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I guess this month can be counted as “exciting” and “thrilling”, if those words can be used to describe the roller-coaster ride in the stock markets around the world! The Greek crisis and the devaluation of the Euro had caused all major market indices to hurtle towards a major correction, and markets had dropped so swiftly that it erased all of 2010’s gains so far, and then some. Strange thing was that the Greek crisis has been in the news for the past few months but investors seemingly chose to ignore it, till now! With the close to US$1 trillion bailout approved by Germany and other stronger European nations pledging to support the Euro and their weaker neighbours, there should have been ample confidence and stability; yet this was not so as Mr. Market’s pendulum swung from irrational exuberance to unjustified pessimism. The fear this time was that Greece’s debt would affect other weak nations in the Euro Zone such as Portugal and Spain and cause the entire Europe to derail, thwarting the global economic recovery.
While at this point in time it is unclear if the contagion will really spread across the world, what I can conclude with certainty is that companies will still continue to do business, and cash will still continue to flow; and perhaps everyone should just relax and continue buying good companies. I took the opportunity to deploy about S$25K in cash to bolster my shareholdings in Kingsmen Creatives (as mentioned in my previous post). By reviewing Kingmen’s business model and cash flows, the company has been consistently generating healthy FCF without the need for heavy investment in capex and without needing a lot of working capital; hence I can foresee that dividends should continue to be paid. Assuming the dividend remains unchanged for FY 2010, the shares will provide a potential yield of 6.2%; and this is in addition to potential growth as Kingsmen extends its footprint across South-East Asia and the Middle East. Since I had already reviewed Kingsmen in my last post, I shall not provide further details here. Read more...