How to determine a Buy period

Using SGX as an example below: 

This method of analysis is not a professional technical analysis but a basic analysis on the low period of this stock. However, this method may not be applicable for every stocks. 

The pattern i noticed about SGX is the price is normally at its lowest in May. So if you wanna buy SGX, you can wait till May to see if the price drops to a satisfactory level. 

Same method can be used to analyse the highest price period too which i see is probably in November period before issuing out their dividends.

The Hour Glass

This premier watch retail outlet sells one of the most expensive watches, with its fine exquisite design featuring only the rich. In good or bad economic situations, The Hour Glass (THG) displays a constant growth of about 5%-15% in net profits. The resilient display of its stable returns coupled with its price close to its book value. The price i bought was $1.425 and its Net Asset Value (NAV) was $1.25. I'm actually paying about 90% of its assets value.

THG brand is unique due to its careful watch brand selections and the locations of their retail store. Their retail stores are located in places which targets the most high end customers like Paragon, Marina Bay Sands. They do not want to open stores in Yishun, Woodlands or neighbourhood places which will tarnish the premier brand of the company.

They also states in their FY2011 annual reports that they will be adding more retail stores in their key markets namely Singapore, Australia. Hong Kong.

Value Investing

Investing in SGX is all about buying low and selling high. Warren Buffet likes to pay $0.50 for a $1 worth of stock.

However, many people are not able to tell the true value of the stock and sell it rashly when the stock go up thinking that the stock is under speculation. However, as inflation rises with time, the value of the stocks appreciates together with it. Just like food and oil prices are constantly rising. You cannot or seldom will find a main course dish in a food court for $2, for now it costs $3-10, which if you can buy a Mac Chicken meal for, even with drinks and fries. Stall rentals in food courts have increased, same goes with food prices.

Value investing speaks from the true intrinsic of a company. The rate of growth the company, ultimately how the company will be valued now and in the future will determine a buy or a sell. If because of a certain decision the company makes which will increase their debts in future, and knowing that the company will have difficulty financing its debts because of bad profits or due to an stronger competitor, then you may decide to sell it or cut loss. One example is Tiger Airways which its share price dropped from $2++ to $0.70++ today due to increased competitions and high oil prices. The unfavourable position of the company makes it hard for it to grow its earnings as competitions are very stiff after the opening of Scoots, a budget airline by Singapore Airlines.

Value investing also comes from the a fundamental analysis point of view. How much risks the companies are exposed to. Airline companies in general are exposed to a constant number of risks which will affect their profits. A plane crash for example will affect huge losses for the company. An increase or a significant increase in oil prices will affect the company. A lack of a minimum required number of passengers in flights, meaning less people want to travel to a country that is part of the airline routes. There are so many factors which will affect the profitability of airlines company. A company that makes more sense in value investing is a company like SIA Engineering (SIAEC) who has a monopoly in its way. Of cause there are much more companies that have the same fundamentals which include Vicom, Singapore Exchange (SGX), Singapore Pools (but is not listed in SGX), ERP (also not listed in SGX). How SIAEC makes money is from the number of airlines landing is Changi Airport per day basis. Because all the airlines need to undergo overhaul operations and maintenance before making the next flight. These airlines have to go through SIA engineering's Overhaul and Maintanance hangars to service their airlines. And thus, SIA Engineering is the monopoly of the overhaul business in Changi Airport. As the number of airlines landing in Changi increases with the completion of Terminal 4, SIA engineering (SIAEC) will grow in terms of profits. As long as airline numbers landing in Changi Airport increases, will benefit the growth of SIA engineering. Inflation will also cause maintenance cost to increase and that will also contribute to SIAEC earnings. In value investing, we look at the factors that will affect the profits of SIAEC. If we know that the airlines traffic numbers are likely to increase, maintenance prices are going up, and SIAEC's stock price had gone down quite a bit, then we know that it is time to buy SIAEC.

I'm selling Thai Beverage

Thai Beverage had gone up a lot, and based on its current price of $0.39 per share. It is only yielding ~3% dividend.

And furthermore, it is buying off F&N at an expensive price previously to compete with Dutch Brewer, Heineken. 

As an fundamental analysis, InvestingSGX.blogspot.sg will recommend a sell on this stock!

My opinion on QE3

Since QE3 will bring up inflation due to dilution of cash in the economy. One reason i can think of is china, which kept its currency low to boost exports despite US claims that they are manipulating the currency.

Firstly, China did not appreciate their currency. US can print more money to buy their assets. And these assets will be come a discounts because it is bought by money being created out of nothing.

Secondly, QE3 is targeting more towards China based on the recent US trade claims against them. These claims, according to Kennedy, G (2012) states that "Chinese government has subsidized its automotive export industry in a way that is not allowed under World Trade Organization rules. As a result of the move, China filed a complaint with the WTO against a new U.S. law aimed at combating China's subsidies. The move is called "Countervailing duties" and includes tariffs on tires and steel."

My take on these were the claims may not be strong enough against China , and therefore decided that an alternative as to be in place. The Quantitative Easing 3, probably to flood China economy with cheap money.

Reference List

George Kennedy 2012, Obama calls for trade case against China, viewed 19 September 2012
< http://www.autoblog.com/2012/09/18/obama-calls-for-trade-case-against-china/>

Anthony Shoemaker 2012, China is ‘unfairly keeping its currency low,’ U.S. Rep. Turner says, viewed 19 September 2012
<http://www.daytondailynews.com/blogs/content/sharedgen/blogs/dayton/ohiopolitics/entries/2012/01/12/china_is_unfairly_keeping_its.html/>

3 REITS for sustainable risks and returns

When the US Fed Reserve Chairman announced QE3, i'm still wondering what will happen in the financial world and how it will impact the markets.

Snyder, M (2012) says, "This time, the quantitative easing is going to be open-ended. The Fed is going to buy 40 billion dollars worth of mortgage-backed securities per month until they have decided that the economy is in good enough shape to stop."

Inflation rates will go up as the US floods the world with more money. Singapore, like other countries, have to protect itself by strengthening its currency. And it has to be well managed because if our currency becomes too strong, it will affect our export rates as our prices will become expensive for other countries to import our goods. Therefore, QE3 will still cause our inflation rates to rise, but probably at a slower rate.

In order to curb inflation, we can hold assets like properties, commodities and stocks which is not affected by export numbers.

Focusing on 3 REITS which i particularly like because of their presence in Singapore

Starhill Global - owner of Wisma Atria and Ngee Ann City retail and offices in Central

CapitalMall Trust - owner/leader of the malls located in different parts of Singapore located n Bugis, Sembawang, Orchard, Clark Quay, Jurong.
More info of its portfolio: http://www.capitamall.com/our_portfolio/portfolio_overview.html

CDL Hospitality Trust - owns Orchard Hotel, Grand Copthorne Waterfront Hotel, M Hotel, Copthorne King’s Hotel, Studio M Hotel, Novotel Singapore Clarke Quay.

Starhill Gobal yields about 7% for $0.75 per share

CapitalMall Trust - yields 5.7% for $1.985 per share

CDL HT - yields 5.4% for $1.965 per share

Reference List

Michael Snyder 2012, QE3: Helicopter Ben Bernanke Makes It Rain Money, viewed 18 September 2012
< http://world.hawaiinewsdaily.com/2012/09/qe3-helicopter-ben-bernanke-makes-it-rain-money/>

REITS, an appreciating gem in Singapore

Blackden, R (2012) says "Federal Reserve chairman Ben Bernanke has announced a third round of quantitative easing in a bid to help America's weakening economy, as the IMF warns that Greece will need a third bail-out.  America's central bank said it will purchase $40bn (£25bn) of mortgage-backed bonds a month to stimulate the housing market and keep long-term interest rates low."

US is slowly recovering as they are now purchasing back their debts. However the Euro Crisis will need a longer time to be resolved as the IMF warns of the third bail-out of Greece as stated by Blackden, R (2012).

The odds of the third bail-out is unknown, but if it happens, stocks will continue to go on the upward trend as inflation rates increases.

The rationale for the upward trend of stocks is because when more liquidity is injected into the Greece economy, the liquidity will flow into countries with good returns and stable economy. Singapore is one example of a stable country with AAA rating by Standard and Poor.

REITS in Singapore had been the best performing assets. If you do not have enough money to buy property assets which was likely to be an uptrend in singapore for the next 5 years due to land constraints, you can invest in REITs in Singapore for good returns.

Some of the REITS:

• Starhill Global
• CapitalMall Trust

Few types of REITS to look at

• Commercial Warehouses / Factories
• Retail
• Hotels
• Residences
• Offices

Reference List

Richard Blackden 2012, Federal Reserve announces QE3 to aid US recovery, viewed 14 September 2012
< http://www.telegraph.co.uk/finance/economics/9541857/Federal-Reserve-announces-QE3-to-aid-US-recovery.html>

Why i think China Stocks will go up

China stocks did not perform very well in SGX for the previous years. I hold a couple of them which up till now seen its value depreciate up to 30% in value as compared to the price i bought it for.

My uncle, who is a CFO of an SME company told me that China companies generally have two different types of accounting standards, one for the public's view and the other one for their own management which was not shown to the public. Because of the lack of trust for china companies, many of the investors prefer to stay away from them.

However, i ignored the negative sentiments for them and went in to buy a few of the china stocks, hoping that they will be part of the China's 10 year growth plan, and appreciate in value in future.

These are the few stocks that i own namely Midas, which business is providing steel related products for the railway sector. Another stock i own is Hu An Cable, which deal with cable products etc electrical wires.

I believe that these two companies are well positioned to tap the expansion plans from the chinese government. Both Midas and Hu An had been constantly winning contracts from the government to build railway trains, extend electric cables along the china provinces.

Below is a news that China had started its expansion plans.

Wang, J (2012) says, "China approved plans to build 2,018 kilometers (1,254 miles) of roads, spurring the biggest stock- market rally in almost eight months on signs the government is stepping up stimulus efforts to revive economic growth.

The government also backed nine sewage-treatment plants, five port and warehouse projects, and two waterway upgrades, according to statements on the website of the National Development and Reform Commission yesterday. No investment amounts were given."

Midas and Hu An Cable went up slightly today. But in the long run, it is still uncertain whether investors will start regaining confidence on chinese stocks. But i am sure that the contracts they won will contribute positively to their revenue at least by end of 2013.

Reference List

Jasmine Wang 2012, China’s Roads-to-Subways Construction Spurs Stocks Rally, viewed 7 September 2012
< http://www.bloomberg.com/news/2012-09-06/china-approves-plan-to-build-new-roads-to-boost-economy.html>

Blindspot

Why i named this topic blindspot is because this company was here for a long time but because of the market noises, i was not able to discover this gem until i read these blogs from two wisemen. Refer to the reference list below

One of the blogs i read was a person who is a long term investor of Kingsmen Creative. Below is what he gathered from the 2012 AGM.

financiallyfreenow (2012) says 

• "One shareholder asked about the competitors of Kingsmen. Benedict Soh, the co-founder and Executive Chairman, said that the competitors vary for each division. He also said something very significant. He said that Hans Bruder, Managing Director of Octanorm, told him, “No other company in the world has the same breadth of services as Kingsmen”. I felt elated at hearing this. Ben joked that now he has someone to quote instead of him always saying that Kingsmen is a strong company.
• 70% of Kingsmen’s clients are repeat customers. Ben said that clients come back to Kingsmen just like how patients always visit the same family doctor for illnesses. Word-of-mouth recommendations have also helped Kingsmen’s business.
• Revenue contributions from Singapore takes a huge percentage of total revenue. Many of the projects done overseas are still billed in Singapore as the Singaporean teams are involved in the project overseas even though the clients are overseas clients."

These 3 points indicate that Kingsmen business is fundamentally sound, meaning to say that their business is resilient to competitions but does not mean that they are not exposed to competitions at all. I do not have a very detailed overview of this company but based on the numbers from recent years, the company had substantially grew their revenue at a steady pace. Next is the quote from sgmusicwhiz, who is also believes greatly in its strong business fundamentals.

sgmusicwhiz (2012) says "Kingsmen’s revenues have seen a steady rise from S$53.5 million in FY 2003 to a high of S$190.6 million in FY 2008, in just a span of 5 years. 9M 2009 revenues were S$151.6 million, and as 4Q is traditionally their strongest quarter, the FY 2009 results may yet surprise on the upside."

CNBC with Wires (2008) says "Financial institutions globally have recorded more than $500 billion of write-downs and credit losses as the U.S. subprime mortgage crisis has spread to other markets." with context to the Lehman Brothers bankruptcy issue caused global investors worldwide to lose confidence, meaning to start withdrawing out money from their investments from bonds, equities, banks etc. This in turn caused a market turmoil. Investors worldwide being fearful, decided to stop spending/investing and soon more and more businesses got affected.

However, if you look closely at the earnings from Kingsmen Creative at the 2008-2009 mark during the turmoil, their revenue was not at all affected. This shows that the company is resilient because it is able to deliver earnings with the presence of an economic crisis.

Now with the Price to Earning(PE) ratio of ~9 is still a cheap buy for this stock.

Reference List

CNBC with Wires, 2008, Lehman Brothers Files For Bankruptcy, Scrambles to Sell Key Business, viewed 2 September 2012
<http://www.cnbc.com/id/26708143/Lehman_Brothers_Files_For_Bankruptcy_Scrambles_to_Sell_Key_Business>

sgmusicwhiz 2012, Kingsmen Creatives Analysis of Purchase, viewed 2 September 2012
<http://sgmusicwhiz.blogspot.sg/2010/03/kingsmen-creatives-analysis-of-purchase.html>

financiallyfreenow 2012, Kingsmen Investment Fair 2012, viewed 2 September 2012
<http://financiallyfreenow.wordpress.com/2012/05/19/kingsmen-annual-general-meeting-fy-2011/>