Saturday 17 October 2009
Current temporary PRICE is determined by a tiny minority interested in buying or selling
Although prices are deemed to reflect consensus, it should be remembered that prices are determined not by the majority of shareholders who are uninterested in buying or selling at the current temporary price, but by the tiny minority who are.
Friday 16 October 2009
Petdag 16.10.2009
Valuation:
http://spreadsheets.google.com/pub?key=tWD_ov2ZEm3y2RrDZLIGDYg&output=html
Implication of less liquid stocks or funds
Liquidity (relative lack of interest and trading activity) can be a double-edged sword:
•If you're selling, you may not get as good a price, but
•if you're buying, you'll likely get a discount.
It is not hard to see that these less liquid stocks or funds should be considered long-term investments.
•If you're selling, you may not get as good a price, but
•if you're buying, you'll likely get a discount.
It is not hard to see that these less liquid stocks or funds should be considered long-term investments.
Is it surprising that iCap is trading at a discount?
During the last bull market, iCap traded at a high of $2.82. There are many investors in the market with realised losses or who are still holding iCap shares at higher costs to its present price.
When selecting a closed-ended fund, investors must determine the reason the fund is trading at a discount and whether the discount is significant enought to be attractive. A discount may be justified by
•uncertainty,
•popularity or perceptions of the fund, and
•the underlying asset base.
When selecting a closed-ended fund, investors must determine the reason the fund is trading at a discount and whether the discount is significant enought to be attractive. A discount may be justified by
•uncertainty,
•popularity or perceptions of the fund, and
•the underlying asset base.
Never subsidize losers with winners.
Rather than take the medicine -- the loss -- they hold on to the losers and sell their winners.
They never learn my rule: Never subsidize losers with winners.
Sell the losers and wait a day. If you really want them, go buy them back the next day. I also am certain that you never will.
Eject the losers and the winners will lift the portfolio.
It is the percentage of time that most of a portfolio is invested in rising stocks that determines how good performance will be. Eject the losers and the winners will lift the portfolio.
An exception to every rule. This applies particularly to value investors with long term horizon. Instead of blindly selling the losers until all you have are winners, you should really look at whether the fundamentals have changed for the stocks. There may indeed be a good reason for the relative underperformance of Stock B – e.g. poor management or grim industry outlook. However if nothing has changed and you thought Stock B was good value when you first bought it, it must be an absolute bargain after dropping an extra 50%! Shouldn’t you be buying more instead of selling?
They never learn my rule: Never subsidize losers with winners.
Sell the losers and wait a day. If you really want them, go buy them back the next day. I also am certain that you never will.
Eject the losers and the winners will lift the portfolio.
It is the percentage of time that most of a portfolio is invested in rising stocks that determines how good performance will be. Eject the losers and the winners will lift the portfolio.
An exception to every rule. This applies particularly to value investors with long term horizon. Instead of blindly selling the losers until all you have are winners, you should really look at whether the fundamentals have changed for the stocks. There may indeed be a good reason for the relative underperformance of Stock B – e.g. poor management or grim industry outlook. However if nothing has changed and you thought Stock B was good value when you first bought it, it must be an absolute bargain after dropping an extra 50%! Shouldn’t you be buying more instead of selling?
Be an emotion free investor
An emotion free investor would only look objectively at the fundamentals and the valuation of the stock, instead of getting hung up on the entry price.
Be confident in the quality of your investments
Remember to be confident in the quality of your investments rather than nervous about the inevitable volatility of the short term.
Day traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement - the one that occurs over many years - so keep your focus on developing your overall investment philosophy by educating yourself.
Don't panic when shares experience short-term movements
As a long term investing strategy, you should not panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture.
Day traders will use these day-to-day and even minute-to-minute fluctuations as a way to make gains. But the gains of a long-term investor come from a completely different market movement - the one that occurs over many years - so keep your focus on developing your overall investment philosophy by educating yourself.
Don't panic when shares experience short-term movements
As a long term investing strategy, you should not panic when your investments experience short-term movements. When tracking the activities of your investments, you should look at the big picture.
Hong Leong Bank starts operations in Vietnam
Hong Leong Bank starts operations in Vietnam
Published: 2009/10/16
HANOI: Malaysia's Hong Leong Bank Bhd has begun operations in Vietnam, making it the first Southeast Asian bank lured to the country's growing market, an official said yesterday.
Wholly owned subsidiary Hong Leong Bank Vietnam Ltd opened its doors in the southern commercial centre of Ho Chi Minh City, Tri Tran Minh, told AFP by telephone.
"They see very good potential in the banking industry here," Minh said.
The State Bank of Vietnam announced late last year that Hong Leong Bank would be allowed to set up a fully-owned subsidiary, and said it would have registered capital of almost US$60 million (US$1 = RM3.35).
Minh said Hong Leong Bank, which did not have a Vietnam presence before, will initially offer a dollar deposit service but would expand its services and plans to open a branch in Hanoi.
On its website, the bank says it is the first foreign bank from Southeast Asia to establish a wholly-owned subsidiary in Vietnam.
A South Korean bank and financial institutions from Australia and Britain, have also been allowed to set up wholly foreign-owned operations in what they see as a relatively untapped market.
On Tuesday, US-based Citibank became the first US bank to offer a retail banking service in Vietnam. It has been in Vietnam since 1993, with branches in Hanoi and Ho Chi Minh City, but until Tuesday had only offered corporate and investment services without retail banking. - AFP
Published: 2009/10/16
HANOI: Malaysia's Hong Leong Bank Bhd has begun operations in Vietnam, making it the first Southeast Asian bank lured to the country's growing market, an official said yesterday.
Wholly owned subsidiary Hong Leong Bank Vietnam Ltd opened its doors in the southern commercial centre of Ho Chi Minh City, Tri Tran Minh, told AFP by telephone.
"They see very good potential in the banking industry here," Minh said.
The State Bank of Vietnam announced late last year that Hong Leong Bank would be allowed to set up a fully-owned subsidiary, and said it would have registered capital of almost US$60 million (US$1 = RM3.35).
Minh said Hong Leong Bank, which did not have a Vietnam presence before, will initially offer a dollar deposit service but would expand its services and plans to open a branch in Hanoi.
On its website, the bank says it is the first foreign bank from Southeast Asia to establish a wholly-owned subsidiary in Vietnam.
A South Korean bank and financial institutions from Australia and Britain, have also been allowed to set up wholly foreign-owned operations in what they see as a relatively untapped market.
On Tuesday, US-based Citibank became the first US bank to offer a retail banking service in Vietnam. It has been in Vietnam since 1993, with branches in Hanoi and Ho Chi Minh City, but until Tuesday had only offered corporate and investment services without retail banking. - AFP
Public Bank nets RM639m profit in Q3
Public Bank nets RM639m profit in Q3
By Chong Pooi Koon
Published: 2009/10/16
Public Bank Bhd (1295), the country's third largest bank, reported a 3.7 per cent higher third-quarter net profit as it earned more from loans, despite a weak economy and even as it has set aside more money to cover potential bad debts.
Net profit for the three months to September 30 2009 came in at RM639 million, although revenue fell 12.7 per cent to RM2.4 billion.
The bank has put aside RM176.4 million of allowances for loan losses, 65 per cent more compared to the same time last year.
Managing director and chief executive officer Tan Sri Tay Ah Lek said Public Bank is on track to achieve a 14-15 per cent loans growth target this year, driven by demand for loans to small businesses, mortgages and car loans.
Public Bank is expected to maintain the earnings momentum and continue to record satisfactory performance for the rest of the year, he said in a statement yesterday.
"As the global recession begins to recede and with recovery on the horizon, the outlook for the banking industry is expected to improve. However, margins continue to be under pressure due to continued intense competition," he added.
Despite a difficult economy this year, Public Bank's net profit has expanded consistently in the first nine months this year.
Net profit in the second quarter grew 3.6 per cent to RM611 million from RM589 million in the first quarter, and improved further by 4.6 per cent in the latest quarter.
Loans grew by 14.3 per cent on an annualised basis, while deposits expanded by 19.5 per cent. This compares with the industry's 6.8 per cent growth for loans and 6.3 per cent for deposits.
Public Bank's non-performing loans ratio stayed below 1 per cent, the lowest among Malaysian banks.
OSK Research analyst Keith Wee said the lender's performance was largely in line with his expectations. He maintains a "buy" call on Public Bank shares with a RM11.80 target price.
"The stock is currently trading at an undemanding 13 times its fiscal 2010 price earnings multiple, against its historical mid-cycle average valuation of 14.8 times," Wee wrote in a note after the results announcement.
The stock closed flat at RM10.62 on Bursa Malaysia yesterday.
http://www.btimes.com.my/Current_News/BTIMES/articles/dougan/Article/index_html
By Chong Pooi Koon
Published: 2009/10/16
Public Bank Bhd (1295), the country's third largest bank, reported a 3.7 per cent higher third-quarter net profit as it earned more from loans, despite a weak economy and even as it has set aside more money to cover potential bad debts.
Net profit for the three months to September 30 2009 came in at RM639 million, although revenue fell 12.7 per cent to RM2.4 billion.
The bank has put aside RM176.4 million of allowances for loan losses, 65 per cent more compared to the same time last year.
Managing director and chief executive officer Tan Sri Tay Ah Lek said Public Bank is on track to achieve a 14-15 per cent loans growth target this year, driven by demand for loans to small businesses, mortgages and car loans.
Public Bank is expected to maintain the earnings momentum and continue to record satisfactory performance for the rest of the year, he said in a statement yesterday.
"As the global recession begins to recede and with recovery on the horizon, the outlook for the banking industry is expected to improve. However, margins continue to be under pressure due to continued intense competition," he added.
Despite a difficult economy this year, Public Bank's net profit has expanded consistently in the first nine months this year.
Net profit in the second quarter grew 3.6 per cent to RM611 million from RM589 million in the first quarter, and improved further by 4.6 per cent in the latest quarter.
Loans grew by 14.3 per cent on an annualised basis, while deposits expanded by 19.5 per cent. This compares with the industry's 6.8 per cent growth for loans and 6.3 per cent for deposits.
Public Bank's non-performing loans ratio stayed below 1 per cent, the lowest among Malaysian banks.
OSK Research analyst Keith Wee said the lender's performance was largely in line with his expectations. He maintains a "buy" call on Public Bank shares with a RM11.80 target price.
"The stock is currently trading at an undemanding 13 times its fiscal 2010 price earnings multiple, against its historical mid-cycle average valuation of 14.8 times," Wee wrote in a note after the results announcement.
The stock closed flat at RM10.62 on Bursa Malaysia yesterday.
http://www.btimes.com.my/Current_News/BTIMES/articles/dougan/Article/index_html
Cash Rich and Profitable Companies
Net Cash = Total Cash and Equivalents - Total Liabilities.
By having net cash and the company is in profit, the company is in the position that is able to make acquisition when opportunity comes or providing consistent dividend to the shareholder.
Ref:
http://fortunesense.blogspot.com/2009/06/cash-rich-and-profitable-companies.html
By having net cash and the company is in profit, the company is in the position that is able to make acquisition when opportunity comes or providing consistent dividend to the shareholder.
| Company | RM mil |
| Resorts World | 4600 |
| Petronas Gas | 1500 |
| Oriental | 910 |
| Bursa Malaysia | 280 |
| Carlsberg | 220 |
| Uchitec | 136 |
| Dialog | 112 |
| Amway | 108 |
Ref:
http://fortunesense.blogspot.com/2009/06/cash-rich-and-profitable-companies.html
Do you know how Warren Buffett invests in stocks ?
How Warren Buffett Invests ?
Do you know how Warren Buffett invests in stocks ?
Here lists down the factors on how Buffett finds low-priced value by asking himself some questions when he evaluates the relationship between a stock's level of excellence and its price.
1. How Long The Company Has Been Established ?
Preferable the company should have been established for at least 10 years. The reason for this factor is that the company has stood the challenging economy hard time.
2. What Are The Company's Products Portfolio?
What are the company's products ? Are the products different than another firm within the same industry. Any products or features that are hard to replicate is what Buffett calls a company's economic moat, or competitive advantage. The wider the moat, the tougher it is for a competitor to gain market share.
3. Is The Stock Intrinsic Value 25% Higher Than The Market Capitalization ?
Find the companies that are undervalued by determine the intrinsic value of a company. Intrinsic value is derived from the elements such as earnings, revenues and assets.
Buffett likes to determine the intrinsic value of the company as a whole and compares it to its current market capitalization. Buffett sees the company as one that has value if intrinsic value is at least 25% higher than the company's market capitalization.
4. Has the Return On Equity (ROE) Consistently Performed Well?
Return on equity (ROE) is likes the stockholder's return on investment (ROI) that reveals the rate at which shareholders are earning income on their shares.
Buffett always looks at ROE to see whether or not a company has consistently performed well in comparison to other companies in the same industry.
ROE = Net Income / Shareholder's Equity
You will need to know the past five to 10 years ROE in order to have a better idea of historical performance.
5. What is the debt/equity ratio ?
Debt/Equity ratio = Total Liabilities / Shareholders' Equity
This ratio shows the proportion of equity and debt the company is using to finance its assets, and the higher the ratio, the more debt is being used to finance the operation of the company.
Buffett prefers to see a small amount of debt so that earnings growth is being generated from shareholders' equity as opposed to borrowed money.
The reason why prefer a small amount of debt is to reduce the volatility of the company earning and to avoid paying too much interest expenses. For a more stringent test, investors sometimes use only long-term debt instead of total liabilities in the calculation above.
6. Profit Margins and Trends
Profit Margins = Net income / Net sales.
Company that shows good and increasing profit margin is better. Again better to have the past five to 10 years profit margins record in order to have a better idea of historical performance.
Company that executes its business well will lead to the high profit margin. Efficient company management level will bring to the increasing margins by controlling the company expenses.
Are you following this methods in your stock selection criteria ? Anyway, those are not the only things Buffett analyzes but rather a brief summary of what Buffett looks for.
If we wish to invest successfully like Buffet, shouldn't we follow his system or methodology since he has proved himself by becoming the world second richest man through investing.
Many books had been published that reveals the system or method of how Warren Buffett select the stocks. One of it is The Buffett System eBook that costs US 49 or around RM 177.
If you are interested and wish to have a try on this system, do visit the Buffett System to find out more information.
http://fortunesense.blogspot.com/2009/07/how-warren-buffett-invests.html
http://fortunesense.blogspot.com/2009/07/buffet-system.html
The Buffett System
Buffett System Table Contents
Do you know how Warren Buffett invests in stocks ?
Here lists down the factors on how Buffett finds low-priced value by asking himself some questions when he evaluates the relationship between a stock's level of excellence and its price.
1. How Long The Company Has Been Established ?
Preferable the company should have been established for at least 10 years. The reason for this factor is that the company has stood the challenging economy hard time.
2. What Are The Company's Products Portfolio?
What are the company's products ? Are the products different than another firm within the same industry. Any products or features that are hard to replicate is what Buffett calls a company's economic moat, or competitive advantage. The wider the moat, the tougher it is for a competitor to gain market share.
3. Is The Stock Intrinsic Value 25% Higher Than The Market Capitalization ?
Find the companies that are undervalued by determine the intrinsic value of a company. Intrinsic value is derived from the elements such as earnings, revenues and assets.
Buffett likes to determine the intrinsic value of the company as a whole and compares it to its current market capitalization. Buffett sees the company as one that has value if intrinsic value is at least 25% higher than the company's market capitalization.
4. Has the Return On Equity (ROE) Consistently Performed Well?
Return on equity (ROE) is likes the stockholder's return on investment (ROI) that reveals the rate at which shareholders are earning income on their shares.
Buffett always looks at ROE to see whether or not a company has consistently performed well in comparison to other companies in the same industry.
ROE = Net Income / Shareholder's Equity
You will need to know the past five to 10 years ROE in order to have a better idea of historical performance.
5. What is the debt/equity ratio ?
Debt/Equity ratio = Total Liabilities / Shareholders' Equity
This ratio shows the proportion of equity and debt the company is using to finance its assets, and the higher the ratio, the more debt is being used to finance the operation of the company.
Buffett prefers to see a small amount of debt so that earnings growth is being generated from shareholders' equity as opposed to borrowed money.
The reason why prefer a small amount of debt is to reduce the volatility of the company earning and to avoid paying too much interest expenses. For a more stringent test, investors sometimes use only long-term debt instead of total liabilities in the calculation above.
6. Profit Margins and Trends
Profit Margins = Net income / Net sales.
Company that shows good and increasing profit margin is better. Again better to have the past five to 10 years profit margins record in order to have a better idea of historical performance.
Company that executes its business well will lead to the high profit margin. Efficient company management level will bring to the increasing margins by controlling the company expenses.
Are you following this methods in your stock selection criteria ? Anyway, those are not the only things Buffett analyzes but rather a brief summary of what Buffett looks for.
If we wish to invest successfully like Buffet, shouldn't we follow his system or methodology since he has proved himself by becoming the world second richest man through investing.
Many books had been published that reveals the system or method of how Warren Buffett select the stocks. One of it is The Buffett System eBook that costs US 49 or around RM 177.
If you are interested and wish to have a try on this system, do visit the Buffett System to find out more information.
http://fortunesense.blogspot.com/2009/07/how-warren-buffett-invests.html
http://fortunesense.blogspot.com/2009/07/buffet-system.html
The Buffett System
Buffett System Table Contents
We're Halfway Back to the Top.
Pulling Ourselves Out of the Crash
We're Halfway Back to the Top. How Much Longer Till We Get There?
By Tomoeh Murakami Tse
Washington Post Staff Writer
Sunday, October 11, 2009
NEW YORK
As far as recovery goes, U.S. stocks appear to be halfway there.
Contrary to warnings by analysts that the market had gone up too much too fast, the rally that began in the spring only accelerated over the summer as investors took on more risk in both the stock and bond markets. The Standard & Poor's 500-stock index now stands at 1071, nearly 400 points above its recent low on March 9.
But the benchmark has almost 500 points to go before it recovers to its October 2007 high, making battered investors whole again.
The force of the surge in equities -- the S&P is up 58 percent since the March low -- came as investors grew more confident that the doomsday scenario of the nationalization of large banks and a prolonged global recession had been avoided. But with consumers hurting and unemployment high, expect the second leg of the healing journey to take much longer, experts say.
"I think we are entering into a period right now of 'Show me,' " said Robert Millen, chairman of Jensen Investment Management. "The market has bounced back dramatically. We're in a real critical period right now where the market's taking a breath and is now starting to pay more attention to fundamentals."
During the past eight recessions, Millen said, the S&P 500 took an average of 1.9 years to recover to the previous high. The fastest recovery time was 83 days, after the 1981-1982 downturn. The longest was 2,114 days, almost six years, after the recession in the mid-1970s.
Analysts will be closely watching the third-quarter corporate earnings results over the next several weeks for clues on just how long this recovery will take.
For his part, Millen says he thinks it could be at least 3 1/2 more years. Some bulls say it could happen sooner. But others say the recent rally is just another bubble in disguise -- not progress toward real recovery.
"We're seeing everything move up," said Axel Merk of Merk Mutual Funds and author of the book "Sustainable Wealth," due out this month. "But that's exactly what we saw in the pre-crisis. . . . Some investors are going to jump on the bandwagon because they want to be a part of this. But this has to have a bad ending."
During the quarter ended Sept. 30, the Dow Jones industrial average of 30 blue-chip stocks jumped 15 percent, to 9712. This is on top of an 11 percent gain in the second quarter. And on Friday, the Dow climbed to its high for 2009, gaining 78 points to hit 9865.
The S&P 500, a broader market measure, finished the third quarter up 15 percent, at 1057. Both benchmarks posted their best quarterly performance in more than a decade. The tech-heavy Nasdaq composite index rose 16 percent.
Leading the rally were the companies hit hardest during the financial crisis -- those with heavier debt, riskier balance sheets and inconsistent earnings. In the third quarter, shares of financial firms soared 25 percent; companies in the consumer discretionary sector -- think home builders, automakers, apparel manufacturers and hotel chains -- rose 19 percent. Defensive stocks in the utilities and consumer-staples sectors, meanwhile, turned in more modest gains of 5 and 10.5 percent, respectively.
According to Lipper, a mutual fund data company, funds that invest in financial services companies rose an average of 23 percent for the quarter. The best performers among sector funds were real estate funds. They returned nearly 33 percent after being hit hard in the downturn.
Mutual funds that invest in shares of small companies outperformed those that invest in more stable, larger companies. Value funds did better than growth funds as investors searched for undervalued shares. Large-cap growth funds returned 14 percent in the third quarter; small-cap value funds came in at 21 percent, Lipper said.
Funds that invest overseas fared even better. International large-cap growth funds returned 17 percent, while emerging-market funds gained 21 percent, Lipper said. Those that focus on Latin American companies were up 28 percent.
Investors also took on more risk in the credit markets. Here, funds that invest in high-yield junk bonds performed best, returning 13 percent for the quarter. Emerging-market debt funds also did well, gaining 11 percent. Meanwhile, short-term U.S. Treasury funds rose 0.8 percent. Longer-dated Treasury funds gained 4.7 percent, Lipper said.
"We're getting the typical market recovery in anticipation of the economy getting better -- and I think it will," said Mark Coffelt, chief investment officer of Empiric Funds, adding that he thinks the S&P could rise 100 to 150 points in the fourth quarter. Because they think the performance trends seen in stocks during the third quarter will continue for at least six more months, his team is looking for stocks of smaller companies that are selling cheaply, he said.
Still, Coffelt and others cautioned that it could be a slow and long recovery. Consumer spending, the main driver of the U.S. economy, is hardly expected to come roaring back, as consumers' job security is threatened and lines of credit are cut.
There is also worry that another shoe could drop. Speaking at a dinner in Manhattan on Tuesday honoring influential female bankers, Sheila C. Bair, head of the Federal Deposit Insurance Corp., said she was concerned about the commercial real estate industry and its impact on banks. "Commercial real estate is starting to eclipse mortgages" as the driver of bank losses, said Bair, who added that she expected bank failures to continue at a good clip into 2010.
Merk said stocks are overvalued and that the recent rally is a direct result of investors taking advantage of the easy money created by the Federal Reserve's fiscal policies. In response to the economic crisis, the Fed has reduced interest rates to near zero and flooded the market with money by buying up Treasurys and other assets.
"People are again yield-hungry," said Merk, 40, who added that he has no stocks in his personal portfolio. "They're going to grab anything that gives them a little bit more return than Treasurys that yield close to nothing. Rather than normalizing things where we would have slower growth but market-based returns, we have the Federal Reserve interfering in the markets artificially, depressing yields and encouraging exactly the sort of practices that got us into trouble in the first place. We haven't resolved the issues from the last crisis."
James Paulsen, the bullish chief investment strategist at Wells Capital Management, disagrees.
During the recent downturn, companies purged payroll and inventory, getting their operating costs down to "a place where they can survive the next coming of the Depression," he said. This, combined with profits generated from the economic recovery, will lead to "a whale of an earnings cycle."
"I still see a lot of potential here," he said. "I highly doubt that the markets are likely to peak a couple of months after the recession is over."
Companies in the S&P 500 were trading at 14.5 times their estimated earnings for the next 12 months, near the historical average of 15 times earnings, according to Thomson Reuters.
But bulls such as Paulsen argue that stocks' price-to-earnings ratio is not necessarily extended, citing favorable market conditions of below-average inflation and interest rates.
Jeff Mortimer, chief investment officer of Charles Schwab Investment Management, says it wouldn't be surprising to see the market pause or pull back 5 to 10 percent. Such moves are typical in the early stages of a bull market, which is where he says we are now.
So, what's a small investor to do?
Of course, the answer depends on an individual's risk tolerance, time horizon and outlook.
"I would be buying at points of weakness to add to my positions or get closer to my target asset allocation if I'm underweight equities," he said. "My recommendation would be to dollar-cost-average and get to your target allocation over the next six, 12, 18 months. You may find that the longer you wait, the higher the market gets. Then you're really in a pickle."
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/09/AR2009100904712_3.html?nav=emailpage
We're Halfway Back to the Top. How Much Longer Till We Get There?
By Tomoeh Murakami Tse
Washington Post Staff Writer
Sunday, October 11, 2009
NEW YORK
As far as recovery goes, U.S. stocks appear to be halfway there.
Contrary to warnings by analysts that the market had gone up too much too fast, the rally that began in the spring only accelerated over the summer as investors took on more risk in both the stock and bond markets. The Standard & Poor's 500-stock index now stands at 1071, nearly 400 points above its recent low on March 9.
But the benchmark has almost 500 points to go before it recovers to its October 2007 high, making battered investors whole again.
The force of the surge in equities -- the S&P is up 58 percent since the March low -- came as investors grew more confident that the doomsday scenario of the nationalization of large banks and a prolonged global recession had been avoided. But with consumers hurting and unemployment high, expect the second leg of the healing journey to take much longer, experts say.
"I think we are entering into a period right now of 'Show me,' " said Robert Millen, chairman of Jensen Investment Management. "The market has bounced back dramatically. We're in a real critical period right now where the market's taking a breath and is now starting to pay more attention to fundamentals."
During the past eight recessions, Millen said, the S&P 500 took an average of 1.9 years to recover to the previous high. The fastest recovery time was 83 days, after the 1981-1982 downturn. The longest was 2,114 days, almost six years, after the recession in the mid-1970s.
Analysts will be closely watching the third-quarter corporate earnings results over the next several weeks for clues on just how long this recovery will take.
For his part, Millen says he thinks it could be at least 3 1/2 more years. Some bulls say it could happen sooner. But others say the recent rally is just another bubble in disguise -- not progress toward real recovery.
"We're seeing everything move up," said Axel Merk of Merk Mutual Funds and author of the book "Sustainable Wealth," due out this month. "But that's exactly what we saw in the pre-crisis. . . . Some investors are going to jump on the bandwagon because they want to be a part of this. But this has to have a bad ending."
During the quarter ended Sept. 30, the Dow Jones industrial average of 30 blue-chip stocks jumped 15 percent, to 9712. This is on top of an 11 percent gain in the second quarter. And on Friday, the Dow climbed to its high for 2009, gaining 78 points to hit 9865.
The S&P 500, a broader market measure, finished the third quarter up 15 percent, at 1057. Both benchmarks posted their best quarterly performance in more than a decade. The tech-heavy Nasdaq composite index rose 16 percent.
Leading the rally were the companies hit hardest during the financial crisis -- those with heavier debt, riskier balance sheets and inconsistent earnings. In the third quarter, shares of financial firms soared 25 percent; companies in the consumer discretionary sector -- think home builders, automakers, apparel manufacturers and hotel chains -- rose 19 percent. Defensive stocks in the utilities and consumer-staples sectors, meanwhile, turned in more modest gains of 5 and 10.5 percent, respectively.
According to Lipper, a mutual fund data company, funds that invest in financial services companies rose an average of 23 percent for the quarter. The best performers among sector funds were real estate funds. They returned nearly 33 percent after being hit hard in the downturn.
Mutual funds that invest in shares of small companies outperformed those that invest in more stable, larger companies. Value funds did better than growth funds as investors searched for undervalued shares. Large-cap growth funds returned 14 percent in the third quarter; small-cap value funds came in at 21 percent, Lipper said.
Funds that invest overseas fared even better. International large-cap growth funds returned 17 percent, while emerging-market funds gained 21 percent, Lipper said. Those that focus on Latin American companies were up 28 percent.
Investors also took on more risk in the credit markets. Here, funds that invest in high-yield junk bonds performed best, returning 13 percent for the quarter. Emerging-market debt funds also did well, gaining 11 percent. Meanwhile, short-term U.S. Treasury funds rose 0.8 percent. Longer-dated Treasury funds gained 4.7 percent, Lipper said.
"We're getting the typical market recovery in anticipation of the economy getting better -- and I think it will," said Mark Coffelt, chief investment officer of Empiric Funds, adding that he thinks the S&P could rise 100 to 150 points in the fourth quarter. Because they think the performance trends seen in stocks during the third quarter will continue for at least six more months, his team is looking for stocks of smaller companies that are selling cheaply, he said.
Still, Coffelt and others cautioned that it could be a slow and long recovery. Consumer spending, the main driver of the U.S. economy, is hardly expected to come roaring back, as consumers' job security is threatened and lines of credit are cut.
There is also worry that another shoe could drop. Speaking at a dinner in Manhattan on Tuesday honoring influential female bankers, Sheila C. Bair, head of the Federal Deposit Insurance Corp., said she was concerned about the commercial real estate industry and its impact on banks. "Commercial real estate is starting to eclipse mortgages" as the driver of bank losses, said Bair, who added that she expected bank failures to continue at a good clip into 2010.
Merk said stocks are overvalued and that the recent rally is a direct result of investors taking advantage of the easy money created by the Federal Reserve's fiscal policies. In response to the economic crisis, the Fed has reduced interest rates to near zero and flooded the market with money by buying up Treasurys and other assets.
"People are again yield-hungry," said Merk, 40, who added that he has no stocks in his personal portfolio. "They're going to grab anything that gives them a little bit more return than Treasurys that yield close to nothing. Rather than normalizing things where we would have slower growth but market-based returns, we have the Federal Reserve interfering in the markets artificially, depressing yields and encouraging exactly the sort of practices that got us into trouble in the first place. We haven't resolved the issues from the last crisis."
James Paulsen, the bullish chief investment strategist at Wells Capital Management, disagrees.
During the recent downturn, companies purged payroll and inventory, getting their operating costs down to "a place where they can survive the next coming of the Depression," he said. This, combined with profits generated from the economic recovery, will lead to "a whale of an earnings cycle."
"I still see a lot of potential here," he said. "I highly doubt that the markets are likely to peak a couple of months after the recession is over."
Companies in the S&P 500 were trading at 14.5 times their estimated earnings for the next 12 months, near the historical average of 15 times earnings, according to Thomson Reuters.
But bulls such as Paulsen argue that stocks' price-to-earnings ratio is not necessarily extended, citing favorable market conditions of below-average inflation and interest rates.
Jeff Mortimer, chief investment officer of Charles Schwab Investment Management, says it wouldn't be surprising to see the market pause or pull back 5 to 10 percent. Such moves are typical in the early stages of a bull market, which is where he says we are now.
So, what's a small investor to do?
Of course, the answer depends on an individual's risk tolerance, time horizon and outlook.
"I would be buying at points of weakness to add to my positions or get closer to my target asset allocation if I'm underweight equities," he said. "My recommendation would be to dollar-cost-average and get to your target allocation over the next six, 12, 18 months. You may find that the longer you wait, the higher the market gets. Then you're really in a pickle."
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/09/AR2009100904712_3.html?nav=emailpage
Many Small Investors Have Sat Out Rally
Investors in mutual funds, which are among the most common ways for individuals to participate in the stock market, pulled more than $205 billion out of stock funds between September 2008, when equities plunged, to the end of March, when they began their rally, according to data from the Investment Company Institute. During the same period, small investors sought the safety of cash, pouring $357 billion into money-market funds.
In contrast, only $56 billion returned to stock funds between April and the end of August, the most recent date for which data are available. Money-market-fund levels remained high.
Many Small Investors Have Sat Out Rally
Rebound Driven by Institutional Clients
The Dow closed above 10,000 on Wednesday. (By Travis Fox -- The Washington Post)
By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, October 15, 2009
NEW YORK, Oct. 14 -- Wall Street may be cheering the rally in the U.S. stock market, but many individual investors watched the Dow Jones industrial average soar past the 10,000 mark Wednesday on the sidelines.
Still shell-shocked from the ravaging of their retirement accounts during the financial crisis, mom-and-pop investors remained cautious as the Dow soared 53 percent from its March 9 low to Wednesday's closing price of 10,015.86.
The likely drivers of the rally are instead institutional investors such as large pension funds and hedge funds, market analysts said. And in interviews over the past two weeks, fund managers and financial advisers said most small investors have only recently begun to talk about getting more aggressive with their beaten-down portfolios.
"For the first six months of the year, people just had their heads down. I don't know how many people told me they haven't looked at their statements," said Dan Lash, a financial planner in Vienna.
It was only last month, when the Dow had already recovered more than 40 percent of its losses, that Charlotte and Larry Vass of La Plata, Md., decided they were ready to consider taking a less conservative stance. The Vasses had been mostly invested in stocks two years ago but began pulling out last fall as markets were pummeled after the collapse of the Wall Street investment bank Lehman Brothers. Over the past year, the Vasses also moved deeper into bonds, said Charlotte, who is in her late 50s.
"Back then, we were in shock," she added.
While the couple plan to keep their portfolio more balanced, Charlotte and her husband, a dentist, have asked their financial planner to be a little more aggressive. They have begun adding money -- slowly -- to stock index funds, she said.
"If your 401(k) turns into a 201(k), you can't get it back in a couple of years," said Charlotte, adding that retirement, which the couple thought might come in a few years, has been pushed further down the road.
Investors in mutual funds, which are among the most common ways for individuals to participate in the stock market, pulled more than $205 billion out of stock funds between September 2008, when equities plunged, to the end of March, when they began their rally, according to data from the Investment Company Institute. During the same period, small investors sought the safety of cash, pouring $357 billion into money-market funds.
In contrast, only $56 billion returned to stock funds between April and the end of August, the most recent date for which data are available. Money-market-fund levels remained high.
"This market rise certainly is not being driven by mutual fund investors," said Brian Reid, the ICI's chief economist. "Mutual fund flows are not causing this run-up, and I would think that probably carries over for retail investors in general."
In fact, there's evidence that small investors in the past few months have once again been moving money out of U.S. stocks. On a weekly basis, small investors took out $2 billion to $4 billion more than they put into funds focusing primarily on domestic stocks from July to September, Reid said.
ICI data show that small investors have been pushing into bonds this year, taking advantage of falling interest rates and rising prices. During the first eight months of the year, $220 billion flowed into bond funds.
This Story
The Dow Passes Mile 10,000 on Road to Recovery
Many Small Investors Have Sat Out Rally
A Look Back: The Dow's First Time Crossing the 10,000 Mark
Market Milestones
"Last year is going to change people's risk tolerance for a long time to come," Lash said. "They're not going to have a diversified stock-only portfolio. They realize that everything went down the same last year. There was nowhere to hide except Treasurys and cash."
According to Christine Parker, president of Parker Financial in La Plata, many small investors have adopted a less-than-go-go outlook.
"There's the pessimism of 'Is this just short-lived? Will this last?' " said Parker, many of whose clients are female executives in their 40s and 50s and retirees. "People are worried about consumer spending and the ending of the stimulus." In particular, she said, investors are wondering what will happen to the economy after the government's $8,000 tax credit for first-time home buyers expires at the end of November.
As stocks go higher, warnings from investment strategists that the market has increased too far, too fast have grown louder.
"We've had this wonderful run-up. What you have to be concerned about is that valuations have become stretched," said Brett Hammond, chief investment strategist at TIAA-CREF. "Markets tend to anticipate economic news, but they don't necessarily predict it. The economic news is better than it was, but it's certainly not rosy."
On Wednesday, as the closing bell approached on the New York Stock Exchange, Charlotte Vass said she had no regrets about not returning to the market sooner.
"We're cautiously optimistic, so it makes sense to move back in more slowly," she said. "The market is a fickle lady."
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/14/AR2009101403657_2.html?nav=emailpage&sid=ST2009101404142
In contrast, only $56 billion returned to stock funds between April and the end of August, the most recent date for which data are available. Money-market-fund levels remained high.
Many Small Investors Have Sat Out Rally
Rebound Driven by Institutional Clients
The Dow closed above 10,000 on Wednesday. (By Travis Fox -- The Washington Post)
By Tomoeh Murakami Tse
Washington Post Staff Writer
Thursday, October 15, 2009
NEW YORK, Oct. 14 -- Wall Street may be cheering the rally in the U.S. stock market, but many individual investors watched the Dow Jones industrial average soar past the 10,000 mark Wednesday on the sidelines.
Still shell-shocked from the ravaging of their retirement accounts during the financial crisis, mom-and-pop investors remained cautious as the Dow soared 53 percent from its March 9 low to Wednesday's closing price of 10,015.86.
The likely drivers of the rally are instead institutional investors such as large pension funds and hedge funds, market analysts said. And in interviews over the past two weeks, fund managers and financial advisers said most small investors have only recently begun to talk about getting more aggressive with their beaten-down portfolios.
"For the first six months of the year, people just had their heads down. I don't know how many people told me they haven't looked at their statements," said Dan Lash, a financial planner in Vienna.
It was only last month, when the Dow had already recovered more than 40 percent of its losses, that Charlotte and Larry Vass of La Plata, Md., decided they were ready to consider taking a less conservative stance. The Vasses had been mostly invested in stocks two years ago but began pulling out last fall as markets were pummeled after the collapse of the Wall Street investment bank Lehman Brothers. Over the past year, the Vasses also moved deeper into bonds, said Charlotte, who is in her late 50s.
"Back then, we were in shock," she added.
While the couple plan to keep their portfolio more balanced, Charlotte and her husband, a dentist, have asked their financial planner to be a little more aggressive. They have begun adding money -- slowly -- to stock index funds, she said.
"If your 401(k) turns into a 201(k), you can't get it back in a couple of years," said Charlotte, adding that retirement, which the couple thought might come in a few years, has been pushed further down the road.
Investors in mutual funds, which are among the most common ways for individuals to participate in the stock market, pulled more than $205 billion out of stock funds between September 2008, when equities plunged, to the end of March, when they began their rally, according to data from the Investment Company Institute. During the same period, small investors sought the safety of cash, pouring $357 billion into money-market funds.
In contrast, only $56 billion returned to stock funds between April and the end of August, the most recent date for which data are available. Money-market-fund levels remained high.
"This market rise certainly is not being driven by mutual fund investors," said Brian Reid, the ICI's chief economist. "Mutual fund flows are not causing this run-up, and I would think that probably carries over for retail investors in general."
In fact, there's evidence that small investors in the past few months have once again been moving money out of U.S. stocks. On a weekly basis, small investors took out $2 billion to $4 billion more than they put into funds focusing primarily on domestic stocks from July to September, Reid said.
ICI data show that small investors have been pushing into bonds this year, taking advantage of falling interest rates and rising prices. During the first eight months of the year, $220 billion flowed into bond funds.
This Story
The Dow Passes Mile 10,000 on Road to Recovery
Many Small Investors Have Sat Out Rally
A Look Back: The Dow's First Time Crossing the 10,000 Mark
Market Milestones
"Last year is going to change people's risk tolerance for a long time to come," Lash said. "They're not going to have a diversified stock-only portfolio. They realize that everything went down the same last year. There was nowhere to hide except Treasurys and cash."
According to Christine Parker, president of Parker Financial in La Plata, many small investors have adopted a less-than-go-go outlook.
"There's the pessimism of 'Is this just short-lived? Will this last?' " said Parker, many of whose clients are female executives in their 40s and 50s and retirees. "People are worried about consumer spending and the ending of the stimulus." In particular, she said, investors are wondering what will happen to the economy after the government's $8,000 tax credit for first-time home buyers expires at the end of November.
As stocks go higher, warnings from investment strategists that the market has increased too far, too fast have grown louder.
"We've had this wonderful run-up. What you have to be concerned about is that valuations have become stretched," said Brett Hammond, chief investment strategist at TIAA-CREF. "Markets tend to anticipate economic news, but they don't necessarily predict it. The economic news is better than it was, but it's certainly not rosy."
On Wednesday, as the closing bell approached on the New York Stock Exchange, Charlotte Vass said she had no regrets about not returning to the market sooner.
"We're cautiously optimistic, so it makes sense to move back in more slowly," she said. "The market is a fickle lady."
http://www.washingtonpost.com/wp-dyn/content/article/2009/10/14/AR2009101403657_2.html?nav=emailpage&sid=ST2009101404142
Thursday 15 October 2009
TRADING PARTICIPATION BY CATEGORY OF KLSE INVESTORS
The graph is updated mid-month, e.g. January's data is updated in mid February
Oct 08 - Dec 08
Domestic Individual 4% 31% 23%
Domestic Institution 36% 34% 34%
Foreign 40% 35% 43%
Jan 09 - Mar 09
Domestic Individual 26% 22% 22%
Domestic Institution 42% 40% 40%
Foreign 32% 38% 38%
Apr 09 - Jun 09
Domestic Individual 36% 42% 43%
Domestic Institution 41% 37% 36%
Foreign 23% 21% 21%
Jul 09 - Sept 09
Domestic Individual 30% 30% 26%
Domestic Institution 47% 46% 45%
Foreign 23% 24% 29%
Graphical format:
http://www.klse.com.my/website/bm/market_information/market_statistics/equities/downloads/trading_participation_investor2009.pdf
Warren Buffett's Priceless Investment Advice
"It's far better to buy a wonderful company at a fair price than a fair company at a wonderful price."
So buying great companies at reasonable prices can deliver solid returns for long-term investors. The challenge, of course, is identifying great companies and determining what constitutes a reasonable price.
If investing in wonderful companies at fair prices is good enough for Warren Buffett -- arguably the finest investor on the planet -- it should be good enough for the rest of us.
The devil is in the details.
http://myinvestingnotes.blogspot.com/2009/07/warren-buffetts-priceless-investment.html
So buying great companies at reasonable prices can deliver solid returns for long-term investors. The challenge, of course, is identifying great companies and determining what constitutes a reasonable price.
If investing in wonderful companies at fair prices is good enough for Warren Buffett -- arguably the finest investor on the planet -- it should be good enough for the rest of us.
The devil is in the details.
http://myinvestingnotes.blogspot.com/2009/07/warren-buffetts-priceless-investment.html
Is the market over-valued?
9.10.2009
KLCI index 1230.09
Market PE 23.53
EY = 1/PE = 4.25%
Risk free FD interest rate = 2.5%
Equity risk premium = 4.25 - 2.5 = 1.75%
Equity risk premium = earnings yield (1/market PE) - the risk free rate.
> 3.5%, market is undervalued
< 0.6%, market is overvalued
0.6% to 3.5%, market is fairly valued.
So, presently, the market is neither undervalued nor overvalued, but trading at fair value.
http://myinvestingnotes.blogspot.com/2009/07/when-is-market-over-valued.html
KLCI index 1230.09
Market PE 23.53
EY = 1/PE = 4.25%
Risk free FD interest rate = 2.5%
Equity risk premium = 4.25 - 2.5 = 1.75%
Equity risk premium = earnings yield (1/market PE) - the risk free rate.
> 3.5%, market is undervalued
< 0.6%, market is overvalued
0.6% to 3.5%, market is fairly valued.
So, presently, the market is neither undervalued nor overvalued, but trading at fair value.
http://myinvestingnotes.blogspot.com/2009/07/when-is-market-over-valued.html
"SALE! 50% OFF!"
Stocks are crashing, so you turn on the television to catch the latest market news.
"Falling stock prices would be fabulous news for any investor with a very long horizon."
"You Ain't Seen Nothin' Yet."
It is to be expected that the price of a stock can goes down by a third and can goes up by a half, even in normal market situations.
In fact, when the market is being sold down, the long term value investor gets excited and enthused.
The risk is not in the price volatility.
•The risk is in oneself, reacting "stupidly" to price fluctuations.
•The other risk of course is making a wrong assessment of the future earnings and future earnings growth of the business of the company you bought.
http://myinvestingnotes.blogspot.com/2009/07/news-you-could-use.html
Investment Owner's Contract
http://myinvestingnotes.blogspot.com/2009/07/investment-owners.html
Market Price Fluctuations
http://myinvestingnotes.blogspot.com/2009/07/52w-hg-1.html
"Falling stock prices would be fabulous news for any investor with a very long horizon."
"You Ain't Seen Nothin' Yet."
It is to be expected that the price of a stock can goes down by a third and can goes up by a half, even in normal market situations.
In fact, when the market is being sold down, the long term value investor gets excited and enthused.
The risk is not in the price volatility.
•The risk is in oneself, reacting "stupidly" to price fluctuations.
•The other risk of course is making a wrong assessment of the future earnings and future earnings growth of the business of the company you bought.
http://myinvestingnotes.blogspot.com/2009/07/news-you-could-use.html
Investment Owner's Contract
http://myinvestingnotes.blogspot.com/2009/07/investment-owners.html
Market Price Fluctuations
http://myinvestingnotes.blogspot.com/2009/07/52w-hg-1.html
Glove companies
Valuation
Supermax, Topglove and Kossan
http://spreadsheets.google.com/pub?key=tIzNTWdhdVSJ803HE80Xn8Q&output=html
PBB 15.10.2009
Valuation:
http://spreadsheets.google.com/pub?key=tE7ISnWkuQCAPx-5JJTDp6g&output=html
Published: Thursday October 15, 2009 MYT 1:59:00 PM
Public Bank net profit higher by 3.7%
KUALA LUMPUR: Public Bank Bhd posted a 3.7% rise in net profit for its third quarter ended Sept 30, at RM639.04mil compared with RM616.34mil recorded a year ago on higher loans growth and deposits.
Revenue for the period was RM2.438 billion, compared with the RM2.79 billion a year ago. Earnings per share were 18.52 sen compared with 18.37 sen.
For the nine-months ended Sept 30, 2009, net profit declined to RM1.839 billion compared with RM1.927 billion. Revenue slipped to RM7.22 billion from RM7.94 billion.
Public Bank said excluding the one-off goodwill income from ING in 2008, the group’s underlying operating net profit for the nine-months increased by 3% from a year ago.
http://biz.thestar.com.my/news/story.asp?file=/2009/10/15/business/20091015135755&sec=business
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