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Wilmar: Should we be buying?

Tuesday, August 28, 2012

A reader asked me if I am buying more shares of Wilmar as I said before that the time to buy is when the selling has dried up. Has the selling dried up?

Well, the trend is still obviously down and my investment is in the red. My long position in Wilmar is my biggest money losing investment on paper this year.

However, I have bought more shares of Wilmar as the MACD is rising while share price declined. Momentum is still negative but with a rising MACD, the negative momentum is weakening.

There is no obvious sign of accumulation or distribution with the OBV flat as the share price languished more or less at the 61.8% Fibo line.

Volume has been relatively low as the Bollinger bands begin to squeeze, confirming the picture of low volatility. A big move in Wilmar's share price could be on the horizon. Which direction? That is anybody's guess.

If the move is to the upside, overcoming the 20d MA on high volume would signal a breakout. If the move is to the downside, the low of $3.04 touched on 15 Aug is the support to watch.

A sign that things might have bottomed is when there is massive pessimism and no one is interested in buying anymore. In fact, there would be more who would sell even at a big loss because they believe the share price could move much lower over time. Then, there are the increasing number of "sell" calls by the research houses all offering much lower 12 months target prices.

The relatively low volumes, the gently rising MACD and the flat OBV tell me that there is currently a stalemate between the bulls and the bears, pending a possible big move in price with the constriction seen in the Bollinger bands. The trend is, however, still in the bears' favour.

Now, no one should tell you what you should do. You have to decide for yourself.

Related post:
Wilmar: Touched a new low.


B said...

I suppose it will trade in a range now with 3.04 as a support. If it doesnt break 3.04 within the next week, then think Wilmar share price has bottomed,though NAV is still way below the current price.


AK71 said...

Hi B,

It is hard to guess what Mr. Market is going to do next. We can only trust our own analyses and hope for the best results. :)

FoodieFC said...

Well, look on the bright side when it goes down, it can also go up. A half filled cup is either half empty or half full. Its a personal perspective.

AK71 said...

Hi FoodieFC,

Oh, definitely. There are always two sides to a coin. :)

Ray said...

Do we anticipate an improve in their profits anytime soon?
WIth their chairman himself admitting to "challenging times" ahead, I suspect the answer is no.

Chances are the next release of financial numbers would miss targets and then the price will tumble further.
An FA led selling pressure will burst any kind of TA support.

Just look at the the recent financials released this month. All the TA were suggesting a bottom had formed but it just take a lower than expected profits to depress the price further.

AK71 said...

Hi Ray,

Indeed. It is when prices rise in spite of bad news that things get interesting for the bulls. I will look out for that. :)

Ray said...

"prices rise in spite of bad news"

I think that's called a bubble . :)

AK71 said...

Hi Ray,

If you check the literature, when prices rise in spite of bad news, that is an early sign of a reversal in a bear market.

I first learned about this reading the column by Michael Kahn in The EDGE a few years ago. :)

RayNg said...


Wilmar 'needs a dose of good luck'

Stock falls to three-year low but chief upbeat on prospects

Published on Aug 16, 2012 ST

AK71 said...

Hi RayNg,

A good dose of luck will not hurt, for sure. ;)

Ray said...

Hi AK,

I know you do read analyst's reports (although following their calls is a different thing), so if everyone thinks Wilmar's shares will go lower than right now and China's equity market is currently really doing badly, ever thought of selling now and cut loss? And collect it cheaper when (not if) it drops below $3?
It may not drop that low but, but very very probable.

AK71 said...

Hi Ray,

Could Wilmar's shares get cheaper? They could get cheaper. How much cheaper? Your guess is as good as mine.

Now, I rely on my own TA which I have shared here. It does not look like price is going up anytime soon but it is probably near a floor, if not the bottom.

Ray said...

For now. but with the economy in china not doing so hot now and Wilmar's immediate future being "challenging", wouldn't it take just another release of underachieving financials to send the prices further south? Many analysts are also talking abt its PE multiple being too high right now to justify for its poor profits.

AK71 said...

Hi Ray,

Wilmar's PE has always been amongst the highest. Even in the doldrums, its PE will stay relatively high.

If we were value investors, we wouldn't touch Wilmar with a 5 feet pole. ;)

The CEO has issued fair warning that its crushing business in China remains challenging. We have to remember that this is not the be all and end all for Wilmar.

Will Wilmar's share price go lower, move sideways or go higher? I can only say that the trend is still down but the negative momentum has weakened.

We must always invest in a way that does not disturb our peace of mind. Being comfortable with being invested is important. If we are not comfortable with anything, stay away from it. :)

meesiam said...

I see their cash as well as debt level. Be frank, not quite comfortable despite the chart say the otherwise

AK71 said...

Hi meesiam,

For years, I have avoided investing in Wilmar, Noble and Olam as I found their debt levels daunting.

The decision to invest in Wilmar a few months ago was a bad one. Now, I just have to make the best of a bad decision.

Ray said...

Bad news.... Wilmar broke the $3 support.

AK71 said...

Hi Ray,

Mr. Market will do what Mr. Market does. :)

AK71 said...

Shares of Wilmar International jumped to the highest in more than two weeks after the palm oil firm launched its first-ever share buyback and the U.S. Federal Reserve stimulus sparked a rally in commodities stocks.

Wilmar said on Thursday it had repurchased 7.4 million shares from the open market, representing 0.115% of outstanding shares, at $3.00 each.

“The buyback is because Wilmar is good value at these prices. It also reflects the confidence that the Wilmar board has in the long term fundamentals and growth prospects of the group,” Wilmar’s spokeswoman said in an email.

Wilmar shares gained as much as 6.7% to $3.20 on Friday, the highest since Aug. 29. More than 34 million shares were traded, triple the average full-day volume over the past 30 days.

But Wilmar was still the worst performing stock on the Straits Times Index so far this year, down about 36 percent, partly due to concerns about weak crush margins in China.

“We believe Wilmar’s equity value will improve as battered margins in Chinese oilseeds processing slowly recover post two quarters of weakness,” Citigroup, which has a ’buy’ rating and S$4.08 target price on Wilmar, said in a report.

Citi said in the longer term, it believes that Wilmar’s scale as the leader in oilseeds processing and in consumer packs remains “best-in-class” and the company is likely to benefit from China’s growing deficit in soybeans.

REUTERS, 14 Sep 2012.

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