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

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.

Saturday, 5 June 2010

Kenmark stock an easy buy after force-selling

Saturday June 5, 2010

Stock an easy buy after force-selling
By IZWAN IDRIS
izwan@thestar.com.my

MORE than half of Kenmark Industrial Co (M) Bhd’s entire paid up share capital were pledged as collateral at various financial institutions by the main shareholders of the company, based on information from the company’s latest annual report.

It is believed that large blocks of these shares were force-sold into the market in recent days, which had paved the way for a shrewd former shareholder to gain control of the troubled furniture maker.

The force-selling on Kenmark shares gained momentum on Monday after some clients failed to top up their margin accounts in the aftermath of the stock’s sudden price collapse the week before, according to several stockbrokers contacted by StarBizWeek.

Kenmark’s annual report 2009 showed that as at Aug 6 last year, about 55% of the company’s total 181.75 million shares were pledged as collateral for the margin financing facilities. That works out to about 100 million shares held in custody by several banks and stockbrokers.

A chunk of these shares belonged to managing director James Hwang, director Chen Wen-Ling @ Dolly Chen, as well as several privately held companies. Executives from two stockbroking firms confirmed that they no longer hold any Kenmark shares as they had dumped the shares in the market.

Another broker confirmed that his firm had to force sell shares in Kenmark earlier this week after a client failed to top up his margin account. An industry observer said that it is highly likely that these institutions would have to bear significant losses as the stock price had plunged considerably.

Kenmark made headlines last week after its key management went missing and bankers demanded the company pay back it loans. Its failure to submit its latest quarterly financial account fuelled speculation the company was deep in a financial quagmire.

Kenmark’s counter has been on a wild roller coaster ride since then. Shares in Kenmark were suspended from trading by the exchange on Monday after just over an hour of trade on extended sell-down to a paltry 10.5 sen which led to a massive surge in trading volume to 71.9 million shares.

Trading resumed on Tuesday and the stock closed at a record low of 6 sen on 191.1 million shares transacted. However, it rebounded on Wednesday to close at 11.5 sen with 138 million shares changing hands.

The stock was suspended for the second time this week on Thursday, and resumed trading yesterday; it shot up 14.5 sen to close at 26 sen on trading volume of 101 million shares.

On Thursday, the market was in for another shock when it was revealed that Datuk Ishak Ismail had acquired a huge block of shares in Kenmark, a company he had helped list back in 1997. He had mopped up some 57.7 million shares in the open market at near rock bottom prices.

Based on press statement issued on Thursday by managing director James Hwang, Ishak had bought the shares on Tuesday and Wednesday. Recent filings to Bursa Malaysia did not offer any indication about Ishak’s purchase cost, but the stock’s average price over the two-day period was well below 10 sen a piece.

The week before Ishak had resurfaced, Kenmark’s share price was trading at 83 sen on May 25 with a mere 55,000 shares transacted. The stock had kept within a tight trading range of RM1 and 80 sen for the past four years right, up until late May this year.

It is however unclear at this stage, whether Hwang’s stakes in Kenmark has been reduced following the recent sell-off.

Based on the latest availaible information on Kenmark’s shareholding structure, Hwang owned 49.48 million shares, or 27.61% stake in Kenmark as at Aug 6 last year.

It was estimated that Hwang had pledged about 13% of his interest in Kenmark as collateral to several financial institutions including Kenanga Investment Bank, Alliance Group, Maybank and SJ Securities. Company director Chen owned 33.5 million shares, or 18.7% stake in Kenmark, with about 10% of her total stake pledged as collateral.

The annual report showed stockbroker A.A. Anthony held 12 million Kenmark shares that was pledged by Paduan Gangsa Sdn Bhd, while TA Enterprise held 8.34 million shares put up by Rancak Bernas Sdn Bhd and 7.28 million shares pledged by a shareholder Mohd Noh Ibrahim.

http://biz.thestar.com.my/news/story.asp?file=/2010/6/5/business/6406163&sec=business

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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)

Saturday, 5 June 2010

Kenmark stock an easy buy after force-selling

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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

Political and Economic News

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