 5%
Willow Technology 5%
Daiman Property 10%
Datasonic Technology 10%
100%

2013-09-02 15:21

kcchongnz, no offence meant. Just to put things in the proper prospective - understand this is just your suggested allocation which of course differs from your actual shareholding.

2013-09-02 15:24

inwest88, you are right. I am too bullish on Pintaras and Kfima.

2013-09-02 15:25

By the way KW Tan, why is the reference price for Dsonic 3.64 as the closing price is only 3.30 ?

2013-09-02 15:26

TanKW, generally I buy and hold. Buy a stock when it is selling at a good margin of safety, then sell if it has gone up close to its intrinsic value. But often easy said than done. My fingers are itchy. The other thing is I can't possibly keep on buying. Often I have to sell some in order to buy what I think is a better stock.

2013-09-02 15:30

KW Tan, why need another portfolio when all these counters are under
Tan KW's Watchlist: Stock Pick Challenge 2013 2H - kcchongnz which is a challenge with OTB.

2013-09-02 15:35

inwest, allow me to correct you. I selected the counters for my own investment. As I do analyze those companies I invested in quite thoroughly as you are aware. I already got a lot of things in my spreadsheet. The extra work I need to do is to write the stuff up.

So I just share my thoughts with you guys, also for learning and educational purpose. It is never meant as a challenge with OTB. You should know OTB is a professional, and I am just a novice in the stock market. How dare i challenge him?

2013-09-02 15:42

Amendment - You are mistaken, what I meant is not a "really" a challenge but more of a "friendly game" between you both, one using FA and one using TA. I use the challenge because it appear in the subject title. from the positing, you have no rivalry with OTB. There is no winner and loser at the end of the year. Pardon me If I had sent the wrong message.

2013-09-02 15:48

Ooi Teik Bee

So I just share my thoughts with you guys, also for learning and educational purpose. It is never meant as a challenge with OTB. You should know OTB is a professional, and I am just a novice in the stock market. How dare i challenge him?

I also think the same way. It is never mean as a challenge. It is just a different school of thought. One is based on FA and another is based on TA. It is a learning process and I want to see what is the result. I am not a Sifu, otherwise, more readers here will be unhappy and attack me for no reason. I am also learning here and try to fine tune to make more money. In stock market, there is no Sifu. Who makes the most money is called Sifu. Thank you.

2013-09-02 15:53

With both kcchongnz and otb having made their stand, I suggest the title should be change to "Tan KW's Watchlist: Stock Pick Ideas 2013 2H.

2013-09-02 15:56

@inwest88 i didn't set the price... i3 set it

the one i setup for kcchongnz is watchlist, it is different with portfolio.

you go to My Portfolio there and create portfolio, the screen will ask you it is a transaction or watchlist... give a try then you will know what i mean.

Noted with thanks. KW

2013-09-02 15:59

A challenge is a contest, a competition, a duet ! hence I suggest to drop the word. Just my opinion. Being the coordinator, you have the final say.

2013-09-02 16:14

Ooi Teik Bee

I am no longer interested to post any selection here. I spent many good hours to write the report, hopefully to help the readers here to make money. What I get here is many personal attacks for no reason. They do not appreciate the hard work, they do not understand simple English, just simply attack me here to get cheap publicity and be a hero here.
I am not good to attack people and I feel very sad when I offend people here. Hence it is a good idea to stop here. Let other better ones to take over so that I also can learn from them to make more money which is my goal.
In stock market, there is no Sifu. Who makes the most money is called Sifu. Thank you.

2013-09-02 16:28

OTB, from what I have been observing, there are only one or two, if at most three who launch personal attacks against you but understand one or two have already been suspended.

2013-09-02 16:32

Good job, KW.

2013-09-02 22:21

It's not the time but the effort !

2013-09-02 22:24

Portfolio return as at 31/8/2013

The portfolio of this generally small capitalized stocks was started at the beginning of August 2013. As at the end of the month, the portfolio suffered a negative return of 0.23% (See computation below). For the same period, KLSE dropped 2.59% from 1773 to 1727. For simplicity, the portfolio return is compared with the return of KLSE in this period.

In a down market, the performance of small capitalized stocks generally perform worse than the overall market, and vice versa. However, this portfolio still returns 2.4% better than the broad market in this downturn.

Again, the actual performance of a portfolio should be viewed in a long term basis in terms of years, not months.

Ref data Now
New 1/08/2013 31/08/2013
Pintaras 4.99 5.43 0.000 0.440 8.8%
Kfima 2.060 1.950 0.000 -0.110 -5.3%
MFCB 1.700 1.790 0.000 0.090 5.3%
Haio 2.670 2.550 0.000 -0.120 -4.5%
Fibon 0.330 0.355 0.000 0.025 7.6%
CBIP 2.830 2.690 0.000 -0.140 -4.9%
Tien Wah 2.510 2.420 0.000 -0.090 -3.6%
Homeritz 0.430 0.410 0.020 0.000 0.0%
Willow 0.530 0.475 0.000 -0.055 -10.4%
Daiman 2.530 2.630 0.000 0.100 4.0%
Datasonic 3.350 3.370 0.000 0.020 0.6%

Average -0.23%
KLSE 1773 1727 -46.000 -2.59%
Alpha 2.4%

2013-09-03 06:19

captainrpes

Dear Mr.Ooi,

What you think about BIMB?i dont understand the meaning of the right issue . mind to explain.? is that worth to subscribe?

2013-09-03 06:52

miketyu

Dear kcchongnz and Mr.Ooi,

Have you guys had a look at YTL Power? This counter is the beneficiary for depreciating ringgit and cash rich. Why the price has always been suppressed at range 1.6-1.7? Is there any future growth for this counter?

2013-09-03 12:29

A Dozen Things I’ve Learned About Investing From Peter Lynch
-Tren Griffin

1. “Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.” It is far more productive for an investor to focus their time and energy on systems which are potentially understandable in a way which might reveal a mispriced asset. George Soros said once: “Unfortunately, the more complex the system, the greater the room for error.” The simplest system on which an investor can focus is an individual company. Trying to understand something as complex as an economy in a way which outperforms the markets is not a wise use of time and is unlikely to happen.

2. “The way you lose money in the stock market is to start off with an economic picture. While you don’t want to be oblivious to the state of the economy, listening to talking head pundits and incessantly following the news cycle is actually counterproductive to profitable investing. Instead, focus on the companies you chose to follow.

3. “The GNP six months out is just malarkey. How is the sneaker industry doing? That’s real economics.” The difference between the predictive power of microeconomics and macroeconomics is “night and day” since with the former vastly fewer assumptions are required and the systems involved are far less complex. The best investors make investing as simple as possible, but no simpler. Lynch is saying he may pay attention to the economics of an industry, but only to understand the economics of the companies he chooses to follow.

4. “To make money, you must find something that nobody else knows, or do something that others won’t do because they have rigid mind-sets.” It is mathematically certain that you can’t beat the market if you *are* the market. You must find bets that are mispriced, be right about that mispricing and when you do find a mispriced bet, by definition, your view will be contrarian.

5. “A share of a stock is not a lottery ticket. It’s part ownership of a business.” Many people love to gamble since it gives their brain a dopamine hit. They gamble even though it is a tax on people with poor math skills. The right thing for an investor to love is the process of investing, not the bet itself. The right process for an investor is to understand the value generated by the underlying business.

6. “Investing without research is like playing stud poker and never looking at the cards.” You can’t understand a business and its place in an industry without doing research. And in doing research you must find something that the market does not properly discount into the price of the stock or bond.

7. “Owning stocks is like having children—don’t get involved with more than you can handle. The part-time stock picker probably has time to follow 8-12 companies.” If you work at a day job and you have a life, only so much time is left to follow stocks and bonds. It is better to be a mile deep in understanding 8-12 companies than an inch deep on many more.

8. “Everyone has the brainpower to follow the stock market. If you made it through fifth-grade math, you can do it.” Addition, subtraction, multiplication and division is all the math skill you need.

9. “People seem more comfortable investing in something about which they are entirely ignorant.” Suspending disbelief about an investment is easier for many people for some reason when you know less rather than more, especially if the story is well crafted and told by the promoter.

10. “If you can’t convince yourself ‘When I’m down 25 percent, I’m a buyer’ and banish forever the fatal thought ‘When I’m down 25 percent, I’m a seller,’ then you’ll never make a decent profit in stocks.” and “Bargains are the holy grail of the true stock picker. We see the latest correction not as a disaster, but as an opportunity to acquire more shares at low prices. This is how great fortunes are made over time.” Also, don’t put yourself in a position where you may need to sell at the wrong time.

11. “A market player has 50 percent of his portfolio in cash at the bottom of the market. When the market moves up, he can miss most of the move.” Markets over long period of time inevitably rise. They always have and always will. That is the good news. The bad news is that you can’t “time” when the rise in a market will happen.

12. “Only invest what you could afford to lose without that loss having any effect on your daily life in the foreseeable future.” Peter Lynch said once: “Small investors tend to be pessimistic and optimistic at precisely the wrong times.”

2013-09-04 06:00

Exactly three months have passed since I first started my portfolio for the second half of 2013 as proposed by some of the forumers here. May be we should review the performance of the portfolio in this three months.

Just to recall, all stocks in my portfolio are small to medium capitalized stocks. They were chosen based on the good past performance using the metrics of value investing such as return on invested capital, return of equity, good and quality earnings as evidenced from cash flows, healthy balance sheet etc. After determining that they are of good companies, their values were assessed against their share prices at that time. Attempts were made to buy those good companies at reasonable or bargain prices basing on PE ratio, Price-to-book etc, and especially their earnings yields from the metric of Ebit/EV.

In this three months, KLCI has risen from 1773 to 1810, or 2.1%. but what is the performance of the portfolio?

kcchongnz's portfolio has gained an average of 26.3% in the last three months. That means the portfolio has returned an alpha of 24.2% using the KLCI as a benchmark. Ten of the eleven stocks made positive return with more than half of them in double digit percentage. They are Datasonic (92.2%), Fibon (81.8%), Pintaras (27.9%), Homeritz (26.7%), Willowglen (21.7%) and Daiman (16.2%). There is no loser with the worst performer, Kumpulan Fima which breaks even. Details of the return of the portfolio is shown in the link appended below.

http://klse.i3investor.com/servlets/pfs/19386.jsp

How is the three month performance of the portfolio against the 68 unit trust funds invested in Malaysian equity as available in the FundSupermart as shown in the link below?

http://www.fundsupermart.com.my/main/fundinfo/compareFund.svdo?sectormaincode=EG&sectorareacode=FE2

The median return of the 68 funds is 2.0% (approximately that of broad market) with the maximum return of 7.5% achieved by Apex Dana Al-Sofi-i.

This means that the return of my portfolio also way outperformed the unit trust funds by a very wide margin.

Appendix: kcchongnz portfolio
xxxx Ref date Now xxxx xxxx xxxx
New 1/08/2013 1/11/2013 xxxx xxxx xxxx
Pintaras 4.990 6.380 0.000 1.390 27.9%
Kfima 2.060 1.980 0.080 0.000 0.00%
MFCB 1.700 1.830 0.030 0.160 9.41%
Haio 2.670 2.780 0.000 0.110 4.12%
Fibon 0.330 0.600 0.000 0.270 81.8%
CBIP 2.830 2.950 0.000 0.120 4.24%
Tien Wah 2.510 2.550 0.077 0.117 4.68%
Homeritz 0.430 0.535 0.010 0.115 26.7%
Willow 0.530 0.645 0.000 0.115 21.7%
Daiman 2.530 2.940 0.000 0.410 16.2%
Datasonic 3.350 6.440 0.000 3.090 92.2%

Average xxxx xxxx xxxx xxxx 26.3%
KLSE 1773 1810 xxxx 37.0 2.09%
Alpha xxxx xxxx xxxx xxxx 24.2%

2013-11-01 19:13

stanley_k

hi kcchongnz,

Congrates on your impressive return. Will Fama 3-factor model be a more appropriate way of explaining the stock return in this case? Since small cap and value firms tend to outperform the market. Thanks.

2013-11-02 00:48

Professor Eugene Fama of the University of Chicago is one of the three economists to be awarded the 2013 Sveriges Riksbank Prize in Economic Sciences for his ground-breaking work advancing the Efficient Market Hypothesis (EMH).

The EMH postulates that in an efficient capital market, current market price reflects all available information about a security and the expected return based upon this price is consistent with its risks. As a result, it is impossible for an investor to consistently beat the market and profit from it, unless he takes up more risks.

The Fama three-factors model expands on the capital asset pricing model (CAPM) by adding size and value risk factors in addition to the market risk factor in CAPM. This model considers the fact that value and small cap stocks outperform markets on a regular basis because of these additional risks. The stock return equation, r, is written as follows:

r = Rf + β*(Rm-Rf) + bs*SMB +bv*HML + α

Where Rf is the risk free rate, Rm is the market return, SMB is Small minus Big market capitalization, HML is the High minus Low book-to-market ratio, bs and bv are the respective coefficients as obtained from regression, α is a random number.

This model claims that when the risks in the size and value are considered, the vast majority of returns are explained. Excess return or alpha just about completely disappears when a portfolio measurement accounts for the average size and value weights of the holdings. No longer can anybody claim credit for unexplained excess results that occur simply because he held a portfolio tilted toward small or value.

Let us look at the portfolio of kcchongnz and see if the claim that the excess return in the order of 24.2% in three months is really due to the additional risks incurred.

1. Do the stocks in the portfolio have historically high volatility as measured by β as in CAPM?
The 11 stocks in the portfolio are hardly researched by investment houses, especially when they are first selected into the portfolio. More than half of them have no research report from any investment bank. Others have only one or the most two research houses covering them. There is hardly any institutional investors owning their stocks. There are also few retail investors invested in those stocks and hence not much trading on them. My hunch is that the values of β are mostly smaller than 1 if one cares to regress the return of their stock prices against the return of the market.

2. Does the portfolio consists of mostly small market capitalized stocks?
For sure it is. None of the stocks in the portfolio has a market capitalization anywhere close to one billion Ringgit. Only a couple of them, Kumpulan Fima and Daiman have slightly above 500 million market capitalization. Fibon’s market capitalization was just 32.3 million and Datasonic just migrated from the ACE market to the main board when they were first written. But are these stocks more risky as postulated by the 3-factor model?

The stocks were picked based on their good and consistent earnings, healthy balance sheets and good cash flows. After determining that those companies are good companies based on fundamental metrics, they were purchased at reasonable price or even way below their intrinsic values. Many of the companies selected have heaps of cash and little debts, if any. So how could they be more risky just because they have small market capitalization and warrant higher risk premiums?

3. Does the portfolio consist of mostly high book-to-market ratios?
In the first place, the stocks were selected as explained in the last section, i.e. good and consistent earnings, healthy balance sheet and good cash flows sold at a comfortable margin of safety in relation to their intrinsic values. But why is it considered as higher risk for stock with a higher book value than the market value? Isn’t that safer to buy stock with a higher book value than the market value?

A review of those stocks in the portfolio shows that a mixed bag of high and low book-to-market ratios and hence the 3-factor model doesn’t seem to apply.

The portfolio out-performed the broad market by a whopping 24.2% in three months. From the argument above, it doesn’t appear that the portfolio consists of stocks of higher market risk as measured by β.

It does appear to confirm that small market capitalization and good value (not necessary book-to-market ratio but other value metrics) may explain the excess return. However, it beats me to think that small market capitalization and good value carry additional risks and hence the explanation of excess return.

So is the market in Malaysia efficient? Does the excess return due to the additional risks carried? For me I highly doubt so.

2013-11-02 07:21

stanley_k

Thanks for your detailed explanation. If the market in Malaysia is really that efficient, there is no way investors can make profit from the market, as all the information will be fully reflected in the stock price.

2013-11-02 08:28

heavyth

kcchongnz...When are you posting the stock pick challenge for year 2014 ???

2013-12-10 20:33

Posted by heavyth > Dec 10, 2013 08:33 PM | Report Abuse
kcchongnz...When are you posting the stock pick challenge for year 2014 ???

Is there a hurry to post the stock picks for 2014? Don't we have another three weeks to go? Besides I have already got two portfolios below, the first is not even one year yet, and the second, hardly 5 months old.

http://klse.i3investor.com/servlets/pfs/13147.jsp

http://klse.i3investor.com/servlets/pfs/21089.jsp

The Efficient Market Hypothesis (EMH) and Capital Asset Pricing Model (CAPM) postulate that in an efficient capital market, current market price reflects all available information about a security and the expected return based upon this price is consistent with its risk. As a result, it is impossible for an investor to consistently beat the market and profit from it.

Hence it is not easy to find a market beating stock, especially when most good stocks have their share prices risen so much, isn't it? Besides even if I think there is one, it will take a huge amount of time for me to analyze, value and finally write a report on it.

In my opinion, it is the thinking and analytical process of investing which is more important. I know, this stuff is boring. But haven't I been saying that I do not have the wisdom of providing stock tips which can make anyone earns huge return in a short time.

2013-12-11 06:21

It is end of the year and exactly five months have passed since I first started this portfolio on 1/8/2013. It is time to review the performance of this portfolios now before moving to the 2014 new portfolio. As a note, this portfolio only has two stocks in common with the earlier one set up by me in January 2013.

In this five months, KLCI has risen from 1773 to 1867, or 5.3%. But how has my portfolio performed?

My portfolio of 11 stocks has made a total return of 44.1% in the last five months as shown in the link below.

http://klse.i3investor.com/servlets/pfs/21089.jsp

The total return has taken into account all dividends paid in this period plus the corporate exercise of one for one bonus for Pintaras and 1 for 5 share split for Datasonic. That means the portfolio has an excess return, or an alpha of 38.8% using the KLCI as a benchmark.

Nine out of eleven stocks made positive returns with all of them in double digit percentage. The two losers, i.e. Kumpulan Fima and Haio only lost an average of 1.5% as shown in the appended Table 1.

The outlier is the rule breaker Datasonic with a return of 229%, something which I have never expected to be truthful. Even if we ignore this outlier, the total return is still well above 25% in this five months period.

KC Chong (12.10 am on new year day 2014 in Auckland)

xxxx Ref date Now xxxx xxxx xxxx
New 1/08/2013 31/12/2013 Dividend xxxx xxxx
Pintaras 2.495 2.860 0.075 0.440 17.6%
Kfima 2.060 1.930 0.080 -0.050 -2.4%
MFCB 1.700 2.180 0.030 0.510 30.0%
Haio 2.670 2.570 0.080 -0.020 -0.7%
Fibon 0.330 0.560 0.013 0.243 73.5%
CBIP 2.830 3.210 0.000 0.380 13.4%
Tien Wah 2.510 2.680 0.080 0.250 10.0%
Homeritz 0.430 0.675 0.010 0.255 59.3%
Willow 0.530 0.680 0.000 0.150 28.3%
Daiman 2.530 3.090 0.120 0.680 26.9%
Datasonic 0.670 2.190 0.015 1.535 229.1%

Average xxxx xxxx xxxx xxxx 44.1%
Median xxxx xxxx xxxx xxxx 26.9%
KLSE 1773 1867 xxxx 94.0 5.3%
Alpha xxxx xxxx xxxx xxxx 38.8%

2013-12-31 19:14

BEWARE PLEASE...DON'T GET CAUGHT WITH YOUR PANTS DOWN.

The recent rise in the Malaysian Stock Market to record highs was used as a smokescreen to divert attention from our economic problems. It is use to fool the people into believing that our economy is growing healthily. However, one of the economic indicators our Government cannot manipulate is the exchange rate. This is because the foreign exchange market is transparent and too big to be manipulated because it trades about US$ 5 trillion a day.

2013-12-31 19:16

Malaysia is not in a better position either. We too have our own problems like high budget deficits, Government Debt/GDP, Household debts and so on. With the current IMF style austerity measure implemented by our Government, it will definitely have a dampening effect on our economy next year. Implementing contractionary Fiscal and Monetary Policy to straighten our Budget Deficit will not work without any corresponding measures to lighten the burden of the lower and middle income group. Cash handout through the BR1M scheme can be likened to Developed nations giving financial aid to Developing countries. In the end it will create a culture on dependency among the receiving nations.

Full article: http://malaysia-chronicle.com/index.php?option=com_k2&view=item&id=207172%3Ared-alert-for-malaysia-the-next-on-the-hit-list-as-indonesia-braces-for-meltdown&Itemid=2#ixzz2p3BhcIFR
Follow us: @MsiaChronicle on Twitter

2013-12-31 19:20

Moreover our economic problems will be further magnified with the coming tapering by the FED which will affect the total Aggregate Demand for Asian exports around the world. Another side effect of the FED tapering will be the rise of interest rates meaning there will be more outflow of capital from emerging markets. Thus this will put more downward pressure on emerging market currencies especially the Ringgit, Rupiah and Rupee. At the same time our local interest rates will be subjected to upward pressure. Hence, this might provide the trigger that will bust our Malaysian and the Indonesian Real Estate market which has reached bubble levels. The following are the charts for the Global real estate prices and by country.

Full article: http://malaysia-chronicle.com/index.php?option=com_k2&view=item&id=207172%3Ared-alert-for-malaysia-the-next-on-the-hit-list-as-indonesia-braces-for-meltdown&Itemid=2#ixzz2p3C8q4PT
Follow us: @MsiaChronicle on Twitter

2013-12-31 19:21

tewnama

Moneyman, apa point u? Pasaran saham sudah tak stabil? Aiya, kalau ia nak runtuh, tak ada org boleh buat apa pun. Walaupun u tak main saham, u pun akan kena dalam cara lain. Tak ada orang dapat lari

2013-12-31 19:36

Pasaran saham sudah stabil? STOP KIDDING YOURSELF...this is just windows dressing to fool people like you. Wake up & don't be an idiot.

2013-12-31 20:02

2013-12-31 20:02

coolio

Excellent performance as usual from Kcchongnz

2013-12-31 21:34

My new portfolio of 11 stocks selected in August 2013 has made an average total return of 44.1% as compared to 5.3% of KLCI in the last five months.

There were two losers, i.e. Kumpulan Fima and Haio which lost an average of 1.5%. Have I done anything wrong when making the selection five months ago? Yes, I think I have made a wrong choice for Haio.
On 4th August 2013 I wrote an article comparing the merits of investing in a few food companies before I made the selection as shown in the link below:

http://klse.i3investor.com/blogs/kianweiaritcles/34314.jsp

I was contemplating whether I should invest in Haio or Zhulian and I have chosen Haio, and that was an error of judgement.

Zhulian has a faster growth in revenue and earnings than Haio. Its ROE and ROIC at 26% and 39% respectively are way above those of Haio at 18% and 29% respectively. I also knew at that time Zhulian’s foray into Indonesia and other Asean countries was very successful at that time.

However I choose Haio over Zhulian because Haio is slightly cheaper at EV/Ebit of 6.9 compared to Zhulain’s 8.5. And also Zhulian’s share price has reached its peak at that time; whereas Haio’s share price was way below its peak of more than 5.00 2-3 years ago. That was an error of judgement.

Since then Zhulian share price has climbed by another 57% from 3.17 to 4.99 now; whereas Haio’s share price has dropped by 5% from 2.70 to 2.57 now, dividends both not included.

The lesson is, it may be better to buy a better company with reasonable higher price than a not-so-good one at cheaper price. And the market has no memory of past stock price. Stock price can go higher if fundamentals improve, and vice versa.

2014-01-02 09:29

bsngpg

Hi KC Chong: very good lesson-“better to buy a better company with reasonable higher price than a not-so-good one at cheaper price..”.

My heart is still hanging in the air. I still cannot turn that lesson into a solid perception to guild my future behavior. I need to experience more. Anyway, thanks for the sharing.

2014-01-02 12:13

So what is wrong with the pick on Kumpulan Fima which lost 2.4% since a year ago? Well there were two or three people in i3 who constantly picked on me for choosing this stock. However they were not able to articulate on why my Kfima pick was such a bad move, except talking nonsense, all of them.

Looking back on the selection process again, I do not see what is wrong. It was selected based on its diversified durable business in security paper printing, palm oil, bulking, food etc. It had high ROIC of 25%, a healthy balance sheet with 255m net cash, or about RM1 per share, excellent quality of earnings with consistent and abundant cash flows from operations and free cash flow. Free cash flow is more than 20% of revenue and invested capital. And most of all, at RM2.06 at that time, the earnings yield (EV/Ebit) was 27%, a great number.

Sure its earnings has dropped by about 10% the last financial year, though its revenue still went up a little. Again which company with plantation as a major earnings didn’t have their earnings reduced last year when palm oil price is depressed? Many even made losses.

Based on Kfima’s last annual financial results, ROIC has dropped to 19%, but this is still a high return of capital. And at RM1.93 now, its earning yields (EV/Ebit) of 26% is still hell of a good bargain. This is a classic case of the Magic Formula Investing Strategy of Joel Greenblatt.

Buying something for less than its value is the most dependable way to make money. Buying discount from IV and having asset price move towards its value doesn’t require serendipity; it just requires that market participants wake up to reality.

Trying to buy below value isn’t infallible, but it’s the best chance we have.

The fact that despite its great fundamentals haven’t changed but its price has gone down a little while the overall market has gone up by 14%, it is even more compelling to keep Kumpulan Fima as a major stock in my portfolio in 2014.

2014-01-02 13:04

Posted by anbz > Dec 26, 2013 01:34 AM | Report Abuse
bsnpg, tan kw and many more are all his member of gang...jcool call them jcw gang...or is it jwc gang? can't remember
he also recommends fibon before...and they goreng it well..now look at fibon...what has happened???!!!

What is wrong with Fibon?

Fibon was another of my stock picks for the second half of 2013 at 32.5 sen, just 5 months ago. My detail analysis can be read from the link below:

http://klse.i3investor.com/blogs/stock_pick_challenge_2013_2h/34374.jsp

Its share price is 54 sen now. Hence the return in this 5 months plus dividend is 67%. So what is wrong for a stock pick with a return of 67% in 5 months?

This stock was alerted by a forumer here who practised value investing. I selected it as a stock in my diversified portfolio with the rationales as detailed below.

Fibon has steady revenue and have been making money every year, not a single year of losses since listing a few years ago. It has excellent profit margins; a gross margin of 59% and net profit margin of 29%. It’s has high ROE of 17.1% is achieved with this high net profit margin, with very low leverage. It is a safe company to invest as it has a squeaky clean balance sheet with net cash of 26 sen per share, which amounts to 65% of its net assets, and with zero debt. It has excellent and consistent quality earnings with good cash flow from operations. Its free cash flow is 18% of revenue and 26% of invested capital. It is not easy at all to find a company in Bursa with these type of cash flows.

The best thing is at 32.5 sen then, PE ratio is just 6.6 and enterprise value is just 2 times of its Ebit, or an earnings yield of more than 50%. Where to find this type of company to invest in Bursa.
It share price has since risen to the close of 54 sen yesterday.

So does value investing work? What is wrong with Fibon? Why are you picking on my choice of Fibon?

“If you do a good job valuing a stock, I guarantee that the market will agree with you. It is just a matter of time. But don’t expect immediate success. Oh yes, you have to be right.” Howard Marks

Actually I have no idea why the success is so immediate in less than a few months for Fibon. Well it could be a fluke, but is it a fluke? Frankly, I don’t know too.

2014-01-03 15:32