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STI down 3.6% on heavy selling! Be fearful? Get ready and be greedy!

Friday, August 5, 2011

Today, almost all of the counters in my watchlist registered a loss. Almost? Yes, although none of the counters registered an increase in share price, one counter closed unchanged. That honour goes to AIMS AMP Capital Industrial REIT.  This demonstrates the relative resilience of the REIT's unit price. Given the bloodbath seen in the stock market today, this is impressive.


The action in the stock market was so exciting that I actually wrote two blog posts in the late morning today. There was a lot of fear to the point of being petrifying. However, if we have already planned for a scenario like this, just execute the plan and there is really nothing to fear.  What? Nothing to fear? Yes, why fear opportunities to collect on the cheap?

In my opinion, the only people who would fear a sharp decline in the stock market are people who are fully invested in the stock market and who

1. Borrow money to invest.

OR

2. Use money which they need for other purposes in the near future to invest.

If we are 50% invested or less and if we are not using borrowed funds or funds we need in the near future, I do not see why we should panic. Stay calm and rational.

As revealed in my two earlier blog posts today, I bought more units of Sabana REIT at 92c and more shares of CapitaMalls Asia at $1.265. Could prices go lower next week? They could, of course. Who can be sure?

Looking at CapitaMalls Asia's chart, we see a huge gap down at the start. Price hit a low of $1.25 before closing at where it started the session at $1.28. That is a nice long legged doji and a bullish one too. It is a bullish reversal signal.


In case you are whooping for joy, remember that signals could fail. If we see price opening higher than $1.28 in the next session, the signal is most probably confirmed and we could see price closing the gap at $1.325. Otherwise, be prepared for possibly more downside.


Sabana REIT's unit price also gapped down in the morning but by the end of the session, it closed at 92c, the same price it started the day at, forming a dragonfly doji in the process.


Volume was relatively high and yet volatility was very low as we saw units changing hands at 92c and 91.5c only. This says something about support for the REIT. If its unit price should retest the 90c low, I will probably buy many more units.

Stay calm and get your warchests ready. There could be many more buying opportunities if the selling persists. Good luck.

Related posts:
A sea of red! Have a plan and execute it!
CapitaMalls Asia: Bought more at 161.8% Fibo line.


20 comments:

financialray said...

REITs should hold, esp the industrial REITs.
But maybe a good time to scoop some blue chips too.
Some healthcare related stocks like Q and M also holding steady at 81 c. May be worthwhile to monitor how "strong" they are.

AK71 said...

Hi financialray,

There are people who think that industrial S-REITs are riskier but I do not think so. Anyway, such "perceived" higher risks are more than compensated by the higher distribution yields, imo.

I am also keeping an eye on SPH. If it should weaken dramatically, I could buy some as well. No TA required here. ;)

Anonymous said...

Hi AK47, i become more confident somewhat after reading your blog. thank you very much as i benefit alot from your input. Industrial REITs survive very well under the recent crisis so far. of course i love sph and other cash-rish counters too. let's see what happen on monday. for me, the bad news are all on the table - which make most uncertainies certain now. (DonaldQ)

AK71 said...

Hi DonaldQ,

I am glad to share and if my blog has gone some way to calm some frayed nerves, I am happy. :)

As per various blog posts in the recent past, I believe that industrial S-REITs are the most resilient ones so far. Reliable passive income? I think so. :)

Hubert wee said...

Yes, heavy selling indeed but that doesn't mean it's the best time to buy. Of course it is sensible to accumulate fundamentally good stocks at oversold, support levels

Sometimes I have to ask myself, for weak stocks such as CMA, NOL, Cosco, Yzj, how much I would have made if I were short instead of long. For stocks with long-term downtrend, buying on dips isn't the way to go - selling (shorting) on rebound would provide a better risk-reward ratio. Best to go with the flow.

Positive divergences in itself are also not a signal to go long.

Good luck.

AK71 said...

Hi Hubert,

I am a long only investor and I never ask myself how much I would have made if I had been short instead of long.

This is not saying anything bad about shorting, of course. It is just a matter of choice.

I have made a lot of money just being long and I think that is enough for me. ;)

Anonymous said...

Hi Ak,

I am also thinking of buying some SPH. Based on TA, what is a good price to go in?

Thank you for your help:-)

Regards
Phyllis

financialray said...

Hi AK,
The value of a commercial property is not determined by how big the shop/office is. It is determined by the location and hence the rental.
Similarly, the value of industrial REITs depends on whether their rental income is sustainable. If rental income is locked in for next few years, I believe the value of the stocks will hold even in the event of a double dip recession.
But never say never as sentiments can drop to subzero.

AK71 said...

Hi Phyllis,

Immediate support is at $3.80 but for a greater margin of safety, I am thinking of $3.60, give or take a few cents. ;)

AK71 said...

Hi financialray,

Indeed. Never say never.

I remember how I bought into First REIT at 42c/unit and LMIR at 18.5c/unit in the last bear market. The distribution yields on these units are pretty amazing today. ;)

Hubert wee said...

Yes but this could well be the early stages of a bear market in which case being heavy on stocks for the long term wouldn't be a good idea.

I don't believe in buy and hold forever.. There is a time to buy and a time to ease up on stocks.

AK71 said...

Hi Hubert,

Yes, it could be the early stages of a bear market but I am sure you are not sure it is either. If you are sure, please let us know. ;)

As for being heavy in stocks, I mentioned in an earlier blog post that the strategy I am adopting now is to be 50% invested. I think that's a prudent level of exposure.

financialray said...

Many investors proclaimed buy and hold way of investment as dead. Some who made money during the 2008 crisis even started courses to teach people how to make money from stocks and how to time the market. Well they MAY be right but they also MAY be wrong.
Some who made money quietly via BUY and HOLD never make any loud noise nor do they wish to teach others what they think is obvious.
I remember our President elect Dr TOny Tan scooping up SPH at $2.65 thereabout during the crisis. Just by dividends alone and rate of yield alone, I think I will be happy to have bought at $2.65. Alas, I only bought 6000 lots at $3.52 with my SRS.
If anyone can tell me when the next crisis is coming, please let me know.
Otherwise, I no choice but to buy more if I get stuck in the next tsunami. They say BIG adversity don't die, sure have good fortune.
That sounds like a SURE SURVIVE way to me. Why should I time the market?

AK71 said...

Hi financialray,

Yes, Dr. Tony Tan is a savvy one. Alas, the lowest price I ever paid for SPH shares was $2.80 thereabouts. I used my CPF-OA to buy some as well on the way up. SPH has been good to me. :)

Anonymous said...

Wu...financialray. ...6000 lots of Sph at $3.52...wah
you sure have beri beri deep pocket lei..

ck

financialray said...

Hi CK
I not young any more and have been contributing faithfully to my SRS for many years liao. I only have 4stocks in my SRS portfolio and SPH is one of them.

You may want to find out how many shares Dr TOny Tan bought during the 2008 crisis. Mr Ngiam, a former civil servant heavyweight, also bought a lot then.
If they have sold, please update me. THank you.

AK71 said...

Hi CK,

I think financialray meant 6000 shares (or 6 lots) of SPH. No one has enough money in his SRS to buy 6000 lots of SPH since the annual contribution cap is about $12k or so. :)

Anonymous said...

Hi AK,

Choppy times indeed, and yes the greedy part of me is waking up....

I am already quite heavily invested in S-REITs, so I'd like to buy some Singaporean blue chips. Would certainly be interested to follow on SPH. Would you disclose the other 3 stocks in your SRS portfolio?

BTW, what do you think of SATS? Its price seems to have fallen very sharply.

Victor

AK71 said...

Hi Victor,

Good to hear from you. :)

I am not looking at any blue chip for passive income generation other than SPH.

I think you are asking about my CPF-OA since I bought SPH shares using funds from CPF-OA. ;)

Currently, I do not have any equities in my CPF-OA. All liquidated some time back. Keeping the powder dry here for bottom fishing. ;)

financialray said...

Hi Ck,

SOrry for the mistake.
I am not that rich la.
only 6 lots.
Not 6000.

Thank you AK for clarifying.

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