ASTI: A doubling of share price in time?

I recently bought some shares of ASTI Holdings Limited.  This company is engaged in the provision of solutions and technologies in the backend (ie assembly, test and finishing) arena of the semiconductor industry as well as the distribution of electronic components and products plus the provision of semiconductor application in consumer electronics, computer peripheral and communication solutions. The description of  ASTI's business is taken from its homepage.

Anyone who knows me well would be somewhat surprised at this move of mine since I am not in tune with high technology at all and IT is as Greek to me as, well, Greek. However, I am not a hermit and I do keep in touch with the real world.  There is much news of how the cyclical demand for semiconductors has been ramping up and that this momentum has yet to run its course.

I read an article in The Straits Times (22 Aug 10) by Tan Ai Teng on why tech stocks are a good buy then:

1. Tech stocks are in a period of strong earnings recovery.

2. The second half of this year would have been stronger if not for a shortage of components.

"I am bullish on the semiconductor equipment related business. According to Semiconductor Association's (SEMI) forecast, global semiconductor equipment sales are expected to climb 104% this year... and rise a further 9% next year."

Since I am so unfamiliar with tech stocks, I was wondering which company's shares offer good value.  As luck would have it, I read an article in Next Insight where NRA reported on Innotek and ASTI.  Both companies seem promising. However, Innotek's share price has appreciated enormously while ASTI seems like a laggard. 

The following factors drew me to ASTI:

1. A share price of 10.5c then with a PER of 3.8x and NTA/share of 16.9c.

2. Improving balance sheet with its gearing level falling from 22% to 8%.

3. Gross margin (GP) expanded from 7.1% to 22% year on year.

Read article here.

As per my usual style, I looked at the chart to find a fair entry price.  ASTI bottomed in late November 08 with price touching a low of 4.5c.  It made a higher low of 6.5c on 16 March 2010. It broke above the 200dMA in April 2010 and has been trading above this MA since. Using candlesticks and the 200dMA as references, strong support at 9c is spotted.  Seeing how the 20d, 50d and 100d MAs are bunching together at around 10.5c, however, I decided to buy some at 10.5c as a hedge.  Price might or might not retest  support at 9c.  If it does not, I'm already in.  If it does, I would buy more as the uptrend is intact.  Looking at the OBV, it is obvious that there is longer term accumulation going on and once all the sellers are done selling, the share price could rise.

NRA has a target price of 21c for ASTI.  That is a 100% upside from my entry price of 10.5c.  Nice but I see resistance at 12c which was tested several times in recent months.  It is, however, also interesting to note that we might be seeing the formation of an ascending triangle here with 12c being the top of the formation.  If  the resistance at 12c is taken out, I see immediate resistance at 13.5c with a near term target of 15c. Over a longer term, we could even see 17.5c, a support level which broke in early 2008, tested.  Of course, in extremely bullish circumstances, prices could go parabolic in which case all resistance levels identified could be destroyed like butter cut by a hot knife. Then, it would be time for me to let go and run for the hills.

Overall, ASTI looks rather promising.  Wish me luck. :)

This video describes how the semiconductor industry may experience shortages due to capacity constraints, increased demand, and low inventory levels (June 14, 2010):

P.S. I am having trouble saving charts from ChartNexus in Lim&Tan. So, I am unable to put up the chart for ASTI here.

Roads to wealth creation in the stock market.

I have a friend who is very risk averse and views the stock market as being fraught with danger. He basically thinks it is a jungle with snake pits and poisonous gas bogs. I am inclined to agree with him which is why it would be most advantageous if we could find a guide who would walk with us.

Having read some personal finance blogs, my friend decided that he wants to try to grow his wealth by investing in the stock market. A commendable change in attitude, if I do say so myself. He wondered if he should try his hands at trading the market and maybe he could grow his wealth quickly that way. I told him candidly that he could make a lot of money that way, the operative word being "could".

I shared with him how I made a lot of money from March 2009 to January 2010.  However, that was a once in a lifetime opportunity to make a lot of money and I was lucky to have participated. Was I smarter than the average investor during the months of March 2009 to January 2010? I don't think so. I was probably just at the right place at the right time. I also told him how I lost a lot of money as well prior to the aforesaid winning streak. So, to me, it's quite simply all about timing.

I told him he might want to invest in some companies and REITs which could give him a yield of 6 to 10% per annum.  This took into consideration his risk averse personality and the current high prices of stocks. I believe that investing in some companies and REITs with strong fundamentals and high yields would be best for him. I also impressed upon him that these companies and REITs could see their share prices fluctuate but since he is investing for income, he should not have to worry too much about the day to day fluctuations in price.  This is a big advantage of this strategy.

How much could he afford to invest?  After doing some calculations with him, setting aside some money for emergencies and daily expenses which amounted to several months of his salary from active employment, he had a capital of about $100k to invest with. I suggested a basket of REITs and companies which he could invest in when prices next pull back (as prices do not usually go up in a straight line). Even then, don't put in all his money at one go but split his funds into 4 or 5 tranches.  This is hedging in case prices do fall lower.  If he has some knowledge of TA, he would be able to spot supports and trends and would be able to decide if he should pump in more funds each time prices fall or if he should wait.  So, learn some TA, he shall.

After saying all these, he was quite pleased but at the back of his mind, there remained a nagging thought that he could grow his $100k to $500k in the next 10 to 20 years if he traded actively. I simply smiled and told him to go learn TA and trading strategies.  There are courses, websites and blogs aplenty.  Could I not teach him? I told him honestly that I am not a very good trader. I use a combination of FA and TA, FA to spot undervalued stocks and TA to spot entry and exit prices. The high yield counters I am vested in could possibly go higher in price as they are mostly undervalued.  I am quite confident and comfortable with my approach. It might or might not be for him.

I also suggested that he could simply wait for the next crash before going into the market. Buy at a time when there is abject pessimism and when most have given up on the market. Is it that simple? Well, it could be, I said. Why bother to trade actively (especially if we are not very good at it)? Just save his money and continue saving as much of his monthly salary as he could.  When the next crash comes, he would be ready.  Load up then and get ready to see his wealth double ... or even triple.

The Chinese have a saying that "one type of rice feeds a hundred types of people". There are many strategies to wealth building and we simply have to find a strategy that works for us.  Age and how much money we have to start out with have a part to play, perhaps, but I believe that ultimately, we must be able to sleep well at night with our decisions in life.

Related posts:
Risks and rewards: TA and FA.
Excuse me, are you an investor?
Seven steps to creating passive income from the stock market.