Would you buy Yoma now?

One year ago, Yoma was all the rage, giving investors as much as 300% returns. The stock has since peaked out at 1.045, and has been trending lower since.

It actually seems a good short candidate now, having broken down fro 200-D MA. Watching for a shorting opportunity.

2014 candidate #3 and 4: The coal miners

In the previous article, I wrote about steel, and how coal is used to manufacture steel. Since demand for steel is expanding, so demand for coal too!

The price of coking coal grew about 5% since the end of the third quarter — for coal miner Walter Energy (WLT).

The chart for Suncoke Energy (SXC) is even stronger, breaking to a new 1-year high. Of course, this is not the time to buy yet, but I am definitely watching.

2014 Candidate #2: Invest in steel?

Goldman Sachs recently upgraded the steel sector stocks. Its reasons are:

• The price of steel — the final arbiter of any debate surrounding steel’s demand — is as strong as it’s been in more than a year.
• Price of metallurgical coal, the material used to smelt iron, has grown, suggesting that steel producers are already seeing demand ramp up at least enough to merit higher smelting material prices.
• The Baltic Dry Index (of maritime shipping costs) has risen considerably since June, from a low of 806 to the current price of 1600; it had been as high as 2115 in early October. Although dry bulk vessels can carry all sorts of goods, the bulk of the recent charters and subsequent rise in charter prices has been fueled by a serious ramp-up in requests to haul iron ore… and most of it is bound for China, where steel production is already up 10% this year. Yet, it still isn’t enough. Forecasters believe demand for steel in China will grow at an annual pace of 3% to 4% through 2020, and the recent surge in iron ore charters validates the outlook. Considering the country drives 45% of the world’s demand for steel, if China’s buying a lot more steel and iron ore than usual, global supplies will be tightened.

Using T3B screener, US Steel (X, NYSE) stands out as an excellent candidate, trending nicely up since Sep. 

Like most stocks, it looks overextended for now, but definitely deserves a place in my watchlist.

2014 Stock Candidate #1:Pitney Bowles (US)

The local stock market is really unhappening these days, with many listless stocks. It is in the US that things are more exciting, with many stocks that are in nice uptrends. Using the T3B screener, I have located one such stock, Pitney Bowles (PBI, NYSE).

This company, which was once known solely for its postage machines, now provides hardware, software and services to integrate physical and digital communication channels.

Recently, the company announced the completion of the sale of its management services business for $400 million. It said it will use the proceeds to pay down debt.
On Oct. 29, the company reported Q3 earnings that were $0.09 higher than the Zacks consensus estimate, and the stock jumped to a new high over $22. (source: InvestorPlace Insights)

As can seen from the chart above, the stock has doubled this year, and the best time to buy was actually around September. Looks overextended now, and will be watching for pullback to consider entering this stock.

No action is the best course of action

Other than having Apple in my trading portfolio, I currently have no more shares. This is because I see little reason to buy shares, now that market is buoyant. However, I am still bullish on US stocks, and is currently using the T3B system to screen for stocks to buy if market weakens. I will be posting this.

Should we invest in Europe?

BNP Parisbas' Damien Kohler says we should invest in European small and mid-caps. Reasons are these companies are trading at attractive valuations, and could take off in a big way over the next 12 months if things continue to improve in Europe. What are these companies? They are:

1. IMI plc (Britain)
2. Nutreco (Holland)
3. Nokian Renkaat (Finland)
4. DS Smith (Britain)
5. Valeo (France)
6. Klepierre (France)
7. Arkema (France)
8. Atos Origin (France)
9. Scor (France)
10. GEA Group (Germany)
11. Weir Group (Scotland)

Shipping stocks are breaking to the upside

Shipping stocks are breaking to the upside! Why? Supposed the global recovery is really in place, and therefore increased trade.

Look at these:
Diana Shipping (NYSE) 

On a firm uptrend since Jan 2013. Strongest of the lot.

Dryships(Nasdaq)

               

On an uptrend since last month. Definitely on  my watchlist.

Knightsbridge(Nasdaq)

On an uptrend since April. Worth watching.

The locals seem to be following suit.

Yangzijiang (SGX)

It is breaking out to the upside. Watchlist

NOL (SGX)

The weakest of the lot, but also gathering pace to break out on the upside. I already own this counter, and am hoping to get a nice ride on this one.

Is the tide turning for Wilmar?

In a recent report by UBS, the bank sees growing demand for food. On the other hand, global warming and erratic weather patterns, as well as a slower rate of productivity gains in farming, are likely to constrain farming. If these views are correct, the tide may be turning for Wilmar, Noble, Golden Agri and Olam

Let's look at their charts:

The above is a chart of Golden Agri. Looks weak. I will not touch it.

Noble above looks more promising. There were up days on heavy volumes. Insiders were also buying around 0.80 level. Worth a watch.

Olam (above) looks bearish, with prices looking like they are not done declining yet. Give this a miss.

Wilmar chart:

This counter is breaking out of a base and looks likeliest among the commodity players to challenge its
200-D MA. Once the 200-D MA is successfully taken, then it is deemed to have changed to uptrend. Go Wilmar.

NB: I am vested in Wilmar.

Taking a bite of Apple

Apple shares has fallen from its height of 700, to a low of 400 recently. It has since recovered, trading now at 500. The case for buying Apple is tempting.

Legendary investor, Carl Icahn announced his position in Apple on Twitter two days ago: "We currently have a large position in APPLE. We believe the company to be extremely undervalued. Spoke to Tim Cook today. More to come."

 

The Wall Street Journal reports that he's been building his $1.5 billion stake in Apple over the last month.  What's his outlook? Icahn says, "Even without earnings growth, we think it ought to be worth $625." (Wyatt Investment Research)

 

Looking at the charts of Apple:

 

It has broken out of a double-bottom formation, and on a new firmly established uptrend (above 200-d MA). Downside 100, Upside 200, so favourable risk-reward ratio of 1:2. It is time to take a bite at Apple. However, having missed entering it at lower prices (400s), I am a bit reluctant. The stock market is currently up. Will wait for it to slightly correct before entering.

 

What happens to share price when CFO resigns?

Midas' CFO has resigned abruptly on Thursday last week. He quoted "personal reasons". As such, Lim and Tan has stopped coverage of the company, citing "resignations of CFOs have traditionally not bode well for its share."

I did some research on companies whose CFOs have resigned. Idox Plc (IDOX), a U.K. supplier of software services to government agencies, fell 8.1%, after its chief financial officer resigned just 2 weeks ago.

Likewise, shares of MTN Group took a beating last month after its CFO resigned amidst unspecified allegations.

Closer to home, when Olam's CFO resigned in June last year, its shares fell 5.4% before recovering later. Now, however, it is trading lower than during last June.

However, Microsoft's CFO resignation in April did not impact its share price. This was after it reported results that beat expectations.

OCBC maintained its "Buy" rating on Midas. This was due to 1) reassurance from management and 2) expected contract wins in HSR from China later this year. The first reason, I am skeptical, because that is standard, politically correct reply. The second reason, I am more accepting.

Nonetheless, I want to be very careful. As I am not fully assured that it is not hiding things in the closet, I am bailing out from this stock as of immediate effect. Thanks, Midas, it has been a rewarding ride.

 

A good analyst

Analysts play an important role in our choice of stocks, but it is quite common when analysts recommend "buy" (think Vard), and it should instead be "sell". Quite dangerous to follow them all the time right? So what makes a great analyst?

He must have 

• Strong convictions about his recommendations. And guts to add to his positions when markets are going against him (something I still find hard to accomplish, as evidenced recently in my investment in China Railway. I bailed way before it reached my target price!)
• Be flexible enough to apply different valuation methods to value different types of securities
• Not afraid to deviate from the consensus

(adapted from The Edge, Aug 19)

I think, to be a great investor is very much like a great analyst. Need to have strong convictions on the stocks purchase. Need to buy, when everyone is selling, and to sell, when everyone is buying.

Not all stocks will go up

Admittedly, the bull run has only a few more months to run... as can be evidenced now by the fast-tiring Dow and local STI... actually, I personally doubt it is going to go up any significantly higher, and a major correction may just be around the corner. Which is why I am not going to add to my positions, but will be using market upticks in the next few months to unload.

My positions are:

Midas...it is expecting more order...so this one is worth keeping for now..I may even add more positions if stock market tanks...but eventually aim to sell out by Jan 2014.

Sunac... I have sold half since its run-up last week... and will be using its upcoming result announcement (expected to be good) to sell the rest

NOL and Wilmar... These two are in a quandary.. no movement at all... so I am caught...  I am prepared to hang on for the longer term..

The worst is behind us

It is only on hindsight that we know what the low is, and for the SSE, HSI and STI, the low point was made on 25 June 2013. The DJIA, because of time zone difference, made its low on 24 June 2013. I am pretty sure the lows will stay for now. The more tricky question is, not all stocks will rise with the index.

Chart for Midas:

It is showing signs of life after the recent correction, having just crossed the 200-d MA gracefully. Think it is preparing for news of contract wins.


Chart for SUNAC

It also just crossed above 200-D MA, representing a more bullish scenario. Management is anticipating excellent results.


These two represent a bullish case for recovering Chinese equities. I think the Chinese market has bottomed, despite ongoing concerns and fear of the Chinese economy tumbling.

Are we in the last stage of the bull run?

Having attended Invest Fair 2013, it was dismal to hear a few speakers there predicting that this 5-year bull run will be coming to an end soon. However, a bull run averages around 5years, and this bull run started in March 2009, so I am more than prepared to face up to this fact.

So what are the signs of this market top? According to the diagram above (used by Kelvin Han, one of the speakers), we are now approaching the late expansion stage. Once oil price starts to hit new high (now at 106, predicted figure is 120), we should prepare for a crash  of the Dow Jones to at least 13440. According to him, we have six more months left, and we should be concentrating on buying energy stocks during this period. However, he is only confident of US stocks, and not Singapore stocks.

After that, it would be a 1 - 1.5 year crash till mid-2015. This is when I will need to short the markets.

Personally, I tend to agree since this bull market is getting old and tired, and I think it needs to rest before charging again. So, this is my plan:

Now - end 2013: Pare down my holdings as much as possible (currently I am vested in Midas, Sunac, NOL and Wilmar). In fact, I do not want to wait till Dec to get out of my positions!

2014: Short the Dow Jones Index

Mid 2015: Buy stocks again (my fav candidate is Las Vegas Sands, I miss out on this during last crisis).

2017: Sell! as traditionally, 1987, 1997, 2007 have seen market tops.

Vard has stirred.

Vard (formerly STX OSV) has been on my buy list for some time now, and recently, it has stirred.

Although the chart shows it is on a firm downtrend, it looks like it has found a bottom, and is now set to reverse.

Kim Eng has a TP of 1.66 for Vard. Reasons include 

• Undue sell-down. We believe that recent weakness in share price is partly due to consensus cutting overly optimistic FY13F numbers and valuations due to margin concerns.
• Brazil yard issues a drag on group margins. In our view, the market has underestimated potential margin pressures from Brazil yard for FY13F and is now/would be realigning their forecasts.
• Room for upside surprise in contract wins. However, we believe that the strength of recovery from returning orders this year could surprise positively.  It is confident to bring in close to NOK12b in new orders for FY13F, but contributions from new contracts would mostly be seen in its financials from FY14F onwards.
• A more supportive owner. According to Vard, Fincantieri looks to be a better fit for Vard given cultural similarities and their greater enthusiasm to grow the company as compared to the previous owner.

I may enter soon.

Geo Energy - Does insider buying equate with share price rise?

A peek at insider activity has revealed directors buying 200,000 shares in Geo Energy at prices ranging from 0.43 to 0.465 this month. Is this the time to buy?

This is the chart for Geo Energy. It is clearly on a downtrend. So, there is really no hurry to buy, unless stock starts moving upwards on higher volumes (wait for 9D to cross above 20D). But I personally believe it could be bottoming.

Fundamentals:

PE: 15.3
P/B: 3.11

Not mouth-watering.

Is Bund Center worth a look?

Bund Center has been on a tear of late. A check shows that the company has been buying back shares in late March at prices ranging from 0.198 - 0.23. Is something brewing?

Share volumes have definitely picked up since, and its share price have broken resistance at 0.24 and hit a high of 0.305 before retreating to 0.265 currently. Hoping correction will take price down to low 20s to make it attractive to enter.

Akan Datang - Stock Market Correction?

The May-June period is traditionally a lull period for stock markets, and the occurrences in the past few days, epitomised by Nikkei's 1000-point last Thursady, have given me "hope" that this may again be happening this year. This explains why other than Midas, I have not loaded up on stocks. Patience is a virtue if anyone wants to make a killing in the markets.

Going forward, if markets are going to retreat in the weeks ahead, there is little cause for panic. Instead, one should be buying.

Two well-respected fund managers, Tan Teng Boo (this is someone I respect too) and Kevin Lyne-Smith, provided reasons on why we should buy if markets correct.

Tan (The Edge, May 2013) points out that "global equities, propelled by US stocks will continue to rise because the worst is over for the five-year global financial crisis that started in 2008 and ended in 3Q2012. Other points he made include:

• US economy currently has a lot of cylinders to sustain its recovery
• S&P will reach 1,800 to 2,000 in the next 3-5 years
• It is a matter of time before the Asian indices like HK and S'pore catch up and  break their 2007 highs

Kevin (The Edge, May 2013) reiterated the case for stocks with reasons why the US recovery is sustainable. This is due to:

• US is back in growth mode
• US real estate has picked up
• There is broad-based improvement in employment
• Credit in US is easing
• PE ratios of stock indices around the world are still below their long-term averages

However, Kevin is currently not very enthusiastic on Asian stocks, as they are weighed down by concerns of slower growth in China, and hence, lacklustre demand for global commodities and natural resources.

He also advised on 2 impending events in the coming months that could cause a correction: Germany's elections and significant slowdown in China. Nonetheless, he is optimistic these scenarios will work themselves out eventually.

So, sit tight, and monitor closely for opportunities should markets correct in the weeks or months ahead.

Stock Watchlist

As correction nears with each new high that the STI makes (even as I am still vested in Midas), it may be good to have a watchlist to pounce on once markets tank again.

Maybank KE has this to say, on a report dated 16 May 2013:

1.
Yongnam Holdings: Positioning Ahead of Contract Wins; Buy TP $0.43
YNH SP | Mkt Cap USD334.9m | ADTV USD2.9m
Ø Reiterate BUY ahead of 2H13. Our TP of SGD0.43 is pegged to 10x
FY13F.
Ø 1Q13 results were largely within expectation. Revenue grew 22% yoy.
Profit was flat yoy, but this was in comparison to exceptional margins
in the same quarter last year.
Ø We expect margins to pick up on execution of strutting orderbook
which has higher margins and the commencement of new contract wins.
Management is gunning for several contracts in 2H13 which will
replenish orderbook substantially.
Current Price: 0.345

2.
Sino Grandness(1.425): Watch Out For The Next Step; Buy TP $1.60
SFGI SP | Mkt Cap USD337.1m | ADTV USD2.3m
Ø Maintain BUY and TP of SGD1.60. Sino Grandness’s 1QFY13 results were
within market expectation but we expect 2Q and 3Q results to be
stronger. BUY maintained.
Ø Garden Fresh continued to drive the growth with revenue up 50% yoy.
It seems RMB250m net profit target for Garden Fresh is on track.
Ø We maintain our BUY call and target price for the time being but
watch out for the further step towards the Garden Fresh IPO, which
could significantly re-rate the stock.

3.
Swiber Holdings(0.69): Strong Start to the Year; Buy TP $0.84
SWIB SP | Mkt Cap USD338.1m | ADTV USD1.1m
Ø Maintain BUY with TP of SGD0.84. A very strong set of 1Q13 results
following a record year in FY12, supports our upbeat view on Swiber.
Ø 1Q13 PATMI of USD20.1m was above expectations and make up 43% of our
previous FY13F forecast. Contract win is our main concern now given
that its last announced contract win was in Feb-13.
Ø Swiber is tendering for close to USD2b of contracts. Contract wins
plus execution is critical for Swiber in order to benefit from better
utilisation of its vessels. This would support a positive re-rating for
the stock and relieve balance sheet concerns.

4.
United Engineers(2.90): Hit by start-up expenses; Buy TP $4.05
UEM SP | Mkt Cap USD725.5m | ADTV USD0.9m
Ø Maintain BUY with TP of SGD4.05/share, 25% discount to RNAV.
Ø 1Q13 results were slightly below our expectations, but largely a
misnomer given UE’s ongoing plans to takeover WBL. With the recent WBL
saga between Straits Trading and UE drawing to a close, we think UE
will experience short term share price weakness via paying over 12%
higher than their original price for WBL
Ø 1Q was hit by higher staff and operating costs arising from the
commencement of UE Bizhub East and Park Avenue Changi. Revenue was at
SGD136.6m (17% YoY, -25% QoQ), and net profit at SGD7.4m (-24% YoY,
-82% QoQ).


5.
Midas Holdings(0.47): On The Way To Recovery; Buy TP $0.75
MIDAS SP | Mkt Cap USD464.3m | ADTV USD3.3m
Ø Maintain BUY and TP of SGD0.75. Midas reported a net loss of RMB5m
for 1QFY13. But our investment theme for Midas remains to be a bet on
improving order flow in 2013 and a turnaround in earnings in 2014.
Ø Management’s contract outlook implies further RMB500-600m order win
for the rest of the year on the top of current RMB650m order book. We
are also optimistic on the likelihood of potential high speed train
tender this year.
Ø We recommend the investors to be patient for the new order wins as
the current 1x PB provides a floor for the share price.

Reasons to be in stocks

These are reasons to continue to be invetsed in stocks:

• The global economy is growing, despite pockets of weakness;
• Corporate earnings growth will likely sustain higher stock prices;
• Valuations are still moderate;
• Negative real interest rates and government bond yields and the yield gap between equities earnings and government securities favour stocks;
• Continued growth in global excess liquidity;
• Economic conditions are not robust enough yet for central bankers to tighten monetary conditions in developed economies; and
• Central bankers have committed themselves as lenders of last resort in the US, euro area and Japan, hence containing periodic bouts of fear related to the twin dysfunctions of debt and deficit in these economies

(adapted from Invest, Sunday Times 28 Apr 2013)

Is First Resources' bull run coming to an end?

First Resources, which has been on a tear since 2011, could finally see a halt in their rise. The chart does not bode well for future prices. 50-day MA cutting below 150-day MA, prices breaking below 200-day support.

As such, this is turning out to be an ideal short candidate. Wait till RSI gets to overbought.

Why I will still buy stocks

I am bullish on the markets for reasons cited below:

• Few people own shares now

Equities are now in the hands of a relative few who stand to gain significantly when investors start creeping off the sidelines and out of the ‘safety’ of treasuries.

• Unsustainable yield differential between equities and treasuries

Never in modern history has the yield differential between these two been by so much and for so long.  During both instances (GFC and bear market of 1974) the yield differential were so high, they lasted only for a few months, compared with its sustained position over the past 12 months.

• Strengthened operating margins and balance sheets (after buyback programmes and deleveraging)

Following the GFC, major companies have returned to their core competencies, reduced costs and lowered gearing levels, improving their competitiveness. Leverage levels in companies are now the lowest in 20 years.

• Investor sentiment

We are still well entrenched in the early stages of scepticism, thanks in large part to the ongoing euro debt ‘crisis’, and persisting market volatility.

• Inflationary pressures could spark mass flight from treasuries to equities

extracted from "A bull market in the making?"

Written by Brad McFadden on February 19th, 2013

Malaysia Boleh?

Analysis of market trends during past elections have shown a consistent pattern, according to RHB's Lim Chee Sing. Typically, a week or two before elections are announced and parliament is dissolved, equities are sold down. Then, after elections are over, these same stocks recover quickly. Malaysian elections are due soon on Mar 30. Parliament could be dissolved by Feb 22.

These are stocks recommended by Lim:

Company	Price @ Feb 13	PER	Dividend Yield (%)
Genting M’sia	3.73	16.2	2.3
CIMB	7.25	12.3	2.1
Gamuda	3.70	13.7	3.2
Lafarge M’sian Cement	9.24	21.8	3.7
Tasek	14.28	16.7	4.2
Sunway	2.41	7.1	-
Dialog	2.33	30	1.3
Dayang	2.46	13.4	4.1
Perdana Petroleum	1.11	25.8 (est)	-
Perisai	1.02	9.4	-

I have done a scan, but found these stocks (other than CIMB) still too high. However, if really there is a huge correction after elections are announced, I may buy.

The Edge's 2013 Stock Picks

Last year, the Edge's picks (refer to last year's post) earned a respectable 33.9%. Its top performer, Pan Utd earned 128%!), outpaced the STI's 17% gain. The updated table below:

 

	Price 2012($)	Price Now($)	Gain/ Loss(%)
Bt Sembawang	4.10	6.68	69.2
CMA	1.31	2.17	68.9
FJ Benjamin	0.30	0.29	-0.4
Genting HK	US$0.35	US$0.43	22.9
Noble	1.36	1.20	-9.8
OKP	0.57	0.55	-0.3
Pan United	0.46	0.98	128.3
Semb Marine	4.92	4.65	-0.9
ST Engineering	2.85	4.00	47.3
UOB	17.4	19.11	13.4

It has published this year's picks, and they sure are worth taking note.

Stock	Current Price as at 2013	Reasons for Upside	Reasons for downside
Auric Pacific	1.18	New mgt; potential for improved synergies with subsidiary Food Juction	Execution risks on turnaround cost increases
CWT	1.41	Differentiated offering and proxy to global economic recovery	Volatility in earnings, particularly from commodities business
Db X-trackers CSI300 Index ETF	US$8.73	Proxy to China recovery; underperformer versus local and global market	Political transition in China; reversal of economic recovery trend
Del Monte Pacific	0.86	Play on Asean consumption; possible re-rating of Philippines debt	High valuations and execution risks in new markets such as Myanmar
Indofood Agri Resources	1.30	Beneficiary of likely rebound in commodity prices; diversified player	Global economic rebound stalls and causes commodity prices to sink again
Midas	0.54	Likely to win contracts for high-speed rail as China steps up investments	Failure to win major contracts or delays in China’s awarding of new projects
Neptune Orient Lines	1.26	Proxy to global economic recovery, which should boost trans-Pacific trade	High gearing, oversupply in the market could weigh on freight rates
Sembcorp Ind	5.49	Offshore industry still booming, possible inflection year for utilities business	Stock rose a lot last year and contributions from SembMarine are lumpy
Swiber	0.68	Investment over the last year could allow it to capitalise on offshore boom	High level of debt and inherent risk in business model
TT J Holdings	0.28	Supports the local construction industry and could win several contracts this year	Small player with no analyst coverage

CSI is an index, and since index returns are not spectacular (I am looking at multi-baggers to accelerate my dreams of financial independence), I will give it a miss.  I already have Midas and NOL, so these are out. Sembcorp, as the authors have acknowledged themselves, is at a high, so this is out too.

This leaves me with Auric, CWT, Del Monte, Indofood, Swiber and TTJ. Auric, CWT, Del Monte and TTJ are already on firm uptrends, so the only way to buy is via a correction. This leaves me with Indofood and Swiber. Even then, I will want to wait for a softer market.