Saturday, October 08, 2016

Fortune favours the prepared mind

Speculators, traders and even investors who do not have any strategies playing the stock market are likely to have a hard time trying to make money. 

If you have been in the market for some time and find that you have not made any money, it’s time for you to think hard why you have not been lucky so far. Is it because luck has been against you or because you have failed to plan well? Many people blame luck when they failed, but when they succeed, they say there are smart and skilful. This is human ego.

There may be some truth that some people are born lucky. If you relied on your luck to succeed, you are likely to fail because luck favours the prepared mind.  

The worst thing that can happen to a novice is for him to make a lot of money immediately he enters the market because of a tip or because of luck. This is called the winner’s curse. Very often the early winnings are the prelude to disastrous losses. Easy money leads you to become greedy and careless. Very soon you will realise that easy money is not easily made. If you bet what you can afford to lose, things may not be so bad, but if you borrow to bet, the result could be disastrous. 

For those who are smart, they will first find out how they can win. How many market players do this? You can’t win without having a competitive edge. 

What is a competitive edge? Experience, knowledge, wisdom, patience and discipline put together will give you the competitive edge. Do you have them?
Do you know how to identify a good company for investment or a good time to enter a trade based on technical analysis. 

Knowing fundamental and technical analysis will definitely give you an edge, simply because the majority of players in the market do not have such knowledge and skill.

The next important thing to know is to know your own traits. It is said that success in the stock market does not depend so much on your intelligence, but rather on your traits. Thomas Edison, one of the smartest men on earth failed miserably in the stock market. He said that he could calculate the movements of the stars, but he was unable to calculate the madness of man. 

Know your own traits; know how much risk you can take; know whether you can cut loss without feeling the pain of losing. Once you know who you are, then think out a strategy to suit yourself. Never do anything without a strategy. 

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Sunday, August 07, 2016

The Internet of Things (IoT)

The IoT will reshape the world. It will change our lifestyle dramatically. The most emphasised word nowadays is: Smart.

Smart phones have been around for a few years. Smart cars that are driverless, more efficient and safer than conventional cars will soon be a common sight.  

A smart plane embedded with sensors will signal you when certain parts need to be upgraded and changed for the plane to remain safe and efficient.  

A bridge embedded with sensors will warn you when it is overloaded. Doors open for you when you are near them. Alarm bells ring when intruders force open your doors. All smart utensils will operate smartly. 

Gartner Inc., predicts that by 2020, some 26 billion devices will be connected to the internet. Thus you can easily figure out the importance of sensors and semiconductor chips. 

Which companies are going to benefit? IQGroup, KESM, MPI, Unisem, MMSV, Penta and Inari are some of them. Presently, my interest is in the first two which have strong balance sheets and growth in earnings.

If you are interested in these two counters, visit my blog: to read about them. And if you are interested to join my Super Telegram Group, use the link below:

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Thursday, August 04, 2016

IQ Group (LEDs, Sensors & Connectivity)

IQ Group Holdings Berhad is a Malaysia-based company principally involved in investment holding and providing management services. The Company's operating segments include investment holding (includes management services); manufacturing of passive infrared detectors, motion sensor light controllers, wireless video communication devices, door bells, home security system, lighting fixtures and plastic products; trading of security lighting systems, passive infrared detectors and motion sensor light controllers, and development, design, manufacture, sale and distribution of light emitting diode (LED) Luminaires and the manufacture of light engines for use in luminaires. The Company has operations in Malaysia, Japan, British Virgin Islands and People's Republic of China (PRC). The Company's subsidiaries include IQ Group Sdn. Bhd., IQ Japan Co., Ltd., IQ Industries Limited, IQ Group (Dongguan) Ltd. and SILQ (Malaysia) Sdn. Bhd. (Source

For the fiscal year ended March 31, 2016, the IQ Group’s metrics are as follows:

Revenue: RM190m
Net income: RM20.86
EPS: 23.7 sen
Share Capital: 88m; Par Value RM1 per share
Dividend 10 sen
ROA: 12.60%
ROE: 16.26%
ROI: 15.86%
Book value per share: RM1.55
Current Ratio: 4.37
Quick Ratio: 3.22
Borrowings: Zero
Cash and bank balances: RM48m or 54 sen per share
Lasted traded price RM2.04 as at 3.8.2016

The above metrics show that this stock is safe and undervalued with a good dividend yield.

The management of the group is full of confidence for the group. Appended below is the Chairman’s statement: 

Corporate Developments 
Another exciting year for IQ-group! Despite the global uncertainty and volatility of market conditions, the repeated strong performance in FY15/16 illustrates the robust position IQ-group currently enjoys. Our signi cant emphasis on R&D drives considerable new product development with related results maintaining 
strong support from our established and developing customer base. 
IQ-group’s revised vision statement (as below) sums up our unrelenting ambition which is enthusiastically supported by the developing strategies within the business. 
“To achieve global market disruption as we detect, illuminate and announce your arrival via shockingly exciting solutions!” 
ere is no doubt that we are in exciting times. ‘LEDs’, ‘sensors’ and ‘connectivity’ are buzz words which are often central to discussions as the world progresses increasingly towards connected devices and ultimately to ‘the internet of things’. IQ-group is undoubtedly well positioned as we bring our reputation, expertise and innovation in these 
areas to the market place. 
In the past year we have continued to invest in people, signi cantly bolstering our breadth and depth of capabilities and so we look forward to the future with con dence and anticipation. 
Financial Overview 
e Group continued to maintain strong nancial performance, delivering a very similar result to last years’ record performance. For the nancial year ended 31 March 2016, the Group achieved a revenue of RM190 million, a slight decrease of 2% as compared to the previous year’s revenue of RM194 million whilst still being able to maintain pro t attributable to the equity holders of RM21million for nancial year ended 31 March 2016. 
e Group has maintained a healthy statement of nancial position with zero gearing. As at 31 March 2016, the net assets of the Group stood at RM137 million with a net cash and bank balances of RM48 million (or RM0.54 per share). 

Future Prospects 
IQ-group is blessed with valued customer relationships and many developing opportunities. As a business, IQ-group has increasing self- belief and ambition. With the clear growth based strategies in place, we remain motivated and con dent regarding the prospects ahead of us. 
On behalf of the Board of Directors, I again wish to thank each and every member of the IQ-group team for their commitment and tireless e orts which have resulted in another encouraging year end result. 
My sincere appreciation also goes to my colleagues on the Board for their valued and appreciated participation over the past one year. 
Chen, Wen-Chin also known as Kent Chen 

Investment is never without risk. You are fully responsible for your own action.

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Sunday, July 17, 2016

KESM, the burn-in Specialist

KESM is principally involved in specialized electronic manufacturing activities. More specifically, the company is engaged in providing burn-in services. The company has business dealings with virtually all the American semiconductor manufacturers.

For the 9 months ended April 30, 2016, KESM’s EPS shot up to 52.7 sen. This is an improvement of 244.44% over the corresponding period of the previous year when its EPS = 15.30 sen.

In the past 2 years, the 4th quarter was better than any other quarter of the year. Based on this fact, the 4th quarter for the fiscal year 31.7.16 should not be lower than 17.6 sen per share. Thus earnings for the full year are likely to be not less that 70.3 sen per share. 

According to its filings with Bursa, KESM has following metrics and key ratios as at 30.4.16: 
Paid-up capital: RM40.015 m. Par value: RM1
Market Cap: RM240.45 (Last traded price: RM5.59)
NTA: RM6.52 per share
Current Assets: RM197.72 m
Current Liabilities: RM63.57
Current Ratio: 3.11
Quick Ratio: 2.956
Cash & short-term investment: RM112.50
Total loans: RM44.66

With a strong balance sheet and good growth in earnings, KESM should deserve a PE of not less than 10. Should the full year’s earnings be not less than 70.3 sen per share, the fair value of KESM should be no less than RM7.30 per share. (This is my opinion. You may have yours.)

Historically, small-cap stocks with strong balance sheets, have performed better than most big-cap stocks. In Malaysia, a stock with a market cap of RM500 million is considered a small-cap stock. 

Since the end of 2015, demand for smart phones, i-pads, tablets and computers have slowed down. However, the internet of things (IoT) are envisaged to pick up going into the 2nd half of 2016. The automotive sector is the likely leader in this respect as car manufacturers compete against one other to produce smarter cars.

To produce smarter cars, more and more newly innovated chips are indispensable. And thus the demand for burn-in and testing services will increase by leaps and bounds. This is where KESM will benefit the most as the company’s growth engine is in the testing of semiconductor chips.

KESM is well prepared.  In 2014, it completed its final phase in its development program mainly for these services. Its plans for 2016 and beyond are in place according to its CEO, Samuel Lim in the 2015 annual report. 

I am bullish on this stock. I had recommended the stock as a buy when it was at RM5 recently.

Investment is never without risk. Please do your own research before buying. 

Remember, you always buy at your own risk. 

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Saturday, June 18, 2016

Plan with wisdom Be wise

Value for money you must insist
  • Insist in buying stocks that have a strong balance sheet, good dividend yields and a good business modal. The current ratio must not be less than 1. It must be net cash positive as well.)

Buying in a downtrend you must resist
  • Don’t buy in a downtrend. Prices move in trends. A trend in motion is assumed to continue. So remember, buy only in an uptrend, not in a downtrend. Wait for a downtrend to end before you buy.

The trend is your friend
  • You must not go against the trend of the market. Never swim against the current.

Follow it to the very end
  • A trend can continue for a few days, a few weeks or even a few years. As long as the trend is up, you must stay with it. Many people make the mistake of selling early in an uptrend. They did not capitalise on the trend. As a result they missed the major part of the profit. This is many people’s mistake. Don’t make it yours. 

Holding on to a falling stock is unwise
  • A stock that is in a downtrend is likely to fall lower. Especially for traders, they must quickly cut loss. Never turn a trade into an investment.

Cut your losses quickly is advised
  • An early loss is the best loss. So sell quickly in a downtrend.

Never kill a golden goose when you have one
  • When you have a good stock, hold on to it. Don’t sell for a small profit. Keep it for the long term.

Never sell prematurely, let it run for once
  • Never sell early in an uptrend. Hold on until the trend ends.

Undervalued unpopular stocks are never a fancy
  • Many undervalued stocks are not in demand as they are ill-liquid. Many people do not know them because analysts do not highlight them. 

Glamour stocks are the choice normally
  • Majority of market participants are small time traders. They usually follow the herd without knowing what they are buying. Their mentality is: When many people are chasing a stock, it must be a good stock. So, I might as well follow.

Join the crowd, enjoy the ride if you wish
  • If you want to have fun and excitement, go ahead, enjoy yourself and participate in the buying and selling.

Be careful though, lest you fall out and vanish
  • When you join the crowd, be careful, as you are likely to lose all your money

The market is most tempting at the top
  • At the last stage of a bull market, news is good; prices move up every trading day. People rush in to buy. You see many of your friends making fast money. In such a scenario, the market is very tempting as easy money seems easily made.

Lock in your profits before volume has a good drop
  • When the market is in euphoric mood, volume transacted is very high. This is the time to sell and take your profit. When the market reverses, volume will drop very fast. So don’t wait for volume to retreat before you sell.

Sell your stocks when you love them most
  • When your shares are highly priced and greatly overvalued, you will love them most. Because of the high price, that would be the best time to sell.

Take your money and let the deal be close
  • Sell to take profits, and call it a day

Buy when volume traded is at its lowest 
  • When volume traded is lowest, prices are normally very low as well. So, you should buy when volume is very low. 

The market will then be at its dullest
  • When volume is lowest, the market is dull and boring. People will shy away from it.

Investors should buy low and sell high
  • Investors are people with lots of idle money to buy. So they can afford to buy and wait for good times to sell

Traders should buy high and sell higher
  • Traders are people who want to see fast money. When the market is at the bottom, you will not know for how long it will be there. So it is better for them not to buy until the market picks up. 

Someday, you will know what I mean
  • One of these days, you will understand why investors should buy low and sell high, while traders should buy higher and sell higher.

By then, you are a stock market dean
  • Once you know the interpretation, you have become an expert of the stock market.

The above poem was written many years ago under the heading Stock Market Wisdom. I hope with this interpretation, people will understand it better.

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Sunday, June 12, 2016

Elliot Wave / Ron Wheeler

For people who are interested in TA (Technical Analysis) this video is interesting and useful. Don't fail to see it. You are advised to see and listen to it more than once.

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