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.

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

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.

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.

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.