RUBHD – to be privatized?

Yes! The news is out. RUBHD would likely be privatized in the first quarter of 2007. The offer price will probably be between 3.30 and 3.50. I had mixed feelings when I read this. I was hoping for 3.80 which I think is a fairer figure in view of its strong balance sheet and prospective earnings.

The counter has finally transformed itself from a chrysalis to a beautiful butterfly. Come Jan 3, 2007, will it fly? Probably, but not very high. Butterflies normally do not fly very high. A 30c on the upside, perhaps.

Very soon 2006 will be behind us. As the curtain comes down, a new one goes up. Let’s start 2007 with a clean slate. It’s a great feeling to start with a clean slate. The beginning is always important. Be smart from the start.

1997 was a very bullish year in the early months. If there is such thing as a 10-year cycle, 2007 may start off with a bang. What will happen is anybody’s guess. We shall plan and strategize as we go along.

To all my readers, I wish them a happy and prosperous New Year. My message is:

Think intelligently, act wisely, buy smartly and most importantly be healthy.

As usual, good luck and all the best.

VADS

VADS is a small-cap company with a paid-up capital of 61,178,000 shares of RM1 each as at 31 Dec 2005. It is 69.52% owned by Telecom. That means it has the backing of a giant. So safety is assured.

Going by its track record, I see fantastic growth in this counter, not only in its share price but also in its revenue and profits. It was first listed in the 2^nd board in August 2002. I had bought some of the shares at 2.38. Last Friday, which is also the last trading day of 2006, the share closed at 6.40.

So far it has declared a bonus issue of 1 for 2. Taking this into account, a layout of RM2380 has appreciated to RM9600 without including the dividends, in 50 months. This is better than the world’s most successful investor, Warren Buffet’s 25% compounded growth rate.

VADS was transferred to the main board in March 2005. Its core businesses are Managed Network Services (MNS) System Integration Services (SIS) and Contact Centre Services). Because of its excellent services and high expertise, VADS has received several awards in 2005. These are Cisco Best Managed Services Partner Award for Malaysia, the IBM Platinum Club Award and the IBM Strategic Win Award.

With the advent of income tax e-filing, e-banking and other services based on self-service becoming more common, VADS is confident that its services will continue to be in great demand. Also of benefits to VADS will be the WIMAX factor. After its onset, computer demands and internet services demands are bound to increase. All these will benefit VADS in no small measures.

The 3^rd quarter result of 13.94c is testimony to its high performance and strong management... This compares well to last year’s corresponding period of 5.83c. For the 9 months ended 30.9.06 the earnings per share is 34.46c. Last year, it was only 18.72c

VADS has paid an interim dividend of 10c tax free in Sept 06. The final dividend should be about 15c.

Going forward, I think its earnings growth will be remarkable.

Chart-wise, the stock peaked at 6.95 on Nov 14, 06. A correction took it to 5.80 where it was strongly supported. Last Friday it closed at 6.40 with 340 lots traded which is about average. In my opinion, around 6.15 should be a good entry point. If you wish to read more about VADS, go to its website www.vads.com.

This is my stock, picked for the New Year 2007. Put in your silver dollars. They will change to gold over time.

Writer disclaims all liability for his comments or advice. He holds a sizable stake in VADS.

Charts are useful

Charts are only useful to those who have the patience to wait, the knowledge to choose and the wisdom to strategize. Most people, especially beginners, do not have the patience to wait. They must buy and sell, just to be in action. This may be good for their brokers but is not good for their bank accounts.

A smart trader will not buy if he does not see a buy signal. Likewise, he will not sell until he sees a sell signal. It is during the base formation that you must make your plan. Wait and watch for a buy signal before you buy.

If you do not have the patience to wait and the discipline to implement your plans, charts are useless to you.

To succeed in the stock market, you must know who you are temperamentally. Can you take a loss? Can you "cut your fingers" and bear the pain? If you can’t, stock trading is probably not for you. The first loss is the best loss. Never compound your error by averaging down, especially when your first purchase is at extremely high level.

No one has the ability to win all the time. Winning and losing are part of the game. You can’t make cakes without breaking eggs. If you want to win, be prepared to lose. The important thing is to keep your losses small. Not only must you know how to use a stop-loss. You must know how to use a trailing stop-loss to lock in your profits.

The beauty of the stock market is that you can either invest or speculate or do a combination of both. For me I am more of an investor than a trader. Most of my funds are tied up with small-cap sound solid companies. I call them baby blue chips. These companies will appreciate the most over time.

I have spotted one which I shall write about, probably in my next posting. So bookmark this page and come back later.

Good luck and Happy New Year.

Price to Sales Ratio (PSR)

This is an important figure to look at. It will give you an idea as to whether a stock is cheap or expensive.

PSR is calculated by dividing the share price by the annual sales per share. The lower the figure is the better. This, of course, must not be taken in isolation to determine whether the stock is worth buying or not. Its usefulness is to compare the valuation of companies within the same industry.

As a rule of thumb, companies with a PSR of less than one are considered cheap. Sales are also known as revenue or turnover.

When the earnings per share increase, sales must increase as well. If they do not, there must be a reason. It is important you know why, to have a better understanding of what is happening.

RUBHD (5050)

My initial mention about RUBHD in Nov 06 was that the stock was greatly undervalued. (Please refer to my postings in Nov 06). The stock closed at 1.49 on 17.11.06. Since then, it has been in a steady uptrend. Yesterday it closed at 2.87. That’s a whopping gain of 92.6% in just 41 days! Great, isn’t it?

The volume of 17,143 lots traded yesterday, when compared with the previous 4 trading days, was higher. The stock is now in a well- established uptrend. Since my first mention of it, I have been extremely bullish, and still am, about this stock.

Buy on dips, the stock is about to fly!

Good luck and all the best.

As usual, this blog disclaims all liability for your perusal of its commentary.

Cost Averaging – Is it a good strategy?

After you have bought a stock and its share price drops, you buy more at a lower price. This brings the average price per share down. This is called averaging down. The exact opposite is averaging up.

Most people like to average down. Is this a good strategy? It all depends on who you are financially and your personal traits. If you are a value investor, that is, an investor who buys sound solid companies at undervalued prices for the long term, you should certainly average down. Buy low and sell high is your way.

But, if you are a speculator or trader, your strategy would be to buy high and sell higher. Your tactic is to ride with the waves. You don’t want to wait. So you have to time your purchases. That means you wait for the stock to move first before you buy.

A trend can reverse direction at any time. As soon as you buy, the price drops. Your positive expectancy vanished. In this case, you must quickly sell to keep your losses small. Don’t compound your error by averaging down. If you are right, you can average up.

There is no way you can win all the time. The important thing is not to get the best of cards but in knowing when to leave the table. In other words, you must know where to correctly place your stop-loss. That’s the difficult part of the problem.

To win, keep you losses small and profits big.

Good luck and all the best.

Ride with the bulls

Ride with the bulls
Raid with the bears
Be smart, be wise
Money is everywhere

Never go against a major force. Never swim against the current. Never catch a falling dagger. And never pee against the wind if you don’t want to get wet.

In every stock market, the syndicates are there .Not one but many. Some call them the Big Boys. I like to call them Smart Money. Some of these syndicates, not only have the resources to control prices, they are powerful enough to control the news as well.

Technical analysis is to track these Big Boys. The small boys are of course no match for the Big Boys. Why go against them? You are not supposed to, and you would be stupid to do so. Actually, we should be thankful to them. They are the ones who create the waves and the storms. Without them, the market will be lethargic and no body will be there to play the market. If you are smart, you should ride with the waves and profit from their moves.

Factors, many and varied, affect share prices. Not all syndicates make money. Some lost at their own game. Syndicates often go against one another. This is a zero-sum game. One man’s win is another’s loss.

Don’t blame the syndicates if you lose money. If you can’t beat them, join them. And if you can’t join them leave them, but don’t go against them.

Regards.

I-Power - more upside

I-Power closes at 1.14 for a gain of 12c with moderate turnover. It has breached its resistance of 1.10. Its range for the day is good. More on the upside is likely.

Is PE the answer?

To value a share, you must know certain numbers which are important. To name a few, they are:

EPS (earnings per share
DY (dividend yield )
PER or PE (price-earnings ratio)
PSR (price to sales ratio)
NTA or NAV (net tangible asset value)
Gearing (sometimes called debt-equity-ratio)

The PE ratio is the most often talked about. It means the market price per share divided by the net earnings per share. One way of looking at it, is that a PE of 4 means that it will take 4 years to recoup your capital at the current rate of earnings.

Is buying a share at low PE the way to riches? Certainly not. PE alone is not the way to value a share. Wealth is not so easily created; otherwise any form five boy can become rich. You need to know very much more.

Sometimes it is better to buy at high PE than at low PE. When a share is selling at low PE, it means that the prospective earnings are poor and therefore its intrinsic value will be lowered. On the contrary, when it is selling at high PE, it means the prospective earnings are good and therefore its intrinsic value will be enhanced.

It is better to buy a good company in its bad year rather than a bad company in its good year. Think about it, and you will know what I mean.

Prospective earnings are forecast earnings which may turn out to be inaccurate. Hence, if you buy at high PE and your forecast earnings are wrong, the share price will not go up. On the contrary if you buy at low PE and earnings per share subsequently drop, your low PE will become high PE, and the share price will drop also, So you see, it all boils down to earnings.

Fundamental analysts are paid highly, because they are supposed to possess the ability to forecast EPS correctly. In reality, sad to say, many failed miserably.

“If you wish to enjoy the glory of the sunrise, you have to slog through the darkness of the night”. Do your homework, read more, upgrade yourself, and someday you will be rich.

To all my Christian readers, I wish them Merry Christmas and a Happy New Year.

RUBHD

RUBHD(5050) opened at 2.60 and closed at 2.72 with moderate volume traded. It's intra day high was 2.76. As it has convincingly overcome its last resistance of 2.62, it should be on its way to challenge the next resistance at 2.95. The daily chart and weekly chart are in accord. Both are in a steady uptrend. This is a bullish sign.

From a chrysalis, it is transforming itself into a beautiful butterfly

Don't kill the golden goose, if gold is what you want.

As usual, this blog disclaims all liability for its commentaries.

Regards.

The scorpion and the frog

The scorpion and the frog

Once there was a scorpion that asked a frog to take it across a stream. The frog said, “How do I know that you are not going to sting me while I am doing it”? The scorpion said, “Don’t worry, if I do that, I will die also”.

The frog thought for awhile and decided that what the scorpion said was not unreasonable. So the frog asked the scorpion to climb onto its back.

Half way across the stream, the frog felt a sharp pain. The scorpion had stung it. Just when the frog was about to die, it looked up at the scorpion and said, “But why”! The scorpion answered, “I can’t help it, it’s my nature”.

Self-destruction; don’t do it.

Change what you cannot accept.

Whom the Gods wish to destroy, they first praise highly

Ancient Greek has a saying, “Whom the Gods wish to destroy, they first praise highly”.

In the stock market, my saying is, “That which smart money wish to distribute, they will first push them up”.

A share has three values. There are: the market value; the net tangible asset value, and the intrinsic value. The first two values are easy to understand. Intrinsic value needs some explanation. Intrinsic value means the real value. What actually is the real value of a company?

To know the real value of a company, we have to take into consideration all the aspects of that company. First, it’s the management, its capability; reliability, integrity, honesty and its moral values must all be considered. Then it’s the earnings. Are the earnings sustainable? And what is the likely growth rate?

Net tangible assets and intangible assets, like goodwill, patents and monopoly must also be taken into the calculation. The nature of its business, its dividend policy and whether it has a high-entry barrier is also important and must be considered.

As it is, the intrinsic value is indeed very hard to calculate. I think ten accountants will come out with ten different answers. The important thing to remember is that earnings are the lifeblood of a company. It’s the future earnings per share (without the exceptional items) that matters. Keep this in mind and do your own calculation.

Because of overly optimism or overly pessimism, manipulation, rigging, insider trading and speculation, share prices can go up to great heights and down to incredibly low levels every now and then.

A smart investor or speculator is able to exploit these situations. Can you do it? If you can, someday you will be rich. If you can’t, better start learning now, so that someday, you too can do it and be rich.

Good luck and Merry Christmas.

Everything has a first time

Everything has a first time. Yesterday we got two. First, Johore got flooded to such an extent that it was a first in 100 years. Second, Thailand’s stock market halted trading for half an hour when its stock market index plunged 10% after its central bank imposed capital control to curb the speculation of the Thai baht.

Is this control good or bad for the Malaysian stock market? To some analysts, it may turn out to be a blessing in disguise. The exit of funds from Thailand may actually benefit us because these funds can flow in to us.

Yesterday I saw a blanket of red on my computer screen all the time. Now this blanket has turned green with few spots of yellow and red here and there. The KLCI at 1073.60 has recovered more than 13 points at the time of writing. Sentiments of fear have improved to stable

The endless flow of news, facts or rumors causes our emotions to change mood. That’s why the stock market is forever changing.

Going forward, I hope the “present” from Thailand may turn out to be good for a Merry Christmas after all.

Good luck and Merry Christmas.

Common Mistakes made in the Stock Market

Here are some common mistakes made in the stock market. I hope readers will take note and avoid them:-

Holding on to a falling stock hoping to get out even or a small gain. (In most cases, the hope becomes hopeless).

Buying in a downtrend or compounding your error by averaging down indiscreetly.

Buying penny stocks without knowing their intrinsic value

Buying on tips and rumors or tagging long with friends

Buying a share because of its name

Not knowing how to select good solid companies

Not knowing what is good advice

Not using charts and being afraid to buy stocks that are trending up

Taking profits too quickly

Speculating more than one can afford to lose

Overestimating one’s own ability (Don’t be the praying mantis thinking it can block a car)

Approaching the market wrongly.

Trying to make the maximum amount of money in the least possible time.

Not realizing that investing intelligently is the right approach.

Not learning from one’s mistakes and that of others..

Fortunes are made and fortunes are lost in the stock market. If you want to be a winner, be serious about it. Don’t go in for fun, but for the fund.

Happy investing.

KLCI closed at 1089.22 (+13.85)

KLCI open: 1078.17
Close: 1089.22; Vol: 8407 million shares
Gainers: 546; Losers:291; Unch: 290

Contrary to my prediction, the KLCI staged a rebound aided by better performance of the regional burses and the bid by Wilmar to privatise PPB Oil. The short term outlook is neutral. For the intermediate term and long term, it is bullish.

RUBHD closed 23c higher at 2.58 and a big white candle has appeared. Volume traded at 16,350 lots had improved. This is bullish. Buy or hold on to your shares. Better days are ahead.

Although the KLCI is at a high level, the second liners and mesdaq counters have not moved much. I see value in the following counters which I believe have upside potentials:

VADS 6.00; AIGB 1.64; I-Power 0.975; Nexnation 0.685; FSBM 1.38; LKT 3.16 and MNRB 4.20.

As usual you buy and sell at your own risk, absolutely. This blog disclaims all liability for your perusal of its commentary, article and opinion.

Good luck and happy investing.

KLCI closes at 1075.47 (-4.13)

Another black candle. Now we have 3 in a row, all with lower highs and lower lows.This steady downward pattern is bearish.

Volume traded at 786,844,800 shares is slightly lower than that of yesterday. Expect the drifting to continue.

Admid the bearish trend, RUBHD holds up extremely well closing 4c higher at 2.35 with some 786,800 shares traded. It appears to me that the counter has strong support at the 2.31 level.
Base on fundamental, the counter looks good to buy.

The above commentary is my personnal opinion and should not be construed as a recommendation to buy or sell.

The Correct Approach is Important

Never approach a horse from the back, a golfer from the side, or a fool in any direction.

The correct approach is the key to success. This is true in the stock market or any other type of business.

The beauty of the stock market is that you can either invest or speculate or do a combination of both. Speculation is not my cup of tea. I prefer to invest.

To invest in the stock market means to buy undervalued sound equities or other financial instruments which promise safety of principal and a good return in the form of capital gains or dividend income after through investigation.

Actually capital appreciation is the name of the game. Dividend yield is the safety net. I would rather do my trapeze with a safety net than without one.

Blue-chip counters are easy to identify. The important thing is that you must not overpay for them. You may buy the bluest of all blue chips and not make money because you bought them at the wrong time. It is much better to buy small-cap size stocks which have good earnings per share with explosive earnings growth and a high-entry barrier.

The success or failure of a company is dependent on its management which is normally its major shareholder. Good management makes money for its minority shareholders. The bad ones “eat” them.

Good management means management with capabilities, integrity, and a high moral value. These are not easy to find. So be careful.

Speculation in the stock market means the assumption of a long or short position in a financial instrument in the anticipation of a favorable market movement which should result in a gain when the position is covered. Speculation provides much thrill and excitement. But it is a dangerous game. Unless you are a genius, it is very difficult to make money consistently. At best you have a fifty to fifty chance.

Whether you want to invest or to speculate, it’s up to you. For me, investment is my choice and I would rather stay with it.

Regards.

KLCI @ 1079.60

Another black candle appeared making two in a row. This is bearish. Will this soil erosion lead to a landslide? Likely, very likely or unlikely? It's anybody's guess. But the market will likely go along the line of least resistance. And that is down.

Volume traded was 955.5 million shares. This is lower than the previous day's transaction of 1,294 million shares. Until a white candle appears, it is best to avoid any buying.

Going against the trend you must resist. Its much easier to swim with the current than against it.

The above commentary is my own opinion and should not be construed as a recommendation to buy or sell.

As always, you buy or sell at your own risk absolutely.

Sudden storms are short

Small showers last long
Sudden storms are short

Once the downtrend starts, nobody knows when it is going to stop. Be on the watchout for any panic sale.

When there is fear in everyboby's face, it's the time to buy.

If volume increases very sharply with very steep drop, it is likely to end there.

Keeping watching.

KLCI @1088.42 Vol. 1.2294b

Prices closed significantly lower and a big black candle appeared. This a bearish sign. As the candle is at a high level, it could be the first sign of a correction or reversal. Nobody will know for sure. Only time will tell.

Volume traded at 1.229 billion shares is much lower than the highest volume of 2.19 traded on 6.12.06. But compared to average volume during August to October 06, this is much higher.

Because of the quick run-up recently, the market has to pause for breath. Unless there is some bullish news, a downward drifting for awhile is most likely.


This commentary is not a recommendation to buy or sell, but rather a guideline to interpreting the chart. This information should only be used by investors who are aware of the risk inherent in securities trading. This blog accepts no liability whatsoever for any loss arising from any use of this expert or its contents.