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What I do before I buy or sell a stock.

Friday, January 3, 2014

People sometimes ask me what kind of software do I use to keep track of investments or to decide what and when to buy and sell. They are always amused by the blank stare I give them.

AK71 is very old school which is a nice way of saying I am outdated when it comes to technology. No kidding.

OK, want an example of how I work? Here is a recent one:


This is the most recent of my scribbles regarding Yongnam.


Yes, I scribble on bits of paper (and hope I don't lose them which I rarely do, anyway).

Some of you might recognise what has been scribbled on the piece of paper. Technical analysis (TA). I usually do this when I have decided to buy or sell based on fundamentals and, yes, I scribble fundamental analyses (FA) I have done on pieces of paper too.

Some of my scribbles get organised and make it to my blog as fully fleshed out articles but many never do. Well, in my pre-blogging days, most of the scribbles would eventually end up in the bin. So, the current situation is probably a big improvement.

I also cut out articles from newspapers and periodicals, using a highlighter or pen to draw attention to what I think is useful information. Example? See: Art of wealth accumulation.

Oh, if you are wondering if I bought more shares of Yongnam's, yes, I did at 24.5c a piece yesterday. That is at a discount to their NAV/unit of 26c or so.

After divesting most of my initial investment in Yongnam in 2013, yesterday's purchase of the company's stock was my third since end October 2013. If Mr. Market continues to offer a good price, I would probably buy more.

Own the kind of assets Yongnam has at a discount? Own a business that will benefit from the projected doubling of  MRT lines in Singapore by 2030? Sounds good to me.

Whenever I scrambled to invest, often, I lost money. Whenever I scribbled to invest, often, I made money. What is the moral of the story? I wonder.

Related posts:
1. Strategy to grow wealth and augment income.
2. When to BUY, HOLD or SELL?
3. Recommended books for FA and TA.
4. 3 points in stocks investing.
5. 7 steps to passive income from stocks.

20 comments:

Solace said...

hahaha Ak,

Who can fault you, when your current system work so well for you. :)

I still say the old phase: when things are working well, don't fix it. :D

AK71 said...

Hi Solace,

You are partly the reason for this blog post. I think you know this. ;p

Many have offered advice on how I could make use of technology and I am sure they mean well.

I am not walled away from the rest of the world to not realise there must be benefits from being IT savvy. I just don't know what I am missing out on, I guess.

One day, maybe. Maybe. :)

sillyinvestor said...

Haha AK,

What 2 opposites like the Ying and the Yang.

I like to go into details, u like it simple.

U make decent returns, I make pittance return.

You say one day maybe, I say never look back...

But at least we converge in one area.

We enjoy the Process. Cheers.

AK71 said...

Hi Mike,

I wonder if there is such a thing as over-analysing. There were times when I suffered from analysis paralysis. ;p

Oh, it has 10 points in its favour but it also has 10 points against it. Prospects seem good but what about the risks? Then, didn't do anything after spending days analysing.

-.-"

Clueless Punter said...

AK you are not alone in your use of the pen and paper :)

One question; I have often identified companies with good fundamentals, good sustained margins etc the works, however they have very low trading volumes on a typical trading day. That has kept me away as I fear I will be unable to get in or out when the time comes.

However, what would you do?

sillyinvestor said...

haha Ak,

Might sound stupid saying this, but I must work hard in order to earn money, I am a super unlucky person...

Remember when I am in colleague, the whole school is playing poker cards,i tried to be a goodie goodie and didn't, when I finally relent, and throw out the first card, I got caught by one tech lab assistant, how suay can you get...And that lady pass my name to the DM.

The first time I skip lecture in my college, they took attendance.. **@#*

The further I journey in investment, the further I get away from beginner's luck.

If a company has 10 things going for it, and 8 things going against it, I would say bye bye...

But it is quite enjoyable reading companies and do companies prospecting. Although like what you say, some of the better companies with Moats are known to all anyway, the key is just to wait for the right price.


AK71 said...

Hi Clueless Punter,

Whenever people ask me this question, I think of Old Chang Kee which is a very illiquid counter.

When I blogged about how I initiated a long position in this in 2011, an esteemed blogger made a comment. See it: here.

I replied that I wasn't bothered by the lack of liquidity in its stock as long as the company was well run and doing well. It was a positive point (and a necessary one) that the company paid meaningful and regular dividends as well.

If we own a wonderful business that is paying us well, there is no need to sell, everything else remaining equal.

Having said this, if Mr. Market should become interested in the stock, volume would expand as price gets pushed up. We would have a chance to sell then, if we wanted to and I sold half of my investment in Old Chang Kee when it happened.

So, the advice that we should not buy into counters with low liquidity doesn't gel with me. Well, not if the stock belonged to a well run company that was doing well anyway. :)

AK71 said...

Hi Mike,

Wow! You make it sound like you dropped into a cauldron of bad luck brew when you were a baby. -.-"

On a brighter note, you are right in that many good companies with moats are well known. So, perhaps, the best thing to do is to wait for Mr. Market to go into a depression and start offering these to us at bargain basement prices. :)

SGYI said...

Hi AK,

Secrets of millionaire investor revealed. haha

FA and TA works well together. I use TA to determine my entry too after the FA has been cleared.

AK71 said...

Hi SGYI,

Er... AK71 is not Adam Khoo hor. Don't get me in trouble. LOL. ;p

Solace said...

Hi AK,

The comments by clueless punters and you about low liquidity has set me thinking.

It is a common problem when it comes to several neglected stocks. Hock Lian Seng comes to mind now.

I will go back to the fundamentals to see if low liquidity is worth the risk. I think i mention this before on the guest post on KingWan.

Kingwan has low trading volume too. However, i reckons that with profitability, cash flows, dividends, strong balance sheet, it will somehow check out the risk. Increase in market attention can bring back liquidity in due time.

Glad that we more or less converge on the same idea when comes to low volume stocks.

AK71 said...

Hi Solace,

Oh, I have Hock Lian Seng too. ;p

If we have bought into a good company, we don't really want to sell it. So, liquidity really isn't too much of an issue for me. :)

Wealth Journey said...

Well ...i'm in good hands knowing AK71 is holding Hock Lian Seng too!
:)

AK71 said...

Hi WJ,

Hey, long time no hear. :)

I feel reassured that an accredited investor like you are vested in Hock Lian Seng. ;)

AhJohn said...

Actually paper and pen is good for creative thinking!

Clueless Punter said...

Thanks for the insight, I believe it does help too if the company's operations are easily visible in the public!

AK71 said...

Hi Ah John,

You think so? I did write a bit of poetry and prose in the past, actually. ;p

AK71 said...

Hi Clueless Punter,

It could be helpful, yes. :)

However, sometimes it is better if they are not so that we are able to accumulate over a period of time. ;p

An example is NeraTel. Some people I know were accumulating this stock when it was still relatively unknown. Look at it now. Amazing.

RayNg said...

Just sharing my thought. Not vested yet.

When I want to invest into a company, management quality is one of the key consideration.

IMO, the director remuneration is on the high side. Mr. Seow / CEO remuneration is ~ $4.5M. This translate to 7~10% of las 4 years Net Profit.

If we dig further, director remenuration increase 10 fold since 2007. Coindentally, Yongnam raise $62M via additional share placement. They paid themselve first. :(

FY2012 EPS drop to 3.45 from 5.06 or 32%. FY13 EPS will be lower than 3.45 as stated in the 3Q interim report. I estimate its FY13 EPS is between 2.00-2.50.

Base on this estimate, with PER of 8X, I think Mr. market will pay < 20 cents.

AK71 said...

Hi Ray,

Thanks for sharing your thoughts on this. :D

Yes, I agree that the CEO's pay is mouth watering. However, I expect him to deliver better results in the coming years.

I cannot tell how much Mr. Market is willing to pay for Yongnam's stock although I personally feel that a PER of 8x is not excessive. ;)

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