The first happened on Friday yesterday, with counters registering bullish engulfings on the daily chart, and the STI rising 50+% after a 10% correction from Jan. I am quite certain we will see a meaningful rebound all the way into April. I hope to add more positions over the first few days.
Some counters to consider:
1. Wilmar - looking very yummy at current levels
2. F&N - strong reversal
3. Genting - I am now reconsidering, given its ability to hold at current levels
Saturday, February 26, 2011
Thursday, February 24, 2011
Preparing for a bear market
I am preparing for a prolonged correction or a bear market ...the writing is on the wall...the local STI broke below its 200-day MA and have since failed to recover above it. Most stocks have also followed suit. It is time to hold my existing portfolio for a prolonged period of time (I don't have that many), and draw up my list of stocks that can be bought at bargain prices later on. I am expecting this bear market (if it materialises) to be a mild one.
Comparatively, the Dow looks stronger, so it may be more worthwhile to invest there.
US names to look out for include:
Anadarko Petroleum
J. Crew
Whirlpool
Wells Fargo
Delta Airlines
Sprint
BP
J.C. Penney
GM
Citigroup
Bank of America
Microsoft
Why these names? Because they are all recently bought by the biggest names on Wall Street, namely, John Paulson, Warren Buffett, David Ainhorn, Bill Ackman, George Soros and Daid Tepper.
Comparatively, the Dow looks stronger, so it may be more worthwhile to invest there.
US names to look out for include:
Anadarko Petroleum
J. Crew
Whirlpool
Wells Fargo
Delta Airlines
Sprint
BP
J.C. Penney
GM
Citigroup
Bank of America
Microsoft
Why these names? Because they are all recently bought by the biggest names on Wall Street, namely, John Paulson, Warren Buffett, David Ainhorn, Bill Ackman, George Soros and Daid Tepper.
Wednesday, February 23, 2011
What can we buy?
Since I believe that the plunge in stock markets is temporary, and that markets will pick up later this year, I will like to do some pickings over the next few weeks as the market turmoil plays itself out.
According to OCBC:
- In the Oil & Gas space, KepCorp is a buy on current price weakness
- In the commodity space, Noble and Olam are down sharply, but fundamentally sound and ideal for longer term investors
- Telco stocks are attractive now for dividend yield of >5%
- Banks have also been sold down, but also ideal time to accumulate on price weakness
- Healthcare stocks, which were expensive, have come off and are value is emerging
- REITs have no exposure to MENA, and remain an overweight
- From a technical perspective, some STI stocks are now hovering near to their respective immediate support levels and may offer buying opportunities should a rebound take place near these levels. These are CapitaLand, CapitaMall Trust, CapitaMalls Asia, City Developments, SembMarine, SPH and SingTel
I currently have:
Olam (2 lots), Noble (2.5 lots) and SGX (1 lot). This is what OCBC has to say on Noble and Olam: While stock prices are likely to remain volatile in the near term, price weakness may present attractive entry levels for long term investors. Noble currently trades at 13.5x FY11 PER (vs. its historical range of 4x-23x between 2007 and 2010) and Olam is trading at 18.4x FY11 PER (vs. its historical range of 8x-49x between 2007 and 2010). While we do not rule out the possibility of further near term pullback, we believe that these stocks should also be sensitive to a rebound in sentiment when risk aversion subsides. For instance, Noble tumbled by 80% during the 2008 downturn but thereafter rebounded six-fold within a year, deeming it among the top STI performers.
Earlier, CLSA issued a "Conviction Sell" on Olam with a $1.60 target. Although I do not really understand the report, I do not think its prices will go that far down, at least not in the near future. I will therefore pursue a policy of "average down".
I will also be adding Noble to my portfolio as its prices become more attractive.
As for KepCorp and SembMar, their prices are still far too high. Not attractive enough.
I should be adding more STX OSV to my portfolio soon, too.
A look at insider trades revealed director/ institutional buying in F&N and share buy back in SembCorp in recent weeks. I am definitely standing by to push the "buy" button on these two.
Increasingly, the STI looks weaker by the day, and I will not be surprised if it enters a baby bear market soon. But I will be buying into the bear market.
According to OCBC:
- In the Oil & Gas space, KepCorp is a buy on current price weakness
- In the commodity space, Noble and Olam are down sharply, but fundamentally sound and ideal for longer term investors
- Telco stocks are attractive now for dividend yield of >5%
- Banks have also been sold down, but also ideal time to accumulate on price weakness
- Healthcare stocks, which were expensive, have come off and are value is emerging
- REITs have no exposure to MENA, and remain an overweight
- From a technical perspective, some STI stocks are now hovering near to their respective immediate support levels and may offer buying opportunities should a rebound take place near these levels. These are CapitaLand, CapitaMall Trust, CapitaMalls Asia, City Developments, SembMarine, SPH and SingTel
I currently have:
Olam (2 lots), Noble (2.5 lots) and SGX (1 lot). This is what OCBC has to say on Noble and Olam: While stock prices are likely to remain volatile in the near term, price weakness may present attractive entry levels for long term investors. Noble currently trades at 13.5x FY11 PER (vs. its historical range of 4x-23x between 2007 and 2010) and Olam is trading at 18.4x FY11 PER (vs. its historical range of 8x-49x between 2007 and 2010). While we do not rule out the possibility of further near term pullback, we believe that these stocks should also be sensitive to a rebound in sentiment when risk aversion subsides. For instance, Noble tumbled by 80% during the 2008 downturn but thereafter rebounded six-fold within a year, deeming it among the top STI performers.
Earlier, CLSA issued a "Conviction Sell" on Olam with a $1.60 target. Although I do not really understand the report, I do not think its prices will go that far down, at least not in the near future. I will therefore pursue a policy of "average down".
I will also be adding Noble to my portfolio as its prices become more attractive.
As for KepCorp and SembMar, their prices are still far too high. Not attractive enough.
I should be adding more STX OSV to my portfolio soon, too.
A look at insider trades revealed director/ institutional buying in F&N and share buy back in SembCorp in recent weeks. I am definitely standing by to push the "buy" button on these two.
Increasingly, the STI looks weaker by the day, and I will not be surprised if it enters a baby bear market soon. But I will be buying into the bear market.
Tuesday, February 22, 2011
What the big guns are buying
Follow the smart money, and you will be rich. This article details what smart investors have been buying during the last quarter. So, if we follow them, won't we be rich?. Only trouble is, we do not know exactly when they enter the positions, and when they liquidate their positions. Therefore, use it only as a rough guide on what to buy in the stock market
Monday, February 21, 2011
Billionaire Tepper Makes Big Move Back Into Financials
Billionaire David Tepper returned investors an astounding 132% net of fees in 2009 and 21% in 2010, and heading into 2011, the New Jersey-based fund manager remained bullish, telling CNBC last month that he’s “cautious but optimistic” about equity markets and the economy. Given Tepper’s outlook, his recently disclosed end-of-2010 equity holdings, which show a big move back into the financial sector, are in focus.
A look at Appaloosa Management’s top-15 U.S.-listed equity holdings from across all its funds at the end of 2010 shows that Tepper was adding to his finanacials exposure. During Q4, the firm added to stakes in Bank of America (BAC), SunTrust Banks (STI), Wells Fargo (WFC), and Citigroup (C), the firm’s largest, U.S.-listed, equity holding at the end of 2010. The moves reversed Tepper’s selling bias in the segment during Q3.
BAC has so far been a sad story for me, refusing to yield me a profit. However, I am expecting that give another quarter, or two, its share price should be higher. Its trend has changed from down to up, so the wait is worthwhile.
A look at Appaloosa Management’s top-15 U.S.-listed equity holdings from across all its funds at the end of 2010 shows that Tepper was adding to his finanacials exposure. During Q4, the firm added to stakes in Bank of America (BAC), SunTrust Banks (STI), Wells Fargo (WFC), and Citigroup (C), the firm’s largest, U.S.-listed, equity holding at the end of 2010. The moves reversed Tepper’s selling bias in the segment during Q3.
BAC has so far been a sad story for me, refusing to yield me a profit. However, I am expecting that give another quarter, or two, its share price should be higher. Its trend has changed from down to up, so the wait is worthwhile.
Sunday, February 20, 2011
Are we near the start of the next bear market?
What goes up must come down, and certainly, we have come a long way since the lows of March 2009. Any logical-thinking person must know that the days of stocks going higher are diminishing by the day. I do not know who Michael Lombardi is (other than he is a financial news writer), but his latest newsletter tugged at some of my heartstrings. In the newsletter dated 16 Feb 2011, he wrote:
In these very pages on April 27, 2004, I wrote, “We will wish Greenspan never brought interest rates down so low as to entice so many consumers to have such big mortgages.” Stock market started rallying.
On July 21, 2005, I wrote, “the Fed’s actions (of reducing interest rates so low as to entice consumers to borrow more than they can afford) will one day be regarded as one of the most costly errors committed by it or any other banking system in the last 75 years.” Stock market continued to rally.
On August 23, 2006, I started warning about a coming recession—two years before it was actually recognized in GDP numbers. I wrote back then, “I see the coming recession being deep and difficult because U.S. consumers do not have the savings to spend their way out of the recession.” Stock market continued to rally.
Till this stage, Lombardi has been right on the credit bubble, but too early.
In the summer of 2007 I started comparing the recession headed our way to the Great Depression: “Anyway you look at it, the U.S. housing market is in for a real beating. In the late 1920s, the real estate market crashed first, the stock market second and the economy third. This is the exact sequence of events I believe we are witnessing 80 years later.” Indeed, the stock market crashed in the first quarter of 2009, two years after the real estate market crashed. He was right at last, as market began their descent.
Turning to the stock market, on November 29, 2007, I really started yelling that stocks are in trouble: “The Dow Jones Industrial Average, the S&P 500 and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market rally of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for Americans.”
In early 2008, I turned outright bearish on stocks and begged my readers to get out of them: “In 2008, I believe investors will fare better invested in T-Bills as opposed to the stock market. I’m bearish on the general stock market for three main reasons: Borrowing money in 2008 will be more difficult for consumers. Consumer spending in the U.S. is drying up, which will push down corporate profits.” (January 10, 2008.) The year 2008 ended up being one of the worst years for the stock market since the 1930s. Indeed, 2008 was the worst year for stocks.
In March of 2009, the Dow Jones Industrial Average fell to 6,440, a 12-year low and, in the depth of the crisis, when Wall Street was warning Washington that the financial system would come to a halt unless the government started bailing out financial institutions and larger corporations, I turned firmly bullish on stocks. We “jumped in with both feet,” to quote an adage. He was right on target.
Now he says:
If you have been reading PROFIT CONFIDENTIAL over the past two years, in my daily “Where the Market Stands; Where it’s Headed” section, you have been reading that I believe we are in a bear market rally, which will bring stock prices higher. In late 2010, early 2011, I changed that prediction to basically, “I believe stocks will continue to rise in the immediate term, but I’m turning bearish for the short to long term.”
Immediate term is now. Short term is three to six months forward. As a stock market analyst and economist, market sentiment and monetary policy are of utmost importance to my analysis. With investors turning more and more bullish on the stock market and long-term interest rates rising, I believe the bear market rally that started on March 9, 2009, has limited life left. The easy money in the market has been made.
I believe that stocks will continue to rise in the immediate term for two simple reasons: stocks love to ride the “wall of worry” higher; and too many stock market advisors are calling for a stock market correction. Stocks never do what is expected of them.
Longer-term, we have severe structural problems in America. We are slowly losing our status as the world economic power to China. Our currency could one day lose its status as the official world reserve currency. Interest rates, after a 30-year down cycle, have entered a 30-year up cycle. Inflation could become a real issue. Hence, 2011 could end up being a very challenging year for stocks. My old saying, “Enjoy the stock rally while it lasts, because it won’t” has never been more relevant.
Shall we believe in him? On one hand, the bull market is fast maturing, so there is reason to be concerned about an end soon. On the other hand, Paulson and Buffett are big buyers of the Great American Recovery, and have been urging people to buy houses in the US. But all three agreed that the US currency is losing its status, and that inflation will be arriving soon.
I believe, that the bear market will return one day. But that day can be a few months, or years away. Some, like Lombardi believes it will be sooner rather than later. Others, like Paulson and Buffett are more optimistic, for now. As for me, I feel markets may trade sideways, or even enter a baby bear market soon. But, I do not think we will experience a repeat of the Great Bear of 2008. Not yet.
In these very pages on April 27, 2004, I wrote, “We will wish Greenspan never brought interest rates down so low as to entice so many consumers to have such big mortgages.” Stock market started rallying.
On July 21, 2005, I wrote, “the Fed’s actions (of reducing interest rates so low as to entice consumers to borrow more than they can afford) will one day be regarded as one of the most costly errors committed by it or any other banking system in the last 75 years.” Stock market continued to rally.
On August 23, 2006, I started warning about a coming recession—two years before it was actually recognized in GDP numbers. I wrote back then, “I see the coming recession being deep and difficult because U.S. consumers do not have the savings to spend their way out of the recession.” Stock market continued to rally.
Till this stage, Lombardi has been right on the credit bubble, but too early.
In the summer of 2007 I started comparing the recession headed our way to the Great Depression: “Anyway you look at it, the U.S. housing market is in for a real beating. In the late 1920s, the real estate market crashed first, the stock market second and the economy third. This is the exact sequence of events I believe we are witnessing 80 years later.” Indeed, the stock market crashed in the first quarter of 2009, two years after the real estate market crashed. He was right at last, as market began their descent.
Turning to the stock market, on November 29, 2007, I really started yelling that stocks are in trouble: “The Dow Jones Industrial Average, the S&P 500 and the other major stock market indices finished yesterday with the best two-day showing since 2002. I’m looking at the market rally of the past two days as a classic stock market bear trap. As the economy gets closer to contraction, 2008 will likely be a most challenging economic year for Americans.”
In early 2008, I turned outright bearish on stocks and begged my readers to get out of them: “In 2008, I believe investors will fare better invested in T-Bills as opposed to the stock market. I’m bearish on the general stock market for three main reasons: Borrowing money in 2008 will be more difficult for consumers. Consumer spending in the U.S. is drying up, which will push down corporate profits.” (January 10, 2008.) The year 2008 ended up being one of the worst years for the stock market since the 1930s. Indeed, 2008 was the worst year for stocks.
In March of 2009, the Dow Jones Industrial Average fell to 6,440, a 12-year low and, in the depth of the crisis, when Wall Street was warning Washington that the financial system would come to a halt unless the government started bailing out financial institutions and larger corporations, I turned firmly bullish on stocks. We “jumped in with both feet,” to quote an adage. He was right on target.
Now he says:
If you have been reading PROFIT CONFIDENTIAL over the past two years, in my daily “Where the Market Stands; Where it’s Headed” section, you have been reading that I believe we are in a bear market rally, which will bring stock prices higher. In late 2010, early 2011, I changed that prediction to basically, “I believe stocks will continue to rise in the immediate term, but I’m turning bearish for the short to long term.”
Immediate term is now. Short term is three to six months forward. As a stock market analyst and economist, market sentiment and monetary policy are of utmost importance to my analysis. With investors turning more and more bullish on the stock market and long-term interest rates rising, I believe the bear market rally that started on March 9, 2009, has limited life left. The easy money in the market has been made.
I believe that stocks will continue to rise in the immediate term for two simple reasons: stocks love to ride the “wall of worry” higher; and too many stock market advisors are calling for a stock market correction. Stocks never do what is expected of them.
Longer-term, we have severe structural problems in America. We are slowly losing our status as the world economic power to China. Our currency could one day lose its status as the official world reserve currency. Interest rates, after a 30-year down cycle, have entered a 30-year up cycle. Inflation could become a real issue. Hence, 2011 could end up being a very challenging year for stocks. My old saying, “Enjoy the stock rally while it lasts, because it won’t” has never been more relevant.
Shall we believe in him? On one hand, the bull market is fast maturing, so there is reason to be concerned about an end soon. On the other hand, Paulson and Buffett are big buyers of the Great American Recovery, and have been urging people to buy houses in the US. But all three agreed that the US currency is losing its status, and that inflation will be arriving soon.
I believe, that the bear market will return one day. But that day can be a few months, or years away. Some, like Lombardi believes it will be sooner rather than later. Others, like Paulson and Buffett are more optimistic, for now. As for me, I feel markets may trade sideways, or even enter a baby bear market soon. But, I do not think we will experience a repeat of the Great Bear of 2008. Not yet.
Saturday, February 19, 2011
Why Paulson switched from banks to energy
It is strikingly obvious that although banks are John Paulson's largest holdings (other than gold), he is more interested in lightening up on them these days. He has instead stocked up on energy plays. This can be explained by understanding the bull cycle. See accompanying diagram.
Friday, February 18, 2011
Paulson stays loyal to gold and banks
As at the end of 4th quarter 2010, SPDR Gold Trust (GLD.P), AngloGold Ashanti (ANGJ.J), Citigroup (C.N) and Bank of America (BAC.N) remains as John Paulson's top four holdings.
He has also initiated new positions in oil and gas companies, such as Transocean and Andarko. He is also buying healthcare stocks such as Medtronic Inc (MDT.N), Teva Pharmaceutical (TEVA.O) and Baxter International (BAX.N).
Perhaps positioning for a resurgence in U.S. consumer spending, in his latest filing Paulson showed a stake in the mid-tier clothing retailer J Crew (JCG.N).
I am pleased to hear this, as I remain a holder of gold and BAC.
He has also initiated new positions in oil and gas companies, such as Transocean and Andarko. He is also buying healthcare stocks such as Medtronic Inc (MDT.N), Teva Pharmaceutical (TEVA.O) and Baxter International (BAX.N).
Perhaps positioning for a resurgence in U.S. consumer spending, in his latest filing Paulson showed a stake in the mid-tier clothing retailer J Crew (JCG.N).
I am pleased to hear this, as I remain a holder of gold and BAC.
Thursday, February 17, 2011
My dream vocation
Lumiere Capital's Victor Khoo and Wong Yu Liang are my idols - at age 33, they managed a fund with an AUM of $31 m - now, that is an indecent amount of money to manage at such a tender loving age.
By employing a strategy of deep value investing, where they purchase "deep-value" companies with good growth potential that are "under the radar" of instituiional investors, they made their first million from stocks before 30, and have managed to grow their fund form $5 m in 2007 to $31 m today. Amongst other things they are prepared to hold their stocks for three to five years, and are unafraid to invest during the financial crisis in 2008. According to them, by value investing, or buying when prices are low, they are more able to take advantage of volatility later on when it took stock prices higher. They expect 2011 to continue to be volatile, and are confortable, since they are value investors. They are now long on Food Empire (Sin), Changan Mingsheng APLL (CMA) Logistics and APT Satelite (both HK).
Now, I must say it is not quite possible to be like them, since I lack the research skills and time to delve into "unknown" companies. But I can still be a value investor by sticking to well-researched big guns. Just develop the guts to buy them whenever they go on fire sale (like now). But one day, I want to be a professional investor like these two young men. And make an indecent amount of money.
By employing a strategy of deep value investing, where they purchase "deep-value" companies with good growth potential that are "under the radar" of instituiional investors, they made their first million from stocks before 30, and have managed to grow their fund form $5 m in 2007 to $31 m today. Amongst other things they are prepared to hold their stocks for three to five years, and are unafraid to invest during the financial crisis in 2008. According to them, by value investing, or buying when prices are low, they are more able to take advantage of volatility later on when it took stock prices higher. They expect 2011 to continue to be volatile, and are confortable, since they are value investors. They are now long on Food Empire (Sin), Changan Mingsheng APLL (CMA) Logistics and APT Satelite (both HK).
Now, I must say it is not quite possible to be like them, since I lack the research skills and time to delve into "unknown" companies. But I can still be a value investor by sticking to well-researched big guns. Just develop the guts to buy them whenever they go on fire sale (like now). But one day, I want to be a professional investor like these two young men. And make an indecent amount of money.
Wednesday, February 16, 2011
Why SGX and Noble are my stand out candidates this year
SGX and Noble are my stand-out candidates on the local bourse this year to deliver splendid returns.
SGX:
Fengshui: Metal, Supposedly Great Year
Pros: Soaring trading Volumes, quantitative easing causing flood of $ from US, revival of new listings, synergy with potential merger with ASX
Cons: Return of risk-aversion in financial markets caused by fresh economic crisis (i think not likely), high costs in acquiring ASX.
Technicals: Oversold now, but I expect it to reclaim 50-day MA soon. Screaming buy. SGX historical high is $17. It is trading at $8+ now. Lots of room to run.
Noble:
Fengshui: Metal, Supposedly Great Year
Pros: Consumption of commodities no signs of slowing down, beneficiary of inflation, upstream acqusitions to start contributing to bottomline
Cons: Price already very high.
Technicals: Oversold, but bearish engulfing on weekly chart, signalling more downside. Result expected on 28 Feb. Looks like I will have to scale in on this one slowly. But this is definitely one of my favourite counters in 2010, giving me steady gains.
SGX:
Fengshui: Metal, Supposedly Great Year
Pros: Soaring trading Volumes, quantitative easing causing flood of $ from US, revival of new listings, synergy with potential merger with ASX
Cons: Return of risk-aversion in financial markets caused by fresh economic crisis (i think not likely), high costs in acquiring ASX.
Technicals: Oversold now, but I expect it to reclaim 50-day MA soon. Screaming buy. SGX historical high is $17. It is trading at $8+ now. Lots of room to run.
Noble:
Fengshui: Metal, Supposedly Great Year
Pros: Consumption of commodities no signs of slowing down, beneficiary of inflation, upstream acqusitions to start contributing to bottomline
Cons: Price already very high.
Technicals: Oversold, but bearish engulfing on weekly chart, signalling more downside. Result expected on 28 Feb. Looks like I will have to scale in on this one slowly. But this is definitely one of my favourite counters in 2010, giving me steady gains.
Tuesday, February 15, 2011
Olam is a good buy
According to RBS, Olam is a great buy at current levels. Sounds a good deal to me, especially with the current correction.
Olam International, a leading supply chain firm, is shifting its business model into more midstream and upstream operations. This should position it well to benefit from the commodity uptrend and deliver higher operational profitability and stronger cash generation. We initiate with a Buy and a S$4.05 target price.
*Shift in business model critical for Olam's future profitability Olam's shift to more midstream and upstream businesses
*Long-term uptrend on commodity prices underpins Olam's future Olam's strategic shift should position it well to benefit from the long-term uptrend in agricultural commodity prices
*Quality investments
The vast majority of the 20 or so investments Olam has made since 2007 have been delivering returns on capital invested in excess of management's initial expectations. This should bode well for the future M&A activity Olam still needs to carry out to meet its targets.
*Risks to our valuation
Our fair value and target price of S$4.05 per share are based on a three-stage DCF valuation methodology. The greatest risk to our valuation and recommendation is that of the global cost of debt spiking up.
Olam International, a leading supply chain firm, is shifting its business model into more midstream and upstream operations. This should position it well to benefit from the commodity uptrend and deliver higher operational profitability and stronger cash generation. We initiate with a Buy and a S$4.05 target price.
*Shift in business model critical for Olam's future profitability Olam's shift to more midstream and upstream businesses
*Long-term uptrend on commodity prices underpins Olam's future Olam's strategic shift should position it well to benefit from the long-term uptrend in agricultural commodity prices
*Quality investments
The vast majority of the 20 or so investments Olam has made since 2007 have been delivering returns on capital invested in excess of management's initial expectations. This should bode well for the future M&A activity Olam still needs to carry out to meet its targets.
*Risks to our valuation
Our fair value and target price of S$4.05 per share are based on a three-stage DCF valuation methodology. The greatest risk to our valuation and recommendation is that of the global cost of debt spiking up.
Genting Results soon, but I will give this one a miss
From OCBC Research:
Genting Singapore intends to announce its FY10 results on 22 Feb 2011 after the market closes.
We are expecting them to post a full-year revenue of S$2830.6m and a core net profit(excluding exceptionals) of S$886.1m
We have a BUY rating and S$2.53 fair value on the stock.
Nonetheless, I intend to give this one a miss. Although Genting is still on an uptrend, with many analysts rooting for it, personally I feel that its best days are behind it. In fact, given such high expectations, any disappointment with its results will just render it another Las Vegas Sands, which dropped 8.5% recently, on below expected earnings. I am more inclined to bet on Sands China, since I am a believer that Shanghai market is going to rally soon.
Genting Singapore intends to announce its FY10 results on 22 Feb 2011 after the market closes.
We are expecting them to post a full-year revenue of S$2830.6m and a core net profit(excluding exceptionals) of S$886.1m
We have a BUY rating and S$2.53 fair value on the stock.
Nonetheless, I intend to give this one a miss. Although Genting is still on an uptrend, with many analysts rooting for it, personally I feel that its best days are behind it. In fact, given such high expectations, any disappointment with its results will just render it another Las Vegas Sands, which dropped 8.5% recently, on below expected earnings. I am more inclined to bet on Sands China, since I am a believer that Shanghai market is going to rally soon.
Monday, February 14, 2011
Asian indices should be reversing soon
Following the lead of Shanghai, I think Hang Seng and our local STI should be reversing soon. Note the sudden reversal(bullish hammer)of 300 points on Hang Seng last Friday (11/2)? I think that could turn out to be a key reversal day, even as many still believe markets to fall further. To date, Hang Seng has corrected 8%, and STI 7%. I expect more, but it rarely performs to my expectations.
But the prospect of a US correction is disturbing to me. Therefore, I would have to play this "impending rally" differently from the rest. I would have to go for the strongest blue chips, with expectations of good results. Even then, I may not be assured of success. I am more nervous about this reversal than the rest. Therefore, if I have to play this rally, it will either have to be on an extremely short term basis (before US corrects), or on a much longer term than usual basis(to wait for market to be comfortable with inflation risks again). But, the good thing is I have an array of blue chips to choose from. My first tier candidates are: Genting, Noble, SembCorp and SembMar. I am also incresingly attracted to SGX. Huge merger potential with ASX plus huge potential price upside.
When to buy:
Ideally, if STI could correct to 2980. And I will time my purchases on expectation that it will happen(falling weekly chart).
Ripe for picking: Genting, SGX
Need to wait: SembCorp, SembMar, Noble
But the prospect of a US correction is disturbing to me. Therefore, I would have to play this "impending rally" differently from the rest. I would have to go for the strongest blue chips, with expectations of good results. Even then, I may not be assured of success. I am more nervous about this reversal than the rest. Therefore, if I have to play this rally, it will either have to be on an extremely short term basis (before US corrects), or on a much longer term than usual basis(to wait for market to be comfortable with inflation risks again). But, the good thing is I have an array of blue chips to choose from. My first tier candidates are: Genting, Noble, SembCorp and SembMar. I am also incresingly attracted to SGX. Huge merger potential with ASX plus huge potential price upside.
When to buy:
Ideally, if STI could correct to 2980. And I will time my purchases on expectation that it will happen(falling weekly chart).
Ripe for picking: Genting, SGX
Need to wait: SembCorp, SembMar, Noble
Sunday, February 13, 2011
Is the Asian market correction turning into a bear market?
Local technical analyst guru, Goola Warden has declared that the Straits Times Index is poised for a break below the neckline of a monstrous top formation. If this happens, it will begin a downtrend that can remain so for weeks, months, and sometimes years. Definitely not a good time to be a long investor, if I believe in Goola. How accurate is Goola? I remember reading an article of her predicting the further decline of Capitaland back in late 2008. Weeks later, the counter surged, proving that one should buy, not sell when the "sell" call was made. See, the technicals must be accompanied by the analysis.
So why are Asian markets selling like crazy, STI included? Because markets generally believe that the PBOC has been behind the curve in fighting inflation, and has been too timid in their rate hikes, according to Phillip Securities. However, Chinese stocks in particular have already priced in this economic hard landing weeks ago
as valuations are hovering near trough (remember, I wrote that the Shanghai Index is nearing the end of its correction. Now, I really think its correction has ended). Thus I think market has got this wrong once again, just like it did in 3Q10. This is good news, as "it could lead to another explosive rally, especially if inflation starts to tame post CNY like we think it will", so says Phillip. The call to action is however only for investors with a clear and long horizon, with a strong mindset to buy when others are fearful as valuations are at giveaway.
But why is Asia so weak, when US stock markets are doing so well? Because US is taking off from a soft mid-2010 patch, while Asian equities, having had a solid run are now facing its first headwinds - inflation. Whilst inflation is a key risk to Asian stocks, some countries (Indonesia, China, Philippines) are perceived to be behind the curve on raising interest rates. This has not been the general case. Most Asian central banks have done quite a few rounds already. India and Indonesia have joined in with the rate hikes.
As such, if you believe central banks are not too far behind the curve, and that high growth Asian economies have some fat in them to withstand front-loading of rate-hikes, there will be no hard landing, and then the money will come back to Asian markets once US stocks have exhausted their run.
I believe the money will come back to Asia, directly defying Goola's technical view that asian stock markets are heading for a bear market. It is still too early to go into bear mode, and lower prices should provide me with an opportuntiy to reenter the market. Like Phillip, I expect the STI to head back higher.
So why are Asian markets selling like crazy, STI included? Because markets generally believe that the PBOC has been behind the curve in fighting inflation, and has been too timid in their rate hikes, according to Phillip Securities. However, Chinese stocks in particular have already priced in this economic hard landing weeks ago
as valuations are hovering near trough (remember, I wrote that the Shanghai Index is nearing the end of its correction. Now, I really think its correction has ended). Thus I think market has got this wrong once again, just like it did in 3Q10. This is good news, as "it could lead to another explosive rally, especially if inflation starts to tame post CNY like we think it will", so says Phillip. The call to action is however only for investors with a clear and long horizon, with a strong mindset to buy when others are fearful as valuations are at giveaway.
But why is Asia so weak, when US stock markets are doing so well? Because US is taking off from a soft mid-2010 patch, while Asian equities, having had a solid run are now facing its first headwinds - inflation. Whilst inflation is a key risk to Asian stocks, some countries (Indonesia, China, Philippines) are perceived to be behind the curve on raising interest rates. This has not been the general case. Most Asian central banks have done quite a few rounds already. India and Indonesia have joined in with the rate hikes.
As such, if you believe central banks are not too far behind the curve, and that high growth Asian economies have some fat in them to withstand front-loading of rate-hikes, there will be no hard landing, and then the money will come back to Asian markets once US stocks have exhausted their run.
I believe the money will come back to Asia, directly defying Goola's technical view that asian stock markets are heading for a bear market. It is still too early to go into bear mode, and lower prices should provide me with an opportuntiy to reenter the market. Like Phillip, I expect the STI to head back higher.
Saturday, February 12, 2011
When to sell my gold?
Many have predicted gold to go all the way to at least US$2,000 per ounce. When will that be? By the end of the decade, declared Jim Rogers. And I believe in this point of view, thereby my recent foray into gold when it corrected back down to US$1300.
But do I really want to wait until the end of the decade to sell? That is 9 years away! Opportunity costs and the risk of currency conversion costs remember? Therefore, I turned to the internet for more information (could be I am getting uncomfortable about my gold positions). And, what I have found was an article that I found believeable and logical.
As of yesterday, Goldman Sachs has turned "bearish" on gold. In its latest article, it argued that trading gold as an inflation and dollar hedge is a spotty affair. More specifically, changes in the dollar explain only 16% of the changes in gold, while shifts in real rates explain another 12% and CPI accounts for a mere 18%.
In addition, in 60% of the episodes when inflation surprised to the upside in the post-World War II period, gold has actually underperformed inflation. As a result, gold has not been a consistent inflation hedge, although it is purchased as one en masse.
Moreover, gold prices have already advanced on expectations of high inflation and dollar weakness, suggesting that the failure of either to materialize, as we expect, could lead to downside risk. In addition, gold has volatility similar to equities, and has, in fact, experienced a larger peak-to-trough decline in price when compared to equities over rolling three-year windows since 1969 (-64.5% for gold vs. -56.8% for equities).
Moreover, the investment demand for gold is reaching euphoric proportions, with a recent press report announcing the availability of gold-dispensing ATMs in select markets this year! Already, the SPDR Gold Trust has become the second largest ETF in the world and now represents the 5th largest stockpile of gold globally, exceeding the gold reserves of China and Switzerland. The demand characteristics of gold producers have changed as well. Indeed, the major gold miners have spent the last several years repurchasing their gold hedges. With that process now near completion, another source of natural demand will be absent from the market this year.
So when will I sell? Pretty soon, but on strength rather than on weakness.
But do I really want to wait until the end of the decade to sell? That is 9 years away! Opportunity costs and the risk of currency conversion costs remember? Therefore, I turned to the internet for more information (could be I am getting uncomfortable about my gold positions). And, what I have found was an article that I found believeable and logical.
As of yesterday, Goldman Sachs has turned "bearish" on gold. In its latest article, it argued that trading gold as an inflation and dollar hedge is a spotty affair. More specifically, changes in the dollar explain only 16% of the changes in gold, while shifts in real rates explain another 12% and CPI accounts for a mere 18%.
In addition, in 60% of the episodes when inflation surprised to the upside in the post-World War II period, gold has actually underperformed inflation. As a result, gold has not been a consistent inflation hedge, although it is purchased as one en masse.
Moreover, gold prices have already advanced on expectations of high inflation and dollar weakness, suggesting that the failure of either to materialize, as we expect, could lead to downside risk. In addition, gold has volatility similar to equities, and has, in fact, experienced a larger peak-to-trough decline in price when compared to equities over rolling three-year windows since 1969 (-64.5% for gold vs. -56.8% for equities).
Moreover, the investment demand for gold is reaching euphoric proportions, with a recent press report announcing the availability of gold-dispensing ATMs in select markets this year! Already, the SPDR Gold Trust has become the second largest ETF in the world and now represents the 5th largest stockpile of gold globally, exceeding the gold reserves of China and Switzerland. The demand characteristics of gold producers have changed as well. Indeed, the major gold miners have spent the last several years repurchasing their gold hedges. With that process now near completion, another source of natural demand will be absent from the market this year.
So when will I sell? Pretty soon, but on strength rather than on weakness.
Thursday, February 10, 2011
At last, a correction
I think the correction that has been postponed for so long, is finally materialising. To date, the STI has fallen about 6.5% from its 3313 high in November 2010. I am expecting it to correct all the down to 10%, to 2980. In fact, the CLSA has predicted this month as "Bumpy" (earlier post). In my opinion, this is a correction, not the start of the bear market yet.
Barry Ritholtz, CEO of Fusion IQ and author of The Big Picture blog, explains why he is not expecting a massive sell-off and believes the bull market will resume once the correction runs its course.
He has been largely in the bullish camp since the lows of March 2009. But as of today, 53% of his firm's roughly $500 million in assets are in cash, thanks to a combination of stop-loss selling and an expectation for a correction of 5-8%, at a minimum, in coming weeks.
Notably, "This [rally] should keep going, if history holds," he says. "We're now in the third year of a Presidential term which history tells us tends to be very powerful" as the party in power tends to do things to stimulate the economy, like cutting taxes and deficit spending, i.e. more of the same.
On the converse, I think the Shanghai Index could be nearing the end of its correction. Therefore, my sticking with Zhaojin.
Barry Ritholtz, CEO of Fusion IQ and author of The Big Picture blog, explains why he is not expecting a massive sell-off and believes the bull market will resume once the correction runs its course.
He has been largely in the bullish camp since the lows of March 2009. But as of today, 53% of his firm's roughly $500 million in assets are in cash, thanks to a combination of stop-loss selling and an expectation for a correction of 5-8%, at a minimum, in coming weeks.
Notably, "This [rally] should keep going, if history holds," he says. "We're now in the third year of a Presidential term which history tells us tends to be very powerful" as the party in power tends to do things to stimulate the economy, like cutting taxes and deficit spending, i.e. more of the same.
On the converse, I think the Shanghai Index could be nearing the end of its correction. Therefore, my sticking with Zhaojin.
Tuesday, February 8, 2011
10 for 11
For two years in a row now, the Edge newspaper has done remarkably well in its stock picks. Last year it averaged 17.9% against 14.5% on the STI. It has published its top 10 stock picks for this year, but has added a disclaimer: Making money in 2011 requires a high degree of risk-taking. On one hand, the US look sets to maintain its loose monetary policy, sending waves of liquidity rippling across the world. On the other, growth is decelerating, inflation is rising and stock valuations have been jacked up by a two-year rally. Therefore, tread with caution.
Nonetheless, the 10 stocks are: China Animal Healthcare, Hong Leong Asia, Lizhong Wheel, Noble, OUE, Raffles Medical, SC Global, SGX, Sino Grandness and UOB.
When to buy: On stock maket weakness/ corrections.
Nonetheless, the 10 stocks are: China Animal Healthcare, Hong Leong Asia, Lizhong Wheel, Noble, OUE, Raffles Medical, SC Global, SGX, Sino Grandness and UOB.
When to buy: On stock maket weakness/ corrections.
Monday, February 7, 2011
Still bargains aplenty?
Some people have earmarked 2011 to be the year of gloom, where stock markets finally begin their slide from glory. Actually, we have all known this. One day, the US dollar would tumble, the Euro would crumble and the price of gold makes its way to the stratosphere. But that day can be another year, or two, or four away. In the meantime, what opportunities remain, given stock markets have already run up tremendously? In the Barron's Roundtable held recently, the following experts gave their opinions:
Felix Zulauf/ consensual opinion: The stock market will move sideways, but fluctuate widely. Too early for stocks to fall in a sloping, bear-market fashion. That is some years out. Another financial crisis in Europe. Gold prone to correction.
Action: Long volatility. Buy agricultural commodities. Long energy. Short Euro. It could go to US$1.20. Short European bonds and banks. Buy gold once it falls to $1,200
Archie MacAllaster:
Action: Buy Manulife at 17.50, Wells Fargo at $31.50, Metlife, Allied World Assurance.
Fred Hickey: The speculative phase in gold is still ahead of us.
Action: Buy Sprott Physical Gold Trust, Yamana Gold under $12, Newmont Miningat $57, ebay and Microsoft.
At this moment, gold has already started its correction. As I do not expect it to fall all the way to $1200, I have added more at $1300. In my last article, I mentioned that a bull market can last anything up to 4 or 5 years. This is the third year of the bull run. I think, even if it ends this year, it is perfectly legetimate. This is where I differ from Zulauf that the slide will only occur some years out.
Felix Zulauf/ consensual opinion: The stock market will move sideways, but fluctuate widely. Too early for stocks to fall in a sloping, bear-market fashion. That is some years out. Another financial crisis in Europe. Gold prone to correction.
Action: Long volatility. Buy agricultural commodities. Long energy. Short Euro. It could go to US$1.20. Short European bonds and banks. Buy gold once it falls to $1,200
Archie MacAllaster:
Action: Buy Manulife at 17.50, Wells Fargo at $31.50, Metlife, Allied World Assurance.
Fred Hickey: The speculative phase in gold is still ahead of us.
Action: Buy Sprott Physical Gold Trust, Yamana Gold under $12, Newmont Miningat $57, ebay and Microsoft.
At this moment, gold has already started its correction. As I do not expect it to fall all the way to $1200, I have added more at $1300. In my last article, I mentioned that a bull market can last anything up to 4 or 5 years. This is the third year of the bull run. I think, even if it ends this year, it is perfectly legetimate. This is where I differ from Zulauf that the slide will only occur some years out.
Friday, February 4, 2011
Which stage of the bull market are we at?
The current bull market began on March 12, 2009. So next month, we’ll be two years into the current bull cycle as of next month. Typically, bull markets have lasted from 18 to 24 months, but have lasted as long as four years.
As of the close on Wednesday, February 2, the current stage was "Market in confirmed uptrend." If you see distribution days (i.e., days of heavy selling) start to mount, the outlook could change to "Uptrend under pressure."
If you get 5 to 6 distribution days over any 5-week period, the general market almost always turns down. In that case, the Current Outlook in The Big Picture would change to “Market in correction.”
A typical intermediate correction (which is normal and healthy) can be 10% to 12%. A more serious correction of 20% or more would indicate the emergence of a bear market — marking the end of the previous bull cycle.
At this late stage of the bull market, it is important to note the following:
Beware of Late-Stage Bases
Cut All Your Losses Short
Continually Refresh Your Watch List
Keep Your Eye on The Big Picture
As of the close on Wednesday, February 2, the current stage was "Market in confirmed uptrend." If you see distribution days (i.e., days of heavy selling) start to mount, the outlook could change to "Uptrend under pressure."
If you get 5 to 6 distribution days over any 5-week period, the general market almost always turns down. In that case, the Current Outlook in The Big Picture would change to “Market in correction.”
A typical intermediate correction (which is normal and healthy) can be 10% to 12%. A more serious correction of 20% or more would indicate the emergence of a bear market — marking the end of the previous bull cycle.
At this late stage of the bull market, it is important to note the following:
Beware of Late-Stage Bases
Cut All Your Losses Short
Continually Refresh Your Watch List
Keep Your Eye on The Big Picture
Tuesday, February 1, 2011
Why I am a buyer of gold currently
After hitting a record $1,422 an ounce in December of 2010, the current correction in the on-going 10-year gold bull market has brought gold down almost $100 to $1,322 per ounce. Note that I think this is a correction, not a change to bear. Despite improving economies, I think gold is still underowned today. This, if we understand the three phases of a bull market.
Phase one is when the bull market develops and few even know it is happening.
Phase two is when the smart money gets in (that is where we are today).
And phase three is when the popular media picks up the bull market, the investing public starts buying and speculation sets in.
However, with really none of the popular media covering the advance in gold prices, the second phase of the bull market remains a safe and lucrative place to put our money... and I believe this correction offers me an opportunity to add positions in gold and Chinese gold mining company Zhaojin.
Phase one is when the bull market develops and few even know it is happening.
Phase two is when the smart money gets in (that is where we are today).
And phase three is when the popular media picks up the bull market, the investing public starts buying and speculation sets in.
However, with really none of the popular media covering the advance in gold prices, the second phase of the bull market remains a safe and lucrative place to put our money... and I believe this correction offers me an opportunity to add positions in gold and Chinese gold mining company Zhaojin.
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