Archive for the ‘Investing’ Category

Posted on August 31, 2010 - by Sgbluechip

Measures to curb property speculation finally revealed

Today’s papers reported that measures are rolled out with immediate effect to curb property speculation. In layman terms, they are:

(1) Sellers to pay stamp duty again if they resell the property within 3 years of purchase. (A $1m property attracts $24,600 of stamp duty.)

(2) For buyers who have outstanding loans with banks or HDB they

(a) need to pay at least 10% in cash for downpayment, instead of 5%.

(b) can only loan up to 70% of property valuation limits.

Looks like the government is intervening as the property market astronomical rise is going out of hand and they can only continue to roll out measures in a such manners to react accordingly.

I feel that more can be done to curb the property craze. It is a good thing that government is trying to balance speculative interest from real home seekers. However from my observation, most speculators are already sitting on high paper/real profits; the people who are trying to buy now are real home seekers. Read more…

Posted on August 31, 2010 - by Jay

Valuation Expansion

On Wall Street, a lot of educated monkeys like to talk about valuation expansion. Basically valuation expansion simply means that some stock trading at 15x PE should be trading at 25x PE bcos its industry is sexy, or the company has undergone transformation of its business to become the new growth story or some other cock-and-bull story.

So say the stock price today is $15, and the stock earns an EPS of $1 ie PE is 15x. Valuation expansion simply means that the stock should be $25 bcos PE should be 25x. The basis of this argument is that since the stock is in a growth industry, or has transformed its business, or watever crap reason, the future EPS is not just $1 but much higher. Since we are not sure what that would be, just give it a higher PE to justify this growth.

The ingenuity of this crap theory is that nothing changed, but the “value” of this stock just expanded 60%. This then can be used to justify buying the stock at any price bcos we can always assuming super normal growth and increase the valuation. We can even increase the target multiple further from 25x to 50x. This would expand the original “value” by 333%.

Let’s just do a simple experiment the debunk this valuation expansion theory.
(more…)

Posted on August 24, 2010 - by Createwealth8888

High Dividend Yield Stocks? – Part 8

Read older post on? High Dividend Yield Stocks? – Part 7

I believe all investors will love high dividend yield unless you are a day trader who don’t really need to care on dividend.

Imagine a high dividend yield bandwagon is rolling past you. A few people on the back of the wagon are partying and playing music of their lives and singing the song of high yield. You may be unable to resist the sweet sounds being played and run to join the party.

But, before you jump on the bandwagon, you may want to wonder a bit as there can be more than one way of looking at high yield; its associated risk of future dividend cut and impact to its stock price.

A. High Yield High Growth

I don’t think you can find it now in the current market. If you can find it, don’t tell anyone. Sell your car and mortgage your home and load it up! Just kidding. LOL (more…)

Posted on August 10, 2010 - by Market Uncle

Shopping vs Investing, behaviour peculiarity

Sale!!!

Whenever there is some genuine sale giving ‘huge’ discounts, e.g. 50%, 70% off original price. There’ll always be enthusiastic crowds grabbing the items as if things are going for free. I recently encountered one for branded handbags near my working area. Most shoppers are predominantly ladies who seems to have a mental database of each item and their prices. They knew their ‘true’ worth and face no problem telling which are the real bargains. Thus seldom do I see them regret their purchases.

Stock market sale

While Great Singapore, Christmas sale happens regularly once a year and some sales never seem to end (e.g. Courts), sales in the stock market occur much more unpredictable and sporadic. In contrast to sales in Orchard Road that drew crowds, sales in the stock market scare away people. The greater the discount, the thinner the trading volume. Read more…

Posted on August 10, 2010 - by Jeflin

Buy On The Dips For Next Phase of Stock Market Rally

The past month has been kind to the stock market as investors hoped on to a nice lift after the World Cup distraction. August will present a tense period though in terms of market movement. While April’s high beckon tantalisingly, the stock market could fall flat or lose steam as there are not much good news left to propel the rally.

In the short term, bulls have an upper hand in momentum and risk appetite to breach minor resistance at 1120 while bears have to exert themselves strengneously for stock market indices to tumble under the 200-day moving average. In fact, some analysts expect SPX to clear 1180 before a correction.

So far it has been a good second quarter. Earnings have mostly surprised on the upside and it is encouraging to see businesses improve cashflow and repair their weak balance sheets. Huge cash hoards put them in a strong position to expand, reinvest and hire new staff.

On the economic front, things are looking up for Asian countries like Japan, South Korea, Taiwan, thanks to a robust recovery in exports. Singapore forecasted a GDP growth of 13-15% for 2010 and is set to be the world’s fastest growing economy. (more…)

Posted on August 8, 2010 - by Createwealth8888

Understanding Stock Market Risks – Updated

You may often hear this – Investing in Stock Market is risky.

In fact, investment of any kind including setting up your own business by nature is risky, and can potentially cause you lose some or all your investing or initial capital.

Actually as a paid employee you also face similar risks of losing your job when you approach 40s or 50s. It is a well known fact that HR department update this list of employees in these age groups during annual budget exercise.

So what are the possible Stock Market Risks and how can we as retail investors mitigate these risks?

1. Price Volatility Risk

• Need to learn how to time your Entry and Exit points
• Buy in batches by Average In (different from Average Down)
• Sell in batches

2. Companies Risk

• Select top tier blue chips that are likely to be rescued by Temasek.
• Limit your exposure to any stock to less than 10%, and for bigger account size less than 5%
• Limit your exposure to any sector to less than 20%, and for bigger account size less than 10%.

Read more…

Posted on August 2, 2010 - by Alvin

Trading Report Card – Jul 10

July 10 was a quiet month of trading for me. I have decided to take a step back and review what I have done wrong. You can see there are no stock trades completed this month. I was mostly trading Forex which also had not much activity, and ended with a small loss.

It was a to step back as I attended Teacher Dennis’s “Secrets to Making Money in Stocks” to gain a perspective in fundamental investing. I did a post earlier to describe the good and bad of fundamental and technical analysis. I have also attended a mass T3B gathering on 30 Jul 10, where Teacher Keane enlightened me on the trading system. I think I found the problem to my stock trading. I was too fixated on individual trades. I should be looking at profitability over the long run and trade the short term. Even though I “knew” about “it’s alright to lose”, I did not realised I was affected. I thought I knew but I wasn’t. To date, I have NEVER enter a trade on the same stock after I cut loss. Read more…

Posted on August 2, 2010 - by musicwhiz

July 2010 Portfolio Summary and Review

OK, so maybe there’s really not much to say for July 2010 after all; unless you count the “usual” economic troubles with Europe, the housing crisis in USA, and the red-hot (but possibly overheating) property market in China. It’s basically the same old stories and news being churned over and over again for dramatic effect (playing out like a Mediacorp drama serial, no less), where the headlines and presenters are the only things changing. This has the unfortunate effect of making me very sleepy and my mind has the tendency to just “switch off” when any of these news topics come up. I apologize if I had really missed anything of significance which I somehow failed to include in this month-end summary; but then again if it was really that important most people would have known about it without me saying anything (unless you were a hermit living in a cave in the last 6 months).

So with that out of the way, I can focus on commenting on something much closer to home – property market, cars and personal finance! Apparently, HDB resale prices have hit yet another high for eight straight quarters; in the last quarter April to June 2010 prices inched up another 4.1%; with median cash over valuation (“COV”) rising to S$30,000. Some “hot” estates even saw COV rising to as high as S$80,000 to S$100,000 (as reported by Business Times July 24, 2010). This is indeed very preposterous and disturbing and it seems to be a trend of never-ending prices rises which will culminate into increased inflation for all. (more…)

Posted on July 31, 2010 - by Jay

Portfolio Management for Retail Investors

Ok so much so for institutional portfolio managers. On average, they are crap. Once in a while, you find stars like Peter Lynch, Seth Klarman and Warren Buffett. But these exceptional people are far and few in between.

The interesting story about Seth Klarman is always about this book that he had written like ages ago, called “Margin of Safety”. It talks about value investing and it didn’t sell well at all. So it went out of print. But recently, some Wall Street people started to bid for it on Ebay and it was sold for US$1,000!

Well, I got a free internet copy and am reading it. Cost me like S$10 to get it printed and binded.

Anyways, today we talk a little about portfolio management for the retail investors. How can a retail guy like you and me try to do some portfolio management?

Well, first, we must have like a couple of tens of thousands to start with. If you only have $10k. Then you can basically only buy 1 or 2 stocks. There is not much portfolio management to talk about. Just buy the blue chips or maybe buy an ETF and wait for it to grow to like $50k. (more…)

Posted on July 30, 2010 - by Alvin

Calculating Long Term Profitability with Risk Reward Ratio

Tek Wee sent me an interesting Equity Curve Random Generator. So what is this generator about? It is for you to calculate your profitability in the long run, with a specific risk reward ratio per trade. In other words, how many times can you be wrong, yet you can grow your capital continuously. I try to simplify as much as possible:

Fact number 1 – you do not need to be right on every stock/investment to be profitable. Yes, you can lose. But the next question is how much can you lose?

Risk Reward Ratio (RRR) – we know that we need to take risk to gain reward. To be a sensible trader/investor, you should be looking for at least 1:2 RRR. This would mean that you risk $1 to earn $2. For example, you buy a stock at $10, and you are willing to risk $1. You will sell if the stock goes to $9. For the upside, you are looking at $2 gain and will profit take when the stock price goes to $12. Hence, your RRR is 1:2.

Let’s say you always follow this RRR for every trade/investment you make. And you are only right 50% of the time. How sure are you that over 10 years, your account will end up higher than you started? Take a look at the chart, which I generated based on these parameters. Read more…