ARA Asset Management and $1.78 a share.

After my ARA "fixed deposit" has been redeemed, what remains is my original investment which I paid $1.00 to $1.32 a share for.

Although the offer of $1.78 would mean a 35% to 78% capital gain, I would be losing a very consistent and meaningful source of passive income. 

A yearly 5c dividend per share (DPS) gives me a yield on cost of 3.78% to 5% and from a growing business with a very strong balance sheet too.

At $1.78 a share, a 5c DPS gives a dividend yield of 2.8% which is still pretty decent considering the fact that ARA pay out only about half of their earnings as dividends.

As an investor for income, naturally, I would like to continue receiving dividends from companies such as ARA. 

With an impressive full year 2016 performance, I am even more reluctant to let go of my investment in ARA now. 

So, I have decided not to accept the offer.

See presentation slides: HERE.

My ARA Asset Management fixed deposit adventure.

When I shared my full year results end of last year, I mentioned ARA Asset Management's offer of $1.78 a share and how it translates to 35% to 78% capital gains for me if the offer is to be accepted.

At the time, I had a fixed deposit maturing and ARA Asset Management's share price was at $1.71. So, I decided to plonk the money from the fixed deposit into their stock. 

It looked like it would be a sure win, an arbitrage opportunity, and I would get a 4% "interest rate" so to speak within half a year or so.

At the time, I knew some shareholders thought $1.78 was too low a price and I knew there was a possibility that the offer would not be accepted. No issues, I thought. I could keep the investment and receive 5c dividend year after year which would give me a yield of around 3%. 

However, at the back of my mind, there was a very small voice which asked if I really want a much larger position in ARA Asset Management and with a yield of only 3% to boot in case the offer is rejected by shareholders?

That voice did not go away

Today, I decided to accept a yield of about 2.6% from Mr. Market. After costs, it would be a bit lesser. I closed my "ARA fixed deposit" and received what is very good "interest income" for a 2 months fixed deposit.

I thought of this position as a "fixed deposit". So, like a fixed deposit it should behave.

I still retain my original investment in ARA Asset Management. What I divested was my more recent "investment".

Related post:
2016 FY passive income non-REITs (Part 2).

2016 full year passive income from non-REITs (Part 2).

UPDATE (20 Jan 17):
When I shared my full year results for non-REITs last year, I wondered if Religare Health Trust (RHT) might be privatised. Then, with Accordia Golf Trust's (AGT) sponsor being bought over by Korean investors, MBK, many asked what is going to happen to AGT? A reader, betta man, shared this with me:

https://www.smartkarma.com/insights/accordia-golf-agt-sp-high-conviction-family-office-favourite

There is nothing wrong with speculation as long as we know we are speculating. Me? I am quite happy to hold on to my investment.
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As promised, this is Part 2 of a very long blog post. If you have not done so, read Part 1: HERE.
Let us start this blog post with some gossip. Wah! Is Religare Health Trust going to be delisted?

You say, I say, they say. Hmm. ;p

Anyway, three big things happened in the non-REIT space for me.

1. A big thing was receiving a much larger than usual distribution from Religare Health Trust (RHT) which I initiated a long position in sometime last year at 88c a unit. The special dividend (which gave me a yield of almost 30% based on cost) came from them disposing a share of an income generating asset due to regulatory requirement. Including regular distributions this year, RHT has been a very rewarding investment for me. I am quite happy to continue holding on to my investment in the Trust as it continues to generate income. 
See this chat with a reader:

2. Another big thing that took place in the non-REIT space was the internalisation of Croesus Retail Trust's management. There was a rights issue because of this. I took up my entitlement and also applied for excess rights. The rights units were priced at slightly under 80c a unit (and will enjoy a distribution yield of almost 9%). The size of my investment in the Trust increased by almost 6% as I took advantage of the exercise.

3. The third big thing is the offer to privatise ARA Asset Management at $1.78 a share. This is likely to be concluded by the middle of next year and based on my entry prices, I would get to enjoy reasonably attractive capital gains of 35% to 78% although I would miss the regular dividends.

As I had a fixed deposit maturing and with the much lower interest rates offered by the banks this year for fixed deposits compared to last year (1.1% per annum at UOB for 13 months, for example), I decided to buy more ARA shares at $1.71 a share in late November.

I believe that this is possibly an arbitrage opportunity which could give me an "interest rate" of about 4% over a period of, maybe, half a year. 

It could be higher because ARA pays dividends twice a year and another payout could happen in April or May. If it should happen, I could see a DPS of 2c to 3c if the privatisation process is not completed by then.

Of course, to be realistic, there is a chance that the offer might not be accepted as I know some shareholders feel that the offer of $1.78 a share still undervalues ARA. 

In such an instance, I would be quite contented to hold on to my latest purchase to receive regular dividends (for a 3% dividend yield based on a DPS of 5c or about 50% of EPS) as I also believe ARA is worth more and that its shares should trade at a higher price. 

Delist or stay listed, I am happy with ARA either way.

Total dividend income from non-REITs in 2016: 


S$ 105,641.29


This translates to S$ 8,803.44 per month.

Apart from dividend income, regular readers know that I used to trade stocks more actively. Earlier this month, I revealed on my Facebook wall as well as the comments section here in ASSI:

Source: A wealth building strategy that has worked for AK.

Although I enjoyed some capital gains from a few trades this year (and the most recent trades being in DBS as its share price rose significantly for a few weeks), it is due to an emphasis on investing for income that has ensured further improvement in my financial health.

On this note, I will now say something about APTT because it seems that many readers were attracted to APTT by the relatively high distribution yield of 10% and bought into it. Now, many of them are worried because the unit price plunged.

If we know the value of a stock, we would know if the price makes sense. If we didn't know the value of the stock, we would never know if the price makes sense. If we don't know this, price movements would make us emotional.

I said before that APTT's past DPU of 8c was unsustainable. Although the management reduced DPU to 6.5c, I said that it might be more prudent to have a DPU of 4c which, I felt, was more sustainable. That was because 4c would be closer to APTT's EPS. 

At 37.5c a unit, I decided to add to my investment in APTT recently. I know what some people might ask and here is my answer: 

I don't know if the unit price will decline further but if it should, knowing what I know and all else being equal, I would probably be buying more.

Investing in APTT, we are not investing for growth. We want its income generation ability. If you thought you were investing for growth when you got into APTT, you might have the wrong tool. 

Know what we want to do and use the right tools.

For those of us who invested in APTT for income, ask if anything has happened which has damaged its ability to generate income significantly and, if something has happened, is the damage long lasting? Then, do what you have to do.

Know what am I going to say? 

Yes, if AK can do it, so can you!

HAPPY NEW YEAR!

And I hope you have found my blogs this year to be inspiring and helpful on your own journey towards financial freedom.

Let me know if I should continue talking to myself next year. ;)

LOL. From my FB wall (1 Jan 17).

Related posts:

1. 1H 2016 income from non-REITs.

2. Breadtalk, OCK and QAF.

3. Made $1m investing for income.
4. 2016 FY income from S-REITs.

Outlook for 2017 

(by OCBC Investment Research):

While the overhang from Brexit and the US presidential election is over for now, heading into 2017, we expect continued weakness in oil-related stocks, softness in the property sector and higher impairment charges for banks to be some of the factors that will dent investor confidence in the Singapore market. While interest rates are likely to head higher, we believe the hunt for yield is not completely over and investors are still likely to accumulate quality high-dividend stocks. We expect banks to report low- to mid-single-digit earnings growth, and the outlook for the residential property sector is still soft after numerous quarters of decline and with no clear pickup in demand or selling prices. The oil and gas sector is still saddled with refinancing issues as well as a lack of orders and earnings. The telecommunications sector is also facing the threat of a new player.

-----------------------------------------
Watch from the 22nd minute for the discussion on Singapore banks:

2016 full year passive income from non-REITs (Part 1).

During an "Evening with AK and friends", someone asked if I was going to sell my stocks as market guru Hu Li Yang was expecting a stock market crash. I said we should stay invested as the market was still awashed in liquidity and money will go to where it is treated best. See: Evening with AK and friends.



So, what did I do in 2H 2016 in the non-REITs space? I made various purchases but, mostly, I was buying DBS shares. Besides DBS, I also bought some shares of OUE Limited, PREH, Wilmar, OCBC, Breadtalk and Starhub.

(I am impressed by DBS' cost management. Their cost to income ratio keeps declining.)

The narrative for investing in OCBC was similar to the one for DBS. Although all three local banks' stocks looked cheap to me, my preference was for DBS because of the perceived cheaper valuation.


The reason for me putting some money in OCBC's stock was mostly because my long position in DBS grew so big (and I do mean BIG) that it was prudent for me to step on the brakes. 




Using a strategy I employ frequently for stocks which I am highly confident in, my relatively large position in DBS included both a core position for income as well as a trading position.

Why not UOB? 


Well, I think UOB has been a bit laid back. I am not saying that it is a bad thing, mind you, but its growth story seems less exciting.

Of course, some might say that DBS and OCBC have been more "adventurous" but I like to think that they are more enterprising.

I feel that growing their wealth management business more aggressively will continue to set them apart from UOB as that business contributes more and more to their earnings.

Next, Wilmar. I continue to like Wilmar's business strategy and their very impressive scale of operations. It is an amazingly complex business and, to be quite honest, I have no way to analyse most of its operations.

However, when Mr. Kuok thinks their shares are cheap and bought more at $3.00 a share, that was a pretty clear signal to me. At that price, we would also be buying at around its NAV which seems conservative.

Source: RHB.

Having accumulated a rather significant long position in Wilmar in recent years, I am quite happy to wait while being paid to do so.

Now, for OUE Limited. I blogged about my rationale for increasing exposure to OUE Limited when I shared my numbers for 1H 2016 (see related post #1). Back then, I added at $1.51 a share. In 2H 2016, I added more at $1.53 a share.

Twin Peaks.

My decision to increase exposure was mostly driven by the even larger discount to NAV from the time I initiated a long position. 

There is much value in OUE Limited but waiting for value to be unlocked requires a lot of patience. Well, remember, a wise man did say before that the big money is in the waiting.

Along similar line of reasoning, I also added to my investment in PREH at 80c a share a few days ago. This is the lowest price I have ever paid for PREH. The last time I bought any PREH shares was more than a year ago. 

It is interesting to me that Mr. Ron Sim, Mr. Pua S.G. and Mr. Kuok K.H. have been increasing their stakes in PREH on price weakness. 

PREH is an asset play but it is also a growth story. It is not for the faint hearted.

PREH

As for Breadtalk, I have a more recent blog post on my decision to initiate a position. I compared it to Old Chang Kee and QAF Limited, both of which I have been a shareholder of for many years. 

If you are interested to know why I had a change of heart and decided to initiate a smallish long position in Breadtalk, go to the related posts at the end of this blog post (see related post #2).

Starhub. In June last year, when I did a technical analysis for Starhub, I said:

"The widening of the Bollinger Bands indicates increased volatility. The OBV shows selling pressure. The MACD is declining and shows no sign of a positive divergence. These are all on the weekly chart which suggests that continuing weakness in the longer term should not surprise us." Read blog post: here.


We saw Starhub's stock price sinking and I nibbled  again in late November. I feel that Mr. Market is right to be concerned but might be overly pessimistic about Starhub's prospects with the introduction of a 4th telco.

There is plenty of speculation now but, to be realistic, it will take time for the new entrant (which is expected to enter the market in 2018) to gain traction and it remains to be seen how successful it will be.




Back in June 2015, I also said that SPH and Starhub were similar:

"They could see earnings come under pressure for different reasons but that makes them similar too as the challenges are very real.... I would like to have some buffer in terms of dividend yield buying into SPH and Starhub because I am investing in them primarily for income and not growth." Read blog post: here.

I believe I am getting a much thicker cushion buying Starhub at under $2.80 a share and that was what I did.

As for SPH, let me share here a recent conversation with a reader:

I have been a SPH shareholder for many years and I am happy enough to be paid while I wait.
---------------------
As this turned out to be a very long blog post, I chopped it up into two parts. Read Part 2: HERE.
Related posts:

1. 1H 2016 income from non-REITs.

2. Breadtalk, OCK and QAF.

3. Made $1m investing for income.
4. 2016 FY income from S-REITs.

2015 full year income from non-REITs.

Before I reveal the numbers, let me talk to myself about what I did in 4Q 2015, investments wise.

I re-initiated a long position in ARA as I felt that its stock price declined to a reasonably attractive level. 

ARA's rights issue which followed not long after was unexpected but I took up my entitlement and applied for excess rights as I looked at it as an opportunity to buy more on the cheap. I will probably buy more if the stock declines further in price.

Of course, those who follow my blog will also remember another rights issue and that was by Croesus Retail Trust. I too participated fully in that rights issue.

A back of the envelope calculation shows that Croesus Retail Trust is now trading at a 10% distribution yield. 

Croesus Retail Trust has rather high gearing level but if we were to take that away, Croesus Retail Trust is actually still generating more than a 5% distribution yield (i.e. non-leveraged yield) which I think is very attractive for a portfolio of mostly freehold retail properties in Japan. 

As the Trust's unit price declined, I added to my position again in the middle of December at 78c a unit.

I also increased my investment in Accordia Golf Trust as its stock price declined. The last time I did this was in mid-December at 51c a unit.

Investing in Accordia Golf Trust, we must realise that weather plays an important part in its performance. So, we have to expect its revenue to fluctuate quite a bit seasonally, much like investing in hospitality REITs.

With sentiments pretty negative, if Mr. Market were to offer me meaningfully lower prices, I would probably be buying more.

I also did a bit of trading in 4Q 2015. I reduced my long positions in Wilmar and ST Engineering as their stock prices recovered. That gave me some trading gains for the quarter.

I don't trade very much anymore as it requires a bit more work. Now, I might not even look at the stock market for several days in a row.

I added to my long position again in ST Engineering as its stock price declined by more than 10% from my recent selling price. 


ST Engineering is still one investment for income and growth. I definitely want to buy more if Mr. Market goes into a depression.

For those who do not follow my comments section, I initiated a smallish long position in DBS. Some know that I have been thinking of buying into the three local banks for a while and have been waiting for their stock prices to become cheaper.

I chose DBS first because it was trading at the smallest premium to NAV compared to OCBC and UOB. There is also consensus that DBS would be the biggest beneficiary of rising interest rates.

I also added to my investment in SingTel as its stock price declined. We invest in SingTel, Starhub and M1 because they are defensive income generators but with SingTel, there is also a nice element of growth.

Finally, I added to my long position in APTT this month after having left it alone since its inception. The rapid plunge in APTT's unit price up till middle of December seemed excessive to me even though I have mentioned before that a DPU of 8c a year is unsustainable in the longer run.


A much lower DPU of between 4c to 5c would probably be more sustainable for APTT. So, adding to my long position at 63c a unit, I am expecting a more realistic distribution yield of 6.3% to 7.9%.


A more recent development was an expression of interest by a party to acquire Ascendas Hospitality Trust which I included in my income portfolio in 3Q 2014. I have added to my investment on a few occasions since then, as and when its unit price declined.

The last time I increased exposure to Ascendas Hospitality Trust was on 24 August 2015 at 58.5c a unit. With an estimated annual DPU of 5.5c, I was looking at a distribution yield of almost 10%.

Although I hope that the offer is going to be at a fairly attractive premium to valuation, I am aware that if the Trust should be taken private, my income from non-REITs next year would take a hit.

Very safe to show hand like this.

Including my first income distribution from Religare Health Trust (RHT), dividends from my investments in non-REITs in Q4 brings my income in 2015 from them to a grand total of S$76,804.69.

This works out to be about S$6,400.00 a month.

Including the distributions from S-REITs this year, I am pretty satisfied with the total income generated by my investment portfolio.


Related post:
1. ARA: Re-initiating long position.
2. Croesus Retail Trust: Rights.
3. Trading ST Engineering.
4. Religare Health Trust: Entered at 88c.
5. 9M 2015 income from non-REITs.

Trading around core positions for extra money.

Some might remember me talking about how I was trading stocks a bit more in the past. I also talked about how it is possible to trade around our core investments for income here and there.

If we are good at it, we could make some extra money from trading and yet retain a portion of our investments for regular income.



I don't trade stocks as much these days because it entails more work. It isn't just about buying stocks and holding them for dividends. We have to look at charts and decide when to sell and, of course, hope that prices might come down again so that we could buy.

However, sometimes, I just feel like doing a bit of trading and one example in the last two weeks was ST Engineering. I partially divested at $3.35 a share at the end of October with the intention to buy again if its stock price should decline meaningfully.

I decided to sell at $3.35 because that was where the mildly declining 200d MA was approximating back then. 

As ST Engineering's stock price declined over a few days, I resisted the urge to buy as connecting the lowest and second lowest price points gave me a trend line which suggests that there is probably going to be stronger support at $2.98 thereabouts which happens to be where the 123.6% Fibo retracement line is also located.

My BUY order at $2.98 today was filled.

Of course, it does not mean that the stock price will not go lower from here. 

Technical analysis simply shows us where the supports are. It doesn't say if the supports will hold. Now, if the support should break, we might see $2.88 tested next. I could buy more then.

Now, what if the stock price did not decline but went higher instead? 

Trading around a core position means that we still have a core investment retained for income generation.

So, some might remember that the mistake I made with ARA a few years ago was not retaining a core position whereas I sold only half of my investment in Old Chang Kee and retained half for income, for example.

So, when employing such a strategy, it is important to buy into stocks which we would be quite happy to hold because of the regular income we will receive. If the opportunity for a trade should present itself, sell a portion of our investment and retain a core position.

If prices go up, we are happy. If prices go down, we are happy too.

I don't think anyone would be unhappy with such a situation or am I mistaken?

Related posts:
1. Have my curry puff and eat it too!
2. ARA: Re-initiating a long position.
3. ST Engineering: Mystical art.

ARA Asset Management: Re-initiating long position.

ARA Asset Management was a stock I fully divested more than 3 years ago. 

On hindsight, it was a mistake because deviating from a familiar practice, I did not keep a core position for income. I suppose I was a bit more active as a trader in the past.

I have been waiting for a chance to get back in and the recent plunge in its stock price has provided me with an opportunity to do so.

ARA's EPS for 2014 was 10.35c and DPS was 5c. So, they paid out about 48% of earnings as dividends. 

When looking at ARA's PE ratios in the last few years since 2012, we see a range of about 12x to 22x. Median PE ratio is, therefore, about 17x.

ARA's 1H 2015's EPS came in lower at 4.19c. Could 2H 2015 do better for FY 2015 to beat FY 2014's EPS in aggregate? Of course, your guess is as good as mine. 



If we should simply annualise 4.19c, we get a full year EPS of 8.38c. Multiply that by 17x and we get a price I might buy at which is about $1.42 a share.


At $1.32 a share, I am re-initiating a long position at a PE ratio of 15.75x which is a bit lower than the median of 17x identified earlier. 




Of course, if ARA should deliver an EPS of 10c for FY 2015, $1.32 a share would look much cheaper then (with a PE ratio of 13.2x).

Dividend yield, assuming DPS of 5c remains unchanged, is almost 3.8% with a purchase price of $1.32 a share.

Another stock for income and growth? Good to accumulate at lower prices? Perhaps so.


Related post:
ARA: Divestment $1.30 and $1.32.

ARA: Divestment at $1.30 and $1.32.

I have been entering overnight sell orders for ARA at $1.30 since early this month. $1.30 was the price I last sold some ARA at. As I noticed some strength in the upward movement in price, I also put in a sell order at $1.32 last night. Both sell orders at $1.30 and $1.32 were filled today.

Price touched a high of $1.33 today before closing at $1.315. Volume was relatively low compared to 3 sessions ago when price action formed a similar white candle. I wonder if it would have enough fuel to push it past the next resistance at $1.335.

Immediate support is at $1.29 but I expect a stronger support to be at $1.25 in case of a retracement. $1.25 is also where a golden cross is likely to be formed with the 20dMA rising to cross the gradually declining 100dMA. A golden cross was earlier formed between the 20d and 50d MAs.

REITs, NOL, ARA and Hyflux.

Hope everyone had an enjoyable long weekend and is not missing the holidays too much.

The bullish movement in the stock market should put smiles on the faces of long holders. Has the bear been vanquished? I think it is too early to think so. So, we might want to make use of the bullish sentiment to lighten our long positions.

For me, I am still heavily invested in selected S-REITs as they could continue to deliver predictable passive income even in a zero growth environment. This is quite different, however, from thinking that S-REITs' unit price would not suffer in tandem with the broader market in the event of a crash. Indeed, it would be naive to think so although, with stronger balance sheets, we should not see the same magnitude of decline as in the last global financial crisis.

If we believe that money should go to where it is treated best, any significant decline in the unit prices of the S-REITs in my portfolio would tempt me with higher yields to add to my long positions. For now, I am keeping the status quo with regards to my S-REITs portfolio.

What about lightening my long positions? Share prices of certain companies went up quite a bit yesterday and I tried to sell some.

Today, my sell order for NOL at $1.22 was filled. With this partial divestment, I made some pocket money from Mr. Market. Why $1.22? That was the high of early September. Indeed, a safer resistance to sell at would be $1.18 as it has been tested many times. I took a chance that the buying momentum could push price pass $1.18 and it paid off. Indeed, price touched a high of $1.23.

However, the formation of a shooting star on the back of higher volume today suggests that NOL's share price could be heading lower from here. If $1.18 cannot serve as support, we could see price retreating to $1.10 which is where we find the 50d and 100d MAs merging.

I was not so lucky with another two counters, ARA and Hyflux.

People would say that ARA's trading volume is so thin most of the time that TA is inaccurate here. I didn't really bother using TA this time as I simply remember selling at $1.30 the last time and tried to do it again this time. Its share price did touch $1.30 last evening but my sell order was not filled. Trying to sell again today at $1.30 proved to be futile.

Well, it is back to the waiting game. If $1.30 should be taken out, I wonder if the next target is $1.45? Allow me my little day dreams.

As for Hyflux, the many white candle days on the back of expanding volumes led me to think that we could possibly see gap closing at $1.365 or even see a test of the support turned resistance of $1.39. Deciding not to be too greedy, I entered a sell order at $1.36. Unfortunately, it turns out that I was still too greedy.

Anyway, looking at the chart, immediate supports are at $1.24 and $1.225. The formation of a black candle on the back on lower volume is good news for long holders. However, that the black candle covers more than half of the preceding day's white candle is ominous. The MACD is rising strongly but it is still in negative territory. So, things could go awry.

I partially divested some of my investment, locking in a small gain in the process. I am just simply managing risk here by reducing exposure. If price should continue its upward trek, I would still stand to gain.

Finally, turning our attention away from the stock market, I have put up new blog posts on my recent trip to Japan. See them at Travel Photos and Videos. More to come. :)

Outside Lumine, Shinjuku. Kitty, "Hey! You can do it!" Believe it!

Related post:
Hyflux: Broke resistance.

ARA: Divested at $1.26 and $1.30.

Trading volume for ARA expanded today, being the highest in six sessions, which helped to form a long wickless white candle. This is the most bullish of candles. Could we see its share price climbing higher tomorrow? We could.

However, I have completely divested my long position in ARA and would not be able to benefit from further appreciation in its share price, if any. Completely? Yes. My overnight sell orders at $1.26 and $1.30 were both filled today. So, does it mean that I believe that ARA's share price has peaked for now? I don't know if it has peaked but I feel that it is nearing a longer term and, most likely, stronger resistance.

Longer term resistance? Connecting the highs of 31 May, 1 Aug and 1 Sep will give us a clear trendline which approximates the declining 50dMA which is at $1.32 thereabouts. If this resistance could be overcome, we could see the counter's share price moving higher. Otherwise, it would retrace to supports.

I simply followed my TA (for what it is worth) and divested as the gap at $1.26 was filled and at $1.30 which is just one bid away from gap fill at $1.305. The latter was filled after the market closed at 5.04pm.

Good luck to all who are still vested.

Related post:
ARA: Partial divestment at $1.18.

ARA: Partial divestment at $1.18.

On 7 October, I said in a blog post that the 61.8% Fibo line "approximates $1.18 and this is also where gap close could take place if the resistance at $1.16 could be taken out convincingly". My overnight sell order at $1.18 was filled.

Closing at $1.205 is exactly where we find the declining 20dMA today. This also coincides with the declining trendline connecting the tops of 1, 9 and 21 Sep. So, it explains why it was such a strong resistance.

With the MACD forming a bullish crossover with the signal line in negative territory, we could see a continuation of this rebound. A necessary condition would be higher volume if price should attempt to push higher. Notice how volume has reduced as price inched higher in recent sessions. This is most probably unsustainable.

Overcoming resistance at $1.205 in the next session convincingly could see buyers piling back into the stock which could then see gap closing at $1.26 and perhaps even at $1.305. The latter is still possible since the declining 50dMA approximates $1.32 and provides some breathing room.

Related post:
ARA: Partial divestment at $1.155.

ARA: Partial divestment at $1.155.

When I was looking at ARA's chart last night, I decided that I should do a partial divestment. I would sell those shares I bought on 4 Oct, Tuesday.

Why? Volume was relatively thin. Up days accompanied by such thin volume are suspicious.

I decided that there would be resistance at $1.16 because that was the price at the start of two long black candle days and with high volume to boot.

Shareholders who had wanted to divest then but did not do so at $1.16 would remember that price. They would also remember how a low of $1.015 was hit by the close of the next day. That was a whopping 14.5c loss in just two days!

Mr. Market remembers extremes well and would try to divest if $1.16 should be tested. Today, the counter hit a high of $1.165 before closing at $1.15. The resistance at $1.16 was overcome only briefly. Closing at $1.15 means $1.16 is still the resistance to watch for now.

Using Fibo lines, we see that 61.8% approximates $1.18 and this is also where gap close could take place if the resistance at $1.16 could be taken out convincingly. The next higher resistance is at $1.23 as provided by the 50% Fibo line and the declining 20dMA.

Naturally, my next sell order is at $1.18. I could also place another sell order where the declining 20dMA is approximating. However, unless volume should increase meaningfully, it is hard to envisage ARA's share price moving much higher. Volume is, after all, the fuel that drives rallies.

As the MACD is still in negative territory and with no sign of a positive divergence, the shares bought on Tuesday were really for a quick trade on expectations that a rebound would materialise. So, I put in an overnight sell order at $1.155, just one bid below $1.16 where I expected some resistance. This was filled.

Locking in gains with a partial divestment is, I believe, the right thing to do. The counter is in a downtrend and we want to sell at resistance in a downtrend. I think that is what short sellers are waiting to do as well.

Related post:
ARA: A trading buy?

ARA: A trading buy?

2,531.02/

-90.38/

-3.45%

2,531.02/

-90.38/

-3.45%

I remember reading an article recently in which Warren Buffet said he has his elephant gun ready and will scoop up undervalued companies if they should present themselves. With so much fear in the air and likely to get worse, we should do the same.

Do not feel fearful when there is so much fear in the air. Instead, get ready to load up on cheap stocks which, by the way, could get cheaper.

One company which I am eyeing is ARA Asset Management. By all accounts, this is a great company to invest in but at the right price, of course.

ARA is in a net cash position and has a net profit margin of 53.6% according to its 1H 2011 numbers! Yes, net margin, not gross! It also has a yearly dividend payout of 4.8c per share which seems sustainable.

NextInsight has two recent articles on ARA Asset Management. So, I shan't say more. Read: ARA Asset Management: resilient earnings, super high profit margins and steady dividends.

We have identified a good company to invest in. The question is what is a good price to buy at or when should we start buying?

On 23 Sep, I initiated a long position at $1.22 per share. Then, I said that although ARA is "a fundamentally sound company, its share price could weaken further from here. It might be a good idea to wait for the dust to settle before adding to my newly created long position." See blog post here.

On 26 Sep, I decided to add to my long position at $1.13 and these shares were divested on 29 Sep at $1.20 for a quick trade. Recognising that price could rebound before weakening again, the long position at $1.13 was more for a trade anyway. I was lucky it turned out nicely. See blog post here.

So, has the dust settled? It doesn't look like it. The MACD has continued its plunge deeper into negative territory as long black candles formed two days in a row on the backs of high volume. However, shares of ARA could be a trading buy. Why?

If we look at the Bollinger Bands and the MA Envelope, we will see that ARA's share price had in the past rebounded if it should break the lower limits. The rebounds tested and broke the 20dMA which acted as a weak resistance. The 50dMA then stopped the share price from moving higher. Could this happen again?

I added to my long position towards the end of the trading session today at $1.04, $1.035 and $1.03. If price should rebound to test resistance, I will offload these shares for a quick trade.  If price should continue to weaken, expect the next supports to be at 98c and 95c.

Looking at the weekly chart, it is clear that stronger support is at 89.5c. This is followed by 61.5c. If these supports should be tested, it will be some way to fall from the current level.

1H 2011 presentation slides here.

ARA: Partial divestment at $1.20

I was hoping that ARA's unit price would retest resistance provided by the declining 20dMA yesterday after the rather nice white candle the day before. So, I was hoping that there would be a chance to sell closer to $1.30.

Unfortunately, yesterday's black candle was formed on the back of much higher volume as price tried unsuccessfully to move higher. The ADX is rising and the DIs are still negatively placed. Selling pressure was strong.

The white candle today had even lower volume than that of two days ago. The bulls seem to lack conviction. So, I decided to lock in some gains by divesting those units obtained at $1.13 recently at $1.20.

If price were to go higher from here to test resistance provided by the declining 20dMA which approximates $1.29, I could divest those units obtained at $1.22 last week. If price were to weaken, I could load up again if the immediate support at $1.11 should hold firm.

First REIT, AIMS AMP Capital Industrial REIT, ARA and Sabana REIT.

It is kind of late and I still have a long drive ahead of me. So, this will be a quick update with very simple charts.

My overnight buy order for First REIT at 76c was filled. My other overnight buy order at 74.5c was not filled although the unit price did go that low today.

Overnight buy order for AIMS AMP Capital Industrial REIT at 19.6c was filled. I thought that many people would want to buy more units of this REIT at 19.5c, the last low. So, I queued 1 bid higher at 19.6c.

Towards the end of the day, I also bought shares in ARA at $1.13 and units in Sabana REIT at 86.5c.

Like I said in my last blog post on ARA, I did not put in an overnight buy order at $1.17 which was the next support I identified if $1.22 should fold. I said I would rather wait and see. Today, ARA's volume was rather low and $1.13 was a good 9c lower than $1.22. Could we see ARA at $1.08 next?

As for Sabana REIT, I would like to get this closer to 83.5c, its last low. At 83.5c, it would be giving a distribution yield of 10.5%. 86.5c is a few bids higher.

Looking at the chart now, I think I should have stuck to the original plan and waited for its unit price to get closer to 83.5c. Well, who knows for sure? Could have a bullish harami in the next session. ;)

Good luck to us all.

ARA: Initiated long position at $1.22.

I initiated a long position in ARA today at $1.22 a share. This decision is based on my TA last evening. Fundamentally, at $1.22, the estimated dividend yield is about 4% but investing in ARA is primarily for growth.

The counter's share price touched a low of $1.20 before closing at $1.205 on the back of very high volume. Such high volume sell down usually has some momentum to follow through. So, we could see ARA's share price head lower next week.

Based on the TA I did last evening, the next supports are at $1.17 and $1.08.  However, seeing how strong the selling was today, there is a good chance that $1.17 will fold if it should be tested.

I am not putting in any overnight buy order, prefering to wait and see how things will unfold next week, given the strength of the selling.

What about the potential positive divergence? It is looking extremely dicey as the MACD took a nosedive today.

Although a fundamentally sound company, its share price could weaken further from here. It might be a good idea to wait for the dust to settle before adding to my newly created long position.

Related post:
ARA: Breaking support. Going lower?