Review: China Farm
Following the fall of 7% from my purchase price of $0.995, I've cut loss at my 7-8% rule that I've always encouraged. Sold my holdings of China Farm at $0.915. 
So whats wrong with China Farm? China Farm is still fundamentally strong. The cut loss rule is there to save my (and your) ass.
"Said it before, compounded returns magnifies your losses as well. a 30% loss would require a 42.8% gain before you break even. And 7% gives the share enough room for short term weakness."
Cut loss is even more important for a person like me that uses margin trading.
China Farm is fundamentally strong, but with the impending bear (or already in a bear) market, maybe the time isn't right. Will be monitoring China Farm and the market, and high posibility of reinvesting into China Farm in the near future.
Sold China Farm at $0.915, 13 Feb 2007 1140h
19 comments:
I think ChinaFarm will rebound in 1-2 weeks. Thank you help me choose it.
Hi Pehon,
You might wish to look at Swiber now, with the US$146.6 million contract win with Brunei Shell. Historical P/E is about 20 times and my computation of forward P/E is about 9.6x based on the LOI signed already. Awarding a P/E of 13 times (industry average) gives a price of about $1.25. The current price of $0.92 is below this intrinsic value.
I am considering to invest in this company, as it has established itself with this customer and has plans for new vessels and to penetrate new markets.
But I must emphasize, $1.25 is NOT the target price. It is simply a computed intrinsic value based on current events. I would think their business is worth much more and if it can scale up, I won't worry too much about the price.
You're not investing (fundamentally speaking) but technically trading when you say how good China Farm is fundamentally and exit at the first sign of market bearishness.
What you spoke about FA simply got thrown out the window.
Hi Pehon,
No offence but I agree with the previous post. The moment you play by the cut loss rule, you are trading, not investing despite you strongly advocating for investment. Unless you can justify that it's due to a sudden change in FA. Warren Buffet never see Coca Cola as a losing company when they lose $$ due to a new management back then.
However, I can understand that it is a good tactic to play the market with your cut loss rule and I believe it correct=) Just to make sure we are on the same page here, I am not critising your method of playing. Just wanna point out that depite your various post on FA, you are doing the opposite. Just my 2c worth, no offence seriously.
Hope everyone HUAT AR! Happy CNY!
hi pehon
with sunpower releases their result. Would you reassess the performance and your valuation on this stock ?
think many of you have misinterpreted what i posted previously.
Yes i'm a FA guy. But I practice the 7-8% rule cause of various reasons (ie. margin).
IMO when i posted those stuff about FA, I am not "disproving" the 7-8% rule at the same time. What i disapprove in my FA posts were people taking puny profits of 5-15% after one month, when they could have take more in 1 year, cause the company is fundamentally sound.
When i invest on fundamentals, i WILL hold if the company is fundamentally sound and it goes up, for the reason of compounded interest. But when a fundamentally sound company that i bought goes down, for the same reason of compounded interest, i sell at 7-8%. Its just a technique i use. i can't afford a margin call.
and for anon, I'm still doing FA cause i look at the fundamentals of a company before putting my money in it. when you practice TA (like what i see here at work), you buy based on the stock charts. Which i totally disprove.
and for the same anon, I did sell my underperforming share in a bearish market, not my performing shares (raffles, sino and hongxing).
and on the other hand, i'm not throwing my technique out of the window, cause i've always preached the 7-8% rule, even for a fundamentally strong company.
hope this clears up some confusion and anger among all. =)
Hi hi,
Good cut loss strategy. I believe in tat too. No use getting stuck in a losing stock.
Altho i would cut at 7% from 1.04 (Hist high), rahter than purchase price. But tat's subjective.
Cheers.
Silverover.
I agree that having a cut-loss point is important. Preserving your capital should be foremost, be in trading or investing.
thanks for the support =)
You made the very correct choice to cut China Farm. And for Sino-Env and China Hongxing, they are cheonging like rockets. Congrats and I am very impressed again with your analysis.
Hi Pehon,
When are Sino-Env and China Hong releasing their results ?
Are you looking at any other company to purchase right now for long-term ? Thanks and good luck !
Hello,
I've been monitoring the 2 websites for the release dates but i can't find it. but you can look at the historical release dates. its late in feb and early march.
I'm currently looking at swiber, but am unable to find the recent westcomb report on swiber.
China Farm is really lousy
Pehon,
The TP for Swiber in Westcomb is reported in the Daily News section. I don't think they issued a formal report on it though there was one long one back in mid-Dec 2006.
Am vested in Swiber now; as I can see earnings visibility.
Good luck and Happy CNY to you !
Your argument is illogical because you should be happier to buy more China Farm the cheaper it gets, unless you feel your previous analysis of China Farm to have a fair value of $2 is wrong. If not, why shouldn't you buy more if it gets cheaper because then your potential profit is greater?
I have nothing against the cut loss strategy, but you cannot combine fundamental future intrinsic value analysis with a technical cut loss strategy. If you do that, then I can guarantee that your method of investing is only applicable in a rising market. All markets must correct from time to time, and when it does, you will be cutting loss like crazy.
When I invest in a fundamentally sound company which I have done research in, I am willing to accept a 30-40% drop in price without "cutting losses". As kleer has said, I would add more to my position if I believed in the prospects of the company.
I did practice what I preach back in Nov 2006, when I added to a position in Boustead on dips (I had bought originally at $1.37 and it plunged to $1.18 on bad half-year results; and I bought in at $1.22 again). Since then, it has won more contracts and has risen to about $1.70. That is about a 14% drop in price fro my original buy price but I feel that fundamentally, nothing has changed with the company and that the half-year results were an anomaly based on late recognition of contract revenues/profits.
As of today, I am still holding it and waiting for the FY 2007 results.
Perhaps you could review the reasons you want to buy into a company in the first place; and see if those reasons have changed when the price drops. If not, adding to your position is advisable.
Just my 2-cents. Have a Happy CNY !
kleer, its not illogical cause my technique is to accumulate on strength, not weakness. Just another capital preservation technique i practice. and i say again, its technique. I've seen fundamentally strong companies fall and never recover, cause there is a inside fundamental change to the company, that retail investors like you (maybe) and me can't possibly know. A fall inprice of 40% is probally a sign of that. Of course, most of the times it will recover. But how lnog does it take? 1 year? thats opportunity cost to your name. just breakin even in 1 year.
pehon,
You have a point about uncertainty regarding inside fundamental change of a company, but there are other things you can do besides cutting loss.
Personally, these are the steps that I take.
1) When I research or monitor a company, I go beyond just studying it business model, looking at its financial figures or reading analyst reports. Readinf forums is one good way of getting to know other investors' opinions on the stock, and you sometimes might come across some juicy unpublished information (not neceassarily illegal). I also ask around my circle of friends if they know anyone who works in the company or has dealings with the company, for their opinions. And lastly, I also make it a point to email the company's investor relations office to answer whatever queries I might have. How they respond can also give you a feel of how the company views minority investors.
By doing this, don't you agree that you can be more informed than the average retail investor?
2) The other protection is to not be overcommitted in one single stock because if that one stock does poorly, your entire stock portfolio is affected. I also agree that the negative of holding too many stocks for the sake of diversification because it can dilute returns. I think the trick is to find a good balance between the two ideas that can work for you. I personally choose to hold about 15 - 20 stocks, but that number will vary according to your individual comfortable level and the amount of effort you want to spend tracking those stocks.
These are some other strategies you might want to consider besides the cut loss strategy.
hi there, your review on china farm has led me to invest in it as well. as you have said, for investment and not trading/speculation. some people also advised not to look at the market once vested. :)
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