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Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.

Tuesday 15 December 2009

EPF net buyer in banking stocks

EPF net buyer in banking stocks

Tags: Bank Negara Malaysia | CIMB Group Holdings Bhd | Domestic banking stocks | ECMLibra Investment Research | EON Capital Bhd | EPF | Hong Leong Bhd | Maybank | PBB

Written by Yong Yen Nie
Monday, 14 December 2009 11:41

KUALA LUMPUR: The Employees Provident Fund (EPF) has re-emerged as a net buyer in most domestic banking stocks, especially large-capped ones since November 2009, a significant shift from its net selling activities in the period prior starting in April this year.

According to latest filings on Bursa Malaysia, EPF has raised its stakes in MALAYAN BANKING BHD [] (Maybank) and CIMB Group Holdings Bhd to 808.7 million shares or 11.4% and 462.22 million or 12.9%, respectively.

A month earlier, EPF held 788.25 million shares or an 11.1% stake in Maybank and 441.68 million shares or a 12.3% stake in CIMB.

Prior to this, the statutory pension fund had pared down its holdings in Maybank and CIMB from April this year. At end-April, it had held 887.77 million shares or a 12.5% stake in Maybank and 623.48 million shares or a 17.4% stake in CIMB.

EPF also picked up PUBLIC BANK BHD [] (PBB) shares in November, raising its interests to 474.93 million shares or 13.4%, compared with 461.54 million shares or 13.1% at end-October.

EPF used to hold a 14.8% stake comprising 523.76 million shares in PBB but had pared down its stake in the banking group since end-August this year.

It also accumulated more AMMB HOLDINGS BHD [] shares and held a 13.4% stake or 405.35 million shares in the banking group as of end-November, compared with 395.38 million shares or 13.1% a month earlier.

EPF had been a net seller in AMMB shares since July. As at end-June, EPF had held 451.57 million shares or a 15% stake in AMMB.

Banking analysts said EPF was seen to be turning its focus on banking stocks, given the improved indicators in the financial sector and stronger expectations of an improved economic outlook in 2010.

A banking analyst with a local research house said several research houses had made overweight calls on the sector following banks’ better-than-expected financial results for the quarter ended Sept 30, 2009.

“With the anticipation of a stronger economy next year, EPF would want to have an investment strategy that benefits the most from the recovery,” she told The Edge Financial Daily last week.

The banking analyst added that while there was still some upside left in the banking stocks, most of them were approaching the target prices.

“(Nevertheless), we believe buying activities for banking stocks will continue for the first half of 2010, underpinned by stronger economic trends, while profit-taking would be more pronounced by June next year,” she said.

EPF had also accumulated shares in other mid-capped banking stocks, filings on Bursa Malaysia showed.

According to filings last Friday, EPF had raised its interests in HONG LEONG BANK BHD [] to 177.28 million shares or 11.2% from 171.32 million shares or a 10.8% stake at end-October.

The pension fund had also increased holdings in ALLIANCE FINANCIAL GROUP BHD [] (AFG) to 235.9 million shares or 15.24% at end-November from 226.02 million shares or 14.6% a month earlier. Filings showed EPF has been accumulating shares in AFG since end-June.

EPF slightly pared down holdings in EON CAPITAL BHD [] to 83.4 million shares representing 12.03% at end-November from 83.62 million shares or 12.06% a month earlier.

Recent Bank Negara Malaysia statistics showed that the decline in loans growth had bottomed in October, following a faster loans expansion of 7.5% year-on-year (y-o-y) compared with 7.2% in September this year.

In a report, ECMLibra Investment Research said the improving loans growth corresponded with a gradual recovery in economic conditions, as shown by a 1.2% contraction in gross domestic product (GDP) for the third quarter of 2009 (3Q09), which was healthier than 1Q09’s and 2Q09’s contraction of 6.2% and 3.9%, respectively.

“Going by the lending indicators, it would seem that there has been some pent-up demand for credit, as shown in the double-digit y-o-y changes in the applications and approval numbers.

“Net NPL (non-performing loans) ratio on a three-month basis remained unchanged at 2.1%, but has improved to 1.5% on a six-month basis (from 1.6% previously),” it said.

The research house added that the banking system’s capitalisation remained stable with risk-weighted capital ratio and core capital ratio of 14.5% and 13%, respectively.

This article appeared in The Edge Financial Daily, December 14, 2009.

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My 18 points guide to Successfully compounding your money in Stocks

Be a good stock picker.
Think as a business owner.
Always look at value rather than the price. Do the homework.
Buy and hold is alright for selected stocks.
Compounding is your friend, get this to work its magic.
Mr. Market is there to be taken advantage of. Do not be the sucker instead. BFS;STS.
Always buy a lot when the price is low.
Never buy when the stock is overpriced.
It is alright to buy when the selected stock is at a fair price.
Phasing in or dollar cost averaging is safe for such stocks during a downtrend, unless the price is still obviously too high.
Do not time the market for such or any stocks.
By keeping to the above strategy, the returns will be delivered through the growth of the company's business.
So, when do you sell the stock? Almost never, as long as the fundamentals remain sound and the future prospects intact.
The downside risk is protected through only buying when the price is low or fairly priced.
Tactical dynamic asset allocation or rebalancing based on valuation can be employed but this sounds easier than is practical, except in extreme market situations.
Sell urgently when the company business fundamental has deteriorated irreversibly.
You may also wish to sell should the growth of the company has obviously slowed and you can reinvest into another company with greater growth potential of similar quality. However, unlike point 16, you can do so leisurely.
In conclusion, a critical key to successful investing is in your stock picking ability.

http://myinvestingnotes.blogspot.com/2012/07/my-18-points-guide-to-successfully.html

11 Lessons From Peter Lynch

Peter Lynch taught me:

1. Behind every stock is a company. Find out what it’s doing.
2. Never invest in any idea you can’t illustrate with a crayon.
3. Over the short term, there may be no correlation between the success of a company’s operations and the success of its stock. Over the long term, there’s a 100% correlation.
4. Buying stocks without studying the companies is the same as playing poker – and never looking at your cards.
5. Time is on your side when you own shares of superior companies.
6. Owning stock is like having children. Don’t get involved with more than you can handle.
7. When the insiders are buying, it’s a good sign.
8. Unless you’re a short seller, it never pays to be pessimistic.
9. A stock market decline is as predictable as a January blizzard in Colorado. If you’re prepared, it can’t hurt you.
10. Everyone has the brainpower to make money in stocks. Not everyone has the stomach.
11. Nobody can predict interest rates, the future direction of the economy, or the stock market. Dismiss all such forecasts and concentrate on what’s actually happening to the companies in which you’ve invested.

Lynch’s advice had a profound effect on my stock market approach. He taught me that investment success isn’t the result of developing the right macro-economic view or deciding when to jump in or out of the market. Success is about researching companies to identify those that are likely to report positive surprises.

Capital Expenditure

A great company with a Durable Competitive Advantage will have a ratio of Capital Expenditures to Net Income of less than 25%. Less is better.

Capital Expenditures are expenses on:
- fixed assets such as equipment, property, or industrial buildings
- fixing problems with an asset
- preparing an asset to be used in business
- restoring property
- starting new businesses

A good company will have a ratio of Capital Expenditures to Net Income of less than 50%.

A great company with a Durable Competitive Advantage will have a ratio of less than 25%.

Less is better.

Benjamin Graham's 113 Wise Words

The true investor scarcely ever is forced to sell his shares, and at all times he is free to disregard the current price quotation. He need pay attention to it and act upon it only to the extent that it suits his book, and no more. Thus the investor who permits himself to be stampeded or unduly worried by unjustified market declines in his holdings is perversely transforming his basic advantage into a basic disadvantage. That man would be better off if his stocks had no market quotation at all, for he would then be spared the mental anguish caused him by other persons' mistakes of judgement."

Philip Fisher's Wise Words

"The refusal to sell at a loss, while completely natural and normal, is probably one of the most dangerous in which we can indulge ourselves in the entire investment process.

More money has probably been lost by investors holding a stock they really did not want until they could 'at least come out even' than from any other single reason. If to these actual losses are added the profits that might have been made through the proper reinvestment of these funds if such reinvestment had been made when the mistake was first realized, the cost of self-indulgence becomes truly tremendous."

(Common Stocks and Uncommon Profits)

The Ultimate Hold-versus-Sell Test

Here is the overriding primary test, followed by observations on why it is so critically important:

Knowing all that you now know and expect about the company and its stock (not what you originally believed or hoped at time of purchase), and assuming that you had available capital, and assuming that it would not cause a portfolio imbalance to do so, would you buy this stock today, at today's price?

No equivocation. Yes or no?

Answers such as maybe or probably are not acceptable since they are ways of dodging the issue. No investor probably buys a stock; they either place an order or do not.

Here is the implication of your answer to that critical test: if you did not answer with a clear affirmative, you should sell; only if you said a strong yes, are you justified to hold.

Some thoughts on Analysing Stocks (KISS)

Ideally a stock you plan to purchase should have all of the following charateristics:

• A rising trend of earnings dividends and book value per share.
• A balance sheet with less debt than other companies in its particular industry.
• A P/E ratio no higher than average.
• A dividend yield that suits your particular needs.
• A below-average dividend pay-out ratio.
• A history of earnings and dividends not pockmarked by erratic ups and downs.
• Companies whose ROE is 15 or better.
• A ratio of price to cash flow (P/CF) that is not too high when compared to other stocks in the same industry.

Margin of Safety Concept: Stocks should be bought like groceries, not like perfume

The high CAGR in the early years of the investing period, due to buying at a discount, tended to decline and approach that of the intrinsic EPS GR of the companies over a longer investment time-frame.

Chapter 20 - “Margin of Safety” as the Central Concept of Investment

A single quote by Graham on page 516 struck me:

Observation over many years has taught us that the chief losses to investors come from the purchase of low-quality securities at times of favorable business conditions.

Basically, Graham is saying that most stock investors lose money because they invest in companies that seem good at a particular point in time, but are lacking the fundamentals of a long-lasting stable company.

This seems obvious on the surface, but it’s actually a great argument for thinking more carefully about your individual stock investments. If most of your losses come from buying companies that seem healthy but really aren’t, isn’t that a profound argument for carefully studying any company you might invest in?

myinvestingnotes.blogspot.my (Bullbear Buffett Stock Investing Notes)

Tuesday 15 December 2009

EPF net buyer in banking stocks

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All equity security investments present a risk of loss of capital

The Ultimate Hold-versus-Sell Test

Some thoughts on Analysing Stocks (KISS)

Benjamin Graham

Sell the losers, let the winners run.

Investment Style

Warren Buffett

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