Investing is NOT Speculation

There is a difference between speculation and investing.  

One distinction defined this by the length of time over which the investor expects to realise their investment; or to put it another way, how quickly one expects to make money.  

Speculation is high-risk-get-rich-quick territory.

Investing is managed risk over long periods of time where you can acquire wealth slowly.  

[  I am an investor by nature, not a speculator.
I am in it for the long haul, and having bought many good shares at fair or bargain prices in the past and presently, I intend to hang onto to them.
My view is that they will move yet higher over time.
Sometimes, the massive and largely unprecedented increase in the share price of my stocks over a short period was not anticipated by me or probably by many others.
So, did I get lucky?  Well, yes and no.
It was my view that the share price of these companies would rise further or eventually recover from recent corrections, whilst the past is no way of accurately predicting the future, I felt that it would rise to around a certain price in the medium term.
The difference between my expectations and what happened is that I would have been happy for it to return to that price within five years.  As it happened, it did so in less than a few months.  ]

Trading versus Investing

Saw these interesting postings in Blackspy fundamental blog.  

There is a saying:  "It is not a sin when you buy a stock at its low price."  This implies that one is able to value the stock confidently, thereby knowing the probability of upside is higher than the probability of the stock going down.  

What can we learn from the actions of Alam Maritim Chairman below?  Many 'investors' in the stock market are using such a strategy already.  Is this a strategy one can employ profitably, safely and consistently? 

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Alam Maritim Chairman disposed 100,000 shares back to market

Still remember DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares on 10 Dec 2010 at my previous post??
http://hongwei85.blogspot.com/2010/12/alam-maritim-chairman-acquired-100000.html

Now he disposed back all the 100,000 shares to open market again~ sign -_-"

On 10 Dec 2010, he acquired 100,000 shares at the price RM 0.89
On 14 Dec 2010, he disposed 30,000 shares at the price RM 1.04
On 16 Dec 2010, he disposed 25,000 shares at the price RM 1.04
On 17 Dec 2010, he disposed 45,000 shares at the price RM 1.056

Just in one week, Dato earned about RM 15k in open market.

Here is the earlier post of when the Alam Maritim Chairman bought the stocks.

Alam Maritim Chairman acquired 100,000 shares.

DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares at 10 Dec 2010.


Why he bought it? He has too much cash and do not know where to spend?
No no! He knows somwthing is worth by putting his money in this company. Nobody know how the company is running other than chairman.

Post modified: 23.12.2010
Here is another portfolio of a trader (copied from a blog)

I'm a long term investor, not so much on daily trading, slowly allocating part of my money into short term trading. Below is my year 2010 investment portfolio and total profit received. Can those active short term traders share your portfolio? I would like to benchmark my trading method to see if long / medium term investment is more lucrative or short term active trading is more lucrative.

Purc. Date Stock Buy Value P Unit C Unit Cost Dividend Sell Price Profit Selling Date Total Month Hold
19-Apr-10 GPacket 1.15 3 3 3,495.04 0 0.92 -735.04 11-Oct-10 6
9-Dec-10 Pchem-ca 0.335 10 10 3,390.00 0.41 710.00 9-Dec-10 1
26-Nov-10 Pechem 5.04 2 2 10,080.00 5.4 720.00 8-Dec-10 1
26-Nov-10 Pechem 5.04 6 6 30,240.00 5.6 3,360.00 9-Dec-10 1
4-Oct-10 Supermax 4.18 1 1 4,200.00 0 4.41 210.00 8-Dec-10 3
11-Mar-10 Maybank 7.5 1 1 7,555.25 0 9 1,444.75 11-Oct-10 7
11-Nov-09 Maxis 4.75 1 1 4,780.00 390 5.34 950.00 11-Oct-10 12
18-Feb-10 Genting 6.65 0.5 3,350.00 10 1,650.00 11-Oct-10 8
18-Feb-10 Genting 6.65 0.5 2,850.00 10.8 2,550.00 22-Dec-10 10
23-Feb-10 BJTOTO 4.25 2 2 8,562.55 320 4.17 97.45 8-Nov-10 9
1-Dec-09 Gamuda 2.81 1 1 2,850.00 100 3.83 1000.00 21-Dec-10 12

Total profit made: around 11,957.16 (some of the shares I didn't keep track of brokerage fees)

The amount of capital he employed into his portfolio peaked on 26th November 2010.
The total amount at risk was = 2,850 + 2,850 + 4,200 + 30,240 + 10,080 =50,220.
His profit of 11,957.16 gives a return of 23.8%.
His individual stock holding period returns will be higher.

Since January 2010, the KLCI index has risen from around 1250 to 1500, giving a return of 20% for the year.

Value Investor versus Speculative Investing

http://www.theintelligentinvestor.net/

While you contemplate a major investment decision, you need to ask yourself if you will be making a value investment or a speculative investment. You can use Benjamin Graham’s extensive writing about the difference between value and speculative investments to categorize potential investments you are considering.

Speculative investors buy a stock with a hunch that the price will go up or down quickly. 

Value investors buy a stock after determining the long-term value of the business.

Although value investors outperform speculative investors in the long-run, value investors do not expect to outperform the market. Value investors accept the reality that no one can predict market behavior; instead, value investors work to control their own investment behavior.

Do you find that you are more of a value investor or a speculative investor?

So before I make a trade I ask myself how easily I will be able to sleep at night, or as Benjamin Graham puts it, I ask myself if the trade promises “safety of principle and a satisfactory return.”

Stock Market Strategy: "One-day trade, Swing trade or Long-term trade"

Stock Market Strategy
Stock market is a risky place to make a profit.

Who are these players generating all this trade -speculating or investing - in the stock market?

There are many types of trades in the stock market.  However, essentially the three most popular of them are:

1.  One-day trade

2.  Swing trade

3.  Long-time trade.

It is common to think that the swing trade has a time horizon between the one-day trade and the long-time trade.  The time horizon of a swing trade is dependent on the event(s) influencing the player to terminate the trade.

The more astute would notice that all these types are characterized by a single factor (risk tolerance profile) of the players:  their ability to hold onto their position in the stock market for various investing time frames.


The beauty of the stock market is that it can be used for various purposes by different investors.


http://www.assetinvesting.com/?p=4473

Thanks SC and Bursa, for alerting investors of possible market manipulations

In todays paper in the Star (18.6.09), the headline reads:

On the alert. SC and Bursa to act against market manipulators.

Investors beware!

Thursday June 18, 2009
SC and Bursa to act against market manipulators
By YAP LENG KUEN


PETALING JAYA: The Securities Commission (SC) and Bursa Malaysia will investigate and take action if there is any evidence of stock market manipulation amidst the current liquidity-driven rally.

“Both the SC and Bursa carry out surveillance of all trading activities on the exchange.

“The scope of surveillance covers all dimensions of the trading activities. If there is any evidence of market manipulation, the SC and/or Bursa Malaysia will investigate and take appropriate enforcement action,” an SC spokesman said in an e-mail response to queries from StarBiz. “This is further complemented by SC’s investor education programmes conducted regularly to help investors make informed investment decisions.”

Since early May, Bursa has issued six unusual market activity (UMA) queries, following sudden surges or drops in share price or volume traded. The first query went to Unisem (M) Bhd (May 6), followed by Measat Global Bhd (June 4), Transmile Group Bhd (June 5), SAAG Consolidated (M) Bhd and Compugates Holdings Bhd (June 11) and Equine Capital Bhd (June 16).


Recent price movements of some counters

Bursa chief regulatory officer Selvarany Rasiah said as a frontline regulator, Bursa had a duty to ensure an orderly and fair market.

“The maintenance of an orderly and fair market necessarily means that the exchange focuses on identifying the presence of any manipulative or artificial nature of trading on the market. On this note, to be clear, it is the manipulative or artificial nature of trading (in the sense of being false or resulting from trickery or deception) that is of concern to the exchange,’’ she said in a statement to StarBiz.

“Where trading takes place in an informed market and in the absence of manipulative conduct, the exchange believes it is a matter for investors to make a decision as to whether to participate.

“So-called speculative trading is not in itself offensive or undesirable but it is not tolerated by the exchange if it transforms into a market offence such as manipulative trading conduct.’’

“While those in the market may only see the UMAs or market alerts – or only be aware of the contact we have directly with them – the exchange engages in a high level of activity across all facets of the market, monitoring and investigating trading and initiating a range of regulatory responses to ensure that the market is fair, orderly and informed.”

On comments that the current market alerts were reminiscent of those issued in old times, she said: “Stock markets, this one included, tend to be cyclical and when market levels change, the exchange will come in as necessary to inform investors about the importance of ignoring rumours and basing their trading decisions on research and a careful consideration of the fundamentals of the stocks that make up the market.

“The exchange will continue its active monitoring of trading, engagement with brokers and registered persons, its use of a range of regulatory responses from those that can be implemented immediately to investigation and disciplinary action which necessarily takes more time to complete.’’

Hence, she added, the market could expect to see continued use of UMAs and market alerts, a continuation of Bursa’s awareness raising activities and emphasis on the role of listed issuers, participating organisations and registered persons’ play in ensuring market integrity.

“We note also the value, particularly to investors, of the publication and reporting of market alerts and other information about trading activity on our market,” she said.

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"Where trading takes place in an informed market and in the absence of manipulative conduct, the exchange believes it is a matter for the investors to make a decision as to whether to participate.

So-called speculative trading is not in itself offensive or undesirable but it is not tolerated by the exchange if it transforms into a market offence such as manipulative trading conduct."

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Wednesday June 17, 2009

Equine queried on heavy trading


PETALING JAYA: Equine Capital Bhd (ECB) in reply to a Bursa Malaysia query yesterday said it was not aware of any event that may have contributed to the unusual market activity in its shares recently, in particular, on June 15.

ECB was the most heavily traded counter on Monday with 50.28 millions exchanging hands.

In a filing with Bursa, the ECB board of directors said that they were not aware of any corporate development relating to ECB group’s business and affairs that had not been previously announced that may account for the unusual market activity.

“We do not have any other possible explanation to account for the unusual market activity,” it added.

Since April, Bursa has issued five unusual market activity queries, issued when the share price or volume of a company suddenly surges.

The first for the year was on May 6 when it queried Unisem (M) Bhd, followed by four more this month, starting with Measat Global Bhd on June 4, Transmile Group Bhd the next day, and SAAG Consolidated (M) Bhd and Compugates Holdings Bhd on June 11.

Meanwhile, Compugates told Bursa yesterday group managing director and substantial shareholder Goh Kheng Peow had received margin call notices between June 2 and June 7 from Malacca Securities, EON Bank Bhd, OSK Investment Bank Bhd and Malayan Banking Bhd.

Earlier, in a reply to Bursa’s query on June 11, Compugates said the recent high trading volume was caused by a reduction of margin facility to Goh by stockbrokers.

For example, RM5mil was revised downwards to RM1.5mil effective May 20 by TA Securities.

EQUINE : [Stock Watch] [News]

http://biz.thestar.com.my/news/story.asp?file=/2009/6/17/business/4132023&sec=business