Smart investment

2008-06-06T09:00:00.000-07:00

SingTel

Singtel looking into the possibility to invest in China Telecom. China Oriental Morning Post reported on its website that Qualcomm and Singtel are the possible investors in China Telecom. So news may attract some buying interest in Singtel on this excitment over the potential deal.

KS Energy

KS energy chairman says at the Reuters energy symmit that the company is planning to grow its fleet of rigs, may take stakes in assets, companies to expand presence as it seeks to capitalize on booming oil and gas industry.

2008-06-06T08:59:00.000-07:00

Mercator

Enter: 0.550 on 06Jun (Big Dipper setup)
Mandatory stop loss: 0.455

2008-06-03T18:24:00.000-07:00

Sinotel

Enter: 0.350 (triggered using POEMS ProTrader)

2008-06-01T19:32:00.000-07:00

Portfolio at the end of May

Sold
Yangzijiang on 23rd May: -1%
Manhanttan resource bought at 0.95 and sold on 0.870: -8.4%

On hold:
Oceanus bought at 0.270: +37%
Marco Polo bought at 0.340: +10.0%
ISDN bought at 0.635 : -1.6%
Asia Env bought at 0.500: -6%

2008-05-26T07:36:00.000-07:00

Yangzijiang

Sold: 1.04 on 23May activated using Poems Protrader

Marco Polo

Buy: 0.340 on 22 May using Poems Protrader

2008-05-22T19:23:00.001-07:00

Keeping in view

To enter at resistance:

Hiap Seng - 0.400
Marco Polo - 0.340
Sunvic - 0.425
Man Wah - 0.320

I activate the buy using POEMS Protrader Stop Limit.

2008-05-21T19:23:00.000-07:00

SGX slump on Dow's slump

1) The Federal Reserve sees worse economic problems ahead, according to new forecasts from the central bank released yesterday.

2) The Fed lowered its economic growth forecast for the year. At the same time, it raised its projections for inflation and unemployment.

3) The Fed said in its minutes that members now expect the economy to shrink in the first half of the year -- the clearest signal yet that Federal Reserve chairman Ben Bernanke and other bankers believe the economy is in a recession.

4) The Fed also raised its unemployment forecast for the year to between 5.5% and 5.7%, up from its earlier estimate of 5.2% to 5.5%. The unemployment rate was 5% in April.

5) In addition, the Fed boosted its projection for inflation. It said it now expects personal consumption expenditures to rise between 3.1% and 3.4% in 2008, a full percentage point more than its earlier expectation.

6) Oils top USD133

Part of information extracted from money.cnn

2008-05-21T09:01:00.000-07:00

Manhattan Resource

Enter: 0.950
Mandatory stop loss: 0.870

Asia Env

Enter: 0.500
Mandatory stop loss: 0.455

2008-05-19T18:51:00.000-07:00

ISDN
Broke its most recent high.

Enter: 0.635
Mandatory stop loss: 0.615

Volume is rather low. Might lose its strength.

Oceanus
Enter: 0.270
Mandatory stop loss: 0.240

2008-05-17T09:52:00.000-07:00

Buffett goes to WhartonWhy Warren Buffett views his job as similar to painting the Sistine Chapel

(Fortune) -- In a presentation he made to students at the Wharton School earlier this month and a subsequent interview with Fortune, Warren Buffett shared his thoughts on everything from the economy to the credit crisis and the Bear Stearns bailout.

In this Web exclusive, we present further excerpts from his talk with the students, in which the megabillionaire offers his insights on judging managers, buying businesses, what metrics - if any - he relies upon, and why he views his job as similar to painting the Sistine Chapel.

Q: You said before that one of the things you look for in businesses you're buying is good managers who are honest, capable, and hard-working. To me, that's a hard judgment to make if you haven't known him for long on a personal level. How do you go about figuring that out about somebody, and how long does it take you to make that evaluation?

WB: Well, almost always, we're buying businesses where the managers come with it, so I do have a record [I can judge]. If I had to pick out the five people in this group here who would be the best managers, I wouldn't know how to do it. I mean, you all have great IQs, you have great academic records. You've all shown the energy to get into school and push hard and all that. So you'd have all these attractive qualities.

Can I pick out the five best? I don't think I can do it. What I can do, when I've seen somebody run a business for 20 years, is decide whether they're going to keep behaving in the future as they have in the past, if I keep the conditions that caused them to behave that way in the past. So when I buy a business - it's the biggest question I ask myself if I decide it's a good business - is "Do they love the money, or do they love the business?" Now, if they love the business, we can do business. If they love the money, we can't.

Now, let's say they love the business, as our managers do. They sell me a business for a billion dollars and can hardly wait to get to work in the morning.

In that situation, I'm the only guy that can mess it up. I can take that out of them. I can't put it into them. But I say to myself, "Why do I go to work in the morning?" I've got enough money. I've got Social Security now, even. [Laughter] I'll make it, you know? The kids won't get much, but that's their problem. So I say, "Why do I go to work in the morning?"

Well, there are two reasons. I love painting my own painting. I come down to the office, I get on my back, and I start painting. And I think I'm in the Sistine Chapel. It's my painting.

Now, if somebody says, "Use more red paint instead of blue. Paint a seascape instead of a landscape," I would hand them the brush in five seconds and I'd say-I'd say a few other things, too - but I'd say, "Do your own painting. I'll go paint what I want to paint." I get to do my own painting. And then I get applause - if I deserve it. And I like that. I like having the painting admired, and I like to get to paint my own painting. That's so much more important to me than getting my golf score down three strokes or beating somebody at shuffleboard or something. I mean, it is the ultimate pleasure. Now, if that turns me on, why won't it turn on these people who have built their own businesses? They have spent their life creating a wonderful painting. Now, for one reason or another, maybe tax reasons, maybe sibling reasons, who knows what, they need to sell it, they need to monetize it.

They come to me, and they know that at Berkshire they're going to keep the brush, they're going to keep doing the painting, and I have to look at them and decide whether they are people that really care about their painting or care about the money. [One giveaway is] if they auction the business. We've never bought a business at an auction. Never. Anybody that wants to auction off their family or auction off the creation of a lifetime, that's not what we want.

I tell people you've got two choices. You've spent a lifetime building this business. Or maybe your father built the business and you carried it on. Maybe your grandfather. You've given up vacations sometimes. You worked on weekends and all these things to create this really incredible painting that you're bringing to me. Now, if they want to auction it, they're not for me.

I tell them they have two choices. They can sell it to us, and it'll be in the Metropolitan Museum of Art. We'll have a wing for their painting. People will come and admire it, which they do. And they will say, "That's one hell of a painter." And you get to keep painting. Or you can take this marvelous painting and you can sell it to a porn shop. [Laughter] And he'll take the thing and he'll make the boobs a little bigger, something like that. And put it in the window. And a guy will come over in a raincoat a few years later, and he'll buy it, post it in his window, and it'll become a piece of meat, basically. We get the ones who care about having in it the Metropolitan Museum.

I got a fax almost three years ago on a Wednesday from a fellow I'd never met about a company I'd never heard of. This fellow named Peter Liegl ran Forest River over in Elkhart, Indiana. He sent me a couple pages, and said, "This is the sort of thing it looks like you're generally interested in."

I called him up that day. I said, "Pete, send me the last few audits. FedEx it, and I'll call you tomorrow afternoon." Never met him, never heard of the company. (It's a recreational vehicle company.) So I got in on Thursday morning, and I called him that afternoon. I said, "Pete, here's what I'll do. And if it works for you, fine." I'd never met the guy, but I could still tell by just the way he presented it and his thinking on it. And he said, "Fine. I'll come over next week with my wife and daughter, who own the stock."

And they came over late in the afternoon. I said to him, "Pete, what kind of salary would you like"; this is a company that did a billion seven last year. That's not the way they teach you to do it in business school, but I don't want anybody working for me that has a compensation system they're unhappy with. These people don't need me. They've got all the money they need. I'm going to [invest] hundreds and hundreds and hundreds of millions of dollars [in their businesses]. And he said, "I don't know." And I said, "Well, just tell me because I want you to be happy. You have to run this thing." "Well," he took a little while, "Well," he said, "I looked at the proxy statement, you make $100,000. I wouldn't want to make more than you do." So that became his salary.

Then I said, "You should get paid for exceeding the figures [on which I'm basing the decision to buy the company]. So," I said, "I want you to have a percentage interest in future earnings above this level," which we worked out. But he offered $100,000 and I offered the percentage above that. He has run the business magnificently since then. I've never been to Elkhart, Indiana. I've never seen this place. I hope it's there. [Laughter] Pete may have some 11-year-old kid in there that says, "What figure shall we send Warren?" [Laughter] The guy has done a remarkable job.

If I told Pete whether he should build a new plant, whether he should bring out a new model, whether he should change dealer firms, he'd tell me to take a hike. You know, why shouldn't he tell me to take a hike? He doesn't need the job. As long as that thing is a lot of fun for him, he's going to keep running it. And he'll run it for a long time.

[I get offered all] kinds of deals from LBO operators. I would just love to bet against the projections of every one that they give me. They hand me these books, which I don't even want to look at, but they hand me the books, and of course they always just project like that [points upward like a graph that only increases]. I would just love to make a career out of betting against the figures presented in those books, but I don't get a chance to do that. If you ever get a chance to short investment banker books, that would be a great activity.

Q: When you purchase a subsidiary, you've mentioned that you allow them to reinvest capital if they're able to go above a certain hurdle rate. So I was wondering how you decide what the cost of capital should be on a risk-adjusted basis.

WB: Well, we don't think about cost of capital or risk-adjusted. I mean, we don't want to take any risk, and we don't. That doesn't mean we don't do things that are wrong and all that, but we are not doing anything that risks real losses.

You know, GEICO spends 800 million on advertising. I may spend $200 million that's wrong this year at GEICO or something. But I recognize the things that I can't further refine. What we do with capital is we just look for the best thing we can do at any given time. I mean, in the end, we're going to retain everything.

We don't want to do anything that doesn't create more than a dollar's worth of value for every dollar expended. And we'll do the best we can. And as I said earlier [regarding stock holdings], we would have sold the thing to do something that offered even better opportunity. We won't do that with businesses at Berkshire. That's a pledge I make to people. If they sell me the business, it's going to stay in the Metropolitan Museum forever. I may make a mistake.

If it's going to permanently lose money, I reserve the right to sell it, and if it has labor problems, I reserve the right to sell it. That's in the back of the annual report every year. They've been there for 20-plus years, those principles. But we believe in them. We follow through on them. So we won't dump a business that way. But about 200 million a week comes in to me every week. I like it, too. [Laughter] And it's my job to figure out how to allocate that.

The smaller capital expenditures, or even fairly large ones at the subsidiaries, they just do them themselves. They don't need me, because if some guy comes in to me and talks about something in the yarn plant or something in Georgia, what the hell do I know about it? I mean, they can always present it in a way that makes it look good. If I say the internal rate of return we demand is 15.83, it'll be 15.84. I mean, you just can bet on it. I've never seen a project that doesn't meet your hurdle rate, you know, if they really want to do it. We don't go through those charades. And it saves my time, saves their time.

If we get into bigger deals, then I get involved. Buying businesses of any size and things of that sort. But we just look for the most intelligent thing. And our cutoff point is where we don't think we're creating more than a dollar of value for every dollar we lay out. Marketable securities, to some extent we just look for the things we think have the best expectancy, but we're not buying - there isn't one security that I've got in the portfolio that I look at as-in terms of risky - in the sense of permanent capital loss. They can go down 50%.

Berkshire Hathaway (BRKA, Fortune 500) stock itself has gone down 50% three times since I bought the first stock in at 7 3/8. In 1974 it got cut in half. In 1987 it got cut in half. In 1998, 2000 or so it got cut in half. So that doesn't make any difference. I mean, I just don't worry about it. I worry about permanent loss of capital. I worry about making the right businesses. I worry about keeping the managers happy. Everything else pretty much takes care of itself.

2008-05-17T09:49:00.000-07:00

Banyan Tree Holdings

May 16 close: S$1.48 CIMB-GK Research, May 16

ABOVE expectations: Q1 2008 core earnings of $15.4 million (+37.6 per cent y-o-y) beat consensus and our estimates, forming 36 per cent of our full-year estimate (we were going for 33-34 per cent). Growth was driven by stronger-than-expected sales of hotel residences while its hotel investment performance was within expectations. Key highlight was that demand from high-net-worth vacationers remained robust.
Property sales (hotel residences and unbranded) Ebitda of $15.2 million (+81 per cent y-o-y) and the value of new units sold are ahead of expectations. The value of new units sold was $67 million (43 units at average selling prices or ASPs of $1.6 million), versus our full-year expectation of $77 million (70 units at ASP of $1.1 million). Ebitda of $34 million (+13 per cent y-o-y) from hotel investments, hotel management and spas was within expectations.

Positive outlook: Bookings for the seasonally softer Q2 remain healthy y-o-y. The group is poised to benefit from its newly-opened Angsana Velavaru (79 keys) and Angsana Riads Collection in Morocco (40 keys), as well as 28 more rooms at Dusit Laguna Phuket in H2 2008. It will also be opening four new resorts in 2008. It has close to 50 resorts (about 7,000 rooms) for opening over the next four years. It recently added three management contracts to the pipeline: BT Macau, BT Tianjin and Angsana Lucia.
Reiterate 'outperform' and target price of $2.60: Banyan Tree continues to trade at a steep discount to its sum-of-the-parts value of $2.60 even as it continues to deliver solid earnings. At $1.37 per share, the market is only paying for its hotel operations ($1.42 per share), we believe. Its property sales and spa franchise are going for free. We continue to like it for its exposure to the luxury travel market.

Singapore Exchange
May 16 close: S$9.03 OCBC Investment Research, May 16

EVOLVING key player: Singapore Exchange (SGX) has successfully transformed itself over the past few years, and is now enjoying earnings contributions from three key segments: securities market, derivatives market and stable revenue.

In recent years, it has also seen good contribution from structured warrants, which saw unprecedented trading value of $18.8 billion in FY2007, up 49 per cent y-o-y. SGX has unceasingly introduced new products and initiatives including real estate investment trusts (Reits), exchange-traded funds (ETFs), shipping trusts, etc.

While volume on the securities market has come off since January 2008, we believe that its overall performance will not be similarly affected, as derivatives and other products continued to see brisk activities as shown by the recent strong Q3 2008 results.

With its wider suite of products and the expansion of its operation, SGX has delivered consecutive sets of good results. Revenue grew 20 per cent each year from FY2002 to FY2007, while pretax profits surged 45 per cent during the same period. In particular, the derivatives segment has done well, registering growth of 33 per cent from FY2004 to FY2007.

We are projecting earnings of $460.5 million for FY2008 and $466.4 million for FY2009 (+9.4 per cent excluding one-off items). The stock has done well in the past two months, appreciating about 20 per cent since our March report. In the past few years, the stock has traded at a historical PE ratio of 26-30 times. This is well supported by very strong compounded earnings growth of 47 per cent from FY2004-2007.

With the improving sentiment, we are raising our valuation parameter from a conservative 21 times to 23 times, increasing our fair-value estimate from $8.80 to $9.60. At this level, yield is still attractive at 3.7 per cent. We are retaining our 'buy' rating for the stock.

2008-05-17T09:34:00.000-07:00

Yangzijiang:

Enter: 1.058 (average)
Mandatory stop loss: 1.04

China Energy:

Enter: 0.630
Mandatory stop loss: 0.535

2008-05-16T10:13:00.001-07:00

What is Technical Analysis?

Technical analysis is the examination of past price movements to identify patterns of price movements. Technical analysts are sometimes referred to as chartists because they rely almost exclusively on charts for their analysis.Technical analysis is applicable to stocks, indices, commodities, futures or any tradable instrument where the price is influenced by the forces of supply and demand. Price refers to any combination of the open, high, low or close for a given security over a specific timeframe.The time frame can be based on intraday (tick, 5-minute, 15-minute or hourly), daily, weekly or monthly price data and last a few hours or many years. In addition, some technical analysts include volume or open interest figures with their study of price action.At the turn of the century, the Dow Theory laid the foundations for what was later to become modern technical analysis. Dow Theory was not presented as one complete amalgamation, but rather pieced together from the writings of Charles Dow over several years. Of the many theorems put forth by Dow, three stand out:

1. Price Discounts Everything
This theorem is similar to the strong and semi-strong forms of market efficiency. Technical analysts believe that the current price fully reflects all information. Because all information is already reflected in the price, it represents the fair value and should form the basis for analysis. After all, the market price reflects the sum knowledge of all participants, including traders, investors, portfolio managers, analysts and many others. Technical analysis utilizes the information captured by the price to interpret what the market is saying with the purpose of forming a view on the future.

2. Prices Movements are not Totally Random
Most technicians agree that prices trend. However, most technicians also acknowledge that there are periods when prices do not trend. If prices were always random, it would be extremely difficult to make money using technical analysis. In his book, Schwager on Futures: Technical Analysis, Jack Schwager states:"One way of viewing it is that markets may witness extended periods of random fluctuation, interspersed with shorter periods of nonrandom behavior. The goal of the chartist is to identify those periods (i.e. major trends)."A technician believes that it is possible to identify a trend, invest or trade based on the trend and make money as the trend unfolds. Because technical analysis can be applied to many different timeframes, it is possible to spot both short-term and long-term trends.

3. What is more Important than Why
In his book, The Psychology of technical analysis, Tony Plummer paraphrases Oscar Wilde by stating, "A technical analyst knows the price of everything, but the value of nothing". Technicians, as technical analysts are called, are only concerned with two things:

What is the current price?
What is the history of the price movement?

The price is the end result of the battle between the forces of supply and demand for the company's stock. The objective of analysis is to forecast the direction of the future price. By focusing on price and only price, technical analysis represents a direct approach. Fundamentalists are concerned with why the price is what it is. For technicians, the why portion of the equation is too broad and many times the fundamental reasons given are highly suspect. Technicians believe it is best to concentrate on what and never mind why. Why did the price go up? It is simple, more buyers (demand) than sellers (supply). After all, the value of any asset is only what someone is willing to pay for it. Who needs to know why?

From SIAS

2008-05-16T10:09:00.000-07:00

What is Fundamental Analysis?

Fundamental Analysis covers the area of research that studies economics, industry and company information for the purpose of making an informed judgement on a stock's value and its growth potential. The crux of Fundamental Analysis lies in its attempt to determine the economic value of a security (a generic term for stocks and shares).

The Focus of Fundamental Analysis
Economic Analysis covers the study of the country's economic indicators such as new orders, money supply, stock price indices, stocks of unfinished goods, new business formations, consumer price index and unit labour costs. Important economic considerations would include interest rates and inflation and its impact on the stock market, the level of government debt, the level of corporate debts, monetary and fiscal policy.Industry Analysis covers the structure and state of competition in the industry, nature and prospects of demand for products and services of the industry, cost conditions and profitability, technology and research requirements, the immediate and long term outlook for sales and profit.

Company Analysis
Company Analysis covers management analysis and financial analysis. Management analysis would consider the business acumen of the CEO and top managers, the past record and performance of the CEO and the corporate work ethic. Financial Analysis would consider revenue, costs, earnings of the company and the company's capital structure as reflected by its debt to equity ratio. Financial Analysis in the form of financial ratio analysis compares the company's current stock price to its earnings, dividends, and assets. Theses financial valuation ratios and then compared the financial valuation of other companies in the same industry to identify overvalued and undervalued companies in terms of earnings, dividends and assets.

The Father of Fundamental Analysis
A discussion of Fundamental Analysis would be incomplete without giving recognition to Benjamin Graham who is hailed as the Father of Fundamental Analysis. Benjamin Graham taught finance at Columbia University and authorized two books. His first book "The Intelligent Investor" is considered an investment classic. His second book " Securities Analysis" is considered the bible of the Fundamental Analyst. Benjamin Graham taught Warren Buffet, Charles Munger and William Ruane. It is not coincidental that Graham's students are considered as icons in the world of investment but rather it is a glowing testimony to the efficacy of Fundamental Analysis as a method of investing.

Types of Fundamental Analysis
Although it is generally accepted that the aim Fundamental Analysis is to determine the economic value of a security, it is the practice of Fundamental Analysis that gives rise to two sub types namely Macro-Fundamental Analysis and Micro-Fundamental Analysis.

Macro-Fundamental Analysis: The Top Down Approach
Macro-Fundamental Analysis focuses on broad economic factors that affect the stock market as a whole or industry groups of securities. This approach is known as the Top Down Approach of Macro-Fundamental Analysis. The practice of Macro-Fundamental Analysis starts at the overall performance of the economy, its impact on industry groups and finally down to specific companies in the industry groups.It is noteworthy that Macro-Fundamental Analysis has a more formal and structured approach and as such this approach is much favoured by research departments of investment management companies and brokerage houses.

Micro- Fundamental Analysis: The Bottom Up Approach
Micro-Fundamental Analysis starts by considering the current price of a stock and compares it to measures of value. Hence the current price of a stock is compared to its dividend, its earnings, and to its assets resulting in valuation ratios such as its dividend yield, price to earnings ratio and its price to asset ratio. The resultant valuations enable comparisons to be made amongst stocks in the same industry groups and undervalued and overvalued stocks are identified by comparisons to the industrial norm. after this phase of analysis, the Micro-Fundamental Analysis attempts to predict industry and economic developments that may positively or negatively impact the stocks current price.It is pertinent to note that investment icons such as Benjamin Graham, his prodigies Warren Buffet, Charles Munger and William Ruane tend toward Micro-Fundamental Analysis.

Conclusion
Fundamental Analysis is a structured and formal approach to research on a stock's value and its potential growth. This analytical procedure facilitates the identification of overvalued and undervalued stocks relative to their earnings potential, dividend income potential and to their asset values, against the backdrop of the economic and industry environment. On the basis of the research, investment decisions are made such that the odds are stacked in favour of the Fundamental Analyst.

By Mr Robert TayMr Robert Tay is a Dealer's Representative and has obtained a BA from NUS and MBA from University of New South Wales, Australia.

2008-05-16T10:06:00.001-07:00

Principles of Investment

Set aside an emergency fund
First, start by setting aside in cash at least 2 to 6 months in living expenses in a contingency fund. This is to help you cope with a sudden loss in regular income in event of a period of unemployment or illness. You should also put aside some regular payment for a health plan. Now that you have done that, commit yourself to a regular savings plan aimed at meeting a future financial objective like your retirement, a new house or your children's educational fund.

Get started now
Every year you put off investing makes your ultimate goals of retirement more difficult to accomplish. As a rule of thumb, for every five years you wait, you will need to double your monthly investments to achieve the same income to meet your retirement needs. Just relying on your CPF alone will not be enough for many individuals.

Know yourself
Try to meet up with a financial or investment planner to assess your financial objectives as well as your tolerance for risks, so that you can create a portfolio of investment that is suitable for you.

Invest for growth
The biggest mistakes that many individuals make is to ignore investing in stocks or unit trusts and rely on safe investment vehicles such as fixed interest deposits. These instruments can usually only perform marginally above inflation rates. Stocks, on the other hand, while they are volatile have historically outperformed most type of investments, and have the advantage of staying ahead of inflation. But if you are averse to participating directly in the stocks markets, then unit trusts can offer a good alternative of staying invested in the stock market.

Always have a long-term view
Be patient. Maintain the discipline of staying invested. If possible, top up your portfolio even in times when markets are down --- some of the best returns in many fund portfolios actually come from investments made when the markets are down. You may want to have a systematic investment plan which includes dollar-cost averaging or value averaging techniques.

Build a diversified portfolio
Inexperienced investors often make the mistake of putting all their eggs into a single basket of investment assets like stocks or fixed deposits. You will need to spread your risks in a wider range of investments such as bonds, stocks and/or unit trusts to ensure that you are protected from market and interest rates fluctuations as well as changes in the economic environment. Try to find an asset allocation model that can help you decide, and be sure to review it from time to time with your investment or financial planner.

Be a lifelong investor
Don't assume that your savings in a bank or a mortgage will take care of itself in the long run. For example, the one-year fixed deposit you have put your money in at 4% may not be earning enough returns for you, if real interest rates rise to 6% in the 12-month period you have invested. The same with your mortgage, you may want to shop around or ask your financial planner about refinancing and the possibility of switching to a cheaper loan that can save you thousands of dollars each year for the duration of the loan. And even if you retire, you should stay invested. Don't just shift all your CPF savings immediately into a fixed income investment and wait for your interest payments. Look instead for ways to maximise your returns with an asset allocation model that will suit your lifestyle and needs. You may also want to ask about annuities as an alternative form of investment.

From SIAS