Archive for August, 2007
The North American semiconductor Book-to-Bill for new equipment has slumped to 0.84 in July 2007. This is one of the leading indicators we need to monitor closely if we are interested in semiconductor stocks, and for that matter stocks in the entire technology sector.
The sharp drop in this ratio is very bad for the entire semiconductor sector, as it basically indicates the bookings (i.e. sales) have slumped. As you can see from the chart below, this ratio while quite stable from Jan till June, it has fallen sharply in July. This may due partly to the slow down in US economy, what we need to do is to monitor this indicator very closely for the next few months.
Obviously, the other thing we need to take note is that, at current reading it is not too far from the lows since 2002. This happened twice and registered at about 0.77 at around end of 2002 and beginning of 2005. Just like monitoring of a trend (in this case is down trend), we would like to keep track of signals for a reversal in trend. While a continuation of a down trend is very bad for all semicon-related stocked, a reversal in this indicator will be a great cheer to those same stocks too.
An indicator not to be missed by tech investors!
Cheers! The Essence of Stock Investment!
August 20th, 2007
NW Teong
Congratulations to those who have read and took action on my blog on last Friday (17 Aug 2007), “Ignore This @ Your Own Risk!”. As I have said many times before, missing good investment opportunities is also a risk in itself. I have also cautioned readers not to under-estimate the strength of this rebound in that article.
Again, at this juncture we must have the right perspective of the markets. In term of market actions: What happen now is that by the action of the central banker in US to lower the interest rates, those hedge funds managers who use to short the markets from US to Thailand would be scare stiff to short the markets now. On the contrary, some of them need to cover back their short positions now. The impact of lower interest rates have been described before (please refer to my e-publication: The Essence of Stock Investment) and hedge fund managers are well aware of this impact.
You see, other than normal gyration of the markets, these hedge fund managers are there to amplify these market actions be it up or down. Mind you, these guys other than having a good understanding of investment and market knowledge, they know very well the investors psychology. They can short the shit out of you (scare to death) that you have to join in to sell your holdings, on the contrary when they are bullish, they can push up the stocks sky high at an incredible rate. Of course, all of these are achieved with the help of the leverage extended by the financial institutions such as investment bankers. Some of these investment bankers are also hedge fund managers themselves. It was indeed ironical that some hedge funds were forced to close or seek for rescue packages in the midst of sub-prime loans saga. Aren’t hedge funds supposed to be hedged? Well, in real life, you know that a perfectly hedged fund will earn you almost nothing after deducting the management fees. Hence, hedge funds are never fully hedged but to take extreme positions is really contradictory to the essence of the hedge funds!
Well, readers are again reminded that markets are still volatile, you would be alright if you have bought some good stocks on 17 Aug 2007.
Today, I have a stock to share with you. If you have bought this stock on 17 Aug 07, you are already making close to 30% today at current price, i.e. 30% in less than two trading days! I have reached my investment objective, while I do understand the short term volatility, I have decided to hold on for a while as I also like its fundamental! Mind you, we cannot have this type of opportunity every day, it really depends on many factors (please refer to my e-publication)
At this juncture, I guess readers are eager to know what stock is this, right? Well, this stock is BRC Asia.
My rationale is based on the following:- 1) It is in construction sector, as I mentioned before this is a sector that will enjoy an uptrend for at least the next 2-3 years in Singapore, 2) Fundamentally solid: This is a rare company in construction sector that makes money even in difficult years. Ask yourself how many construction firms that make money very year in the last 5 years? I know I can sleep well at night even when something severe happen, this company is not going to disappear. Do you know how many years this company has been around? You will be surprise when you find out. Please find this out yourself (hint: this is one of the oldest construction related companies that you can find in Singapore!) 3) Valuation is decent and the added bonus is that it is giving you a dividend yield of about 4.3% even at current share price of S$0.175/share!
On last Friday, this stock was trading between S$0.15 to as low as $0.12 per share, hence if you bought at (say not at the lowest, at the mean price) S$0.135. Your return is about 30% with current share price of $0.175. Check this out yourself!
Again, please read disclaimer as usual.
Cheers! Master of Your Own Destiny!
August 20th, 2007
NW Teong
My bold message today is: This is a perfect day to do an investrade buy! Do it now!
What causes the current market turmoil? Yes, sub-prime loans in US. What causes this sub-prime loans problem? Yes, easy credit by lenders. After years of easy credit, what triggers this tsunami in sub-prime market? Yes, the interest rates. Ah ha, we are finally pointing to the lead actor in the whole saga!
There are lots of articles in US talking about years of easy credit due to severe cuts in interest rates during Alan Greenspan’s era. I am not here to discuss about this. What I would like to share with you is that interest rates have come down rather quickly since the middle of June. This, in addition to other indicators that I monitor, leads me to make my bold call today. Please take a look at the chart below:-
As you should know by now (for those who have constantly read my blog), chart of the 10-year treasury is a good proxy of the movement of the interest rates in US! A lower of interest rates will give immediate release of the tense situation in the sub-prime markets. The impact of interest rates are well described in my e-book: The Essence of Stock Investments or my e-seminar of the same title (please feel free to visit: www.master-rider.com)
Please note that I did not say market will be back to bullish tone, on the contrary I think market will still be volatile (actually without volatility, what are you trading for?). All I am saying, this is a perfect timing to make investrade buys. Do not over-look the strength of such kind of rebound, especially on stocks that with great fundamentals. In short, I have all signals to lead me for my decision today! 1) My selected macro indicators say so, 2) fundamental analysis say so (please do your home work), 3) Technical analysis say so
Ha ha, good day!
Please read the disclaimer at the end of my blog. Readers are buying or selling stocks at their own risk!
August 17th, 2007
NW Teong
Hi, I think it is good to revisit my article on “How to tame market volatility?” dated 10th Aug 2007. I would like to point out point 2 on the liquidity issue. While we all know that under normal circumstances, fundamental analysis is useful. However, under extreme condition such as a severe liquidity squeeze due to stampede in pulling our of stock markets by big funds for what ever reasons, we have to be mindful that this will cause a shift in our fundamental.
In short, under severe condition, when we see capitulation in the share or financial markets, the real economy would get a severe knock which in turn will cause all REAL fundamentals to deterioriate (recall the Asian financial crisis in 1997). If this happens, your fundamental analysis will need to be modified. However, this doe not mean your fundamental analysis is useless. What we need to do is to factor in this event and knowing that, at least at this juncture, the chance of a total capitulation is slim, we should gather a list of good stocks with good potential and importantly relatively in-expensive valuation and wait for a good timing to go in (which is not too far away). Please note that even under an extreme condition, your down side would be limited if you have done your home work.
However, we have to know that at this moment market is volatile, and while we do our home work we have to wait for the dust to settle or any least until the redemption (selling by funds) is over before we buy big time! Caution: market would be volatile, please use the investrade strategy! As for me, while monitor the big picture, I also will not hesitate to buy selective stocks if they are really at a very attractive level even though I know market will still volatile. You need to diversify across different “time zone” too.
Also, I think it is important for readers to note that important of monitoring the movement of interest rate (please refer to article on “How to tame market volatility?”). I shall try to post a better chart for all of you to view, hopefully the effect is better this time. If you look at the charts below, it really pays to monitor the interest rates movement. The first chart is that of 10-year treasury, a proxy of interest rates movement, second chart is that of Nasdaq, third is the relative movement of the first two charts. Can you see that high interest rates always mean trouble at the markets? For current market correction, it started since 2nd week of July (see Nasdaq chart below) where it peaked at around 2700. However, the interest rate peaked at around middle of June at around 5.2%. Almost a whole month in advance! This in fact is a clear leading signal that stock markets will be in touble. If you superimpose the two charts (see 3rd chart below), you will always notice that the peak in interest rates always preceed a major market correction!
Interesting note on Hi-P: At today’s level at $0.66, this is exactly the same level on around 5th Mar 07, this is also the lowest level on 21 Aug 06. In fact, at this level, HI-P is at its all time low since Dec 2003. Judging from its fundamental, I would say its down side is really limited. As I said many times before, do not expect an immediate big up swing for tech sector. However, a 30% up swing from this level in 6 months’ time is highly possible! (of course, baring unforeseen circumstances such as a total collapse of financial markets etc)
Cheers!
August 16th, 2007
NW Teong
I am glad to share with you that I am in the process to automate my investment/trading process. I am doing this by leveraging on widely available information. In short, I am combining my investment valuation model with the live data provided by Singapore Stock Exchange (www.sgx.com).
Once this is completed, my valuation model will get the live feed from the SGX web site, and using my own customized valuation model, I will be alerted on all interesting stocks. In other words, this system will not only tell me but also alert me (on mere seconds) on stocks with screaming buys, on stocks that just break out of their resistance, on stocks that change trend and hence need to quickly lock in profits (or simply cut loss). I must say that his system coupled with my fundamental analysis would be very versatile. I believe, this will increase the numbers of time we can make money from the market. In short, using this system we can capture more investment opportunities in the market. (If you have read my e-publication, you should be aware that missing money making opportunities is also one type of risk we should minimised!)
Hopefully, once this system is in place, I will be able to share more interesting stocks with all of you! Please take note that even with the system in place; it is always good to continue to conduct the fundamental analysis. We need to understand the companies that we invest, their management, business model, earning prospect etc. This will take times. The advantage of doing this is that, through this process, your horizon will be expanded and in times to come you will be more and more knowledgeable.
My parting shot today is: always remember the essence of stock investment! Wow! I cannot help but feeling very excited about my new project (i.e. to link up SGX data to my valuation spreadsheet). Of course, for those rich ones you can always buy existing software and subscribe to some market data to achieve the same effect. However, I will always advocate that we make full use of information that is available and is free of charge. Besides, I prefer to customize my own model.
Cheers!
p.s. You have to understand that different category of stocks will present different opportunity and different risk and reward profiles. For instance, tech stocks now are cheap (in term of valuation) but need to wait for more evidence of cyclical up swing, construction stocks are now on the up swing (hence can search for some good valuation and good prospect stocks to hold), also there are trading (speculative in nature) stocks which present higher risk and reward profile. Ironically, I am not too interested in big blue chips at this moment as risk and reward profile is not really favourable. They are what I call highly vulnerable to event risk!
My personal view is that we should diversify across the few categories that we like. Hence, you will see that some of your investments are for short term; some are for mid term (e.g. tech stocks). NEVER HOLD STOCKS FOR LONG TERM! (Remember this, in the long run, we are all dead! This is why I said that life is like an option, it has its expiry date). Please also don’t abuse this term. What I hate to see is that investors, before buying stocks have already make up their mind that they are going to hold them for a long time. What happen? They are very likely to use this strategy call buy and forget. While we should allow enough time for our stocks to perform, what we really need to do is monitor our portfolio actively!
August 15th, 2007
NW Teong
There is an interesting article in The Business Times today, titled “Sub-prime mess just a Chicken Flap” by Ben Stein. In this article, he went through the mathematics and deduced that the total loss due to sub-prime loan in US was only US$33b to US$34b. This is about 3.4% of total mortgage market in US which is about US10.4 trillion, a drop in the ocean.
Ben further mentioned the recent fear of market meltdown due to concern in sub-prime loan has helped to knocked off US1.1 trillion in stock market’s value. This is about 30 times higher than the total loss estimated in sub-prime market.
Is this surprising? Not really. This is basically the clear demonstration of the power of fear!
Fear of more losses in sub-prime market, fear of more funds and financial institutions being dragged down due to this, fear of collapse of US dollars as foreign investors pulling out of US market, fear of this problem spread to Europe, Asia and other parts of the world, fear of the sub-prime problem would ultimately pull down world economy and collapse the world financial system. The list can go on and on. In short, we are always fearful of the unknown, fearful of more bad news to come.
I am sure at this juncture, those smart readers would have deduced that it is also true on the contrary. That is in a very bullish situation, everyone keeps expecting good news.
Whether in bull or bear, the media is very likely to what I called over-reporting the news. In short, a piece of bad news in bear market is very likely to appear in news many times. You would get paranoid if you are exposed to bad news too many times! You see, media choose to highlight certain news and events under certain circumstances, it is you as a reader who needs to choose what news to read and analyse to your own benefits.
It is also interesting to note that there are articles appeared in today’s newspaper asking investors not to panic. The content basically mirrored what I have said in my blog “Market Crash, Don’t Panic” on 6 of August 2007.
Oops, discovered one stock with good speculative buy: Biosensors. It was a superb level to go in at S$0.63 yesterday. Of course, it is still a very good speculative buy at $0.68 today! While it has some positives news lately, it looks interesting purely from TA point of view. This stock has dropped about 40% in less than a month’s time! At S$0.63 is basically revisit its 2-year low at around $0.60.
Please read the disclaimer! Cheers!
August 14th, 2007
NW Teong
大家好! 我在过去几年里主办了不少投资讲座与课程．也为新加坡交易所，理工学院， 私人金融机构等等主讲了投资讲座！总之， 我在投资讲座上应该有训练了数以千记的人！
由于我目前是全职的专业投资人员，没有时间去主办现场投资讲座与课程．不过，我已把这些整理成电子书与 e-讲座与大家分享！你可以通过此网站www.master-rider.com进入. 此网站是有中, 英文的．我坚决认为财富创造并非偶然的，它是可以学习的．而财富创造的最佳途径就是通过投资与做生意！记住，没有投资知识而想在股市里持久地赚大钱的人，他们都是在发白日梦！一时的侥幸是不值的太高兴的．投资是没有捷径的，不过，通过(master rider )神骑者 e-刊物，你将会缩短投资的学习过程！欢迎你浏览我的网站：www.master-rider.com, 里面除了我的电子书与 e-讲座也有我的搏客（也叫部落格）．我相信我的电子书与 e-讲座将对那些欲学习一个专业的投资过程，估值模型，还有一些爆发性的投交易策略等来捉住市场时机的人非常有帮助．我在新加坡的学生告诉我，他们说我的 e-刊物是送给他们孩子与朋友的最佳礼物！很感谢大家对我的支持与帮助！
希望你们在投资上（家庭, 股票，生意，工作等等）会有非常好的回报！
祝：事事如意！
August 10th, 2007
NW Teong
After reaching its peak around $1.04 on 9th July, it started its steep fall since then till today at around $0.68, a whopping 35% drop in about a month’s time. With all indications, today is a great time to buy this stock. Fundamentally, tech stocks are slated to register stronger growth in the 2H of the year, this stock is no exception albeit weaker than original forecast, valuation is not demanding at less than 10 times 2007 forecast earning, and technically it is poised to rebound very very soon!
Screaming buy today, targeting a 15% to 20% in 1-3 months’ time. Please note that I may or may not hold this stock at the moment. Please read the disclaimer at the end of the blog. Goodluck!
August 10th, 2007
NW Teong
For those who have read my blog on Market Crash? Don’t Panic dated 6 Aug, you may recall that I mentioned about market volatility in that article and despite market weakness, I mentioned that I can afford to wait a while before going into the market. Quote from my blog on Market Crash? Don’t Panic dated 6 Aug: …. As you can see, market is extremely weak today (6 August 2007), I can afford to observe for the next few days before buying my list of potential stocks. unquote
I would like to point out few things to you:-
First, market always tends to overshoot or under-shoot. It overshoots during extreme bulls and under-shoot during extreme bears. While I cannot say it is extreme bear now, market sentiment is extremely weak at the moment due to eventual explosion of the sub-prime loan saga (one of my hedge fund friends told me that we are yet to see the worse. Of course, while we listen to the experts’ view, we must always listen with a pinch of salt). More often than not, this is also times for market to under-shoot. Under such scenario, it pays to be a little patient. You must still do your homework and have all the buy and sell (and target) levels ready for all your stocks in your valuation model and monitor the situation closely. I believe the trigger of our buy decisions is not too far away (well, I am saying those stocks really have great fundamentals, good growth potential and relatively inexpensive valuation….please refer to my earlier blog).
Second, watch out for liquidity. Liquidity may suddenly dry up due to the negative chain effect from the sub-prime loan debacle. This will further damp the market sentiment and force the markets to fall at a higher speed. Watch out for interest rate, watch out if there are signs for the unwinding of yen carried trades, watch out for the weakness of regional currencies if any (note: when funds pull out from local market, the local currency will be weaken vis-à-vis US$).
Third, as I mentioned before, some important anniversaries are approaching. Dates such as 911, Black Monday, will further make investors jittery about the stock markets.
Fourthly, how markets move with relative to interest rates movement? Traditionally, they are negatively co-related.
This is the relative movement between the 10-year treasury and Nasdaq index. If you study the above charts carefully, you will find that traditionally, the big correction in the markets will be preceded by the peak in interest rates. Have you noticed the 10-year treasury peaked around 5.2% sometime at mid June and early of July? Interestingly, Nasdaq index peaked right after that at round 2700 sometime at the middle of July.
Despite the above, I will not hesitate to execute my buy decisions after I have done my home work. For those who are really scared but still want to participate in the stock market, you may consider buy your desired stocks but hedge them against the index. (I apologise if the above charts did not appear properly, however you can always go to yahoo.finance to view these charts: ^TNX for the 10-year treasury, ^IXIC for Nasdaq chart)
Cheers!
August 10th, 2007
NW Teong
Yes, today is the auspicious date for launching my website: www.master-rider.com and I sincerely thank all of you for visiting and supporting my web site!
I would like to specially thank Sing Chyun for putting this web site together and I must say that I have learnt many internet related knowledge from him. Thank you Sing Chyun!
For those who have visited my web site, I hope you have benefited from it as it is always my passion to share my professional investment knowledge with all of you. With this spirit of sharing, I do hope that you will also introduce this web site to your relatives, friends and to as many people as possible.
While there is no short cut in investments, you can surely cut short your learning curve by learning from the right source!
I wish every one of you many bountiful returns!
August 8th, 2007
NW Teong
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