Penny Stocks: Pump and Dump (SELL TO SUCKERS)

Penny stocks are those that trade at < RM 1.00.

Some investors confuse these low prices for value.

These stocks are often and easily promoted or manipulated.

Beware of the promoters or manipulators who hype these stocks in the internet forums.

They have often taken a position well before.

The unwary "investors" enter and soon find themselves buying these stocks higher than they can sell.

Here is an example of a stock that was from a forum.

Study the chart of the stock and the table of its prices and volumes.

I believe this chart depicts this penny stocks when it was being "Pumped and Dumped" by its promoters or manipulators. (Period of interest:  September 2010 to December 2010)

There are good lessons one can draw from this event.

Check the observations made below.

LCTH :  Daily Prices and Volumes

Prices (Daily)

Date Open High Low Close Volume Adj Close* Jan 19, 2011 0.28 0.28 0.28 0.28 437,800 0.28 Jan 18, 2011 0.29 0.29 0.28 0.28 435,000 0.28 Jan 17, 2011 0.28 0.29 0.28 0.28 469,400 0.28 Jan 14, 2011 0.29 0.29 0.28 0.29 479,000 0.29 Jan 13, 2011 0.29 0.29 0.28 0.29 993,400 0.29 Jan 12, 2011 0.29 0.29 0.28 0.29 744,000 0.29 Jan 11, 2011 0.29 0.29 0.28 0.29 409,000 0.29 Jan 10, 2011 0.29 0.30 0.28 0.30 833,600 0.30 Jan 7, 2011 0.30 0.30 0.28 0.29 678,300 0.29 Jan 6, 2011 0.28 0.30 0.28 0.30 1,728,800 0.30 Jan 5, 2011 0.27 0.28 0.27 0.28 583,600 0.28 Jan 4, 2011 0.26 0.28 0.26 0.28 487,300 0.28 Jan 3, 2011 0.26 0.26 0.25 0.26 492,100 0.26 Dec 30, 2010 0.26 0.26 0.25 0.26 217,000 0.26 Dec 29, 2010 0.26 0.26 0.25 0.26 93,000 0.26 Dec 28, 2010 0.27 0.27 0.26 0.26 86,000 0.26 Dec 27, 2010 0.25 0.28 0.25 0.27 1,468,000 0.27 Dec 24, 2010 0.25 0.25 0.25 0.25 166,200 0.25 Dec 23, 2010 0.25 0.26 0.25 0.26 203,800 0.26 Dec 22, 2010 0.25 0.26 0.25 0.26 648,700 0.26 Dec 21, 2010 0.25 0.26 0.25 0.25 822,000 0.25 Dec 20, 2010 0.26 0.26 0.25 0.25 598,400 0.25 Dec 17, 2010 0.26 0.26 0.26 0.26 400,600 0.26 Dec 16, 2010 0.26 0.26 0.26 0.26 57,400 0.26 Dec 15, 2010 0.26 0.27 0.26 0.27 169,600 0.27 Dec 14, 2010 0.26 0.26 0.26 0.26 456,400 0.26 Dec 13, 2010 0.26 0.26 0.25 0.26 649,500 0.26 Dec 10, 2010 0.26 0.26 0.25 0.25 732,200 0.25 Dec 9, 2010 0.26 0.26 0.25 0.26 303,900 0.26 Dec 8, 2010 0.26 0.26 0.25 0.26 304,600 0.26 Dec 6, 2010 0.26 0.27 0.25 0.26 625,500 0.26 Dec 3, 2010 0.27 0.27 0.26 0.26 628,600 0.26 Dec 2, 2010 0.27 0.28 0.27 0.27 283,400 0.27 Dec 1, 2010 0.26 0.27 0.26 0.26 93,500 0.26 Nov 30, 2010 0.28 0.28 0.26 0.27 875,200 0.27 Nov 29, 2010 0.28 0.28 0.27 0.28 579,100 0.28 Nov 26, 2010 0.28 0.28 0.28 0.28 378,800 0.28 Nov 25, 2010 0.28 0.28 0.28 0.28 720,800 0.28 Nov 24, 2010 0.28 0.28 0.28 0.28 305,900 0.28 Nov 23, 2010 0.29 0.29 0.27 0.28 928,300 0.28 Nov 22, 2010 0.29 0.29 0.28 0.28 1,057,800 0.28 Nov 19, 2010 0.29 0.29 0.29 0.29 504,200 0.29 Nov 18, 2010 0.29 0.30 0.29 0.29 552,100 0.29 Nov 16, 2010 0.31 0.31 0.30 0.31 811,000 0.31 Nov 15, 2010 0.34 0.34 0.29 0.31 3,137,500 0.31 Nov 12, 2010 0.38 0.40 0.37 0.37 2,716,800 0.37 Nov 11, 2010 0.37 0.38 0.35 0.38 3,223,300 0.38 Nov 10, 2010 0.38 0.38 0.36 0.37 789,500 0.37 Nov 9, 2010 0.40 0.40 0.36 0.38 1,299,100 0.38 Nov 8, 2010 0.39 0.40 0.38 0.38 4,302,600 0.38 Nov 4, 2010 0.32 0.41 0.32 0.38 11,517,500 0.38 Nov 3, 2010 0.31 0.32 0.31 0.32 466,000 0.32 Nov 2, 2010 0.32 0.32 0.31 0.31 419,000 0.31 Nov 1, 2010 0.32 0.33 0.32 0.33 1,067,600 0.33 Oct 29, 2010 0.30 0.32 0.30 0.31 1,036,800 0.31 Oct 28, 2010 0.30 0.31 0.29 0.31 127,000 0.31 Oct 27, 2010 0.29 0.31 0.29 0.31 572,600 0.31 Oct 26, 2010 0.28 0.29 0.28 0.29 309,000 0.29 Oct 25, 2010 0.28 0.28 0.28 0.28 204,300 0.28 Oct 22, 2010 0.28 0.28 0.28 0.28 130,000 0.28 Oct 21, 2010 0.28 0.28 0.27 0.28 156,100 0.28 Oct 20, 2010 0.27 0.28 0.27 0.28 254,000 0.28 Oct 19, 2010 0.28 0.28 0.28 0.28 40,000 0.28 Oct 18, 2010 0.28 0.28 0.28 0.28 12,000 0.28 Oct 15, 2010 0.27 0.28 0.27 0.27 0 0.27 Oct 14, 2010 0.28 0.28 0.28 0.28 70,000 0.28

Observations:

After a long period of promotion, many investors were made aware of the stock in the internet forum.  

Subconsciously, the stock entered their attention and was in their radar screen.  

Many hesitated and did not enter in the early stages of the promotion due to doubts and cautiousness.

Then, when the volume started to climb and the prices started to move upwards, these previously primed "investors" took notice.  

The more adventurous entered first and early at this stage.

As the price rose, more entered.  This was the confirmation that many of these "primed investors" were waiting and looking for.  "It must be true, the game is now on, I am getting in too."  

But note, they were buying at higher prices.  Some even bought more at higher prices (averaging up).   Did you notice that they were already paying a higher price than the "usual"?

Then more of the "dumb money" flowed in.  Look at the huge volume of stocks transacted on 4.11.2010.  This counter was the talk of the market now.  Ever wondered WHO SOLD on that day?  Of course, the manipulators and the smart money.

The party was as good as over by now.  However, more SUCKERS came in over the next few trading days.  With ALL SUCKERS in the stock now, and the smart money having moved out, there were no more SUCKERS to support the price.  

ALL the SUCKERS now holding the stocks were hoping to sell to ANOTHER SUCKER who was willing to buy from them at higher prices.  

Alas, NO new SUCKERS appeared.  This led to the precipitous fall in the price from the 6th trading day after the peak of the volumes and the price of the stock.

It was then a matter of awakening for those left holding the stock at high prices.  Over the subsequent weeks and months, they too realised they were SUCKED, holding or departing from the shares with their losses.

Prices (Daily)

Date Open High Low Close Volume Adj Close* Oct 13, 2010 0.28 0.28 0.28 0.28 80,600 0.28 Oct 12, 2010 0.28 0.28 0.28 0.28 135,000 0.28 Oct 11, 2010 0.28 0.28 0.28 0.28 120,000 0.28 Oct 8, 2010 0.28 0.28 0.28 0.28 0 0.28 Oct 7, 2010 0.28 0.28 0.28 0.28 20,600 0.28 Oct 6, 2010 0.28 0.28 0.28 0.28 42,000 0.28 Oct 5, 2010 0.28 0.28 0.28 0.28 13,000 0.28 Oct 4, 2010 0.28 0.28 0.27 0.27 220,000 0.27 Oct 1, 2010 0.27 0.28 0.27 0.28 91,900 0.28 Sep 30, 2010 0.27 0.27 0.27 0.27 72,600 0.27 Sep 29, 2010 0.28 0.28 0.27 0.27 28,400 0.27 Sep 28, 2010 0.28 0.28 0.28 0.28 190,000 0.28 Sep 27, 2010 0.28 0.28 0.28 0.28 3,000 0.28 Sep 24, 2010 0.27 0.27 0.27 0.27 1,800 0.27 Sep 23, 2010 0.28 0.28 0.28 0.28 60,000 0.28 Sep 22, 2010 0.28 0.28 0.28 0.28 172,000 0.28 Sep 21, 2010 0.28 0.28 0.28 0.28 5,000 0.28 Sep 20, 2010 0.28 0.28 0.28 0.28 0 0.28 Sep 17, 2010 0.28 0.28 0.28 0.28 6,000 0.28 Sep 15, 2010 0.28 0.28 0.28 0.28 10,000 0.28 Sep 14, 2010 0.28 0.28 0.26 0.26 71,600 0.26 Sep 13, 2010 0.27 0.28 0.27 0.27 0 0.27 Sep 9, 2010 0.28 0.28 0.28 0.28 10,000 0.28 Sep 8, 2010 0.27 0.27 0.27 0.27 10,600 0.27 Sep 7, 2010 0.28 0.28 0.27 0.27 36,000 0.27 Sep 6, 2010 0.27 0.29 0.27 0.27 0 0.27 Sep 3, 2010 0.28 0.28 0.28 0.28 25,600 0.28 Sep 2, 2010 0.27 0.28 0.26 0.28 76,200 0.28 Sep 1, 2010 0.28 0.28 0.28 0.28 0 0.28 Aug 30, 2010 0.28 0.28 0.28 0.28 43,000 0.28 Aug 27, 2010 0.28 0.28 0.28 0.28 20,000 0.28 Aug 26, 2010 0.28 0.28 0.28 0.28 70,000 0.28 Aug 25, 2010 0.28 0.28 0.28 0.28 186,000 0.28 Aug 24, 2010 0.29 0.29 0.28 0.28 40,000 0.28 Aug 23, 2010 0.28 0.28 0.28 0.28 20,600 0.28 Aug 20, 2010 0.28 0.28 0.28 0.28 200,000 0.28 Aug 19, 2010 0.29 0.29 0.29 0.29 0 0.29 Aug 18, 2010 0.29 0.29 0.28 0.29 163,700 0.29 Aug 17, 2010 0.28 0.29 0.28 0.29 241,500 0.29 Aug 16, 2010 0.28 0.29 0.28 0.28 341,800 0.28 Aug 13, 2010 0.28 0.29 0.28 0.29 214,000 0.29 Aug 12, 2010 0.29 0.29 0.29 0.29 0 0.29 Aug 11, 2010 0.29 0.29 0.29 0.29 0 0.29 Aug 10, 2010 0.29 0.29 0.29 0.29 37,500 0.29 Aug 9, 2010 0.31 0.31 0.29 0.29 19,000 0.29 Aug 6, 2010 0.29 0.31 0.29 0.29 0 0.29

Prices (Daily)

Date Open High Low Close Volume Adj Close* Aug 3, 2010 0.30 0.30 0.30 0.30 30,000 0.30 Aug 2, 2010 0.28 0.30 0.28 0.30 18,600 0.30 Jul 30, 2010 0.30 0.30 0.29 0.30 202,000 0.30 Jul 29, 2010 0.31 0.31 0.30 0.30 238,800 0.30 Jul 28, 2010 0.29 0.30 0.29 0.29 53,000 0.29 Jul 27, 2010 0.29 0.29 0.29 0.29 95,000 0.29 Jul 26, 2010 0.29 0.29 0.29 0.29 94,900 0.29 Jul 23, 2010 0.30 0.31 0.29 0.29 306,000 0.29 Jul 22, 2010 0.30 0.31 0.29 0.29 40,500 0.29 Jul 21, 2010 0.29 0.31 0.29 0.30 273,600 0.30 Jul 20, 2010 0.29 0.31 0.29 0.29 185,200 0.29 Jul 19, 2010 0.30 0.30 0.29 0.30 18,000 0.30 Jul 16, 2010 0.29 0.31 0.29 0.29 0 0.29 Jul 15, 2010 0.31 0.31 0.29 0.31 159,600 0.31 Jul 14, 2010 0.29 0.31 0.29 0.31 15,000 0.31 Jul 13, 2010 0.28 0.29 0.28 0.29 1,800 0.29 Jul 12, 2010 0.29 0.29 0.28 0.28 28,900 0.28 Jul 9, 2010 0.29 0.30 0.29 0.30 50,000 0.30 Jul 8, 2010 0.29 0.29 0.29 0.29 25,000 0.29 Jul 7, 2010 0.29 0.30 0.29 0.29 37,000 0.29 Jul 6, 2010 0.28 0.28 0.28 0.28 10,000 0.28 Jul 5, 2010 0.28 0.30 0.28 0.28 0 0.28 Jul 2, 2010 0.29 0.29 0.29 0.29 20,000 0.29 Jul 1, 2010 0.29 0.29 0.29 0.29 10,000 0.29 Jun 30, 2010 0.29 0.29 0.29 0.29 26,000 0.29 Jun 29, 2010 0.29 0.29 0.28 0.28 100,500 0.28 Jun 28, 2010 0.31 0.31 0.29 0.30 75,000 0.30 Jun 25, 2010 0.29 0.31 0.29 0.29 0 0.29 Jun 24, 2010 0.30 0.30 0.30 0.30 10,000 0.30 Jun 23, 2010 0.30 0.32 0.30 0.31 680,700 0.31 Jun 22, 2010 0.29 0.30 0.29 0.29 0 0.29 Jun 21, 2010 0.29 0.30 0.29 0.29 121,200 0.29 Jun 18, 2010 0.29 0.29 0.29 0.29 20,000 0.29 Jun 17, 2010 0.30 0.30 0.30 0.30 1,000 0.30 Jun 16, 2010 0.29 0.29 0.29 0.29 85,000 0.29 Jun 15, 2010 0.28 0.29 0.28 0.29 20,000 0.29 Jun 14, 2010 0.28 0.30 0.28 0.28 0 0.28 Jun 11, 2010 0.28 0.30 0.28 0.28 0 0.28 Jun 10, 2010 0.29 0.29 0.29 0.29 40,000 0.29 Jun 9, 2010 0.29 0.30 0.29 0.30 46,000 0.30 Jun 8, 2010 0.28 0.28 0.28 0.28 22,700 0.28 Jun 7, 2010 0.28 0.28 0.28 0.28 7,000 0.28 Jun 4, 2010 0.28 0.28 0.28 0.28 600 0.28 Jun 3, 2010 0.28 0.31 0.28 0.29 89,800 0.29 Jun 2, 2010 0.28 0.29 0.28 0.28 0 0.28 Jun 1, 2010 0.29 0.29 0.28 0.29 282,600 0.29 May 31, 2010 0.29 0.29 0.29 0.29 12,000 0.29 May 27, 2010 0.28 0.29 0.28 0.29 216,200 0.29 May 26, 2010 0.28 0.28 0.28 0.28 168,000 0.28 May 25, 2010 0.29 0.29 0.27 0.28 378,800 0.28 May 24, 2010 0.29 0.29 0.28 0.29 85,000 0.29 May 21, 2010 0.28 0.29 0.27 0.29 162,500 0.29 May 20, 2010 0.29 0.29 0.28 0.29 121,800 0.29 May 19, 2010 0.30 0.30 0.30 0.30 305,000 0.30 May 18, 2010 0.31 0.31 0.30 0.30 173,000 0.30 May 17, 2010 0.31 0.31 0.31 0.31 44,600 0.31 May 14, 2010 0.31 0.31 0.31 0.31 77,000 0.31 May 13, 2010 0.32 0.34 0.30 0.31 730,100 0.31 May 12, 2010 0.31 0.32 0.31 0.31 866,700 0.31 May 11, 2010 0.33 0.33 0.33 0.33 30,000 0.33 May 10, 2010 0.33 0.33 0.32 0.33 144,700 0.33 May 7, 2010 0.32 0.34 0.32 0.32 253,600 0.32 May 6, 2010 0.34 0.34 0.33 0.34 272,300 0.34 May 5, 2010 0.34 0.34 0.34 0.34 15,000 0.34 May 5, 2010 0.0178 Dividend May 4, 2010 0.36 0.36 0.35 0.36 206,100 0.34 May 3, 2010 0.36 0.36 0.36 0.36 30,000 0.34

Check also:

Penny  Stocks:  Pump and Dump

http://www.investlah.com/forum/index.php/topic,19103.0.html

GSB: "Hidden Gem" or "Pump and Dump Penny Stock"

http://www.investlah.com/forum/index.php/topic,18320.0.html

Buffett Abandons Value Investing. Penny Stocks, Day Trading Are My Real Key To Wealth

Buffett: Penny Stocks, Day Trading Are My Real Key To Wealth

 Posted: April 1, 2011 11:05AM by Stephen Simpson

TUTORIALS: The Greatest Investors

In an interview that is sure to shake the pillars of Wall Street, billionaire investor Warren Buffett revealed to our crack reporter Kent Baleevit that he actually made his wealth from risky penny stocks and day trading. "C'mon, Kent ... long term value investing? Who has time for that crap? I'm an old man ... I need to make my money quick and get to the casino before the lines at the early-bird buffet get too long."

Turning His Back on Value
Although Warren Buffett is one of the investors widely credited with popularizing long-term value investing, in point of fact he has long since abandoned that approach. "Here's the thing, Kent … I just got tired of waiting. Do you know how long it takes to make money from holding undervalued stocks?"

Apparently academic research played a significant role in Buffett's change of heart. Many academics have written papers that demonstrate that there is no system that can reliably beat the market, and that market-beating investors are just a statistical anomaly. This view has perhaps been best expressed in Burton Malkiel's book "A Random Walk Down Wall Street".

"See, Kent? I read these papers and these books and they made a really impressive case that it was just impossible to consistently beat the markets. They had a lot of stats and cool charts and everything. So, I looked at the billions and billions of dollars that I had, and the hundreds of thousands of dollar that they had, and decided that they must know something I didn't. So, I decided to abandon long-term value investing".

When asked if he had any plans to continue investing, the famous Omaha investor was practically ebullient. "Day trading, baby! It's exciting and these sites make it so easy. I mean, I just log on to read the news and there's a "Trade" button everywhere I look. And when I trade, it makes this cool sound … like the machine is happy. And if I trade a thousand times this month? I'll get to be in their Super-Duper Special Trader Club, and that will give me access to these software packages that I could just go out and buy for $100".

Making Dollars Out Of Pennies
Instead of buying giant boring companies and holding for decades, Buffett has thrown his lot in with the penny stocks. After all, those efficient market hypothesizers that proved that it's impossible to beat the market have based their case largely on information - the idea being that all that can be known about a big company is already known, but that it might be possible for lesser-known companies to have some outperformance potential. Not only that - at just pennies a share an investor can own hundreds of thousands of shares at a time.

On top of that, Buffett has discovered that there are some truly amazing opportunities in penny stocks. "Yeah, this one company? They're going to cure cancer. I called the CEO and he told me so himself. I did some research afterwards on Google and I didn't see any articles about it in Science or Nature, but the CEO assured me that those journals are just fronts for the hedge fund industry and his company had to keep all of the really interesting information to themselves or the pharmaco-industrial-media-complex would steal it all."

"Oh, and this other company? They know how to change your car's engine to run on water. And there's one here that can clean up pollution. And then there are these China companies. I don't really know what they do, but they're Chinese, so that has to work right? I mean, I know they don't have any auditors and they're actually headquartered in the Caymans, but I'm sure it's all fine. I mean, it's China!"

Day Trading - The Real Secret to Wealth?
Buffett has also apparently turned to day trading to supplement his income. Apparently, dozens of helpful millionaires log on to message boards every day just to help investors like him make more money. "Yeah, Kent, it's really cool. I read about all this money that people were making, and these systems that could double or triple my money in just a couple of weeks. So, I had to check it out, right?"

"Once I got to doing research online, it really just changed my life. There were all these guys talking about how they doubled their money in just a week and all I had to do was follow their picks and I could do the same. How awesome is that? I mean, I know there are all those newsletters out there that promise to double my money, but they charge money. And hey, I'm Warren-freaking-Buffett. I don't spend money if I don't have to, right? And besides, it's the internet … it must be true, right? I mean, I'm a billionaire and I never give any of my ideas away a minute sooner than I have to, but there's all of these rich people online just waiting to help you!".

On The Markets and Corporate Strategy
Buffett was not just going to talk about his new investment strategies. He also wanted to offer a few thoughts on the markets themselves and corporate policies. "Here's the thing … I know the market is rigged, but that's actually a good thing. I mean, I've never once lost money because I made any kind of mistake - it was just a conspiracy by shorts and journalists to bring down the stocks and hurt innocent investors like me. Once we stop them from exposing the problems these companies have and raising any kind of doubts whatsoever, all of those stocks will go right back up".

Turning to acquisitions, Buffett questioned why all of these companies are so active in mergers and acquisitions. "I don't see why these companies keep buying and selling these units. I mean, they're just enriching the bankers and amusing themselves, right?"

"I know I used to do deals, but I've sworn off of them now". When asked why he would stop such a successful strategy, he answered, "well, it's those academics again. I read some papers that said that deals don't add value and the markets are always efficient … so any sort of deal done at any premium has to be a bad move. Who was I going to believe? My own track record of value-building deals or a paper written by an academic who never had to meet a payroll in his life?"

The Bottom Line
To say the least, Buffett's newfound market wisdom is intriguing. After years of building incredible wealth with a very well-described and consistent strategy, Buffett has decided to believe those who lack the patience or ability to replicate the strategy and assert that it therefore cannot work. Likewise, this famous investor's embrace of modern investment strategies like day trading and penny stocks is sure to force a reevaluation of these neglected sectors.

Happy April Fool's Day from Financial Edge! This article was written for fun, and was not intended to offend or misinform.

http://financialedge.investopedia.com/financial-edge/0411/Buffett-Penny-Stocks-Day-Trading-Are-My-Real-Key-To-Wealth.aspx?partner=wbw0411

Why Warren Buffett can't make money any more

Diary of a private investor: It might be hard to believe, but sometimes not being mega-rich offers you more opportunities.

Warren Buffett admits he can't do it any more - he has too much money under management Photo: AFP/GETTY

By James Bartholomew 10:40AM GMT 18 Mar 2011

66 Comments

Spare a sympathetic thought for Warren Buffett. You may think the investment manager does not need a great deal of commiseration having made himself one of the richest men on the planet and enjoying the adulation of fans. However, nobody's life is perfect. Even Warren Buffett has at least one painful circumstance to endure.

In his admirably frank words, "The huge sums of capital we currently manage eliminate any chance of exceptional performance." That might sound dry and technical. But to those of us who relish competing in the portfolio investment game, this is obviously a cry of pain, a moan of misery.

Mr Buffett, whose pleasure, fame and fortune have all been based on outperforming the stock market by a wide margin, is admitting he can't do it any more. He has too much money under management. He can't beat the market because he cannot easily move in and out of investments. He cannot buy into small companies at all. So those of us with smaller pots of money to play with should enjoy our advantage over Mr Buffett. We can still duck and dive, get in and out.

Unfortunately I have not done very much of this recently. I have been sitting on the same shares for quite a while. They have done well. But finally I have stirred myself. I know I ought to try to ''rotate'' from time to time into some new purchases that are undervalued and where I can, again, benefit from a re-rating. So what have I bought?

My first idea came from a fund manager friend who was complaining that many people were talking nonsense about which shares to buy now. They were saying you ought to buy into good-quality companies. "On the contrary," he said, "you should be buying rubbish."

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I think he is right. The biggest gains will be in companies regarded as basket cases sometime in the past few years but which, over the next year, will come to seem not so risky after all.

I have several ''rubbish'' companies in my portfolio. The one he mentioned was Lloyds Bank. The shares have been under the weather. They have spent the past two years languishing between 47p and 75p. I have bought at 68.6p and 67.6p, since when the shares have fallen to 62p. At that price they stand at 7.2 times forecast earnings per share in 2012. That ratio is pretty low for a bank. I am hoping for a significant re-rating.

My second purchase has also been in the financial sector because this is where good value seems to be at the moment. I have bought into an insurance underwriter called Catlin. Its shares are quite a way below the highs of 2007 yet the business has continued to grow and profits have recovered. The shares, at the price I bought, 372.7p, stand at only seven times the forecast earnings for the current year. There is also a pretty reliable-looking forecast dividend yield of just under 7pc.

My third purchase is also in insurance. Randall and Quilter has a number of activities, including buying other insurance companies to ''run off'' their business. This company is on an attractive valuation. At 102.5p, the price I paid this week, it is on nine times forecast earnings for this year. It also has a big forecast yield of 7.8pc. The clincher is the interim statement, an attractive mix of ambition, carefulness about possible difficulties and attention to detail.

Finally, I bought into First Property Group, which owns commercial property in Poland and manages property for others. I have wanted to increase my investment in property in Eastern Europe after the financial crisis. This company has one property that yields 8pc. That makes me believe there is scope for a re-rating here too as well as rental growth.

I don't know if Warren Buffett would like a piece of the action but, if so, it is unfortunate for the great man. He's just got too much money.

http://www.telegraph.co.uk/finance/personalfinance/investing/8380312/Why-Warren-Buffett-cant-make-money-any-more.html

Related:

http://www.berkshirehathaway.com/

The varied ways in which students of Graham and Dodd have made money is in this excellent article - text of a speech delivered by Buffett himself many years ago:

http://www.tilsonfunds.com/superinvestors.pdf

Warren Buffett never dived into and out of companies. He and CM sought good companies at a good price for long term holds.
He frequently points out that dealing costs erode profits and that timing is very difficult.
One can always find investments which do better than WB over a short term, or for a selected period. For instance he lost out on the dot com boom. But then he missed the collapse as well.
He did not say he was losing money but that the stellar returns of the past were unlikely.
He clearly said that his aim was to outperform the various indices as otherwise his investors would be better in investing in a tracker.

Petronas Dagangan seeks to buy assets

Petronas Dagangan seeks to buy assets
Published: 2011/03/31

Petronas Dagangan Bhd, controlled by Malaysia’s state oil and gas company, is seeking to acquire assets to strengthen its retail network, according to CIMB Investment Bank Bhd.

The company is debt-free and has a cash-pile of RM1 billion, Norziana Mohd Inon, an analyst at CIMB, wrote in a report today.

The stock’s price estimate may be upgraded, according to the report.

The stock climbed 1 per cent to RM15.76 at 9:30 a.m. local time, set to close at an all-time high. The shares have gained 35 per cent this year, set to be the best performer on the benchmark FTSE Bursa Malaysia KLCI Index. -- Bloomberg



Read more: Petronas Dagangan seeks to buy assets http://www.btimes.com.my/Current_News/BTIMES/articles/20110331092640/Article/index_html#ixzz1IBXcoDZv

Welcome to the World of Stock Arbitrage and Special Investment Situations

Give a man a fish and you will feed him for a day.  Teach a man to arbitrage and you will feed him forever.
- Warren Buffett

One of the great secrets of Warren Buffett's investment success has been his arbitrage and special situations investment.

With the advance of the Internet, brokerages started offering online trading at deep discounts from their full-service retail rates.  With the lower rates the world of stock arbitrage and other special situations are opened up to the masses.  Sitting alone with a computer and an online brokerage account with deeply discounted trading rates, an individual investor could compete in the field of arbitrage with even the most powerful of Wall Street firms.

Warren Buffett is probably the greatest player in the arbitrage and special situations game today.  Not because he takes the biggest risks.  Just the opposite - because he learned how to identify the bet with the least risk, which has enabled him to take very large positions, and produce results that can only be described as spectacular.

It was Warren's arbitrage investments that took a great investor and turned him into a worldwide phenomenon.  Professors Gerald Martin and John Puthenpurackal's study of Berkshire Hathaway's stock portfolio's performance from 1980 to 2003, they discovered that the portfolio's 261 investments had an average annualized rate of return of 39.3%.  Even more amazing was that out of those 261 investments, 59 of them (22.7%) were identified as arbitrage deals.  And those 59 arbitrage deals produced an average annualised rate of return of 81.28%.

In 1987, Forbes magazine noted that Warren's arbitrage activities earned an amazing 90% that year, while the S&P 500 delivered a miserable 5%.  Arbitrage is Warren's secret for producing great results when the rest of the stock market is having a down year.

With Warren's incredible arbitrage performance in mind, and the knowledge that the average investor now has access to institutional brokerage rates, it was high time that you took a serious look at the arbitrage and special situation investment strategies and techniques that produce Warren's mind-numbing results.

You must explore how he find the deals, evaluates them, and makes sure that they are winners. You will dwell into the mathematical equations and intellectual formulas that he uses to determine the probability of the deal being a success.   In Warren's world, certainty of the deal being completed is everything.  It is how the high probability of the event happening that creates the rare situation in which Warren is willing to use leverage to help boost his performance in these investments to unheard-of-numbers.  

Goldman Sachs says buy ringgit

Goldman Sachs says buy ringgit
Published: 2011/03/31

Goldman Sachs Group Inc says buy Malaysia’s ringgit against the US dollar on speculation the central bank will favor currency appreciation to help fight inflation.

The ringgit strengthened 1.3 per cent this quarter to 3.0256 versus the greenback as of 11:47 a.m. in Kuala Lumpur, according to data compiled by Bloomberg, less than one sen short of a 13- year high of 3.0210 reached on March 25. A government report that day showed consumer prices rose 2.9 per cent last month from a year earlier, the fastest pace since April 2009.

The US bank recommended buying 12-month non-deliverable forwards, betting the contracts will rise 5.8 per cent to 2.9 per dollar from today’s rate of 3.0695, according to a research note today from Goldman Sachs’ currency analysts including London- based Thomas Stolper. A stop-loss order should be placed at 3.08 to guard against losses in the trade, it said.

“Inflation in emerging markets remains one of the most important themes in foreign exchange,” the report said. “We think Bank Negara Malaysia will respond primarily by allowing the ringgit to strengthen, a stance that is also supported by strong activity growth and a large balance-of-payments surplus of about 15 per cent of gross domestic product.”

Goldman Sachs revised its forecasts for the ringgit’s spot price in three, six and 12 months to 2.98, 2.90 and 2.85. -- Bloomberg


Read more: Goldman Sachs says buy ringgit http://www.btimes.com.my/Current_News/BTIMES/articles/20110331144824/Article/index_html#ixzz1IAoDt51K


Comment:  Maybe this is the reason for the strong performance of the Bursa today.

Financial literacy vital to invest in complex environment

Wednesday March 30, 2011

KUALA LUMPUR: Financial literacy is important to enable people to protect themselves in an environment that offers increasingly complex and sophisticated investment products.

Securities Industry Development Corp (SIDC) chief executive officer John Zinkin said some people needed to be guided on how to manage their money for savings and investments.

“They need to understand not just income and expenditure but also save, budget and invest. They have to understand the whole concept,” he told a media briefing yesterday.

Zinkin said different stages of life required different financial needs and SIDC’s financial literacy programme, Bijak Mengurus Wang (BMW), would cater to differ levels of learning.

He said the programme, aimed at creating knowledge and vigilant investors, had benefited 21,133 participants.

The programme teaches participants about smart money management, wise investing and how to spot scams.

To gauge the programme’s effectiveness, SIDC has recently engaged a third party to conduct an impact survey among 800 random participants.

The survey shows that 87.3% of the participants are now more vigilant when considering an investment, 85.8% have started implementing personal budget and 84.4% have started setting financial goals.

Zinkin said 88% of the participants had also set aside some money as force saving before spending their income every month.

More than half of the respondents have opted for automatic salary deduction facility to practice “pay yourself first”. Additionally, 46% of the participants had become investors for the first time after attending the programme.

This year, SIDC hopes to educate 5,500 people. The programme, which is free for all, is part and parcel of the overall effort by the Securities Commission (SC) to promote investor education.

For more information, visit www.sidc.com.my or www.min.com.my.

http://biz.thestar.com.my/news/story.asp?file=/2011/3/30/business/8375425&sec=business

Wednesday March 30, 2011

Don't over-borrow

Plain Speaking - By Yap Leng Kuen

ALTHOUGH only two restrictions have been placed on borrowing for the purchase of a third or more homes and credit card eligibility, it does not mean that there won't be more to come.

In fact, consumers should be vigilant as Bank Negara is believed to be putting more intensive supervision on certain aspects of the property and personal loans sectors.

For example, the 5:95 property loan scheme offered by certain companies falls under this category of supervision.

Under this arrangement that was implemented during the market doldrums, only 5% downpayment was required for the purchase of a property with the rest of the financing in the form of a bank loan.

There was talk that the 5:95 scheme was mainly extended to affluent housebuyers but the bulk of the repayments are coming onstream this year. Hence, the monitoring of these repayments as well as pockets of borrowing that are still available under this scheme.

Personal loans form 15% of the total loans portfolio but due to the higher borrowing rates, extra care and discipline are required to guard against over-borrowing.

The extension of credit by non-bank institutions is also being monitored amidst lessons gleaned from countries suffering from high indebtedness.

Credit schemes extended by cooperatives and cooperative banks are likely to be scrutinised for affordability on the part of the borrowers.

Covering all aspects of household loans, the upcoming guidelines on lending and affordability represent part of the internal controls that are put in place to monitor the situation.

Under this surveillance, over-lending to single borrowers is discouraged.

In fact, the entire credit scenario is being assessed via a holistic package of policies and measures that cover prudential, intensive supervision, standards on banking institutions and consumer education.

Household indebtedness, at 75.9% of Gross Domestic Product at the end of last year, may be on the increase but indications are that it has not become destabilising.

On the contrary, wealth accumulation remains healthy with liquid assets forming 64% of financial assets while delinquency levels remain low - the non-performing loans for credit cards is at 2%.

Nevertheless, it is not a time to be sanguine especially when high energy and commodity prices pose risks to the economy.

Senior business editor Yap Leng Kuen views this an opportune time to remind everyone that “prevention is better than cure.''

http://biz.thestar.com.my/news/story.asp?file=/2011/3/30/business/8375253&sec=business