Wednesday, January 31, 2007

Reader's Questions

My reader said
"Hey there Pehon,

I really like your blogsite, it's really informative and succinct.I'll continue to read from it regularly!Just hope you can maybe give me some advice on Wilmar.

I bought it at $2.82 earlier this month, and currently it's been hovering at about $2.30 to $2.40 on a daily basis. I've invested x amount in it, and I too agree with you about not averaging down. Iresisted the urge even when the price bottomed out at $2.25 just lastweek.

So, in your opinion, following your trading philosophy, whatwould you do? Hold, sell and invest in other things, or buy somemore?

Another share that I've very recently purchased is MMI Holdings. I think it's got very good upside potential, and there has been alot ofinterest in this stock lately. Currently it's already up 4.7%. I'vealso put in x amount in this.Do you think it is wise to sell off whatever I have in Wilmar to invest in MMI as you have suggested in your example you gave aboutStock A & B in your blog?

Cheers,
Reader"


Well, first of all, thank you for your support for the blog.

For the first question, based on my investment model, i would have sold Wilmar at $2.61 if i were you. That would translate to a -7% to -8% loss. At the price you are talking about of $2.40, its already a -14% loss. Its much easier to swallow a -8% loss compared to -14%.

I'm definitely against averaging down, buying or holding your Wilmar anymore. I'll say sell and buy into other shares.

For your portfolio, I would recommend 2 routes.

  1. Sell all of Wilmar and invest into other shares.
  2. Sell all of Wilmar, and invest in MMI.

I'm aware that most professional analysis houses recommend MMI. However, i've looked into MMI's 1Q2007 results, and I'm going to voice concerns about its QoQ growth.

"Its a single digit growth. I've resonable doubt to say that its not going to sustain its growth achieved in 2006."

Maybe another counter would be better for your cash.

Ps. Refer to disclaimer below.

Review: China Hong Xing & Sino Env

What a good day it has been with China Hong Xing. Congrats to those who has followed my recommendations, and made 13% in 2 days (at todays intraday high).

Take profit if you are on contra. There might be a small correction for the next few days. I'm staying vested. Looking for more gains for China Hong Xing, which in my opinion, has a huge potential.

Addition (1700H, 31 Jan 2007):

I do not recommend selling before a possible correction. What if it doesn't happen? I recommend investors who intend to stay invested, to stay that way, and not try to outsmart the market by selling today at a high (for both Sino Env and China Hong Xing), and hopefully bargin hunt tomorrow.

I'm talking about people who bought on contra, on my recommendation. Today is a good day to take profits. Don't hold contra gains for too long. (i don't recommend contra by the way).

For those who have missed the boat for both counters (Sino Env and China Hong Xing), it is my opinion that these 2 shares can still grow. But you must be patient and have the holding power. Generally, a large 1 day gain isn't healthy for a short term.

Monday, January 29, 2007

Buy: Ching Hong Xing

China Hong Xing deals with sporting equipment in China. They own two brands, namely China Hong Xing Sporting Equipment and Li Ning. They have recently won a sponsorship contract with the South Koreans for their Olympics campaign.

China Hong Xing's profit growth has been increasing steadily, and at an increasing rate over the last 2 years. Like many of my lost opportunities, China Hong Xing has been in my watchlist for the last year already, and I've seen it grown to its current level from a modest price.
The 3Q 2006 report showed a 3Q QoQ growth of 40% and likewise for the 9 month comparison. This impressive quarter is supported by several quarters in the past 1 1/2 years. They showed similiar increasing profit growth.

"A company with not only profit growth, but increasing growth is the perfect company to invest in."

China Hong Xing's annual growth has also shown growth over the last few years. Infact, China Hong Xing has a even larger room to grow. With an extremely large population, China Hong Xing is well positioned to tap the large consumer base. The projections show a steady increase in retail outlets to tap an increased pie of consumer spending.

Looking forward, to the next few years, with the Olympics in Beijing coming up, there will be more Chinese spending on sporting goods. Who knows, with them sponsoring the Korean team, they might just be the next big thing in sports like the way Nike is.

Buy, with a target of $3.00
Vested at $2.56 on 29 Jan 2007, 1415hrs

Sunday, January 28, 2007

Quick Lesson: What the Rich Does, and the Rest Don't (part 2: Gambling?)

One important factor that the rich sets themselves from normal investors, is the way the rich look at investing.

Normal investors have to understand that investing in shares should never be exciting. Define exciting? When you find yourself sitting infront of the live price stream, and find a drop of 2% too much to handle, such that it makes you want to look at the price stream, hoping for more buyers than sellers.

If you are staring at the charts cause of contra trades, you are gambling.

In the past, with me holding shares of companies that have made +30% (and still holding), I no longer feel the thrill of the shares increasing in price. In the search for thrill, I made the mistake of finding excitment by doing contra on large movers. Maybe initially I'm able to make money, but gains were in the range of $100-$500 dollars, but losses were larger due to the large commission charges. In the end, I see my +30% gain in my portfolio become something more like 20% due to contra losses I made.

I can safely bet (and its a calculated gamble here) that 90% of successful investors never do contra. The gains from contra trading is too insignificant for the amount of time staring at the charts, and sleepless nights cause its T+2 already. If you were to hold on to good stocks, chances are 50% PA returns are very easily achievable. Together with compounding returns, you will see your $10,000 become $50,000 in no time. Try doing that in contra trading.

Saturday, January 27, 2007

Quick Lesson: What the Rich Does, and the Rest Don't (part 1)

Many people around me always whine about how the rich seem to get richer, and the poor just stays poor. And when I'm talking about poor people, I don't just mean families or individuals that make less than $20,000 a year.

First of all, what makes an individual wealthy? By the car they drive? House? Monthly expenditure? You've got to understand, even if you make $5000 a month, but you squander away all that money within that month on luxury stuff, you might appear wealthy, but in fact you are not. Here is why.

Most wealthy have the ability to put aside a large proportion of their income to investment. Most of us don't. The wealthy have the ability to to that due to their large income. Many of us can't due to our small pay check. And even when we get a raise, we would just increase our monthly expenditure, and that includes our year end bonuses.

"The rich get richer cause they know how to spend their bonus and pay raise, not on material gains, but in investments."

Most of the wealthy people reinvest their investment returns. Most of us don't. Many of my peers make $1000 from their $10,000 shares, and immediately sell and splurge on a holiday or a material gains. They remain that "10,000-dollar-air". You should reinvest to enjoy compounded returns.

"Spending your profits in shares really leave you standing in Square 1"

The fact of the matter is, if you are interested in trading in shares, and you are here reading my blog, really means you have that spare cash (that you really don't need) to invest! So ask yourself, why do you need to spend the cash that you made on your investments?! Isn't it better for you to reinvest those gains, for larger absolute gains next time? Yes I do understand the need to enjoy yourself. My guide is not to use more than 10% of your gain on celebration.

"The fact of the matter is that if you are reading my blog, you probably have the spare cash that you don't ever need to use to invest. So stay vested."

So to answer the question, the ricch have the ability to not only make their capital grow, they know how to make their investment returns grow as well.

Over the next week, I'll be talking about "compounded interests" and several other things that the rich do, but the rest don't.

Friday, January 26, 2007

Sell: UTAC

Lack of interest in UTAC despite good FY. Maybe investors really did read the management review section of the report.

Keep away from UTAC, unless you are a shortie.

Review: Sino-Env

For the last few days, Sino-Env has started a slight descend since its peak of $3.00+. However, I'm not worried yet.

Sino-Env is still a fundamentally strong company, and there is no reason for the price drop (price rise was due to placement of shares). The price drop currently is just a flow of cash out of Sino-Env to other stocks right now that are rallying.

Historically, Sino-Env is "immue" to market corrections, remembering August 06. The chart shows a healthy base during the period where most other shares are struggling.

And boxed up in those three red boxes, show similiar patterns as what we are seeing for the last few days. The share closes at a low point on the chart, and its almost sure to rally the next day. The logic behind this is investors see it as a good point to accumulate.

I'm saying with 70% certainty, Sino-Env will rally latest on Monday, due to possible profit taking seen on Fridays.

Thursday, January 25, 2007

Trading Buy: UTAC

UTAC has put in an extremely impressive performance for FY 06. They have achieved a profit growth of 81.9%, and EPS growth of 67.3%.

For Quarter on Quarter (4Q 06 vs 05), there was only a change of 11.7 % for its EPS. For the model i follow, not only am i looking at a good FY result, i'm also looking at QOQ Quarterly results.
Why is it so? Its possible that this profit growth can't be sustained for the next quarter, by virtue of the fact that QOQ growth isn't good. Indeed, if you were to look into what the management thinks, they only expect a growth of -6% to 0% on Q1 07. This makes UTAC not a stock to hold for the long run.
However, it is my belief that the stock is on its way to a rally. The stock should rally for the tomorrow and thru to wednesday. I'll make a high risk call for
Trading BUY, to Queue tomorrow morning, and a conservative sell target of $1.00.

Wednesday, January 24, 2007

Preview: Why do the rich get richer?

Ever wonder why does the upper echelon of wealthy people always seem to become richer?

What are they doing that lower and middle income people are not?

Find Out This Sunday

Tuesday, January 23, 2007

Buy: Technics Oil and Gas

As the name suggests, Technics Oil and Gas provides services to the Oil and Gas industry, though they are not directly involved in the drilling process.

Technics Oil and Gas has turn their years of loss to years of profit growth.

Revenue for FY 2006 increased 154% while gross profit for the years was up 361%. The company has stated that the good resut was cause of technics oil and gas's expansion programme reaping benefits.

Net margin in 2006 improved to 13.1% from 7.2%, due to economies of scale.

"Technics oil and gas has shown that they are able to keep cost down with expansion."

Technics Oil and Gas's liability to equity has remained significantly unchanged over the years.

"Expansion seemed to be well executed and well planned. Liability to equity seemed to be healthy."

YoY EPS has improved from 2005's 1.54 to 6.24. And another interesting characteristic of this company is the extremely small number of issued shares. Only 142,000,000 shares are issued, with 76.74% of that held by the top 20 shareholders. I estimate less than 25,000,000 shares are floating on the daily market.

"With less shares in the market, it doesn't take a big or important announcement to create a large price change."

However, there is much doubt to whether the earning (and eps) will continue to grow, or will 2007 show a eps and profit unchanged from 2006. The company only releases their reports 2 times a year. Therein lies the risk for this company. If 1H2007's results don't show any significant earning growth (i'm talking about 30% or more), than get out of this company, provided the 7-8% cut loss mark has not been met first.

"Always cut loss at -7to8%. This way, you can be right once, wrong twice, and still be profitable"

However, approaching the 1H 2007 announcement, watch out for any contracts that Technics Oil and Gas wins. This will give us an idea on how 2007 will be.

Buy Technics Oil and Gas, Target of $1.10
Vested at $0.88, 23 Jan 07 1700H

Sunday, January 21, 2007

Quick Lesson: Should I Buy and Hold?

Most financial advisors will advising against contra trading or trading for the short term. They say that one should buy a fundamentally sound company and hold on to it, through thick and thin. However, I'll like to show you the other side of the coin.

The problem with buying and holding is that you might not maximise your returns. Lets say you buy a stock for $1.00. 2 months later, it rises to $1.50. However, a market wide correction occurs or even worse, a economy downturn causes the share to drop to $0.50.

Most of the time when this happens, most daily traders would have cashed in on their loss (if they were late in withdrawing), or made a profit less than what they could have made (if they saw the trend earlier). Institutional investors will stay in it, so long as the company fundamental has not change. If you believed those financial advisors, you would have stayed and suffered a paper loss of 50%. From there, do you realise you need a 100% gain to get back to your break even point?

"A 50% paper loss would require a 100% gain to reach breakeven point"

The difference with institutional investors and small time investors like you and me is the volume of assets we have in Equities. Most of us only have $100,000 or less in the market. The institutional investors have whats more like $100,000,000. They have the ability to move the market single handedly to their advantage. Could you do that? Thats their advantage.

The advantage investors like you and me is the ability to cash in on profits before an impending correction or downturn.

Use the advantage that you as a investor have. You are more agile than large institutional invstors. You can move from trend to trend quickly, mostly within an hour. They can't do that. When you "fight", you fight using the advantages you have. Its the same here in the stock market.

You have the upper hand in withdrawing from a downturning market. Use it.

Review: Sunpower

FUNKY Said

"How about Sunpower....it has been tout as a medium risk high return stock (WILD CARD)...Care to analyse or review....Thanks..... "

If you haven't noticed, the way I analyse stocks defies the norm. The basic reason is I don't use P/E ratios, and stocks i invest in need to have earning growths.

I don't know why sunpower has been touted as "high return". My reason being this.

It seems to me that sunpower is having problems controlling their expenditure. Sunpower have had an excellent revenue growth over 2004, but because of all the incurred cost of increasing the revenue, Sunpower's profit for 2005 has dropped vs 2004.

This is just the kind of company I'll keep away from.

"Earning increase, thats what I look out for"

Otherwise its just like gambling.

Review: Sino-Env

Several people has asked me. "Sell"?

Here is what I will say. "NO"

Just in from the news, they are going to announce FY2006 performance on 28 Feb 2006. In my opinion, its going to be an extremely good result. Does that change your mind?

I'm looking at a 12% profit from my buy price. However, when we are into stocks, we are looking at big profits, when we finally identify a company like Sino-Env. My current sell target is $3.40, but when we reach that price, I'll be evaluating the performance of the company, whether they still have the EPS >25% quarterly growth. If they are, I will re-evaluate the profit target, and of course the loss point (-7% from $3.40).

"The point in shares is to make big profits, when you are right. Invest in Aberdeen Pac Equities Unit Trust if you are looking at 15-20% PA"

Saturday, January 20, 2007

Quick Lesson: Share Placement, the aftermath

When I first started studying the stock market, it was my understanding that the more the issued shares, the more diluted the supply and demand effect will be. When my company, Raffles Education announced a 30,000,000 share placement, i was worried. I thought it would dilute the market. Whats more, the EPS will be much lower. EPS is really what i work with. What i really wanted was a share buyback, to undilute the market.

But I was pleasantly surprised.

The stock increased over 2 days to $1.890. The same thing happened to Sino-Env, though the rise wasn't that significant, due to a previous rise prior to the announcement. So doesn't it defy the economics law of supply and demand?

Well, if you were to learn about placement, its not avaliable for people like you or me (unless you fish it out from your broker or other sources). Most won't issue this discounted placements to the public, for the obvious fact that its discounted. Daily traders would apply for the placements and for sure, immediately sell for quick profit.

The placements are usually given to investment companies or board directors who have a long term out look about the company. Hence it doesn't affect the "free floating" shares out there. The number of floating shares for daily trading remains virtually unchange as the new placements remain unreachable to the common market.

"The Free Floating shares avaliable to you and me remains unchanged after a placement"

What causes the price rise is probably the expected increase in earnings from a company that re-invests the income from the placement. Hence the subsequent price rise.

Request: China Energy

Extremely impressive performance since IPO. Offered at $0.83 a share, and currently trading at $1.210.

I did look at this IPO initially, but I decided against applying for it. Yes, you might say I've just missed the boat, and i'm stupid. But in my experience and analysis, it could have gone both ways. Here is why.
A look at the prospectus. Skip all the tall stories. Jump straight to the financial statement. China Energy had problem keeping profitable since 2003. On top of that, given the sudden jump in 2005 and impressive 1H earnings that exceeded all of the last 3 years combined, I would have given some time for the company to prove itself.

What were the problems China Energy any had when they were losing money? Why the sudden rise?

"I'll only invest in companies with 3 years of proven earnings growth"

A quick look at IPOs last year that had the above condition. Sino-Env. China Fishery. Really. Just take a quick look. Look at their prospectus (financial statement part). Look at where they started trading. Look at where they are now. Will China Energy perform as well as these shares? I don't think so.

Current price hike is caused by too forward looking expectations. It will be very badly hit when the correction comes.

Maybe i'll consider China Energy after its FY2006 report.

Requests: Various Companies

A-Sonic

No offence, but i took a look at the 2005 annual statement, and i closed it immediately. There is no significant profit growth, and the EPS remained virtually unchanged. The industry has been growing alot but A-Sonic doesn't seem to be able to capitalise in it. This is the kind of company to keep away from. On top of that, being a penny stock, it is extremely volatile, and subject to alot of punters' torture.

China Sun

The annual report looks really good. However, stock prices has been on a downward motion. I was unable to access its quarterly report. Website was down. I'll really take a good look at it when I can.

Quick Lesson: Contra vs Cash

There has been some people writing to me, telling me they have lost big money on contra.

Just like to send out a note to all readers that all my recommendations are not contra recommendations, but recommendations for the short (not contra short) to medium term.

And I've never had luck with contra. Everytime I do that, i see the price drop, and I'll do whats known as a "panic sell", and most of the time I'll see it rise above my buy price.

Buying contra is really like going to Genting (Highland), for a double or half (double cause most contra on more than their capital, hence 100% gain).

I won't recommend going contra. Its very vulnerable to daily market flauctuations.

Thursday, January 18, 2007

Review: Sino-Env

Sino-Env's stocks tested the $3.00 mark today. Reached a $3.08 high today. Doesn't the following statement sound familiar to some of you.

"Sino-Env at $2.58, thats too expensive!"

I understand. Thats the kind of response i get when i tell my friends about this stock. Many will rather buy shares that are less than $0.50, as a small price rise translate into a large % gain. However, many of them buy these shares without due research.

"Don't expect quick gains, without adequate work done."

I'm not saying stay from shares that don't cost much. As long as a company is showing good growth, it should be a safe bet, even if its only $0.01. In fact, if u can find a company that is $0.01 and shows 30% QoQ growth, i would say its the perfect share to buy.

I'll re-emphasise that no stock is too expensive, as long as they show a proven profit growth for the last 2 years, most of the quarters.

"No stock is too expensive as long as they have a proven profit growth for the last 2 years, for most of the quarters 30%rise QoQ."

Don't make the same mistake again, when picking stocks.

Review: Osim

As requested by one of the readers, here is my take on Osim.

Look at this report.

2005 Annual Report


It looks really good. Turnover, profits and EPS has increased at an impressive rate. The company has been coming up with new products, and Singaporeans will know they are one of the most actively marketed companies here in our island.

However, look between the line.

3rd Quarter Report

Doesn't look that good anymore. 3rd Quarter profits has become negative. 9 month profit has also become negative. Needless to say, the EPS has dropped from 2005.

There are 2 reasons i can think of that gave Osim good results in 2005. First, there might be a one off gain by offloading some of it assets. Secondly, there has been an unsustainable growth in sales, which i can't really confirmed cause i don't think this stock is worth looking at.

Give I might have vested into this stock if i had saw the 2005 report, provided the profit growth was not from an one off gain. However, you should be glad if you did not invest in Osim then.

"One off gains should be taken out of a company's profits, and EPS when analysing."

Based on my investing model, I advise against investing in Osim. There isn't sustainable earning growths, yet. Until next time, there are other stocks to look at.

Wednesday, January 17, 2007

Quick Lesson: P/E Ratio vs EPS Growth

Yesterday I recieved an E-Mail from a reader, asking me to review a particular company, whose P/E Ration is extremely low, but growth is almost not consistant.

I'm aware that most professional research companies use P/E Ratios to pick out undervalued stocks. I find it amazing how these reports put so much emphasis on P/E ratio, cause I find a consistantly growing EPS more important than a low P/E ratio.

"EPS growth is more important than P/E Ratio. I say that through experience and research."

The idea of comparing 2 competitor's P/E to decide which stock is undevalued is wrong. Lets take stock A and B. Stock A has a P/E ratio of 5x while B has 30x. Stock A has reported flat annual earnings, while B reported growing profits of 30% annually (and of course 30% EPS growth).

Before you buy Stock A, you should ask yourself this question. "Why is there such a big difference in P/E ratio?". Well, P/E ratios are really affected by market anticipation of a company's potential. There really isn't any anticipation for a good future for Stock A, due to the company being unable to grow earnings. There is no reason to expect increase in earnings.

However, Stock B has been growing. In theory, a 30% profit growth should translate to a 30% increase in share prices, all things being equal. Most investors will invest in this company as they anticipate higher earnings.

"Which stock will you invest your hard earned money?

How many of you thought that singtel was expensive at $3.00 now $3.40, and shyed away from investing in it. Capitaland when it was $5.00 now $6.00 SGX when it was $5.00 now $6.00. High P/E ratios. don't invest. Google was $400, now $500. Well you missed more than 20-30% of profits. These companies have a few things in common. High P/E rations, and more than 20% EPS growth.

"Anticipation for profit growth (EPS growth) is an important market force, able to push P/E ratios up. But a high P/E doesn't make a stock unattractive"

Given the rare chances of a low P/E ratio stock surging thru a 1 day frenzy, you're better off putting your hard earned money in a company that can almost guarantee growth thru their operations, using the above companies as prove of the importance of EPS growth.

"Investing in a low P/E company with no EPS growth is like gambling."

Next time when you recieve a research report, claiming stock growth due to low P/E, maybe you should look between the lines, in the financial statement. Look for EPS growth, not the P/E ratio. Or you should just check if those research companies have vested interested in low P/E companies. Maybe thats the reason why they upgraded that company.

The real ideal investment would be in a company with low P/E ratio, and high EPS growth. These stocks are putting in great profit growths, but have not been discovered. But chances are, you will never see this.

Tuesday, January 16, 2007

Review: Genting International

Many would have made thousands of dollars over the last 1 month buying Genting when it was $0.50 cents and now, its challenging the $1.00 mark. In fact, today it broke above the $1.00 mark again, though you got to take note it reached $1.10+ for what felt like 1 minute, 2 weeks ago.

Even I've joined in the speculation at $0.56, on its initial advance, and sold my shares at $0.79, worrying over the impending correction, which only happened after $1.10. And with me thinking it'll correct to $0.80--, I was only proved wrong when it went back up to $1.00 today.

So what do i think about this stock? Well, in my opinion, its a $2.00 stock, after 1 year of IR operation. Why? I invest on the belief that the only "pillars" holding shares at their prices are positive profit growth. Last year, Genting made a loss. There isn't really much growth in this company over the years anyway. Whats holding it at $1.00 is the excitement, and anticipation.

"Only buy shares that have good growth for the last few years. Anything else, its just speculation, otherwise known as gambling."

There isn't going to any profits for the next 3 years. In fact, the company's liability is going to increase to $3 billion dollars. Will the current share holders stay in this company for another 4 years to allow it to grow to $2.00. I don't think so, no matter how Genting is known to take care of her shareholders.

With far better shares out there supported by good financial results, I'll give Genting a miss, based on the fact that there isn't going to be any increase in operations for the next few years, my money goes to other stocks.

Monday, January 15, 2007

Quick Lesson - "Free Floating" Shares

When you start off with trading stocks, you got to understand that the market, is simply put, a large scale demand and supply mechanism. When there is demand, and little supply, large price fluctuation occurs!

Raffles Education has to date issued 516,000,000++ shares.

http://www.listedcompany.com/ir/raffleseducation/web/show.cgi?content=shareholdings&integrate=1

Look at the amount of shares that are held by the top 20 share holders. A whooping 94.25%. It is safe to say that these people won't buy and sell their holdings on a day to day basis. So only 5.75% of all shares are actually being traded daily.

Food Empire, to date issued 389,000,000 shares.

http://www.foodempire.com/investor1.htm

But only 77.96% are held by the top 20 share holders.

Just by simply looking at that, you can conclude which company has more shares that are 'free floating' in the market.

And with the theory of Supply and Demand, with less supply, a slight increase in demand, will cause a larger increase in price equilibrium!

Sunday, January 14, 2007

Quick Lesson - When to take profit

I remember for one of my trade, UTAC, before the mid 2006 correction, it was priced at $1.10, and i bought it at $0.80 cents. Thats a 27% rise. It has already hit my target at $1.00. Being greedy, i didn't want to sell it.

Over the next few weeks, I saw the price fall back to $1.00. I didn't want to see my 27% profits turn into something smaller. Than in no time, it was back to $0.80, and finally below my buy point. I was stupid into thinking I wanted to keep it for a long term. It never moved for the next 6 months, and still isn't. Luckily i sold it at $0.79. Why would i said lucky? Well, i guess i've placed the money somewhere else, and I've profit much more from it!

Anyway, what the lesson to be learnt from here. Although you might have chosen a good stock, its a good reason to think you can keep it for 5 years and expect the stock to rise with its actual quarterly profits. The market might be shrinking in the total money supply. Investors might just not be interested in the stock.

Through my experience of seeing unrealized profits become realized losses, I've learnt some important lessons.

1. Set a target price. Usually, for good companies, a 30-40% price appreciation would be a good price target.

2. When the stock price reach the target, you can re-evaluate the situation, and consider setting another target, for selling.

3. Never let your profits fall below 7% of its current high. You may want to look at my Food Empire buy and sell. (For eg. you bought a share for $0.7 and it rises to $1. Once the price drops to $0.93, sell.)

4. If your stock rises past your target in less than 8 weeks, keep it for the whole 8 weeks, provided the previous conditions have not been met.

Thats the basic rules for you to follow. If you follow that rule, you will never see your profits fall to a loss, like I did. So what if you sold too early (ie the stock continued its ascend after that), don't worry about. You now have 30-40% more to spend on your next great stock.

Tune in next time. I'll talk about tell tales sign to take profits, from the charts.

Saturday, January 13, 2007

Quick lesson - Cut loss at 7-8%, always

One common mistake made by many stock investors is the inability to realise their "buy" was infact the wrong "buy" at the wrong time.

Lets take this example. You own 2 stocks, Stock A and Stock B. Stock A grew +10% over the last 1 month, while stock B fell -5% over the last 1 month. What would a usual investor do? Sell Stock A for the profits and buy Stock B in a hope to reduce his/her average price. That is infact the wrong thing to do. What you should sell your underperforming stocks and buy your performing stocks

"Never Average Down,instead, you should Average Up"

and

"Never answer a margin call. Don't let your mistake run deeper"

The fact that Stock B went down vs stock A that grew, means either your stock selection was wrong, or investors are simply not interested in the stock.

"Always remember there must be interest in a stock"

Back to the topic of cutting loss at 7-8%, based on the fact that you have a target growth for stock you buy of 30%, you can be wrong 2 times (by cutting loss at 7-8%), and be right once (selling at +30%), and you'll never run into financial difficulty.

Remember, a 50% fall would require a 100% rise for you to break even

Buy: Sino-Env

Sino-Env's revenue is set to increase, and has been increasing at a very very impressive rate. Net profit as well, and whats most importantly, EPS growth has been at the >%40 rate, and forcasted to grow at +198% in FY2007.

A quick look at their quarterly statement, their revenue has grown 86.9% Quarter on Quarter, and profit before tax grew 90.4%., showing improving margins.

Not only that, their net assets has almost doubled QOQ, showing they have been able to control their liabilities, and will do so in future.

Share issued numbered at 300,312,870, showing a relatively small number of floating shares, with about 9% of their total shares floating around.

"Generally, less floating shares, the better"

"High target achievable, considering the small number of floating shares and high rate of growth in 2007"

BUY Sino-Env target $3.4.

Vested at $2.580 12 Jan 2007 0915H

Thursday, January 11, 2007

SELL: Food Empire

Food Empire Shares has performed extremely well over the least 1 week for me. Its formed 2 gaps over the last 4 days, and surged to a high of 40% from my purchase price.

Its a matter of time the stock will correct itself, with the previous base formed at the $0.590 level. Revert to sell over the previous review due to the large fall in price after peaking, implying a large correction soon.

"Had the stock not fall >10% from the peak, the stock would not have been sold"

"Always sell a little too soon. Otherwise the chance will be lost should the stock turn sour."

SELL Food Empire, Should fall to $0.68-0.75 level from here.
Sold at $0.79, 32.7% gain from buy price.

REVIEW: Food Empire

Food Empire has reached a high of $0.84 today. Our sell target for Food Empire has been reached within 1 week.

"If stock has surged 33% within 8 weeks, it should be held till 8 weeks is up. The idea is not to make small gains when you are right, but large profits when you are right"

REVIEW to Sell Food Empire at 5th Feb 2007, unless circumstances change.

Buy: Food Empire

http://www.foodempire.com

Have always had this counter on my watchlist since it was $0.30 cents, but never really took noticed of it until its price was $0.590. I read some report saying it won some award for its branding, so I decided to re-evaluate this stock.

Food Empire extremely popular company with the Russians

"Buy stocks with the branding advantage"

Their profit growths are growing at and increasing rate (rate of growth increasing). Stock prices been growing steadily. They have since left the years where profit growths was a struggle. Its time to expect them to put in impressive growth of >30% per quarter.

"Profit growths are important"

With the current increasing rate of growth, $.81 target by DBS will have to be upgraded soon. The Number of outstanding shares is relatively little as well.

"With small number of shares, less volume is required to cause an increase of share price.

BUY, with a sell target of $0.80
Vested at $0.595 (4th Jan 2007)

Buy: Raffles Education

Refering to 1Q Financial Result and Annual Report.

The Company reported a 34.1% increase in revenue 1Q06 result vs 1Q05. And from that, a 28.4% Increase in profit.

"An increase in profit has to be supported by an increase in revenue"

"A good stock must show a consistant >25% increase in quarterly profits for 2 years"

Even with the growth in businesses in Singapore and Overseas, they have been able to consistantly control their assets vs liabilities.

"A good stock must be able to control their assets vs liabilities"

With large institutional support and shareholding, although the number if issued shares exceed 3,000,000,000 shares, the number of "floating" shares is actually a small number.

"Good stock should have institutional support"

Yearly EPS has consistantly been improving from 2004 to 2006 (2.0-3.5-5.8), showing a minimum of 65% EPS Growth.

"You are buying a stock of the company, not the company. There must be an increase in EPS (earning over issued shares) vs increase in profits. There is no use of having 33% increase in profits with a negative growth in EPS (the company has recently issued a hell lot of shares)"

There are reasons to expect similiar growth over the next 1 year.

BUY now and sell target of $2.00
Vested $1.69 (11 Dec 2006)