Volatility of Single Stocks

Volatility of Single Stocks

Individual stocks tend to have highly volatile prices.

The returns you might receive on any single stock may vary wildly.



Best Performing Stocks

If you invest in the right stock, you could make bundles of money.

• For instance, Eaton Vance, an investment-management company, has had the best-performing stock for almost 25 years.  If you had invested $10,000 in 1979 in Eaton Vance, assuming you had reinvested all dividends, your investment would have been worth $10.6 million by December 2004.

Worst Performing Stocks

On the downside, since the returns on stock investments are not guaranteed, you risk losing everything on any given investment.

• There are hundreds of dot-com investments that went bankrupt or are trading for a fraction of their former highs in early 2000.

• Even established, well-known companies such as Enron, WorldCom and Kmart filed for bankruptcy and investors in these companies lost everything.

All Stocks in Between these two Extremes

Between these two extremes is the daily, weekly, monthly and yearly fluctuation of any given company's stock price.

• Most stocks won't double in the coming year, nor will many go to zero.

• But the average difference between the yearly high and low stock prices of the typical stock on the NYSE is nearly 40%.

Stocks that don't perform over Long Time

In addition to being volatile, there is the risk that a single company's stock price may not increase significantly over time. 

• In 1965, you could have purchased General Motors' stock for $50 per share (split adjusted).  By May 2005 (4 decades later), your shares of General Motors would be worth only about $30 each.  Though dividends would have provided some ease to the pain, General Motors' return has been terrible.  
• You would have been better off if you had invested your money in a bank savings account instead of General Motors' stock.

All your Eggs in a Single Basket

Clearly, if you put all of your eggs in a single basket, sometimes that basket may fail, breaking all the eggs.

Other times, that basket will hold the equivalent of a winning lottery ticket.

Petronas Dagangan

The stock price has risen from MR 2.00 in 2000 to MR 4.00 in 2005.

It has risen from MR 4.00 in 2005 to MR 8.00 in 2010.

From MR 8.00 in 2010, it has risen to MR 17.00 in 2015..

From 2000 to 2015, this stock has delivered multi-bagger returns.

Between 2000 to 2015, there were 3 big dips in the price of the stock, in 2001, 2009 and recent months.

Don't forget to add the GROWING dividends!

Latest February 2015  Special Dividend  0.22 

18 Nov 2014	0.12 Dividend
21 Aug 2014	0.14 Dividend
21 May 2014	0.12 Dividend
20 Feb 2014	0.175 Dividend
14 Nov 2013	0.175 Dividend
4 Sep 2013	0.175 Dividend
10 Jun 2013	0.175 Dividend
7 Mar 2013	0.175 Dividend
12 Dec 2012	0.175 Dividend
4 Sep 2012	0.175 Dividend
4 Jun 2012	0.175 Dividend
8 Mar 2012	0.15 Dividend
7 Dec 2011	0.15 Dividend
24 Aug 2011	0.15 Dividend
1 Aug 2011	0.35 Dividend
9 Dec 2010	0.30 Dividend
24 Feb 2005	2: 1 Stock Split
* Close price adjusted for dividends and splits.

3 Aug 2010	0.15 Dividend
7 Dec 2009	0.15 Dividend
5 Aug 2009	0.33 Dividend
10 Dec 2008	0.12 Dividend
1 Aug 2008	0.33 Dividend
14 Dec 2007	0.12 Dividend
12 Dec 2005	0.05 Dividend
17 Aug 2005	0.10 Dividend
30 Nov 2004	0.10 Dividend
5 Aug 2004	0.20 Dividend
10 Dec 2003	0.20 Dividend
23 Jul 2003	0.10 Dividend
22 Jul 2003	0.10 Dividend
* Close price adjusted for dividends and splits.

Comments:  5.2.2015

Revenue - Lower due to Decrease in Sales volume

Group Operating Profit  -  Lower due to lower gross margin and higher operating expenditure.

1.  Lower gross profit margin - Lower due to higher product cost due to unfavourable timing differences of the Mean of Platts Singapore ("MOPS" prices compared to corresponding quarter last year.

2.  Higher operating expenditure - mainly attributed to manpower expenses, ICT maintenance charges, advertising and promotion and net loss on foreign currency as US dollar weakened against Malaysian Ringgit during the current period compared to net gain on foreign currency during the corresponding period last year.

Increase in revenue - due to higher selling price 

Decrease in revenue - due to decrease in sales volume, despite a higher average selling price.


The downward trend in global oil prices has an adverse impact on PDB's margins.  

PDB's business is expected to be challenging as long as the downward trend is expected to continue.


How to defend its overall market leadership position?

1. Grow its business domestically - further strengthening its brand, sweating existing assets and continuosly enhancing customer relationship management.

2.  Continue its cost optimisation efforts - enhancement of supply and distribution efficienecy, improvement of terminal operational excellence to further improve cost of operations.



NOTE:  

Results of PDB will be affected adversely when:

1.  US currency is weakening.  

2.  The global oil price is trending downwards.    


Do you think the fundamentals of PDB are permanently damaged or they are facing a temporary period of difficulties or challenges?   


How can PDB delivers better results?

1.  Increasing its volume sold.
2.  Lower average selling prices may lead to increase in volume sold.
3.  Operational efficiency - cost and expense minimisation - leading to increasing profit margins.
4.  When US dollar is appreciating or getting stronger.
5.  When global oil price is stabilised or increasing in price trend.

Comparing equity yields with term deposits is lazy

Marcus Padley
December 3, 2011

I have been getting a little bit irritated by the constant comparisons between the yield on equities and the yield on a bond or term deposit.

The argument goes that equity yields are now higher than bond yields and also higher than term deposits, so you should switch.

But the truth is that a comparison of the returns on term deposits or bonds with equity yields is simply lazy and ridiculous and reckless, because it misses the point about why people are in term deposits in the first place.

Let me explain by taking a well-known income stock - the National Australia Bank, one of the highest-yielding and safest blue-chip stocks in the market. The yield on the NAB is 7.5 per cent - 10.7 per cent including franking. That, everyone will tell you, is cheap and the argument is that all you mugs holding term deposits earning just 5.5 per cent are idiots because you get a whole extra 2.2 per cent in the NAB or 5.2 per cent including franking.

Fair enough, until you consider this exercise.



Get a chart up of the NAB over the last year (one year will do). Now mark off the peaks and troughs since January and calculate how many and how big the variations have been. You will find that the NAB has had 10 fluctuations. Five rallies and five falls.

The size of the rallies has been +12.8 per cent, +17.8 per cent, +8.3 per cent, +23.2 per cent and +26.9 per cent. The falls have been -9.8 per cent, -15.3 per cent, -23.9 per cent, -13.5 per cent and -18.7 per cent and if we picked a smaller-income stock or took NAB out over a longer period, it would be even more dramatic.



Now tell me after 10 moves of more than 7.5 per cent in just a year that I should be worrying about the 7.5 per cent yield on the NAB. Now tell me, amid that volatility and instability, that I should mention the yield on the NAB and the yield on a risk-free term deposit or bond in the same breath. Now tell me the prudence behind selling my term deposit and buying the NAB.


The NAB and almost all other income stocks in the current market, are not stable low-risk investments; they are volatile trading stocks and the message is clear and let's make it clearer, once and for all. You cannot compare the yield on an equity to the yield on a bond because one includes no risk of a capital loss (no risk of a gain either) and the other contains a currently huge perceived risk of a capital loss (or gain).

Promoting income stocks because they yield more than a bond is ignoring that extra risk and misunderstanding why people are now in bonds and term deposits. They are there because they don't want to lose any more money. Because they don't want volatility.

The only way to compare equities to bonds or equities to term deposits is if the equities came with a price guarantee, which they don't, or if you compare risk-free yields with the expected total return from equities, which includes the extra volatility and risk and not just the dividends.

In the current market, equities are nothing like a bond or term deposit because share-price risk is dominating the investment decision not the yield. Do you really think people are in term deposits to make 5.5 per cent? No, they are in term deposits to avoid losing money. The focus is on the risk not the return. Risk rules.

But it's not all gloom. The good news is that this is not a normal state of affairs. The sharemarket is supposed to be about opportunity not risk and the fact that risk is so in focus means the opportunity side of the equation is being ignored.

Also, risk can change very quickly. Ahead of the last European Union summit the market jumped 11 per cent in four days on lower perceived equity risk. The banks jumped 19.2 per cent. If the GFC doesn't reignite, the focus is going to very rapidly swing back to yields and price-to-earnings (PE) ratios. If the GFC is behind us, how long do you think the NAB is going to trade on a 10.7 per cent yield and the market on a PE of 10.7 times against a long-term average of 14 times?

Not long. In which case the game now is not debating the marginal merits of term deposits versus equities but waiting for a chink of light in the outlook for risk, because that is all that matters and because when it appears, the herd is going to smash down the door to get to those yields and PEs.

At the moment they don't believe in them. Your job is to be on the ball on the day they do.

Marcus Padley is a stockbroker with Patersons Securities and the author of sharemarket newsletter Marcus Today. His views do not necessarily reflect those of Patersons.



Read more: http://www.smh.com.au/money/investing/comparing-equity-yields-with-term-deposits-is-lazy-20111202-1oakh.html#ixzz1jkzaigzd

Redefining Risk. Realistic definition of Risk.

Redefining Risk

Risk was the chance that you might not meet your long-term investment goals. 

And the greatest enemy of reaching those goals:  inflation. 

Nothing is safe from inflation. 

It's major victims are savings accounts, T-bills, bonds, and other types of fixed-income investments.

Investors usually use Treasury bills as their benchmark for risk. These are considered risk-free because their nominal value can't go down. However, T-bills and bonds are in fact highly risky because of their susceptibility to inflation.




Realistic definition of Risk

A realistic definition of risk recognizes the potential loss of capital through inflation and taxes, and includes:

1. The probability your investment will preserve your capital over your investment time horizon.

2. The probability your investments will outperform alternative investments during the period.

Short-term stock price volatility is not risk. Avoid investment advice based on volatility.

So if volatility is not risk, what is your major risk?

The major risk is not the short-term stock price volatility that many thousands of academic articles have been written about. 

Rather it is the possibility of not reaching your long-term investment goal through the growth of your funds in real terms. 

To measure monthly or quarterly volatility and call it risk - for investors who have time horizons 5, 10, 15 or even 30 years away - is a completely inappropriate definition. (David Dreman)


Take Home Lesson

Using Dreman's definition of risk, stocks are actually the safest investment out there over the long term. 

Investors who put some or most of their money into bonds and other investments on the assumption they are lowering their risk are, in fact, deluding themselves.

"Indeed, it goes against the principle we were taught from childhood - that the safest way to save was putting our money in the bank." 

Stock market volatility - getting used to it

Diary of a private investor: politicians have us in their grip

Once you become acclimatised to the market turbulence, the investment game is still worth playing.

German Chancellor Angela Merkel, Greek Prime Minister George Papandreou and French President Nicolas Sarkozy Photo: Reuters

By James Bartholomew

2:00AM BST 01 Oct 2011

Stock market volatility has been going on so long that one is almost getting used to it. It is the peacetime equivalent of living through a war and getting accustomed to siren wails. A share of mine drops 4pc and the next day falls another 7pc. Nothing unusual about that. If I can't take it, I should go and get treated for shell shock.

Often people who write in newspapers adopt a persona and, in particular, a confidence that is not genuine, let alone justified. Actually, most of us do not know what is going to happen. And in our personal investments and other financial decisions, we make mistakes like everyone else. Investment is living with uncertainty – knowing you will get it wrong some of the time but reckoning the game is still worth playing.

There is certainly no need to think that everyone but you is doing fine in the current crisis. I got the following email from a former chief investment officer of a major fund manager who now looks after his own money: "I am doing badly. I sell the wrong stocks, hold onto the wrong stocks and bottom fish in the wrong stocks." I know how he feels.

A couple of months ago, when the current crisis of confidence began, I sold off some of my shares in Telecom Plus, a utility company. I reasoned that people had been pushing the price up because it was a relatively safe bet in uncertain times but really the shares were now somewhat overrated. I sold when the shares had fallen a little and they have since risen, even above the level in July – a magnificent outperformance. Thank goodness I sold only a minority of my holding.

Right now the outlook for the markets seems to depend more on politicians than I can ever remember it doing before. They are often referred to on radio and television as "leaders", which I am beginning to find slightly risible. It is apparent that this bunch of "leaders" firstly does not really know what to do and secondly, to the extent that they have got ideas of what to do, their ideas are all different. It has a bit of a feel of the doomed Weimar Republic.

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Of course it is not surprising that nothing can easily be done when the euro is a single currency without a single country running it.

Nevertheless, at any moment an announcement could conceivably be made which will overcome the widespread fear and distrust. If that happens, the market could rise so fast that you would not be able to get any money into it. But if the "leaders" continue to dribble out half-hearted rescues that don't work, the market could fall further. It's up to those "leaders".

Despite all the uncertainty and volatility, I have been buying some shares in the past month, bringing my cash down from about 14pc of my portfolio to 10pc.

One notion of mine has been to secure some of the fabulous dividend yields that are currently available. I half-think "forget about the share prices, just focus on the whopping dividend income".

Apparently investors in the United States have had the same thought and have been buying into exchange-traded funds (ETFs).

ETFs are funds you can buy and sell like shares and give you exposure to a particular kind of investment – like gold, or a whole stock market, or whatever.

There is an equivalent one in Britain called iShares FTSE UK Dividend Plus, but it might be better to buy directly into big companies with handsome prospective yields, such as Vodafone (5.8pc with the price at 164p), Shell (5.2pc at £20.27) and British Land (5.5pc at 490p).

At least one piece of good news has turned up. It now looks likely that the Bank of England will finally put in place some quantitative easing either this month or next.

The minutes of the Monetary Policy Committee openly raised the possibility last month and one of the members has said he almost voted for it then.

Some people have objected in the past that there is a danger it could fuel inflation. But wage inflation is dormant and commodity prices have now fallen back.

I am particularly aware of this since I have shares in a zinc mine and the price of this estimable metal has slipped from $1.12 in July to 86 cents earlier this week. Ouch!

http://www.telegraph.co.uk/finance/personalfinance/investing/shares-and-stock-tips/8798796/Diary-of-a-private-investor-politicians-have-us-in-their-grip.html

Volatility Play Investing

Volatility Play Investing

A method of trading stocks that myself and my team have developed. It involves buying and selling the same stocks, again and again, as they undergo repetitive fluctuation in price. 

http://www.pennystocks.org/glossary-of-terms-used.php