Market Crash? Please don’t panic!
Since January this year, I have been saying that the stock markets would be more volatile this year as compared to 2006. What happen in 2006 was a beautiful story for all (at least most) investors as markets everywhere had advanced almost in a 45 degree straight line manner. One glance at STI index, you would know what I mean.
However, come 2007, investors have to be aware that markets would be more volatile basically due to the following factors:-
- Subprime loan problem in US,
- High crude price,
- Weak US$, also fearful of reversal of Yen carried trades
- China economy and stock market are getting too hot and government is thinking of ways and means to moderate them!
- Valuation is getting expensive after about 4 years of uninterrupted bull market.
- Technology/manufacturing sector seems to be still in the doldrums
- Cannot rule out the possibility of terrorist attacks (anniversary of 911 is fast approaching)
- Anniversary of Black Monday (19 Oct 1987) also not too far away. For those investors that have no idea what Black Monday was, it was a day that the global stock markets crashed!
- Others such as environmental issues, wars and conflicts etc
Please do not get me wrong or have the impression that I am a pessimist. On the contrary, I am an optimist and I think precisely what happen in the market (such as huge correction and big surge in share price) makes investment both interesting and exciting! The market is simply a reflection of “greed and fear” of all investors combined, full stop.
After days of huge correction, I guess most investors are a little panicky. Please do not panic, this is the time to do an analysis on the macro picture and to look at your valuation model (for those who wish to know how to view the macro picture and look at a valuation model please visit: www.master-rider.com). As far as Asia is concerned, there is still plenty of good growth stories!
In short, this is the best time to conduct our fundamental analysis. If I can show you that there are stocks that trade at 5-6 times PER and growing at double digits in both the top and bottom line growth in the next two years, and in addition, it will also give you at least 4% dividend yield, would you want to invest? What is your down side for this type of investment here? The risk is practically quite low if you have done your home work, the type of risks I can think of (and this applies to all other stocks in the market) is firstly the assumption that the forecast made by the research analyst will be realized and secondly is the event risk. However, the biggest comfort you have here is the cheap valuation which in my view is more than offset the risks that I mentioned above.
Having built my own valuation model and looking at the model today, I find some very interesting stocks that can potentially make me 30% to 50% in 6-12 months’ time. This is the time, I can either use my investrade or board the rocket strategy. 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.
You see, the essence of stock investment is to make good money. This seems to be an obvious statement but please pause for a while and think about it. Try to link it to the company that you wish to invest. Then, it becomes obvious that why you choose to invest in them in the first place i.e. these companies can create value by making good money and their valuation is cheap!
I hope I have managed to convince you to do your fundamental analysis (and have a valuation model ready at all times) at this very trying period. If you do that, you would be greatly rewarded!
Markets would be very interesting within the next two weeks!
August 6th, 2007
NW Teong
Hi everyone, I am Teong and I would like to extend a very warm welcome to you! If you would like to know a little bit more about me you could visit this web site: www.master-rider.com and click on about.
As you can see, I have a very ‘complicated’ background. I started my career as a Project Engineer with a developer when I first graduated from the National University of Singapore (‘NUS’). However, barely after 3 years, I concluded that for this job the reward does not justify my effort. Hence I made up my mind then either I be my own boss (in real estate) or quit the job. At the tender age of twenty something, with no capital to be my own boss my choice is obvious.
I went on to join a market research and consultancy company which exposed me to all kind of companies in all sectors that came to us for market research, survey and consultancy works. This is a good exposure for me as I have the first chance to really come into contact with people across all industries. Two years after this job, I realized that I need a business degree to complement my engineering degree. At that time (even till today), I thought that an engineering degree coupled with a MBA degree was one of the best combination as far as tertiary education was concerned.
However, I faced with two options: doing my MBA full time or part-time? It did not take me long to make a decision, yes I did my MBA full time also at NUS. Doing a cost-benefit analysis, I felt that doing full time MBA was more superior as I could really benefit the most. Besides obtaining a full scholarship for two consecutive years from the Institute of Banking and Finance in Singapore, I also went on to become the President of the MBA Club while doing my course. In fact, I was fortunate to say that my whole MBA course was fully covered by the scholarship!
After I came out from NUS with a newly equipped MBA, I joined a conglomerate founded by one of the richest tycoons in this region. This job brought me to China in the early 90s. During my 3-year stay in China, I traveled extensively, especially the coastal and the north-eastern regions in China. Oh boy! I can tell you, it was really an eye-opener. I had tried the best and the worst food in China. One of my more interesting lunches was at a river side restaurant somewhere in Heilongjiang province. The sea food was excellent, as the fish and water used for cooking were both from the river (江水煮江鱼!). There was also an unforgettable experience of eating dog meat for the first (also my last) time in my life in a remote Korean village somewhere in Liaoning province. At that particular fateful day, we had been traveled for half a day already and we were (with my Chinese colleagues) all tired and hungry but we some how ended up in this little Korean village which offered no other food other than dog meat!
I also cannot forget the spectacular view of a vast soybean crop that extended to as far as your eyesight can see. It was simply a sea of soybean plants that seemed to connect to the sky at the far end!
Of course, I had also been to many parts of China during that three years. Oops, I got a bit carried away on my China experience!
After this job, I came back to Singapore for personal reason and joined a shipping company. After a short stint in this company, I joined a venture capital firm in 1996, which officially began my investment career. You can find my profile in the above mentioned website. In short, I have spent the last 10 years in investment, managing both the private as well as public listed markets. In between, I also published a popular investment book, “The Essence of Stock Investment” in 2005. I have also conducted many seminars, short courses, radio talks in the past few years. I have great passion in investment and I am truly sincere in sharing my professional investment experience with you. To me, something that works must be both simple and effective!
I regret to say that other than selected seminars organized by Singapore Stock Exchange (‘SGX’), I have stopped all my seminars, courses since middle of 2006 due to my current job commitment. FYI, I am currently still a full time investment professional (still waiting to retire la!). However, there is one piece of great news. I have just re-launched my website: www.master-rider.com, and once again I am able to share my investment experience through my e-book and e-seminars with you.
One piece of advice to share with you:-
Every knowledge/wisdom that you come across, you have to really grasp the essence of it. This applies to those who read my e-book, e-seminar and other e-publications.
Last but not least, I wish every one of you great success in investments and in life! Stay healthy, happy and wealthy (in that order please)!
August 3rd, 2007
NW Teong
Hi there! Welcome to my blog. In the days to come, I’ll be blogging my personal thoughts and observations. Feel free to leave your comments.
If you find my blog beneficial, I would like to encourage you to also visit my website at: http://www.master-rider.com.
August 3rd, 2007
NW Teong
