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 moral. 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.

https://www.youtube.com/watch?v=konvREHelj4

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Sunday, April 03, 2016

CBIP Slow but Steady

The FBM KLCI closed at 1750 on 24.12.2013. Last Friday 1.4.2016, it closed at 1711. This means the market had dropped 39 points or 2.23% during this period.

Via my post dated 24.12.13 in my blog, Wisdom Wise, I recommended CBIP as a good stock to buy and keep at RM3.20. 

Last Friday, CBIP closed at RM2.28. In year 2014, it gave a bonus issue of 1 for 1 and free warrants of 1 for 3 after the bonus issue. The warrants were last traded at 47.5 sen per warrant. Factored in the dividends paid during this period. it works out that for every 1000 shares you bought at RM3,200 the value of it would have gone up to RM5,013. This means an upside of 57% in 2 years & 3 months. Although this is short of anything fantastic, it has beaten the market by a big margin, hands down. 

What’s in store for CBIP? In the 4th quarter of 2015, EPS came in at 7.42 sen. In the corresponding quarter of the previous year, EPS was 4.14. This is up 79%!  Not bad by any standard.

As at 31.12.2015, some key statistics & metrics of CBIP were as follows:

Current assets: RM421.88 ml
Current Liabilities: RM154.08
Current Ratio: 2.738
Cash RM196.91 ml
Share Capital RM269.124
Total shares issued 538.248 ml (Par Value 50 sen per share)
Borrowings RM19.728 ml
Total liabilities: RM154.079 ml

From the info mentioned above, it can easily be seen that the stock has a strong balance sheet with cash alone enough to cover its total liabilities. 

The management in its filings with Bursa has indicated that the planation sector of the group is likely to add profits to its bottom line in 2016

I expect that its 1st quarter ended 31.3.2016 to be commendable, and that 2016 would be a great year for the stock. 

TA-wise, the chart shows that the stock is in a gradual uptrend. The special dividend of 4 sen paid on 15.3.2016 is a harbinger of better things to come. 

Investment is never without risk. Anything can happen. You buy, sell or hold at your own risk absolutely. 

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Saturday, March 26, 2016

VGD Portfolio

The KLCI closed at 1703.79 on Friday 25 March 2016

With RM30,000, I have started a new portfolio based on the closing prices on Friday 25 March 2016. The stocks are picked for their value, growth and dividends. Hence the name. The time limit set for this portfolio is 31.12. 2018. The stocks chosen are as follows:

CBIP 1000 at RM2.28: RM2,280
ECS (CD 3 sen) 1000 at RM1.75 =  RM1,750
FLBHD 2000 at RM2.14 = RM4,280
Gadang 1000 at RM1.91 = 1,910
Kim Hin (CD 3 sen) 1000 at RM2.01= RM2,010
Magni (CD 5 sen) 1000 at RM4.40 = RM4,400
Sam 1000 at RM6.63 = RM6,630
TGuan LA 1000 at RM2.90 = RM2,900
Uchitech 2000 at RM1.66 = 3,320

Total = RM29,480
Cash balance = RM520.

The stocks are picked to compete with the KLCI. Let’s see how it (the portfolio ) goes from time to time. 

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Sunday, March 20, 2016

FLBHD (5197)

FLBHD is a small-cap stock with a paid-up capital of RM51.6 ml as at 31.12.2015. Its par value per share is 50 sen. Its principal activities are the manufacturing and sale of plywood, veneer and laminated veneer lumber and investment holding. 

The company was listed on 28.4.2011 in the main board. The earnings of the company are as follows: 

Year 2011 : EPS 14.15 sen; 2012 : 11.24 sen; 2013 : 14.66 sen; 2014 : 15.53 sen; 2015 : 30.74 sen. 

Comparing the EPS of 2015 to that of 2011, earnings have more than doubled. This is excellent growth.

As at 30.12.2015, its current assets total RM121.563 ml of which RM57.819 ml is cash. Total liabilities amount to only RM12.715 ml of which current liabilities amount to RM9,699. The Current Ratio stands at 12.53!!!

The company has no borrowings. Its cash alone is enough to cover total liabilities by 4.547 times!!! Is there another company listed in Bursa with such a strong cash position? Please let me know if you know of one.

In respect of dividends paid, there are as follows: 2011: 6 sen; 2012: 6 sen; 2013: 8 sen; 2014: 8 sen & 2015: 15 sen. Thus dividend growth is excellent as well. With so much cash in the banks, the company should have no problem maintaining its dividend payments. Although the company does not have a dividend policy, we can see that it usually pays out about 50% of its earnings as dividends. This is good for those who love dividends.

I understand that the company does not have concession in any timberland. I called the inter-relation officer to find out how the company sources its raw materials, especially timber logs and glue. Unfortunately he refused to tell me about this, saying that was the secret of the company.

The new minimum wages commence on July 1, 2016. This will have an impact on the production cost of plywood. To mitigate this, the company will modernise and automate the manufacturing facilities of the group. This should not be a problem as the company has lots of cash to implement this intention.

The company exports 92% of its products, the bulk of which (76%) goes to US and the rest to other countries, mainly Taiwan & Korea. The value of the US$ has a great impact on the bottom line of the group. The more it appreciates against the Ringgit, the more the group will benefit. The reverse is the other way round. So, keep an eye on the exchange rates.

One of the things I like about this company is that it is environmentally friendly. Its mill is the first Malaysian plywood mill that is certified as a CARB Certified Manufacturer in 2008 by Professional Service Industries, Inc.  The company was also awarded with the JAS certification by the Ministry of Agriculture, Forestry and Fisheries of Japan in 2009 as a proven qualified plywood manufacturer. These certifications certify that the groups’ products are of high quality, and goes a long way to enhance customers’ confidence. 

In additions to the above awards, the company was accredited as a certified Lacey Compliant Wood Products Manufacturer by Benchmark International, LLC (BMH) under the BMH Lacey Compliance  Verification (LCV) Program. This means that its timber logs are confirmed to be sourced legally. 

I like to use the metric, ROACE (Return On Average Capital Employed) to appraise the competency of the management. The higher this is, the better. Using the figures in its balance sheet as at 31.12.2015 and 31.12.2014,  FLBHD’s ROACE is 25.67% which is deemed to be on the high side. 

Going by the track record of this company, I have full confidence that it will continue to grow well. I give a 5-star rating to the management.  

The chart below shows that the stock hit a bottom on 17.8.15 at RM1.22, and then moved up to RM3.09 on 11.1.2016. It is now undergoing a correction phase. The last done price is RM2.23. Should it drift lower, the support levels are: RM2.08 and 2.02 while its immediate resistance is RM2.37. 

Action to take: Buy at support and also when it decisively crossed RM2.37.

This is my opinion. Whatever action you take, you do so at your own risk absolutely.

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Saturday, March 12, 2016

Stock Selection Points To Note

Core business
The first thing I look at when evaluating a stock to buy is the company’s business model. What it does and how it generates profit is important.
In this respect, I will consider the competition of the industry, the quality of its products, barrier of entry, availability of raw materials, as well as the demand and necessity of its products and services.  

Calibre of Management 
Competency and Integrity counts. Competency without integrity is worse than integrity without competency. Incompetency of the management is the main cause of failure. The only way for you to know the management is to look at its record. A growing revenue, improved earnings and dividend payments year after year are the things to look at. 

Balance Sheet (BS)
The BS is an important statement. It tells you what the company has and what it owes others. Once studied, you will know whether the company is solvent or not. An insolvent company is somebody’s problem which you shouldn’t get involved with. 

Current Ratios, Free Cash Flow, Borrowings, Receivables, Payables, Pay-up Capitals, Par Value must all be carefully considered.

Metrics such as EPS, Dividend Yields, Profit Margins, Current Ratio, Debt-equity-ratio, ROCE & Price-to-book Ratio are some important metrics to look at closely. (Refer to Investopedia.com, if you do not understand any of the terms mentioned.)

Income Statement
Quality of earnings must be carefully look at. Not all earnings are the same. The important thing to think about is whether the earnings are sustainable or improved going forward.

Cash Flow Statement 
How cash flow in and flow out must be analysed carefully. Looking at the bottom line alone is not enough. You must know the details.

CEO’s Statement
The CEO is the most important person in a company. Know who the person is. Failure or success of the company depends on this person rather than on anything else. Besides being competent, the person must have integrity as well. 

Dividend Policy
I like companies that have a dividend policy of paying 30% to 50% of its earnings to shareholders. I don’t like to share risk without sharing the gains. A company that pays regular dividends in tandem with its earnings is preferable to one that pays no dividend in the name of growth. Bear in mind that the only benefit a minority shareholder has is the dividend. 

Major Shareholders
The major shareholders control everything. If, for whatever reasons, you don’t like them, avoid the stock. On the other hand, strong major shareholders can do wonder for the company. Next time, when you are about to buy a stock, don’t forget to find out who the major shareholders are. 

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Sunday, February 21, 2016

MMSV Current Year Prospects


MMSV current year prospect extracted from Bursa Announcement:
Despite the soft demand experienced from the smart devices sector in the past few months, the Directors foresee ample rooms for expansion in the Group’s market shares for other LED related industry especially the 
automotive sector. Besides, talks about smart devices’ manufacturers coming out with new products for their end consumers are expected to materialise. 

MMSV FYE 31.12.15; Shares Issued 163 ml at 10 sen each.

Essential statistics and metrics as at 31.9.2015:

3Q result EPS 1.33 Vs 2.88 senPYCQ) poor showing
Non-current assets: RM9.698
Current assets: RM34.219 ml
Total equity: RM35.050
Total non-current liabilities: RM8.391 ml
Current ratio: 4.078
Cash & near cash: RM18.460
Total liabilities: RM8.867 ml
Bank borrowings: zero

High cash position, high current ratio, and no borrowings show that this stock is fundamentally sound and solid.

Since its 3rd quarterly report on 24.11.15, there were company buy-backs & insiders buying in the stocks as well. (For details, check Bursa Announcement)

The company will announce 4Q result within the next few days. I believe
the result will be a better than that of the 3rd Qtr.

Strong US$ is good for the stock.

Chart shows a weak uptrend with little volume traded. Resistance is likely to be at 58.5 sen and 61.5 sen. If 61.5 sen is decisively breached, the stock is likely to trend higher. 

Our world is moving towards automation and LED lightings which are the core businesses of the company. Please do your own research, and buy at your own risk. 




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