Master Rider Blog

Value Buy?

I have mentioned that market would be volatile on the downside biase in my blog “Happy New Year” dated 3^rd of Jan 2008. Market indeed was very volatile and falling like a stone few days before.

In fact, I have emailed to all Master Club Riders (i.e. whose who have bought any of the  e-publication from  master rider web site: http://www.master-rider.com) on  22^nd Jan 2008 to advise them to invest in Venture Corp at that point in time. My whole email message to Master Rider Club members as follows:-

Dear Master Riders, 

As mentioned in my blog on 3rd Jan, market would be volatile with the tendency on the downside. This has been proven right so far. With the relentless selling by the investors, some value does appear for some of the good blue chip stocks.

Yes, I would think Venture Corp at $8.3 is a very good buy, with prospective PER of about 7 times and dividend yield of around 6%. This stock at this price is really a rare pick! I would not hesitate to buy at this level and hold for at least the next twelve months (longer if needed). Remain clam amid the turbulence and you would be alright.Wishing all of you a bumper crop in the year of Rat!    Cheers!

The reason for posting this email message is sharing this message with all of you:  We should not hesitate to accumulate value stocks when the time is right!

As I have shared many times with my fellow students as well as readers, we should adopt different strategy at different time. We all know that business and economy are cyclical, for instance, when economy is coming from the bottom and is growing, we can use buy and hold strategy. When it is growing at greater pace, i.e. economy is accelerating, we can use both buy and hold as well as momentum strategy. On the same note, when the macro picture is slowing down like now, we should be extremely careful (for reasons that I have mentioned many times, please check back my past blogs and e-publications). In fact, I would always advise people to divest way before this happen. My dear friends, if you use the Baltic Dry index (“BADI”) as leading indicator to time this divestment, you would not be doing so badly. Please refer to my blog “Chart-wise on 28 Nov” and also the chart below:

If you follow the BADI, then you would probably divest your portfolio on around 23^rd November 07, i.e. when the index started to plunge where the stock market was still stable. Please note that this index has crossed down the stock index on around 23^rd November which indicated a souring mood for market in time to come.

As mentioned, we have different stages in an economic cycle. This is like driving, when we are going up a slope, we use 1^st or 2^nd gear and when we are on a downhill slope, we use 4^th or 5^th gear. Similarly, at this moment in time and at this stage of economy, we have to adopt the value-investing strategy (similar to Warren Buffet) where we prepare to buy good value blue chip stocks when good value emerge and are prepared to hold for longer term. Unfortunately, many investors only have single gear and simply do not know how to adapt to changes in the economy.

Who says you cannot bottom fish? You can bottom fish provided you know two things: first this is the real bottom (for the market or more importantly for the stocks that you are going to invest) and second you must know what fish to catch. You need to catch big blue fishes than small frail fishes which may die half way through your holding period (especially times like this)

How do I see the market from now on? Well, stock markets would definitely remain volatile in the next few weeks. Please take a look at BADI, it is still dropping. However, some good investment opportunities would continue to appear along the way. As usual, do your home work and accumulate your valued stocks along the way.

Congratulations to all Master Rider Club members who have bought Venture Corps at S$8.30 or below (after I have sent out the email, it went down to as low as S$7.70). Currently it is at around S$10, you may wish to lock in profit if you like, A profit of 20% is the objective of our short term trading target, of course, you may also opt to hold a longer term if you wish.

Cheers!

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

Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website

5 comments January 24th, 2008 NW Teong

Happy New Year!

Hi, I would like to wish every one a very happy new year and that all of you would have a new year filled with joy, plenty of wealth and lots of health.

I am sorry to say that I have not blogged for quite sometimes due to my heavy commitment in my private equity career. This is not an excuse, more importantly I feel that there is nothing much to talk about the markets in the last few weeks. To put it simply, there are no new factors to talk about on the markets. Markets are basically still spooked by the depth of the sub-prime loan debacle and its severe impact on leading financial institutions.

Due to the sub-prime problem and its impact on the financial institutions as well as on the macro picture, markets would be volatile with the tendency to trend downwards in the next few weeks. In short, investors should all be wary when macro picture is turning down, i.e. GDP growth rate is coming off. Under such scenario, we should not invest in the equity markets if we can afford to. What shall we do then? Well, we should continue to monitor the markets and wait for good opportunity to go in or at least when macro picture started to turn up again. We may not know how long the economic slow down will be, nevertheless we should be patient to wait for a turnaround. However, if we have to invest at this moment, we have to really look for value-stocks and prepare ourselves to hold for a longer term. My own view is that if we can we shall put most of our money in safer instruments such as government bonds and some money in in-expensive value stocks which we prepared to hold longer term. These stocks preferably also give out 4-5% dividend per year. Be cautious and conservative. The Santa Claus rally, if any was really muted last year and I do not think there will be any Capricorn effect this month. On the contrary, markets would be extremely volatile.

Cheers!

Master “The Essence of Stock Investment” and ride towards the journey of your financial freedom to be the “Master of Your Own Destiny”!Disclaimer: Investors are investing at your own risk. Please read full disclaimer at the end of the blog or from the main page of the website.

7 comments January 3rd, 2008 NW Teong