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Olam: Accumulate now?

Sunday, June 17, 2012



A few days ago, I blogged about Olam and how Kim Eng has a SELL recommendation. That got a reader who is invested in Olam sufficiently flustered to send me an email. Hey, I was just sharing an analysis which I thought made sense. Don't shoot the messenger and if it is any consolation, my badly timed initial investment in Wilmar fared worse.

"Olam has been the second worst performing member of the STI this year, with only Wilmar having done worse." (The EDGE, 18 June)

Anyhow, the article by Joan Ng in the same publication went on to report that CIMB Research thinks that present cheap valuations could be a buying opportunity for long term investors.

"The correct investment stratey to follow since 2009 has been to raise market exposure and beta when sentiment enters the panic zone, like now," Ajay Kapur, Deutsche Bank. He notes that there have been three major reflation exercises over the past three years.

"At the start of each of these episodes, investors were incorrectly cynical, consumed by the panic of the moment. We think we are on the verge of another policy reflation in the coming weeks or months. Start buying during this bottoming process rather than over-analysing." (The EDGE, 18 June)

For the numerically inclined, Olam is said to be trading at a price to book value of only 1.2x now compared to its trough of 1.5x during the global financial crisis.

Accumulate? Olam's management seems to think their stock presents great value too.

Related post:
Olam: Share price up on buy backs.

4 comments:

Singapore Man Of Leisure said...

I guess we can't help have split-personality when on one hand, we pride ourselves for our independent thought - can't trust sell-side analysts we boast.

But on the other hand, we get happy when analysts recommend stocks we own; and if analysts recommend sell, all hell broke lose?

Eh?

AK71 said...

Hi SMOL,

Haha.. LP warned me before about the hazards of blogging. I remember on one occasion, he even left a comment in one of my blog posts predicting that I would be flamed for what I wrote. ;)

After blogging for 2.5 years now, I have received my fair share of flaming, some overt and some covert. I used to be bothered but not anymore. It comes with the job. It is a package deal.

Anyway, I digress.

It is important to keep an open mind and to take in new information and perspectives. If we are closed minded, we stagnate and stop growing. We would be doing no one any injustice but ourselves.

To stay level headed and to be firm in our course is not easy, especially in the beginning but it gets easier over time, especially when we see the rewards. It is about having conviction.

If we are agitated by what others say, it probably says something about our level of conviction or lack of it. ;)

B said...

AK71

Agree with your above post. On one hand, we have the information that Olam is currently trading at historical low of their book value. And we know that it is one of the potential multi baggers should the bull takes place. On the other hand, we also know that Olam has its problem of debt issue. Is this a form of gambling if we decide to buy or not buy them?

*btw just curious on whether you are still currently working at the moment at your age of 40.

AK71 said...

Hi B,

There is definitely an element of luck in all that we do, no less in our investments. :)

Yes, I am still a productive member of the Singapore workforce at the ripe old age of 40 years old. ;)

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