One for your portfolio

VADS is 66.91% owned by Telekom Malaysia Bhd (TM) as at 31.3.2007. Its core business activities are: Managed Net Work System, System Integration Services, and Contact Centre Services.

The company has 15 years of uninterrupted growth from 1992 to 2006.

Its vision is to be the leading Managed ICT Services Provider in Malaysia.

In 2002, VADS was listed in the Second Board with an offer price of RM2.10.

In 2003, it signed with AT & T to provide high speed international Managed Network Services to over 60 countries.

In 2004, it achieved Cisco Silver Partner status.

In 2005, it was transferred to the Main Board after a bonus issue of 1 for 2. In the same year, it won the Cisco Best Managed Services Partner award as well as the IBM Platinum award.

Besides in-sourcing business from TM group, its other customers encompass other industries with includes banking, insurance, shipping, power & telecommunications

For fiscal year 2006, its EPS was 52.9c. This compares well with EPS of 28.7 sen for 2005.

For the 1^st half year ended 30.6.07, EPS jumped to 34.84. The 2^nd quarter, in particular, shows phenomenal growth. EPS stand at 21.51 sen. This is a 96.79% improvement over the previous corresponding period of last year.

With some overseas contracts coming on stream, earnings will continue to grow unabated and with greater momentum as well.

The growth potential of this small-cap stock is immense and commendable. Recently, the company announced a share split of 1 into 2 and an interim dividend of 17 sen tax free.

OSK Securities has upgraded its share price to RM10.50 per share.

CEO Dennis Koh Seng Huat and his team have done superbly. May their splendid run continues.

A small-cap stock with explosive earnings growth is the key to great wealth.

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

Cheers!

English is interesting, flexible, funny and crazy

We have nose that runs and feet that smell. 

Boxing rings are square. 

Quicksand takes you down slowly. 

There is neither pine nor apple in pineapples.

French fried potatoes are not from France. 

A French kiss is a play of the tongues. 

You can have a Dutch wife as your sleeping partner without incurring the wrath of your wife. 

While it’s normal for you to go Dutch when you take your lunch with your friends, you can’t take French leave without facing the sack.

A ladybird is not a bird but a beetle with short legs and is usually brightly colored.

A secretary bird is a large bird of prey. It feeds largely on reptiles and is an expert in catching snakes.

When  stars are out, they are visible. When lights are out, they cannot be seen.

You can burn down a house by burning it up.

A vegetarian is one who eats vegetables. So, what does a humanitarian eat?

While you can cool your body with a cold bath, you can actually hot up the night with some cold beer.

A stop-loss is to limit your loss; a trailing stop-loss is to lock in your gains.

An inside tip is actually an outside chance to riches.

A bear lumbers; a bull charges, a stag bounds, a pig trots, a peacock struts, a rabbit leaps, a mouse scampers, a cat steals and a bird flies.

The stock market has the most talent. It can break out, gap up, crawl, climb, jump, fly, hit the top and burst through the roof. It can make you feel sad, frustrated, disappointed and sorry. It can also give you joy, glory, happiness and wealth.

English has eight parts of speech. Adjective is one of them. If you have trouble using a series of adjectives to say more about a noun, remember this word, “OPSHACOM” which stands for Opinion, Shape, Age, Color, Origin and Material. Thus we say: It is a lovely round new reddish Malaysian wooden table.

In English, we can use the present tense or present continuous tense to talk about the future. Hence, it is grammatically correct to say:

The bus leaves for KL tomorrow at 9 in the morning.

I am having a party tonight.

Remember, English is flexible. When I wind my grandfather’s clock, it starts to work. But when I wind up this article, I have come to the end of it.

Thank you for reading.

Contradictory Proverbs

A proverb is a short popular wise saying that states a general truth or gives good advice.

Some proverbs have contradictory proverbs. Below are some selected for light reading pleasures:

1. Great minds think alike. Fools seldom differ.
2. Save for a rainy day. Tomorrow will take care of itself.
3. Life is what we make it. What will be, will be.
4. Too many cooks spoil the broth. Many hands make light work.
5. One man’s meat is another man’s poison. Sauce for the goose is sauce for the gander.
6. Silence is golden. The squeaky wheel gets the grease.
7. Opposite attracts. Birds of the same feather flock together.
8. Faint heart never won fair lady. The meek shall inherit the earth.
9. All good things come to those who wait. Those who hesitate are lost.
10. Clothes make the man. Don’t judge a book by its cover.
11. Nothing ventures, nothing gains. Better be safe than sorry.
12. The bigger, the better. The best things come in small packages.
13. Absence makes the heart grows fonder. Out of sight is out of mind.
14. With age comes wisdom. Out of the mouths of babes come all wise sayings.
15. Two is company, three is a crowd. The more, the merrier.
16. Actions speak louder than words. The pen is mightier than the sword.
    

Readers who wish to add more, please do so in the ‘comments’ column.

Thanks.

The Ant and the Chrysalis

An ant while searching for food came across a Chrysalis. The Chrysalis was at its stage of transformation. The ant, being a boastful one, looked at the Chrysalis and cried contemptuously, “What sad fate; what a pitiable sight! While I can move and run about at my pleasure, and ascend to the top of the tallest tree, you lie imprisoned in your shell with power only to wriggle.”

The Chrysalis heard the Ant but said nothing. A few days later, the ant came back. He saw only the shell of the Chrysalis. He was wondering what had happened when he felt himself shaded and fanned by the wings of a butterfly. Then he heard the Butterfly said: “Behold in me, your much-pitied friend! Get me to listen to your boastings regarding your power to run and climb, if only you can come close to me.” So saying, the Butterfly flitted away and was soon aloft the morning breeze in the sun, leaving the Ant bewildered.

Never despise others. Appearances are deceptive.

Many that are down shall be restored and many that are now in honor may not remain so. At least two sleepy and normally quiet stocks showed some life yesterday. Fima Corp has been in a downtrend since its high of 2.74 in November 2006. It hit a low of 2.08 in May 07. Last Friday, the stock closed at 2.25 with some volume. The stock is 59.82% owned by Fima Metal Box Holdings Sdn Bhd as at 16.6.2006. Yesterday’s glimmer of hope could be an indication of better things to come for Fima Corp. Keep this in view.

The other stock is VADS which closed at 7 with some volume. The correction for this counter appears to be over. OSK said that the stock was worth RM9 plus per share some time ago.

Fear

In life, fear is unavoidable. We fear poverty, failure, illness, disease, sufferings, pains, natural calamites, war, loss of love, old age and death. The list is endless.

Fear leads to worries. Worries lead to miseries. Miseries lead to loss of sleep, loss of appetite and eventually to illness.

Medical science agrees that worries and anxieties aggravate high-blood pressures, diabetes, ulcers and many other chronic diseases.

Fear of poverty is the worst kind of fear. Man is by nature, avaricious. And because of his insatiable greed for riches, man finds satisfaction in preying upon man, not to eat his fresh and blood, but to rob him of this wealth. Thus man also creates fear for man. People can cause you trouble but if you know how to guard yourself, others cannot create worries in your mind.

Each type of fear needs a different approach to subjugate it. For example, if you fear illness, you must adopt a healthy lifestyle; do your exercise regularly and also control your diet. If you don’t want others to take advantage of you, you need to upgrade your skill and enhance your knowledge.

Fortunately man is endowed with the faculty of thought which is controllable. Every human being has the ability to control his own mind. By intelligence, we can mitigate fear. Negative thought creates fear and demoralization. Positive thought brings forth hopes and ideals. By refusing to think negatively, much fear if not all, is eliminated.

A newborn calf has no fear for a tiger because the calf does not know that the tiger can eat him up for lunch. A hunter with his men and guns has no fear for the tiger because he knows that he can kill the tiger before the tiger can cause him any harm.

A professional trader or investor has no fear in the stock market because he knows that he is skilful enough to win. A beginner in the stock market has no fear because he is as naïve as the calf.

Know who you are before you attempt to ‘play’ the market.

Lately, another kind of fear has emerged in the stock market. This is accounting fraud or accounting irregularities. How can anyone protect himself against such fear? (All comments and opinions are welcome.)

Is there any hope for Nextnation? What about MNRB?

Like those who have bought Nextnation around the 60c level, I am much aggrieved by the dismal quarterly results just announced. My worst fear was confirmed when the profit figures turned red. From a profit of 4.463m in the previous corresponding period, it now shows a loss of 251,000. Its revenue at 21.533m as against 17.782m has, however, shown an improvement. As to why the profit has gone into the red while revenue has increased, only the management has the explanation. I hope this is not in anyway another accounting irregularity.

Earnings per share for the year ended 30.4.2007 is 6.4c as against 6.9c the previous year. This is before the private placement of 60c per share cum the bonus issue of 2 for 1.

Chart-wise, the stock is traded to a high of 35c and a low of 26c after the bonus issue, where it appears to be well supported. I have no idea what’s in store going forward. There were some SMS scams and some bad publicity going on about the company. Action speaks louder than words. Perhaps it’s best to follow your chart. As for me, I am holding on to my stake and hoping for happier days. I am not a trader.

What about MNRB?

MNRB is a reinsurance company. Its business activity is the underwriting of all classes of general reinsurance business.

As at March 31, 2007, MNRB has a paid-up capital of 211,866,000 shares of RM1 each. Its top four major shareholders are: Amanah Raya Nominee 48.18%; Pemodalan National Bhd 11.43%; EPF 5.83% and Amanah Raya Nominee 3.29%. Its EPS at 61.4c is commendable.

An interim dividend of 20 sen per share has been paid. It has proposed a final dividend of 26c per share. At it last traded price of 5.35, the dividend yield is 8.598.

MNRB has 1.6 billion under investment. This stake is surely worth very much more in view of our bullish market.

Linde AG has offered to buy MNRB’s shares of 4,488,000 in MOX at RM15 per share. The offered price is now raised to RP17 per share. These shares were bought in 1981 for RM914, 463. At RM17 per share, this will give a capital gain of 75,381,537.

MNRB shall be going to Dubai in the near future. Its prospective earrings and dividend payments look likely to be enchanced in future years.

The above comments should not be construed as a recommendation to buy or sell. You buy or sell at your own risk absolutely.

Lady Luck is Essential

Bird-fighting has been a gaming activity in our country for a long time. Some people call this a spot; others say bird-fighting is the poor men’s race course. It is easy to own a bird but not easy to identify a good bird to buy. Besides, a good bird can cost up to ten thousand ringgits. I had bought one on behalf of a friend for that amount.

There was a time when I was interested in bird-fighting. In a bird-fight, live betting is usually on. The bets are normally quite small, more for the fun rather than the money. However, in certain fights, bets can go up to a hundred thousand ringgits. Actually these bird-fights are very exciting and interesting. If legalized, bird-fighting can be turned into a tourist attraction. You need to see your bird fights to feel the adrenalin flow or the thrill.

I have a friend who is popularly known as Guaranteed To Win (GTW). He used to live-punt on these fights. Live-betting means as the fight is on, bets are on-going. If you know how to read a fight and the body language of the birds, you can more or less predict the outcome.

AT one time GTW had nine wins in a row. He felt elated and started to boast about his ability of reading a fight. “Guaranteed to win” he went about bragging his skill.

Soon after, some thing strange happened. He started to lose. Every bet he betted he lost. Even when the bird which was about to win would suddenly surrender as soon as he placed his bet on it. Eventually he lost all that he had won. Now he no longer talks about birds and has gone back to taxi-driving to earn his livelihood.

When lady luck smiles at you, everything will go smoothly. When you are in a loosing streak, your skill, for no obvious reason, becomes unskillful.

Winning is easy when lady luck is smiling at you.

The Wisdom of Playing a Loser’s Game

In the book Extraordinary Tennis for Ordinary Tennis Player, Dr Simon Ramo pointed out that professional players and amateurs play differently. Professionals attack by playing powerful and tricky shots to win points. Amateurs, except for a gifted few, must play defensively to win. While professionals seldom make mistakes, amateurs make many mistakes if they play aggressively. So to win the game, amateurs must make fewer mistakes than their opponents. This is called, “the loser’s game.”

In the stock market, amateurs will do well to play a loser’s game to win. You cannot afford to play like the professionals. You do not have the skill or the resources to do that. You have to invest intelligently and play the market in your own terms. Appended below are some common mistakes you need to be aware of and avoid as well:

1. Listening to rumors and taking advice at face value.
2. Going after penny stocks that have no value.
3. Overtrading and trading on thin margin.
4. Buying in a downtrend.
5. Buying a stock because of its name.
6. Holding on to a falling stock. Hence failure to protect your capital.
7. Averaging down indiscreetly.
8. Failure to allow a winning stock to complete its uptrend.
9. Confusing price with value; not knowing what is cheap and what is low-priced.
10. Bargaining for a bid when you should buy or sell at the market.
11. Overact to good news or bad news.
12. Trying to make quick money without knowing the risk-reward ratio.
13. Failing to know the importance of buying sound and solid companies.
14. Not knowing fundamental and technical analysis.
15. Overestimating your own abilities.
16. Buying a Proton for the price of a Mercedes.
    

The fewer mistakes you make, the more is your chance of winning.

As for trading, this is what Benjamin Graham, the mentor and teacher of Warren Buffett, said, “Everyone knows that most people who trade in the market lose money in the end. The people who persist in trying it are either unintelligent, or willing to lose money for the fun of the game, or gifted with some uncommon and incommunicable talent. In any case, they are not investors.”

In every field, however, we do have the exceptional and the gifted few. If you are one of them, I salute you!

From 60 to 1.15 in less than 18 months

Someone I know asked me in 1996 whether it was okay to buy Sin Heng Chan at 60 ringgit a share. I had sold 200 units at 55 two days ago. I told him that at that price it would be madness to buy. He said his wife got the tip from the horse’s month that Sin Heng Chan was sure to reach a hundred within a month. He further told me that one Tan Sri, a close friend of his wife had given the tip. I warned him that if he wished to try his luck, he should put a stop order at 55.

Sin Heng Chan did hit 60. From there the stock headed south very fast and by Jan 1998 it was traded at a low of 1.80 before it rallied to 4.68. Then it came down again! By August 1998, it hit a low of 1.15. A year or so later, the stock closed at 4.10 before it was suspended for restructuring. On June 8, 2007, the stock closed at 83.5 sen per share.

I understand that he (the person who got the tip) bought 2000 shares at 60 a share and had failed to use a stop-loss. Because of a tip and the failure to use a stop-loss, he had lost over 100 thousand ringgit in just one deal of 2000 shares.

From this instance, you can imagine the madness of the investing or speculating crowd at that time.

The KLCI closed at 1,352.39 today. Its all time high at 1,374.33 was established two days ago. Our present bull market is entirely different from the previous bull markets. This one has great disparity between the blue chips and the second liners.

The 2^nd board index closed at 106.10 today. This is only a fraction of its historic high of 682.99. Most second liners, even the ones with good fundamentals, have not been restored to their previous glories. Some examples are:

HSL as at Mar 1997 high: 36.00; now 3.88

Ranhill as at Sep 2003 high: 9.85; now 1.70

MNRB as at Dec 1996 high: 9.00; now 4.64

DRB as at Jan 1994 high: 11.30; now 1.83

FSBM as at Feb 2000 high: 10.50; now 1.47

Choo Bee as at May 1997 high: 4.82; now 2.38

Oriental as at Feb 1997 high: 9.00; now 5.50

For those who have bought any of the above stocks at its historic high, they are still licking their wounds. Hopefully, the market will continue to be bullish going forward. Until the second liners catch up and close the gap between them and the blue chips, the market is unlikely to crash for the present.

Disclaimer: This commentary is the opinion of the writer. It should not be construed as a recommendation to buy or sell. You buy or sell at your own risk absolutely.

The fiasco of Transmile

The fiasco of Transmile was a sorry sight to behold. Right from the opening bell, the stock gapped down from 8.90 to 6.25. It was limit down.

In the afternoon, the stock came down further to 5.20 before moving up to 6.00. Volume traded amounted to 17,597,800 units which was moderately high. At the end of the day, a black long-lower shadow candle appeared. This looks bullish and there is hope that the price may move up come the next trading day. Much will depend on the outcome of the investigation that is now ongoing. Better be safe, better avoid this counter until the dust settles.

It is incredible how a blue chip counter like Transmile can have irregularities in its accounts. Those who are responsible for the scandal should not be let off easily. A through investigation should be made and proper action without fear or favor should be taken. Confidence in the stock market must be restored before investors moved out with their money.

A lawyer says that Transmile is now open to legal suits. If you are interested to know more, here is the link.

There is also an article at Blisswind.

What’s controlling us?

Whether on sports, games or duties, there were times when we performed superbly and there were times when we underperformed.

In the stock market, how many times have we picked a well-reasoned stock in anticipation of a price rise which never came? How often have we patiently waited, become disgusted and eventually sold off just when the stock began its upward moves?

What about the times when we kept holding on to a falling stock only to sell at the bottom? Again there were times when we delayed our purchases in an advancing stock only to buy at or near the ultimate top? Why so precisely wrong?

Is knowledge, wisdom, experience or charting the solution to these errors?

Jesse Livermore popularly known as the greatest speculator and trader made 100 millions in the 1929 cash. He became the richest American. For more than 30 years he had been successful in trading in commodities and the stock market. Who would have thought that Jesse would one day end tragically?

Jesse made two fatal errors. According to his tape-reading, Union Pacific was under accumulation. After he had bought 5000 shares, a personal friend, Ed Hutton, a great financier and owner of a broker firm, told him that he had inside tips that Union Pacific would tank. Acting on this tip, he sold his 5000 shares at $162 per share and made a profit of $10,000. The next day the stock jumped 10 points which meant $50,000 additional profits if he didn’t sell. He vowed never to listen to tips again.

There was a time when he shorted cotton. He was doing well when Percy Thomas, the “Cotton King” came into his life. Percy was a great talker. Before long, Jesse was under his influence. He covered his shorts and began to go long when cotton price was declining. The price of cotton continued to decline. For some mysterious reasons, he started to average down and kept on averaging down against his own principles. Eventually he lost 90% of his capital before he finally came back to his senses and sold out his stake for $300,000.

He tried to make a come back in the stock market. But from then on, his decisions were never right. From brilliancy to stupidity, he lost all his money; he was in debt to the tune of $1 million.

Eventually, he became a bankrupt in 1934 and committed suicide in 1940. He left a suicide note to his wife admitting that he was a failure.

Why did Jesse, a master speculator and trader with ample experiences, go against his own principles? Did God send Percy to bring about his downfalls? Is he destined to end in tragedy?

God helps us in mysterious ways, but he also brings about our downfall in the same manner.

What looks easy may not be easy

In the stock market we have bulls, bears, stags, chickens and pigs.

Bulls are those who buy in anticipation of a rise in the market.

Bears are those who sell in anticipation that the market will drop.

Stags are those who will only apply for new issues in the hope of making a profit.

Chickens are very scared to enter the market. They keep their money in the banks, in bonds or in treasury bills. When chickens turn bulls, the market will be at a very late stage of a bull market. At this stage, the market will be most tempting and the most dangerous.

Pigs are lazy; they will not do any research; their ideology is to wait for a good tip to make them rich. They forget that in this world, you can’t get something for nothing.
The market has a way of fattening the pigs, and then sending them to the slaughter house.

Lately, monkeys have also come in.
There was once a monkey who saw some fish swimming about in a river. As it was watching, a flock of wild ducks also came to swim and play happily in the water. The day was hot. The lure of the cool water was too tempting to resist. As the monkey watched, it said, “ Oh! Swimming is fun, it’s enjoyable and it’s easy. I also can do that even without any practice.” The monkey then jumped into the river. It tried very hard to swim and keep itself afloat. Unfortunately, it did not have the skill and drowned.

Which character would you rather be? You are the one to decide.

Good luck.

Black Fury Energy (New Energy Drink)

Hi guys/gals,

Silver Bird Bhd (your premier bread company in Malaysia) is launching a new energy drink, Black Fury. There is a DAILY lucky draw that can win you the Black Fury drink ... will be delivered all the way to your house ... and which is yet to be available in the market :)

And this is very EXCITING because the contest starts in approximately 30 mins from the time of this writing :) ... I got some news from friend working there... hehe :>

Go to www.blackfury-energy.com, register your Yahoo/MSN ID, and change your avatar and status to participate. Take less than a minute to do. The earlier you join, the higher the chance you stand to win.

Good luck!!

cheers,

~KEGan

The danger of the ‘Bigger Fool Concept’

Initially people are attracted to the market because of earnings and good dividend yields. As the market moves up from undervalued to fairly valued, more and more people come into the market. The quickening of the market tempo pushes the market into the overvalued territory. It is here that a bubble is created. As the market moves up further, the bubble becomes bigger and bigger.

The magic lure of a constantly rising market soon becomes too much to resist. Now people are looking at future earnings, prospective dividend yields, and big contracts to justify buying. Little did they realize that the bubble has become much bigger and a burst can happen anytime.

In a prolong market advance, people become accustomed to the daily market rise. They soon throw cautious to the wind and start to buy in earnest. They think that with stop orders, they can limit their losses and hence only a small amount is at risk. In the meantime they can luxuriate in yielding to the herd instinct.

In real trades, stop orders may not be executed when they matter most. A suspension or sudden drop in price very much below your stop order can often happen at any time. This can inflate your limited loss to a catastrophe loss which may result in your inability to bear. And this can be disastrous.

The market gives and the market takes away. Don’t expect too much from the market if you don’t want to get hurt too deeply. The market does not owe you anything. Bet only what you can afford to lose.

When you are seduced into buying a stock you know is overvalued and hope to sell it a little higher to make a quick buck, this is a good indicator that a severe bear market is about to follow.

In the well-known philosophy called the ‘bigger fool concept’ it involves buying very date in a bull market in anticipation of a bigger fool to pay a higher price for your purchase. As the stock changes hands, the price hastens to the ultimate top. Eventually the person holding it finds that there is no one willing to pay a higher price for it. Thus if you do not find someone willing to pay a higher price for an overvalued stock, you must quickly sell it at a slightly lower price. Had the poor souls who bought Hwa Tai in 1997 at 200 sold it at 180, he would not have to ‘cut his limps’ when it subsequently dropped to below 3.

This blog disclaims all liability for your perusal of the above article. Whatever action you take, intelligent or otherwise, you do so at your own risk absolutely.

The KLCI, What happened in the last ten years?

1997 High 1,278.94 --- (Feb) Volume for the month 9,282,000 units
Low 512.41 --- (Nov) Volume for the month 5,791,000 units

1998 High 764.94 (Feb) Weekly volume 4,259,000 units
Low 261.33 (Sep) Weekly volume 1,542,000 units

1999 High 870.39 (July) Weekly volume 5,702,000 units
Low 488.90 (Mar) Weekly volume 455,000 units

2000 High 1,021.20 (Feb) Weekly volume 5,188,000 units
Low 673.74 (Dec) Weekly volume 122,000 units

2001 High 737.56 (Feb) Weekly volume 780,000 units
Low 547.72 (Apr) Weekly volume 590,000 units

2002 High 816.94 (April) Weekly volume 2,168,000 units
Low 614.00 (Dec) Weekly volume 510,000 units

2003 High 818.57 (Oct) Weekly volume 5,027,000 units
Low 615.77 (Mar) Weekly volume 921,000 units

2004 High 920.57 (Dec) Weekly volume 3,261,800 units
Low 769.29 (May) Weekly volume 2,017,500 units

2005 High 953.88 (Aug) Weekly volume 2,849,100 units
Low 858.84 (June) Weekly volume 2,262,600 units

2006 High 1,110.12 (Dec) Weekly volume 4,893,800 units
Low 883.29 (June) Weekly volume 1,671,200 units

From the above data we can easily see that the volume at the highs is very much greater than that at the lows. This means that if you want to buy low and sell high you should buy when the volume is very low and sell when the volume is very high. Also to be noted is that the favorite month of the year for the yearly high was February.

Looking at 2007, a top was established on 26 February with very heavy volume transacted in the previous few days. The top was followed by a correction that lasted for six trading days. The CI closed at 1,090.39 on 5.3.07. Support came in the next day. From a low of 1,113.29 it resumed it uptrend.

Yesterday the CI closed at 1,363.40 with 1.533 billion shares traded. This volume is moderately high considering that the lowest of the year so for was 808,100 shares and that the highest was 4.7817 billion traded on Feb 22.

I believe we have not seen the best of 2007 yet. The valuation gap between the blue chips and the second liners and mesdaq counters is too wide. Until the lower liners and penny stocks are whipped up as well, the ultimate top will not be formed yet. When people are fearful of a crash, the crash will not happen. It is only when everyone is most optimistic; when new comers come in droves to drive the market crazy; when permanent prosperity is deemed everywhere; when price rises are the norm and expectation of the day and when the market is at its strongest, then and there, a crash will suddenly come.

When will this happen? Nobody knows. The market itself does not know where the ultimate top is. So how can anyone know? Wait till you see people behaving like lemmings trying to cross the ocean in search of food or flying insects mesmerized by a fire in the darkness of the night and performing as kamikazes.

For the present, the good time is likely to continue.

The above point of view is my personal opinion only. You are entitled to your own.

Cash Flow

To enable you to have a better understanding of what is happening in a company; you need to have a good look at the Cash Flow statement. Whether in good time or bad time, cash is still the king. With cash, you can even ask the supernatural to push cars for you; without it, to move one step forward is difficult. (Chinese proverb)

Cash flow is cash coming in and cash going out. Operating cash flow is net cash inflow from operating activities.

A profitable company may have liquidity problem if its cash inflow is inefficient. That means its incoming cash derived from its services or products is not enough to meet its outgoing cash obligations, such as salaries and wages, rental, utility bills, telephone bills, etc.

Operating cash flow minus tax, interest, and capital expenditure is called free cash flow (fcf). Thus fcf is cash that is left after all essential bills and what must be paid to stay in business, have been paid.

The management has the option to decide what to do with the fcf. It can be paid as dividends to its shareholders; for share buy-backs; for acquisition or simply be retained in the company. What it does is reflective of its view for the company going forward.

Thus, don’t forget to look closely at the Cash Flow statement when you evaluate the solvency of the company.

One is Enough

There was a time when I received six same annual reports when I needed only one. These reports were elegantly and beautifully presented with lots of pictures inside. But the worst thing was that the bottom line in the P & L account statement was in red ink. They might have cost a few ringgits each. Adding in packing and delivery charges, the actual cost per copy could be up to at least seven ringgits. I couldn’t help sighing, “What a waste.”

We know that when we open an account with a broker firm, a CDS a/c will be allocated to us. Thus, if we open accounts with three broker firms, we have three CDS accounts. Often we have the same stock in each of the accounts, and thus, three same annual reports will be sent to us. You can imagine how many millions of annual reports are wasted in this manner. This is money down the drain for nothing. Why waste shareholders’ funds when they can be saved?

I understand that in America one person has only one CDS account irrespective of how many broker firms you deal with. You can buy and sell at any broker firm but only one CDS account is all that is needed.

Why can’t we follow such a system of one person one CDS account? Apart from the possibility of using the wrong account to sell, there are plenty to be saved.

Underutilization of assets is a waste. To use, consume, spend or expend thoughtlessly is also a waste. Like most people, I hate to see waste. Over the years, I have been wondering why Bursa cannot do anything to improve things in this respect. We have to change for the better if we want to move forward. Complacency has no place in an ever- changing world.

Not so long ago, some companies have gotten smart. The YTL Group for example; they packed the annual reports of YTL Corp, YTL Power, YTL Land, YTL Cement, and YTLE all into a disk. From this alone we can visualize the shrewdness and excellence of the management.

How about those companies who got fined year after year for late filings or other obligations not carried out? What can you say of their management when the red ink at the bottom line has become redder and redder? You already got the answer.

Be smart, associate with successful people to be successful.

A brilliant solution to a poser

Life is full of problems; some are expected; some are unforeseen. Problems tend to become bigger and may lead to other problems if they are not solved early. Luckily most problems can be solved or settled amicably or at least minimized.

Once there was a man who left 17 horses for his three sons. The eldest was to get 1/2 of them; the second son, 1/3 and the third son, 1/9. None of horses was to be slaughtered. And they were not supposed to do that.

How are you going to solve this problem? Before you read on can you find a solution?

They were concurring as to what they should do and how best to share the horses when a mathematician happened to be there. Upon hearing their plight, the mathematician said, “Let me do the sharing for you. I have one horse which I shall add to the 17 horses so as to enable the sharing to be carried out efficiently.”

Thus with 18 horses, half of them means 9; one-third means 6 and 1/9 means 2. 9+6+2=17. After the sharing, the mathematician walked away with his own horse. The three sons were amazed, happy, and satisfied as well, with the solution.

Where is the catch or trick? Can you figure it out?

Well folks, if you have a problem do not despair. Surely, there is a solution somewhere.

The stock market is a different game

In badminton, the player who gets the first 21 points wins the game. In soccer, the team which scores the most goals is the winner. In the stock market, things are different. It is not how many times you win that count; it is how much you win when you win that matters You can actually lose ten times and win once and on balance you win.

Small losses and small winnings cancel themselves out. They are of no use except for the fun and the experience. Your aim is to win big when you are on the right stock, Just like in a game of poker, you must make the best use of a good hand otherwise the best of cards will go to waste.

If you are an intelligent investor, you will only be buying undervalued stocks. There is no need for you to cut losses. Warren Buffett says there is no need for you to panic even when the value of your stocks has dropped 50%. You can actually buy to average down. In trading, an entirely different strategy is called for. You never average down but cut your losses quickly. If you are one of those who cannot bear the pain of a small loss, never be a trader.

Prospective earnings are more important than current earnings. They are what people look at when they buy. That’s why some companies are selling at high price earnings ratio.

Do not buy anything you do not understand. If you are really serious about the stock market, keep a daily trading diary. Every time you buy or sell, write down the reasons for the actions. You will be amazed at how smart or stupid you have been when reading them a year or so later. In any case, these recordings will go a long way to grooming you as a smart trader or investor.

Ten Tips For The Successful Long-Term Investor

By Investopedia Staff, (Investopedia.com)

1) Sell the losers and let the winners ride! - Time and time again, investors take profits by selling their appreciated investments, but they hold onto stocks that have declined in hopes of a rebound. If an investor doesn't know when it's time to let go of hopeless stocks, he or she can, in the worst-case scenario, see the stock sink to the point where it is almost worthless. Of course, the idea of holding onto high-quality investments while selling the poor ones is great in theory, but hard to put into practice. The following information might help:

• Riding a Winner - Peter Lynch was famous for talking about his "tenbaggers", his investments that had increased tenfold in value. The theory is that much of his overall success was due to a small number of stocks in his portfolio that returned big. If you have a personal policy to sell after a stock has increased by a certain multiple - say three, for instance - you may never fully ride out a winner. No one in the history of investing with a "sell-after-I-have-tripled-my-money" mentality has ever had a tenbagger. Don't underestimate a stock that is performing well by sticking to some rigid personal rule - if you don't have a good understanding of the potential of your investments, your personal rules may end up being arbitrary and too limiting.
• Selling a Loser - There is no guarantee that a stock will bounce back after a protracted decline. While it's important not to underestimate good stocks, it's equally important to be realistic about investments that are performing badly. Recognizing your losers is hard because it's also an acknowledgment of your mistake. But it's important to be honest when you realize that a stock is not performing as well as you expected it to. Don't be afraid to swallow your pride and move on before your losses become even greater!

In both cases, the point is to judge companies on their merits according to your research. In each situation, you still have to decide whether a price justifies future potential. Just remember not to let your fears limit your returns or inflate your losses.

2) Don't chase the "hot tip" - Whether the tip comes from your brother, cousin, neighbor, or even broker, no one can ever guarantee what a stock will do. When you make an investment, it's important you know the reasons for doing so: do your own research and analysis of any company before you even consider investing your hard earned money. Relying on a tidbit of information from someone else is not only an attempt at taking the easy way out, it's also a type of gambling. Sure, with some luck, tips may sometimes pan out. But they will never make you an informed investor, which is what you need to be to be successful in the long run.

3) Don't sweat the small stuff - In tip No.1, we explained the importance of realizing when your investments are not performing as you expected them to - but remember to expect short-term fluctuations. As a long-term investor, you shouldn't panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture. Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term. Also, don't overemphasize the few cents difference you might save from using a limit versus market order.

Granted, active traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement - the one that occurs over many years - so keep your focus on developing your overall investment philosophy by educating yourself.

4) Do not overemphasize the P/E ratio - Investors often place too much importance on the P/E ratio. Because it is one key tool among many, using only this ratio to make buy or sell decisions is dangerous and ill-advised. The P/E ratio must be interpreted within a context, and it should be used in conjunction with other analytical processes. So, a low P/E ratio doesn't necessarily mean a security is undervalued, nor does a high P/E ratio necessarily mean a company is overvalued. (For further reading, see our tutorial Understanding the P/E Ratio.)

5) Resist the lure of penny stocks - A common misconception is that there is less to lose in buying a low-priced stock. But whether you buy a $5 stock that plunges to $0 or a $75 stock that does the same, either way you'd still have a 100% loss of your initial investment. A lousy $5 company has just as much downside risk as a lousy $75 company. In fact, a penny stock is probably riskier than a company with a higher share price, which would have more regulations placed on it. (For further reading, see The Lowdown on Penny Stocks.)

6) Pick a strategy and stick with it - Different people use different methods to pick stocks and fulfill investing goals. There are many ways to be successful and no one strategy is inherently better than any other. However, once you find your style, stick with it. An investor who flounders between different stock-picking strategies will probably experience the worst, rather than the best, of each. Constantly switching strategies effectively makes you a market timer, and this is definitely territory most investors should avoid. Take Warren Buffett's actions during the dotcom boom of the late '90s as an example. Buffett's value-oriented strategy had worked for him for decades, and - despite criticism from the media - it prevented him from getting sucked into tech startups that had no earnings and eventually crashed.

7) Focus on the future - The tough part about investing is that we are trying to make informed decisions based on things that are yet to happen. It's important to keep in mind that even though we use past data as an indication of things to come, it's what happens in the future that matters most.

A quote from Peter Lynch's book "One Up on Wall Street" about his experience with Subaru demonstrates this: "If I'd bothered to ask myself, 'How can this stock go any higher?' I would have never bought Subaru after it already went up twentyfold. But I checked the fundamentals, realized that Subaru was still cheap, bought the stock, and made sevenfold after that." The point is to base a decision on future potential rather than on what has already happened in the past.

8) Investors adopt a long-term perspective - Large short-term profits can often entice those who are new to the market. But adopting a long-term horizon and dismissing the "get in, get out and make a killing" mentality is a must for any investor. This doesn't mean that it's impossible to make money by actively trading in the short term. But, as we already mentioned, investing and trading are very different ways of making gains from the market. Trading involves very different risks that buy-and-hold investors don't experience. As such, active trading requires certain specialized skills.

Neither investing style is necessarily better than the other - both have their pros and cons. But active trading can be wrong for someone without the appropriate time, financial resources, education and desire. (For further reading, see Defining Active Trading.) Most people don't fit into this category.

9) Be open-minded when selecting companies - Many great companies are household names, but many good investments are not household names (and vice versa). Thousands of smaller companies have the potential to turn into the large blue chips of tomorrow. In fact, historically, small-caps have had greater returns than large-caps: over the decades from 1926-2001, small-cap stocks in the U.S. returned an average of 12.27% while the S&P 500 returned 10.53%.

This is not to suggest that you should devote your entire portfolio to small-cap stocks. Rather, understand that there are many great companies beyond those in the Dow Jones Industrial Average, and that by neglecting all these lesser-known companies, you could also be neglecting some of the biggest gains.

10) Taxes are important, but not that important - Putting taxes above all else is a dangerous strategy, as it can often cause investors to make poor, misguided decisions. Yes, tax implications are important, but they are a secondary concern. The primary goals in investing are to grow and secure your money. You should always attempt to minimize the amount of tax you pay and maximize your after-tax return, but the situations are rare where you'll want to put tax considerations above all else when making an investment decision (see Basic Investment Objectives).

Conclusion
In this article, we've covered 10 solid tips for long-term investors. We started off saying that there is an exception to every rule, and we can't overemphasize this point. Depending on your circumstances, you might even disagree with some of these pointers. However, we hope that the common sense principles we've discussed benefit you overall and provide some insight into how you should think about investing.

I believe readers will find the above tips useful. At Blisswind, you have nothing to lose and everything to gain. You are welcome to join us.