Master Rider Blog

Tech Sector III

September 11th, 2007 NW Teong

I know I know, I am a bit crazy to talk about tech sector three times in a space of 8 days. I simply cannot help it as I think that at current level, it is still very good level to accumulate and build up my tech portfolio (One, please be selective in your stock picks and two be sure to allocate your funds prudently, i.e. diversify whenever possible).

Other than monitor some macro indicators such as the semicon book to bill number (refer earlier blogs), I noted with great interest on some recent news. Both TSMC and UMC has just reported good sales and bottom line numbers for August 2007 and more importantly have improved their guidance for third quarter. Please note that TSMC and UMC are No 1 and No 2 semicon foundries respectively in the world. What does this tell you? Sure, as No 1 and No 2 foundries in the world, they are surely indicative of what this industry is performing few months down the road. In fact, their results are important indicator of what will happen to the entire tech sector in the world as most tech products need semicon components to a varying degree. They give me a very positive feeling and reinforce my positive view on tech sector in the next six months (at least till end of the year). Another piece of positive news came from the No 1 semicon stock, i.e. chip maker Intel which has also upgraded its gross margin and sales guidance for third quarter. Intel cited better world wide demand for the upgrade.

In fact, some of the tech stocks that I am monitoring have, on average rose by about 10% since I first made the buy call in tech stocks. However, these stocks still have the potential to rise another 20%-30% by the end of the year albeit unforeseen circumstances. Having said that I must point out again that markets would still be volatile (by now some of my readers may complain that I am really “lor so” which is a Hockkian phrase for being long winded in English as I have already cautioned a few times in my earlier blogs that 3^rd Quarter is one of the most volatile quarter in a year, especially now with the unfolding of the sub-prime saga). However, this also makes it a great quarter to cherry pick the stocks you really like!

Remember to use the strategy that I mentioned before: buy core stocks + insurance (hedge). Ideally, our portfolio should consist of stocks that rely heavily on domestic market (I am talking about Asia Markets, especially, markets such as Singapore) such as the construction sector and other sectors that depend on global trade such as tech sector. My objective on this is to achieve a natural diversification. If we really cannot find good stocks in different sectors, then we should forget about diversification, remember do not diversify just for the sake of diversification. I always urge people to understand the essence of things that they learnt. Diversification is a simple term that most people can understand, however it is also most widely abused by investors.

Another example is dollar-cost averaging. We always hear this from unit trust sale persons, especially when market is on the down trend. They would advise customers to invest more when market is falling so as to achieve a lower averaging cost. If you blindly doing this dollar-cost averaging, you could stand to lose big, very big! Of course, this technique has its own merits but only applicable under certain condition. One scenario that you can use this technique is when the stocks/funds that you like are already at screaming buy level (obviously, you have done your home work…..macro analysis, company in-depth analysis, valuation….TA etc to derive this conclusion) and they are still falling due to extreme bearishness in the markets.

Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom! Be the “Master of Your Own Destiny”!

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Entry Filed under: tech sector, Stocks, Singapore