Ever since the CPFB introduced a colorful pie chart of our CPF savings a few years ago, I would look forward to mine every year like a teena...
Past blog posts now load week by week. The old style created a problem for some as the system would load 50 blog posts each time. Hope the new style is better. Search archives in box below.
Many were expecting HPH to open underwater and that was exactly what it did. I have not tried my hands at IPOs in years, taking to heart what Warren Buffet said about how IPOs are never undervalued and never good for investors. Of course, we could make money from IPOs in very bullish circumstances but Warren Buffet was referring to value and not price.
HPH touched a low of 94c before closing the session at 95c today.
Warren Buffett sent an open letter to the U.S. government recently thanking it for a job well done:
"Uncle Sam, you delivered... overall your actions were remarkably effective."
Warren Buffett thinks that the stimulus money and bailouts worked. Well, there is finally hard evidence that the U.S.A. is back on a growth path. This is taken from Yahoo!Finance:
“In October we were able to rule out this double-dip nightmare scenario,” he says. “We are able to see very clearly, with a good deal of conviction, a revival in growth,” Achuthan tells Aaron and Dan in this clip. The improvements are widespread, Achuthan says.
-- Profit growth and productivity are on the rise. Achuthan says that leads to more hiring and capital investment in equipment.
-- Housing has stabilized. The outlook may not be rosy, but “it’s not falling off a new cliff,” which means it’s not a drag.
-- Cheap capital as a result of low interest rates. The private sector continues to create jobs.
-- Pent-up demand. Thanks to the jump in jobs, people are less afraid of losing their positions, Achuthan suggests. And after two years of saving and worrying, consumers have “frugality fatigue” which is beginning to show in the improvements in holiday shopping data.
Posted Dec 01, 2010 03:50pm EST by Peter Gorenstein
This bodes well for U.S.A.'s trading partners like Singapore.
just want to understand better with respect to the various stocks. I understand how say a TRUST / REITS works..and noticed that the price does not fluctuate much- but in return there is steady dividends that is tied to the NAV.
How then does one determine the NAV of say a stock that is tied to a business like manufacturing, services etc etc? and also the PE ratio?
Say for e.g memstart which focuses on membranes for water treatment. I do think that this is one sector besides solar/ green energy that would have a strong demand in the future given the scarcity of natural resources in the future. How does one decide whether this is a good stock to invest in. Are there questions that one should ask if we're investing for long term vs short term?
It's good to get a FAQ on how to choose stocks for long term and short term, and not just purely on TA or FA.
Cheers
D
My reply:
Hi D,
A FAQ on how could we value different companies in different sectors would be a gold mine. Unfortunately, I do not have the expertise to do this. I think we would probably have to assemble 10 to 20 different bloggers who are experts in their own stocks of interest. ;-)
Different sectors are valued differently. So, some companies could have PEs of 30 and is considered cheap compared to other companies in a different sector with PEs of less than 10. So, comparing against peers in the same sector is something I do often.
If you are asking questions about NAV and PE, you are doing fundamental analysis (FA) and likely to care more about values (i.e. you are a value investor). These numbers are easily obtained in a company's financial report (quarterly) or annual report. NAV is usually found towards the end of the reports.
I believe that the idea of long term investment is actually flawed and made into a legend by stories of how Warren Buffet kept adding to his investment in Coca Cola, for example. If Coca Cola's fundamentals should take a turn for the worse one day, I am sure Warren Buffet might sell out. Stay nimble because circumstances are very fluid. They could and often change from time to time.
If you really like the idea of long term investment, you would need the kind of foresight that Warren Buffet has. Take note that even he makes mistakes. You want to look for companies with big "moats" (strong competitive advantages which are hard to replicate). To this end, there are many books available about how Warren Buffet picks winning stocks for the long term. :)
After learning TA, I tried applying it and I have made and lost money. I think I am not very good as a trader since I must have lost more than I made. My roots are in FA but it was only during this recent crisis that I beefed it up. I believe that my current style of combining FA and TA is most suitable for me.
The thing about FA is that we are looking for value. We want to buy something valued at $1 for 50c, for example, but that, to anyone who has been practising FA for sometime, is too simplistic. Let us not dwell on that for now in order to push this post forward.
When we buy something based on FA, the chances of us being disciplined and to hold on, riding through rough patches, are higher. This is because our knowledge of the fundamentals of the stock anchors us down. We are less likely to be flighty. Personally, I need that kind of anchor. That was how I had the mental strength to hold on to Healthway Medical when some gave up. The story is here.
I am not a good trader because I don't like to cut loss and if I do cut loss, I hurt. I am not without emotions and I don't like feeling hurt.
I am not a good trader because I feel half clothed not knowing the fundamentals of a company. I feel like I am looking through lens with cataracts.
A clear picture of a company's fundamentals is important for me. I would buy into a company that is undervalued or even fairly valued as long as I see potential given the circumstances in the present and what is foreseeable in the future.
For anyone who wants to look for value in companies, start by reading up on financial statements. As good a place to start as any is here. Economics and the industry the company is found in are important considerations too. Not everyone enjoys FA just like how not everyone is a good trader. We have to find our own niche. Whatever our choice, remember that there is no free lunch in this world.
A 'powerful' sermon. Matthews says the Q&A session is a highlight for him -- watching both Buffett and Munger apply their guiding principles to each, individual question...."Do the right thing. Look for value. And buy and hold" is their message, Matthews says. But, "it's the difference between reading a sermon on paper and actually hearing it in person. It's very powerful....
Looking into crystal balls can be hazardous to health because they give you signs of what might be and not what will be. Usually cryptic and sometimes perverse, it's best to avoid these magical objects. However, being human, I have the failings of our kind, the type of failings which got us kicked out of Paradise in the first instance.
In a post dated 12 Jan, I wondered if a correction was at hand and on 13 Jan, it looked as if a correction was underway. For a recap, please seeConfirming the signs. However, on 14 Jan, things did a u-turn and that got people wondering if there would be more upside to come.
To me, the recent ups and downs of the STI is a sign that a correction is probably going to happen. A 3000 points initial target which so many analysts have talked about is so near and yet so far. The market is grudging and unwilling to give bulls the satisfaction (yet). Analysts have also talked about a 3300 points eventual target for the STI by end 2010. That's a mere 10% from where we are now.
Marc Faber, in an interview with Yahoo! Finance on 13 Jan said that he is no longer bullish on stocks because everyone is now bullish on stocks. Marc is a shrewd contrarian who has been proven right time and time again. He made the observation that many stocks' prices are flattening out and that once the momentum fizzles out, momentum players who are in the market for the upward momentum and not to hold long term positions, will pull out and they will pull out fast! We will then have a correction in earnest. It would be prudent for us to take Marc's views seriously.
What are we to do? I suggest keeping an eye on the newsflow and on the STI at the same time for signs.
During the recent multi-months recovery from the market bottom, we saw how streams of bad news were brushed aside as the market powered upwards. That was a powerful sign that a cyclical bull was charging back. It was a sign which many ignored much to their regret later on. At best, disbelievers missed out on a money making opportunity of a lifetime. At worst, shortists were caught with their pants down and lost their pants in the process (and some even got spanked on their backsides).
If we get a constant stream of positive newsflow and the STI hardly budges but a slight whiff of negative news sends it down, the signs are clear: a correction is not far away.
A saying from Warren Buffet now rings clear in my mind: Be fearful when others are greedy! That is a generalisation like many of his sayings. It serves to inform and not to instruct. That's where many would be Buffets got it wrong. They think his sayings are instructions.
Personally, I believe in being a pragmatist and not being overly bullish or bearish. I believe in hedging. I have taken some profit off the table, leaving some long positions in the market in case it decides to go higher. After all, crystal balls reveal only part of the picture, leaving us to form our own conclusions and, usually, we see what we want to see.
Posts
Bloggy Award