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Bullish on Noble, IndoAgri, Genting and DBS?

Sunday, September 4, 2011


I was reading The Straits Times online edition. Yup! AK71 is catching up with the Times! I love this pun!

There is an interesting article by Andy Mukherjee titled "Don't get seduced by analysts' darlings" and he selected four stocks as examples.

Andy is of the opinion that "analysts are overly bullish. They are beginning to turn nervous, but are far from throwing in the towel."

He also said that "for choppy markets to get better, sentiment must first hit rock bottom. Like it did in the first quarter of 2009."

Stock #1: Noble Group


"Analysts are still wildly bullish about Noble... (with) consensus estimate for the stock (suggesting) a 35 per cent upside.

"Noble shares fell more than 80 per cent between June and October 2008."

Stock #2: Indofood Agri Resources

"With the hiving off of Salim Ivomas Pratama, .. the company is sitting S$860 million in cash, with little clarity from management on future expansion. Meanwhile, the profit accruing to Indofood shareholders grew less than expected in the June quarter... The consensus estimate for the stock's target price is about 33 per cent higher than the current price."

Stock #3: Genting Singapore

"Chip volumes declined 13 per cent from the previous three months... Overall, though, the analyst community is still gung-ho on Genting... (and) the consensus target price is still 28 per cent higher than the market price."

Stock # 4: DBS

".. local currency interbank rates in Singapore... have collapsed. One key rate - the swap offer rate - has even turned negative.... The consensus in the analyst community, however, is that DBS Group's fair value is 28 per cent higher than what the stock currently sells for.

"If the Singapore economy slips into a technical recession this quarter and loan growth slows markedly, then the lingering optimism on DBS could dissipate. That could be risky for investors.

"For now, the cash in your mattress is quite safe where it is. If you really want to do something with your money, consider stocks with high dividend yields."

I do not think staying in cash 100% is a good idea since Mr. Market has a way of surprising us sometimes. Will we have a recession for sure? What if markets simply continue to trade sideways while inflation rages on?

Even famed New York University economist Nouriel Roubini, a perpetual bear, puts the risk of a double dip recession at 60 per cent probability and not anything closer to 100 per cent certainty.

The more we expect something to happen, the more it might not happen. So, without perfect knowledge, the best strategy, in my opinion, is to have a warchest ready even as we stay invested.

Oh, I am not vested in any of the above stocks.

Related posts:
1. Should we be staying invested or in cash?
2. Sleep well at night with a plan.
3. Stock market analysts.
4. A capital question: How much to have or how much to use?
5. Investing in REITs: A flawed strategy?
6. Dr Marc Faber: How not to lose money?

18 comments:

Marti said...

With inflation around 5% keeping cash is the surest way to loose money. Difficult times...

AK71 said...

Hi Marti,

Indeed! We are experiencing some trying times.

FoodieFC said...

wonder how next week will fare. am not vested in the 4 shares too =0

INVS 2.0 said...

Hi AK71,

I am so tired of negative sentiments that I don't care already. Just be confident of my own judgement and my stocks.

Every now and then since 2008, the market is filled with negative news. When there is finally a recovery in sight, it will be shot down in flames very soon.

But I believe if there is really a confirmed recession, it is definitely a painful one worse than 2008.

AK71 said...

Hi FoodieFC,

These stocks could be very good investments in time to come if we believe that prices would continue to trend southwards.

I doubt anyone knows for sure how next week would turn out. Wait and see. :)

AK71 said...

Hi INVS 2.0,

It is hard for me to see with clarity at this point in time what will happen in the next few months.

If European leaders were to act decisively to lower interest rates once more, we could see equities going back up again.

Of course, there is debate on whether it is the right thing to do but it does not matter to me as I am only concerned with the value of my investments. ;)

Have a plan and act accordingly. I see that is what you are doing and that is what I am doing too. ;)

Calvin said...

AK, I agree with the part about staying invested. If you divest out completely and you happen to be wrong about the bear, you could miss out on some spetacular gains.

Overall, I am still neutral on the stock market. So I am 50 cash/50 stocks at the moment. Don't need to read too much into the news, they don't do anything but invoke fear and greed. There is no one person who can call the market direction 100% all the time so all the analysts are jus speculating as well.

AK71 said...

Hi Calvin,

I always say that I try not to be overly bearish or bullish. I am a pragmatist. ;)

financialray said...

Looks like the stock market is going to be volatile for many months to come.
I think property investment gives better control.
ALthough AK is right in pointing out that when recession occurs, some may even have to sell their property investments or lose their jobs.
There are no more iron rice bowls now but some rice bowls are more durable than others.
Similarly, property investments also come with higher risks but some do give a good sense of control.

AK71 said...

Hi financialray,

Property investment is one of the best ways of making a lot of money especially in a country like Singapore.

People who can afford to invest in properties but refuse to do it because of some misconceptions are missing out on a great opportunity.

Having said this, property market is cyclical and is definitely not recession proof. So, due diligence is required plus a dose of luck. ;)

financialray said...

Yes, AK , I must agree that a GREAT DOSE of luck is very important and till today I too am not sure if successful property investments can be duplicated.
Think the answer will be known after a few more years.
One advice that I read in RObert Kiyosaki's book is that a good property investment must be able to give good cash flow and must be good not only in good economic times, but also in bad times.
It took a while to read his book from the library 2 to 3 times before the pearl of wisdom is gelled.
However, as with different individuals, I don't agree with him about everything eg using rental income to buy his Porsche.
I have simple needs...a toyota camry will do

AK71 said...

Hi financialray,

Robert K. is a savvy salesman and has his fair share of scandals. You are right not to take all that he says as the Gospel truth. ;)

This reminds me of another blog post:

Conspiracy of the rich.

financialray said...

Thank you for the lead AK.
ABout Executive Directions ,I think they still advertise free seminars for their property investment talks. Very good orator, the speaker who is interviewed in SUnday times and she claimed to own more than 50 properties. Come, join the seminar for only a few thousand dollars and be financially free.

As I said before, even if we have only a few bags of gold coins, guard them well and pray we meet the right person along our life journey. Otherwise, greed for a pot of gold will inevitably see us lose the few gold coins that we work so hard to save.

AK71 said...

Hi financialray,

You are reminding me of many past blog posts today. Hahaha..

Be a real estate owner the easy way.

There is no free lunch in this world. ;)

Why should we share free lunches with people around us? Wait! If we could charge people a few thousand dollars before we give them a free lunch, why not? ;p

financialray said...

Yes there is no free lunch in this world.
When someone seems to offering a free lunch, it is time to be on alert. Be VERY ALERT.
It is sad to read in the papers recently again that many aunties have fallen into a scam buying into GOLD where high returns were promised. It amazes me how such a Ponzi scheme never ceases to find willing victims. But then again, Madoff pulled off one of the most spectacular Ponzi. Greed blinds the eyes and stupefies the brains, even of the shrewdest investors.
Everyone wants to work as little as possible but to remunerated as much as possible. So subprime and ponzis will just come again and again in a slightly differenet form.

AK71 said...

Hi financialray,

I actually shared a real life experience in CW's blog.

My housing agent paid for $10k worth of gold but was only given $6k worth. The company she entered into an agreement with said that they will pay her 25% yield on $10k every quarter. So far, they have paid her for two quarters.

I told her that she has essentially taken back her own money and a bit more. If they continue to pay her in the next quarter, she would have made quite a bit of money.

I went on to tell her that I would never take part in such a scheme since gold does not generate cashflow. How could this company pay her a yield of 100% in a year?

Now, this sounds like a ponzi scheme or similar.

Anonymous said...

The more we expect something to happen, the least likely it will happen. So true, that is exactly what makes investing a challenge, as we continually phase between thinking of ourselves as contrarians, and then wondering if there are so many other contrarians thinking exactly like us at the same time?

Sometimes I like to talk aloud to myself when there is no one around and try to gauge where my emotional state lies :)

Blackjack

AK71 said...

Hi Blackjack,

I talk to myself so much that I get my mom worried quite a bit. Haha.. ;p

I do not have perfect knowledge. So, my strategy can never be perfect.

I accept that paper losses could be unavoidable since I am staying invested. I also accept that I could never maximise gains as I maintain a high level of liquidity.

With acceptance comes equanimity.

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