CASE STUDIES
Building an income: Ming's story
Investor Education Fund
Published Tuesday, Mar. 31, 2009 10:20AM EDT
Last updated Tuesday, Mar. 23, 2010 11:35AM EDT
With $20,000 extra to invest, Ming likes the idea of investing for income. But he doesn’t want to invest too conservatively. He hopes to retire within the next 10 years, and he wants to grow his savings without taking on too much risk.
Ming decides what to do: Ming sat down with his adviser, and together they created a portfolio that would balance income and growth. Here what they did with the money:
· Put $5,000 in a five-year, non-cashable Guaranteed Investment Certificate (GIC): Ming will get about $175 a year in interest from this investment, guaranteed.
· Put $5,000 in a 10-year government bond: He will get about $200 in interest each year from this investment, guaranteed.
· Put $10,000 in preferred shares: Ming hopes to get about $400 each year in dividends, paid as $100 once every three months. Here, there’s no guarantee. He plans to hold the stock for now so he won’t have to pay tax on any capital gains.
Result: Ming will get some of this extra income yearly, and some more often. Some of the money is guaranteed, and some of it is not. By putting about half of his money in non-guaranteed income investments (the preferred shares), he hopes to balance income with growth.
There are also certain tax benefits. The preferred shares pay dividends, which are taxed at a much lower rate than interest. That means Ming will be able to keep more of the income he makes from investing. He plans to reinvest this income so he can keep growing his savings until he retires.
Saturday 25 December 2010
How do I make or lose money on stocks?
How do I make money from stocks?
You make money in two ways:
- You sell when the price is higher than you paid.
Example: Let’s say you buy a stock when the price is $10 a share. A year later the price goes up to $11 and you sell. You will make $1 on each share you own, minus fees or taxes.
- You get dividends.
Example:
Let’s say you bought 100 common shares of a company at the start of the year. At the end of the year, you get a dividend of 25 cents a share. That means you made $25 in dividends that year (100 shares x 25 cents = $25). Some years, you may get a higher dividend. Some years, you may get a lower dividend, or no dividend at all.
Tip: Before you buy a stock, ask these questions: Is this stock’s price likely to rise over time? Does the company pay dividends often?
How do I lose money from stocks?
- You sell when the price is lower than you paid.
Example: Let’s say you buy a stock when the price is $10 a share. A year later, the price has dropped to $9. If you choose to sell then, you will lose $1 on each share you own. You’ll also have to pay fees for selling the stock.
Tip: You don’t really lose money on your stock investment until you sell. You may decide to hold on to the stock and hope that its price will rise. There’s no way to tell for sure if the price will rise again or how soon. It could even fall lower. As an investor, you have to decide when you should sell. Or, get help from a registered adviser.
- The company whose stock you own goes out of business.
This doesn’t happen often. But a company can go bankrupt if it can’t afford to pay its bills. Its stock will drop a lot in value and may even become worthless.
Remember: There is no sure thing in the stock market
For better results, learn as much as you can before you invest your hard-earned cash. You may also want to get professional advice.
Four ways investors go wrong
1. Bad market timing. I fear that too often investors attempt to time the markets, which is extremely difficult even for professional money managers.
As I have pointed out many times over the years, it is one thing to identify trends but quite another to pinpoint when they will result in major market turns. Sometimes, the time lag can be many months or even years. Being on the wrong side of the market during that period can prove to be very costly.
2. Aggressive asset allocation. Although it has been repeatedly proven to be the most important single factor in investment performance, many investors fail to use the principles of asset allocation in constructing their portfolios. This frequently results in a higher level of risk than is appropriate [because investors tend to] overweight stocks and/or equity mutual funds and underweight fixed-income securities.
I have seen many cases where people in their sixties and seventies had equity weightings of more than 75% and then were stunned when they lost a lot of money in the market bust of 2008 and 2009. For most people, a disciplined asset-allocation approach is the first step to successful investing.
3. Flawed advice. I just read another study purporting to show that Canadians who use financial advisors are better off than those who don't. This one came from the Investment Funds Institute of Canada (IFIC), most of whose products are sold by advisors.
[According to the report,] households with an advisor had 68 per cent of their money in "market-sensitive" securities (equities and mutual funds) and 32% in "conservative" vehicles (term deposits, savings accounts, bonds).
Those who did not use an advisor were split almost equally—51 per cent market-sensitive to 49 per cent conservative. I suspect that a similar U.S. study would produce comparable results.
Financial advisors, like all other professionals, aren't perfect. Sometimes the guidance they offer simply isn’t appropriate, either because it is inconsistent with a person's objectives and risk tolerance or because it is motivated at least in part by commissions. So, it is always a good idea to ask questions and be sure you understand exactly what you're buying before taking the plunge.
4. Pure speculation. Some people like to gamble, pure and simple. I have always said that the place for that is a casino, not the stock market, but there are investors who can't resist. Occasionally, they make a big score. More often, they lose their stake.
Successful long-term investing requires patience and discipline. That may not seem exciting, but it will pay off over time and you won't end up sending me e-mails bemoaning your losses.
Gordon Pape is editor of the Canada Report.
http://www.theglobeandmail.com/globe-investor/investment-ideas/four-ways-investors-go-wrong/article1730868/
Who knew? Things investors wish they saw coming
Hindsight bias: The inclination to see events that have occurred as being more predictable than they were before they took place.
That’s Wikipedia’s definition of a behavioural weakness we all have. We take credit for having seen something coming when we really didn’t (or at least our actions give no indication that we did). Investors are particularly susceptible to hindsight bias. So much so in fact, that a friend of mine suggested we start up a helpline to assist deluded portfolio managers who have convinced themselves they saw the tech wreck coming. She’s heard it too many times.
So in looking back at 2010, I’m going to focus on things that few people saw coming. I’m not talking about the obvious – the Leafs being bad or the Alouettes winning the Eastern Conference – but rather stuff that wasn’t even contemplated a year ago: LeBron James going from revered to despised, or curling emerging as a viewing highlight of the Vancouver Olympics. The stuff that prompts us to say, “Who knew?”
For instance, who knew Canada would continue to cruise along, seemingly immune to the troubles of its largest customer, the United States. And our residential and commercial real estate would be downright hot, while the market to the south was a sinkhole.
As for the U.S., who knew the government would go another year without showing any spending discipline, let alone austerity. Or that investors would continue to spend so much time listening to an institution that was discredited years ago, namely the U.S. Federal Reserve.
Who knew another year would go by without a plan to utilize one of Canada’s greatest resources – natural gas. I guess declining exports to the U.S. (they now have lots of gas, too) and environmental concerns about the oil sands weren’t enough of an incentive.
Who knew a major takeover (Potash Corp.) would get turned down after foreigners had effortlessly bought Alcan, Algoma, Anderson, ATI, Canadian Hunter, Cognos, Creo, Dofasco, Duvernay, Fairmont, Falconbridge, Four Seasons, Hudson’s Bay, Ipsco, Inco, Labatt, MacMillan Bloedel, Masonite and Newbridge, to name a few.
While most investors started the year worrying about rising interest rates, who knew bond yields would drop further (David Rosenberg, that’s who). In the face of the crises in Greece and Ireland, and a U.S. economy that was weak enough to require more quantitative easing, stock markets went up. And despite all the talk about the loonie’s strong fundamentals against the U.S. dollar, it remains where it was last January.
Who knew that after two excellent years in the markets, so many people would still hate stocks? Over the course of my career, I’ve never come across as many investors who are sitting on cash, making a huge bet again the market (and their own investment plan).
In the investment industry, who knew that Ned Goodman would sell out – to a bank, no less. Or that we’d have so many new exotic exchange-traded funds, including ones that play the spread between oil and gas, the volatility of the S&P 500 and the odds of “The Biebs” winning a Grammy.
Who knew the U.S. government would make money on its Citigroup investment, or that Government Motors (GM) would be one of the year’s hottest IPOs.
Who knew that Manulife would let another year pass without rebuilding the confidence of the investment community? Or that making women’s bums look good would be worth 55 times earnings to Lululemon shareholders.
And speaking of multiples, who knew RIM would be down 16.8 per cent on the year, and trading at well under 10 times earnings, after revenue grew by 35 per cent, earnings by 45 per cent and the company bought back $2-billion worth of stock?
The year once again demonstrated how perverse and unpredictable financial markets are, and how lucky we are to be living where we do.
That’s Wikipedia’s definition of a behavioural weakness we all have. We take credit for having seen something coming when we really didn’t (or at least our actions give no indication that we did). Investors are particularly susceptible to hindsight bias. So much so in fact, that a friend of mine suggested we start up a helpline to assist deluded portfolio managers who have convinced themselves they saw the tech wreck coming. She’s heard it too many times.
So in looking back at 2010, I’m going to focus on things that few people saw coming. I’m not talking about the obvious – the Leafs being bad or the Alouettes winning the Eastern Conference – but rather stuff that wasn’t even contemplated a year ago: LeBron James going from revered to despised, or curling emerging as a viewing highlight of the Vancouver Olympics. The stuff that prompts us to say, “Who knew?”
For instance, who knew Canada would continue to cruise along, seemingly immune to the troubles of its largest customer, the United States. And our residential and commercial real estate would be downright hot, while the market to the south was a sinkhole.
As for the U.S., who knew the government would go another year without showing any spending discipline, let alone austerity. Or that investors would continue to spend so much time listening to an institution that was discredited years ago, namely the U.S. Federal Reserve.
Who knew another year would go by without a plan to utilize one of Canada’s greatest resources – natural gas. I guess declining exports to the U.S. (they now have lots of gas, too) and environmental concerns about the oil sands weren’t enough of an incentive.
Who knew a major takeover (Potash Corp.) would get turned down after foreigners had effortlessly bought Alcan, Algoma, Anderson, ATI, Canadian Hunter, Cognos, Creo, Dofasco, Duvernay, Fairmont, Falconbridge, Four Seasons, Hudson’s Bay, Ipsco, Inco, Labatt, MacMillan Bloedel, Masonite and Newbridge, to name a few.
While most investors started the year worrying about rising interest rates, who knew bond yields would drop further (David Rosenberg, that’s who). In the face of the crises in Greece and Ireland, and a U.S. economy that was weak enough to require more quantitative easing, stock markets went up. And despite all the talk about the loonie’s strong fundamentals against the U.S. dollar, it remains where it was last January.
Who knew that after two excellent years in the markets, so many people would still hate stocks? Over the course of my career, I’ve never come across as many investors who are sitting on cash, making a huge bet again the market (and their own investment plan).
In the investment industry, who knew that Ned Goodman would sell out – to a bank, no less. Or that we’d have so many new exotic exchange-traded funds, including ones that play the spread between oil and gas, the volatility of the S&P 500 and the odds of “The Biebs” winning a Grammy.
Who knew the U.S. government would make money on its Citigroup investment, or that Government Motors (GM) would be one of the year’s hottest IPOs.
Who knew that Manulife would let another year pass without rebuilding the confidence of the investment community? Or that making women’s bums look good would be worth 55 times earnings to Lululemon shareholders.
And speaking of multiples, who knew RIM would be down 16.8 per cent on the year, and trading at well under 10 times earnings, after revenue grew by 35 per cent, earnings by 45 per cent and the company bought back $2-billion worth of stock?
The year once again demonstrated how perverse and unpredictable financial markets are, and how lucky we are to be living where we do.
What's Buffett got against gold?
The Oracle of Omaha has become wealthy investing in undervalued companies that contribute valuable goods and services. Gold just sits there.
By InvestorPlace
Warren Buffett is an investing icon, and when he talks about the stock market, individual investors and Wall Street insiders alike take notice. Perhaps Buffett's most controversial investment advice regards gold prices. Gold bullion, gold miners and gold exchange-traded funds simply have no place in Warren Buffett's portfolio. And to hear Buffett tell it, gold should have no place in yours, either.
So what does Buffett have against gold? Well, the famous value investor has been pretty clear on this: Gold is, in a word, useless.
As early as 1998, the Oracle of Omaha was criticizing gold bugs. Buffett emphasized the nonproductive aspect of gold in a speech at Harvard that included this gem:
"(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
He echoed these thoughts last year during an appearance on CNBC, when he was asked, "Where do you think gold will be in five years, and should that be a part of value investing?"
Buffett's answer: "I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO, news, msgs) will be making money, and I think Wells Fargo (WFC, news, msgs) will be making a lot of money and . . . it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that."
Buffett struck a similar vein last month in an interview with Fortune.
"You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States," Buffett said. "Plus, you could buy 10 Exxon Mobils (XOM, news, msgs), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"
He has certainly stayed on message over the years. Key talking points for Buffett appear to be that gold is expensive to store, has no practical use and doesn't generate and income. Those are all pretty good reasons to hate gold.
For investors who think Buffett is wrong on gold, though, there are several ways to invest in the yellow stuff.
One of the most popular is through exchange-traded funds that operate as gold trusts – including SPDR Gold Shares (GLD, news, msgs) and iShares Gold Trust (IAU, news, msgs). These investments mirror the price of gold bullion and are a pure play on the metal, as opposed to investments in the shares of companies that mine gold.
What's more, these ETFs allow you to buy gold without worrying about the logistics of storing it or insuring it in your own home. The SPDR and iShares gold ETFs recently have exploded not just in popularity, but also in price, with the IAU and GLD ETFs both up about 23% so far this year, significantly outperforming the broader stock market.
In 1998, the year that Buffett made his remarks at Harvard, gold averaged around $300 an ounce, meaning that anyone who bought an ounce of the precious metal back then would now be sitting on a return of 400%.
Shares of Buffett's Berkshire Hathaway (BRK.A, news, msgs), on the other hand, have appreciated about 140% since early 1998. That's significantly better than the broader market, but it doesn't come close to gold's advance.
In the short term, the results are varied. Gold prices are up about 53% since Buffett's March 2009 interview with CNBC, while Berkshire Hathaway stock has notched a 63% gain over the same period. Since the Fortune piece was published, gold has risen about 6%, while Berkshire Hathaway has sustained a small decline.
It's hard to tell what the future holds for gold, but one thing seems certain: Buffett will sit out the gold rush.
This article was reported by Jeff Reeves for InvestorPlace.
http://articles.moneycentral.msn.com/Investing/MutualFunds/what-has-buffett-got-against-gold.aspx
By InvestorPlace
Warren Buffett is an investing icon, and when he talks about the stock market, individual investors and Wall Street insiders alike take notice. Perhaps Buffett's most controversial investment advice regards gold prices. Gold bullion, gold miners and gold exchange-traded funds simply have no place in Warren Buffett's portfolio. And to hear Buffett tell it, gold should have no place in yours, either.
So what does Buffett have against gold? Well, the famous value investor has been pretty clear on this: Gold is, in a word, useless.
As early as 1998, the Oracle of Omaha was criticizing gold bugs. Buffett emphasized the nonproductive aspect of gold in a speech at Harvard that included this gem:
"(Gold) gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their head."
He echoed these thoughts last year during an appearance on CNBC, when he was asked, "Where do you think gold will be in five years, and should that be a part of value investing?"
Buffett's answer: "I have no views as to where it will be, but the one thing I can tell you is it won't do anything between now and then except look at you. Whereas, you know, Coca-Cola (KO, news, msgs) will be making money, and I think Wells Fargo (WFC, news, msgs) will be making a lot of money and . . . it's a lot better to have a goose that keeps laying eggs than a goose that just sits there and eats insurance and storage and a few things like that."
Buffett struck a similar vein last month in an interview with Fortune.
"You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States," Buffett said. "Plus, you could buy 10 Exxon Mobils (XOM, news, msgs), plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"
He has certainly stayed on message over the years. Key talking points for Buffett appear to be that gold is expensive to store, has no practical use and doesn't generate and income. Those are all pretty good reasons to hate gold.
For investors who think Buffett is wrong on gold, though, there are several ways to invest in the yellow stuff.
One of the most popular is through exchange-traded funds that operate as gold trusts – including SPDR Gold Shares (GLD, news, msgs) and iShares Gold Trust (IAU, news, msgs). These investments mirror the price of gold bullion and are a pure play on the metal, as opposed to investments in the shares of companies that mine gold.
What's more, these ETFs allow you to buy gold without worrying about the logistics of storing it or insuring it in your own home. The SPDR and iShares gold ETFs recently have exploded not just in popularity, but also in price, with the IAU and GLD ETFs both up about 23% so far this year, significantly outperforming the broader stock market.
In 1998, the year that Buffett made his remarks at Harvard, gold averaged around $300 an ounce, meaning that anyone who bought an ounce of the precious metal back then would now be sitting on a return of 400%.
Shares of Buffett's Berkshire Hathaway (BRK.A, news, msgs), on the other hand, have appreciated about 140% since early 1998. That's significantly better than the broader market, but it doesn't come close to gold's advance.
In the short term, the results are varied. Gold prices are up about 53% since Buffett's March 2009 interview with CNBC, while Berkshire Hathaway stock has notched a 63% gain over the same period. Since the Fortune piece was published, gold has risen about 6%, while Berkshire Hathaway has sustained a small decline.
It's hard to tell what the future holds for gold, but one thing seems certain: Buffett will sit out the gold rush.
This article was reported by Jeff Reeves for InvestorPlace.
http://articles.moneycentral.msn.com/Investing/MutualFunds/what-has-buffett-got-against-gold.aspx
How can a financial planner help me?
Financial planners offer advice on a wide range of financial topics. In most cases, you will pay either a flat fee or an hourly fee to work with a financial planner.
How can a financial planner help me?
A financial planner will show you how to:
What will I talk about with a financial planner?
http://www.theglobeandmail.com/globe-investor/investor-education/chapter-2-what-does-a-financial-planner-do/article878954/
How can a financial planner help me?
A financial planner will show you how to:
- Set realistic goals and take steps to achieve them
- Decide what type of insurance you need
- Save for your children’s education and training
- Plan and save for retirement
- Build an estate to leave to your family or for other worthy causes
- Save and invest in smart ways that reduce your taxes
What will I talk about with a financial planner?
http://www.theglobeandmail.com/globe-investor/investor-education/chapter-2-what-does-a-financial-planner-do/article878954/
Thursday 23 December 2010
KNM’s orderbook balloons to above RM4 billion
KNM’s orderbook balloons to above RM4 billion
by Jonathan Chia jonathanchia@theborneopost.com. Posted on December 23, 2010, Thursday
KUCHING: KNM Group Bhd’s (KNM) orderbook of above RM4 billion should be able to keep the company busy for the next two years. The company’s current tenderbook stands at more than RM16 billion.
BIOMASS ENERGY GENERATION PLANT: KNM recently announced that its 100 per cent subsidiary KPS, has entered into an EPC contract to generate energy from biomass and a waste recycling centre known as ‘EnergyPark Peterborough’ in Peterborough, the UK. — Photo by Agragas, Inc
KNM recently announced that its 100 per cent subsidiary KNM Process Systems Sdn Bhd (KPS), had entered into an engineering, procurement and construction (EPC) contract towards the development of a plant with gross capacity of approximately 80 megawatts (MW) to generate energy from biomass and a waste recycling centre known as ‘EnergyPark Peterborough’ in Peterborough, the UK.
The contract from Peterborough Renewable Energy Ltd (PREL), valued at £450 million (RM2.2 billion) would cover the duration of about four years starting from the commencement date which was yet to be determined.
“We gather that the amount would likely be equally spread over the four-year period, which would amount to about RM500 million a year.
“We also understand that this EPC project includes the structural construction, which would likely be carried out by a third party, the gross margin expected to be more than 20 per cent and although the commencement date is yet to be determined, there is no risk to KNM as we understand that the deposit received by the company is enough to cover the cost of initial material to be purchased,” said OSK Research Sdn Bhd’s (OSK Research) analyst, Jason Yap.
Yap noted that there was no change to KNM’s financial year 2010 (FY10) to financial year 2011 (FY11) earnings.
“This is because we had earlier assumed some orderbook replenishment for the company based on the success rate guidance from its management,” he added.
Given the positive investor sentiment on the stock, he believed there would be more upside to its share price since this stock was traditionally driven by positive news flow such as contract announcements.
Hence, OSK Research was upgrading its target price for the company to RM3.45 per share, which was based on a higher price earnings ratio (PER) of 14 times FY11 earnings per share (EPS).
“Our valuation is slightly higher than the current industry average of 13 times because we believe that at the rate the share prices of most oil and gas (O&G) companies are performing, we think that the industry average would soon catch up to 14 times.
“As for KNM, we believe its share price would react positively to this big one-off contract in the short term,” Yap said.
However, as for the longer term sustainability of its share price, he believed that investors would need more assurance in the form of continuous contracts flow, on which he was still not entirely certain since the global O&G industry had not fully recovered in the past 12 months although crude oil prices had stabilised at about US$80 per barrel.
Yap noted that KNM was a global O&G process equipment company, which made its business dependent on the health of the global economy and not Malaysia alone.
Padini plans more stores
By June Ramlee
Published: 2010/12/23
However, Padini is concerned about the labour shortage and the inability of getting Malaysians to work in the retail sector
Read more: Padini plans more stores http://www.btimes.com.my/Current_News/BTIMES/articles/jrpadini/Article/index_html#ixzz18vTicDGR
Published: 2010/12/23
However, Padini is concerned about the labour shortage and the inability of getting Malaysians to work in the retail sector
 |
PADINI Holdings Bhd (7052)plans to open more Brands Outlet stores, which sells cheaper value brands, in 2011 but it is worried about a local labour shortage for the retail industry.
"What concerns me is the labour shortage and the inability of getting locals to work in the retail sector and make it a career that not many people are willing to invest their lives in," executive chairman Chan Kwai Heng said.
This is why Padini's expansion plans in Sabah and Sarawak has suffered a setback as there were not many capable people who could do the job.
"Between Sabah and Sarawak we have three stores ... we want to expand more here but we are looking for the right person who can handle the retailing side of the business," he added.
The company now has 12 Brands Outlet stores nationwide.
"We are going to expand the Brands Outlet store to many states in Malaysia but we are not sure of the number yet," he added.
Padini's revenue grew 9.5 per cent to RM520.9 million in 2010 over RM475.5 million in 2009.
Its most profitable business was women's footwear Vincci which garnered a revenue of RM173.2 million compared with RM160.3 million the previous year.
Chan said the group doesn't plan to expand its brand presence overseas as it still has a lot of room to grow within the country.
"The Economic Transformation Plan (ETP) report says that in 2009 the apparel and footwear industry in Malaysia was worth RM13 billion. Now our revenue is only at RM520.9 million, so we still have a lot of room to grow here," he said.
He is also not worried about the rise in cotton prices due to bad weather as it could lock in prices earlier through the futures market.
Padini expects a single-digit growth for the fashion industry next year as there are not many big events to help push sales.
"There is no Visit Malaysia Year next year, but I am very interested in the ETP ... if it works, then it will be good for the industry," he added.
"What concerns me is the labour shortage and the inability of getting locals to work in the retail sector and make it a career that not many people are willing to invest their lives in," executive chairman Chan Kwai Heng said.
This is why Padini's expansion plans in Sabah and Sarawak has suffered a setback as there were not many capable people who could do the job.
"Between Sabah and Sarawak we have three stores ... we want to expand more here but we are looking for the right person who can handle the retailing side of the business," he added.
The company now has 12 Brands Outlet stores nationwide.
"We are going to expand the Brands Outlet store to many states in Malaysia but we are not sure of the number yet," he added.
Padini's revenue grew 9.5 per cent to RM520.9 million in 2010 over RM475.5 million in 2009.
Its most profitable business was women's footwear Vincci which garnered a revenue of RM173.2 million compared with RM160.3 million the previous year.
Chan said the group doesn't plan to expand its brand presence overseas as it still has a lot of room to grow within the country.
"The Economic Transformation Plan (ETP) report says that in 2009 the apparel and footwear industry in Malaysia was worth RM13 billion. Now our revenue is only at RM520.9 million, so we still have a lot of room to grow here," he said.
He is also not worried about the rise in cotton prices due to bad weather as it could lock in prices earlier through the futures market.
Padini expects a single-digit growth for the fashion industry next year as there are not many big events to help push sales.
"There is no Visit Malaysia Year next year, but I am very interested in the ETP ... if it works, then it will be good for the industry," he added.
Read more: Padini plans more stores http://www.btimes.com.my/Current_News/BTIMES/articles/jrpadini/Article/index_html#ixzz18vTicDGR
Pheim, CEO appeal on stock-rigging case
Pheim Asset Management Sdn Bhd and its Chief Executive Officer Tan Chong Koay, appealed a Singapore High Court ruling that they’d manipulated the shares of a listed company in the country’s first civil stock-rigging lawsuit.
“If left to stand, the decision would either serve to curtail genuine market activity by the timorous or to set a penal trap for the unwary,” they said in their appeal filed Dec 21 at the Singapore High Court.
Tan and Pheim bought almost 90 per cent of the traded shares of United Envirotech Ltd. from Dec 29 to Dec 31, 2004. The shares rose 17 per cent over the three trading days and helped raise the net asset value of the fund management firm’s accounts, triggering bonuses of S$50,790 ($38,866) and a management fee of S$115. Justice Lai Siu Chiu said the gain sought by Pheim and Tan wasn’t monetary, in ruling they manipulated the stock.
Tan and his Malaysian fund management company were fined S$250,000 each. The Monetary Authority of Singapore sought a fine of S$1 million for each.
“If left to stand, the decision would either serve to curtail genuine market activity by the timorous or to set a penal trap for the unwary,” they said in their appeal filed Dec 21 at the Singapore High Court.
Tan and Pheim bought almost 90 per cent of the traded shares of United Envirotech Ltd. from Dec 29 to Dec 31, 2004. The shares rose 17 per cent over the three trading days and helped raise the net asset value of the fund management firm’s accounts, triggering bonuses of S$50,790 ($38,866) and a management fee of S$115. Justice Lai Siu Chiu said the gain sought by Pheim and Tan wasn’t monetary, in ruling they manipulated the stock.
Tan and his Malaysian fund management company were fined S$250,000 each. The Monetary Authority of Singapore sought a fine of S$1 million for each.
The Monetary Authority has no evidence to prove Pheim and Tan had any other intention but to buy undervalued shares, they said in the 212 pages of court documents filed to back the appeal.
“There was in fact no other intention,” they said.
‘Good Investment’
Pheim expected shares of companies in the water treatment sector to rise since 2001, according to the filing. United Envirotech shares were overlooked and deemed to be a good investment, Pheim said in its appeal.
Singapore, which expanded its fund management industry to a record S$1.2 trillion at the end of 2009, has vowed to clamp down on market abuse. The central bank, which won the city’s first civil lawsuits for stock rigging and insider trading this year tightened the rules for financial institutions in reporting employee misconduct.
“Such offenses undermine the effectiveness and efficiency of the securities market and are often insidious and difficult to detect,” Lai said.
Tan, who founded Pheim Group, was in 2002 named one of five successful Singapore-based boutique fund managers by the Government of Singapore Investment Corp..
Tan has offices in Singapore and Malaysia. He had said, jokingly, in August 2006 that Pheim, which manages about $1 billion, was a made-up word which means Please Help Everyone Invest Money.
Tan and Pheim “would not have risked their livelihood and business by seeking to manipulate” the stock knowing that any unusual trading activities would be tracked by the financial regulator, according to their appeal.
The case is Pheim Asset Management Sdn Bhd v Monetary Authority of Singapore, CA186/2010 in the Singapore High Court. - Bloomberg
Read more: Pheim, CEO appeal on stock-rigging case http://www.btimes.com.my/Current_News/BTIMES/articles/20101223112041/Article/index_html#ixzz18vQHvfh9
Trading versus Investing
Saw these interesting postings in Blackspy fundamental blog.
There is a saying: "It is not a sin when you buy a stock at its low price." This implies that one is able to value the stock confidently, thereby knowing the probability of upside is higher than the probability of the stock going down.
What can we learn from the actions of Alam Maritim Chairman below? Many 'investors' in the stock market are using such a strategy already. Is this a strategy one can employ profitably, safely and consistently?
-----
Alam Maritim Chairman disposed 100,000 shares back to market
Still remember DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares on 10 Dec 2010 at my previous post??
http://hongwei85.blogspot.com/2010/12/alam-maritim-chairman-acquired-100000.html
Now he disposed back all the 100,000 shares to open market again~ sign -_-"
On 10 Dec 2010, he acquired 100,000 shares at the price RM 0.89
On 14 Dec 2010, he disposed 30,000 shares at the price RM 1.04
On 16 Dec 2010, he disposed 25,000 shares at the price RM 1.04
On 17 Dec 2010, he disposed 45,000 shares at the price RM 1.056
Just in one week, Dato earned about RM 15k in open market.
http://hongwei85.blogspot.com/2010/12/alam-maritim-chairman-acquired-100000.html
Now he disposed back all the 100,000 shares to open market again~ sign -_-"
On 10 Dec 2010, he acquired 100,000 shares at the price RM 0.89
On 14 Dec 2010, he disposed 30,000 shares at the price RM 1.04
On 16 Dec 2010, he disposed 25,000 shares at the price RM 1.04
On 17 Dec 2010, he disposed 45,000 shares at the price RM 1.056
Just in one week, Dato earned about RM 15k in open market.
Here is the earlier post of when the Alam Maritim Chairman bought the stocks.
Alam Maritim Chairman acquired 100,000 shares.
DATO' CAPT AHMAD SUFIAN BIN QURNAIN @ABDUL RASHID acquired Alam Maritim 100,000 shares at 10 Dec 2010.
Why he bought it? He has too much cash and do not know where to spend?
No no! He knows somwthing is worth by putting his money in this company. Nobody know how the company is running other than chairman.
Why he bought it? He has too much cash and do not know where to spend?
No no! He knows somwthing is worth by putting his money in this company. Nobody know how the company is running other than chairman.
Post modified: 23.12.2010
Here is another portfolio of a trader (copied from a blog)
I'm a long term investor, not so much on daily trading, slowly allocating part of my money into short term trading. Below is my year 2010 investment portfolio and total profit received. Can those active short term traders share your portfolio? I would like to benchmark my trading method to see if long / medium term investment is more lucrative or short term active trading is more lucrative.
Purc. Date Stock Buy Value P Unit C Unit Cost Dividend Sell Price Profit Selling Date Total Month Hold
19-Apr-10 GPacket 1.15 3 3 3,495.04 0 0.92 -735.04 11-Oct-10 6
9-Dec-10 Pchem-ca 0.335 10 10 3,390.00 0.41 710.00 9-Dec-10 1
26-Nov-10 Pechem 5.04 2 2 10,080.00 5.4 720.00 8-Dec-10 1
26-Nov-10 Pechem 5.04 6 6 30,240.00 5.6 3,360.00 9-Dec-10 1
4-Oct-10 Supermax 4.18 1 1 4,200.00 0 4.41 210.00 8-Dec-10 3
11-Mar-10 Maybank 7.5 1 1 7,555.25 0 9 1,444.75 11-Oct-10 7
11-Nov-09 Maxis 4.75 1 1 4,780.00 390 5.34 950.00 11-Oct-10 12
18-Feb-10 Genting 6.65 0.5 3,350.00 10 1,650.00 11-Oct-10 8
18-Feb-10 Genting 6.65 0.5 2,850.00 10.8 2,550.00 22-Dec-10 10
23-Feb-10 BJTOTO 4.25 2 2 8,562.55 320 4.17 97.45 8-Nov-10 9
1-Dec-09 Gamuda 2.81 1 1 2,850.00 100 3.83 1000.00 21-Dec-10 12
Total profit made: around 11,957.16 (some of the shares I didn't keep track of brokerage fees)
The amount of capital he employed into his portfolio peaked on 26th November 2010.
The total amount at risk was = 2,850 + 2,850 + 4,200 + 30,240 + 10,080 =50,220.
His profit of 11,957.16 gives a return of 23.8%.
His individual stock holding period returns will be higher.
Since January 2010, the KLCI index has risen from around 1250 to 1500, giving a return of 20% for the year.
Wednesday 22 December 2010
Does crowd mentality influence your investment?
The BSE Sensex has multiplied six-seven times over the last decade. And many stocks have sky-rocketed. Some investors have made money. Others have lost money. And most people continue to lose. Strikingly, most people also do what most other people do. Isn't that quite a coincidence?
In our previous article on crowd mentality, we had emphasised the need to keep away from crowds and to stay focused on company fundamentals. Now let us understand some dynamics of this phenomenon called 'crowd'. We have all had our share of experiences at 'becoming a crowd'. Let's recount some.
Let's look back at these common experiences with a different perspective. Of all, one thing is quite clear:
Being part of a crowd causes people to behave differently from the way that they would in isolation.
Crowds introduce a very overwhelming emotional and often irrational element to decision-making: making an individual equate his own needs with those of the crowd. This is particularly noticeable in financial markets. At peaks and troughs of the stock market, for example, very few people will be concentrating on the fundamental economic influences. The vast majority will be concerned with only the recent short-term movements in prices themselves. Consequently, this majority will inevitably be on the wrong foot when a price reversal occurs.
People who have spent a decent amount of time investing in stocks must have often felt a two-way pull on their decisions. Their 'personal' approach may suggest one course of action. On the other hand, the lure of the 'herd instinct' may be pulling entirely in the opposite direction. This is true even for a lot of seasoned professionals. The reason for this two-way pull lies in these two primary tendencies-
Self-assertive tendency: the ability to behave in a self-determined way.
Integrative tendency: the willingness to belong to crowds.
What we ultimately do depends on which of these two tendencies stands prominently in us.
A crowd is something other than the sum of its parts
A crowd is a psychological phenomenon. Its formation does not really require the physical presence of its members. All that is needed is a common cause. The most striking peculiarity of a crowd in a financial market is this:
The individuals composing a crowd may be very different from each other. They may differ in their lifestyles, their character, or their intelligence. But the fact that they have been transformed into a crowd puts them in possession of a sort of collective mind. And the way they feel, think and act gets altered drastically.
Doesn't this remind you of chemistry lessons? Two or more different elements combining together. Then transforming into a compound whose characteristics are quite distinct from that of its components. Ditto for investors! Successful investment, therefore, depends on an individual's ability to stand aside from the crowd's influence.
Equimaster
In our previous article on crowd mentality, we had emphasised the need to keep away from crowds and to stay focused on company fundamentals. Now let us understand some dynamics of this phenomenon called 'crowd'. We have all had our share of experiences at 'becoming a crowd'. Let's recount some.
| Situation/ Activity | Our response in a crowd |
| Watching a cricket match in a jam packed stadium | We end up yelling and cheering more than we would otherwise if watching alone on TV. |
| In a professional company meeting | We're prone to agreeing more often than not. |
| In Bombay local trains | Need we say anything? |
| The 2007 bull run. The 2008 crash | Remember??? |
Let's look back at these common experiences with a different perspective. Of all, one thing is quite clear:
Being part of a crowd causes people to behave differently from the way that they would in isolation.
Crowds introduce a very overwhelming emotional and often irrational element to decision-making: making an individual equate his own needs with those of the crowd. This is particularly noticeable in financial markets. At peaks and troughs of the stock market, for example, very few people will be concentrating on the fundamental economic influences. The vast majority will be concerned with only the recent short-term movements in prices themselves. Consequently, this majority will inevitably be on the wrong foot when a price reversal occurs.
People who have spent a decent amount of time investing in stocks must have often felt a two-way pull on their decisions. Their 'personal' approach may suggest one course of action. On the other hand, the lure of the 'herd instinct' may be pulling entirely in the opposite direction. This is true even for a lot of seasoned professionals. The reason for this two-way pull lies in these two primary tendencies-
Self-assertive tendency: the ability to behave in a self-determined way.
Integrative tendency: the willingness to belong to crowds.
What we ultimately do depends on which of these two tendencies stands prominently in us.
A crowd is something other than the sum of its parts
A crowd is a psychological phenomenon. Its formation does not really require the physical presence of its members. All that is needed is a common cause. The most striking peculiarity of a crowd in a financial market is this:
The individuals composing a crowd may be very different from each other. They may differ in their lifestyles, their character, or their intelligence. But the fact that they have been transformed into a crowd puts them in possession of a sort of collective mind. And the way they feel, think and act gets altered drastically.
Doesn't this remind you of chemistry lessons? Two or more different elements combining together. Then transforming into a compound whose characteristics are quite distinct from that of its components. Ditto for investors! Successful investment, therefore, depends on an individual's ability to stand aside from the crowd's influence.
Equimaster
Marc Faber: "If you cannot swallow a 30% correction in whatever you buy, then don't even get up in the morning from your bed."
A 30% correction in emerging markets?
More money than you can imagine. Billions and trillions of currency notes. The Fed's quantitative easing program sent a lot of cheap money floating around the world. This money directly found its way to emerging markets. With high interest rates, and strong economic recoveries, the flow of money in this direction was but obvious.
For a while, increased cash makes everyone feel happy. FIIs pumped in a total of US$ 29.3 bn in India so far in 2010. This sent stock prices soaring. The very same stocks which were selling at their lows a year back, reached their lifetime highs. Stock markets climbed quickly to their previous peaks.
But, was the excess money even needed in the first place? Increased inflows of money have led to inflationary pressure, currency appreciation and asset bubbles forming in these countries. According to Nobel Prize-winning economist Joseph Stiglitz, these are "considerable risks". So, how do the emerging markets react? Well, economies from San Paulo to New Delhi have been trying hard to control these volatile capital inflows. Brazil raised its taxes on foreign bond purchases by almost three times. India tried to raise interest rates to stem rampant inflation.
But now, India has inadvertently done something to further reduce FII inflows. The recent bribery scams, stock price riggings and political uncertainty led to FIIs dropping Indian stocks like hot potatoes. The pace of FII inflows has slowed down considerably over the past three months. Marc Faber believes that emerging markets could easily see a 20-30% correction. Tightening monetary conditions, high crude prices and food supply concerns are all adding to the mess.
But, if you bought the right stocks at the right valuations and with the right management, you may still be safe. We believe that Faber has it right by saying that if you cannot swallow a 30% correction in whatever you buy, then don't even get up in the morning from your bed.
Equimaster
More money than you can imagine. Billions and trillions of currency notes. The Fed's quantitative easing program sent a lot of cheap money floating around the world. This money directly found its way to emerging markets. With high interest rates, and strong economic recoveries, the flow of money in this direction was but obvious.
For a while, increased cash makes everyone feel happy. FIIs pumped in a total of US$ 29.3 bn in India so far in 2010. This sent stock prices soaring. The very same stocks which were selling at their lows a year back, reached their lifetime highs. Stock markets climbed quickly to their previous peaks.
But, was the excess money even needed in the first place? Increased inflows of money have led to inflationary pressure, currency appreciation and asset bubbles forming in these countries. According to Nobel Prize-winning economist Joseph Stiglitz, these are "considerable risks". So, how do the emerging markets react? Well, economies from San Paulo to New Delhi have been trying hard to control these volatile capital inflows. Brazil raised its taxes on foreign bond purchases by almost three times. India tried to raise interest rates to stem rampant inflation.
But now, India has inadvertently done something to further reduce FII inflows. The recent bribery scams, stock price riggings and political uncertainty led to FIIs dropping Indian stocks like hot potatoes. The pace of FII inflows has slowed down considerably over the past three months. Marc Faber believes that emerging markets could easily see a 20-30% correction. Tightening monetary conditions, high crude prices and food supply concerns are all adding to the mess.
But, if you bought the right stocks at the right valuations and with the right management, you may still be safe. We believe that Faber has it right by saying that if you cannot swallow a 30% correction in whatever you buy, then don't even get up in the morning from your bed.
Equimaster
Do you invest in what you don't understand?
Principles of value investing have helped create legends of the likes of Warren Buffett and Peter Lynch. The principles are simple and easy to understand. Pick a sound business that is available at cheap valuations. And then hold it till such time the value is realized.
But the most important principle is to invest only in what you understand. This means to stay within your own circle of competence. As Buffett puts it "Everybody's got a different circle of competence. The important thing is not how big the circle is. The important thing is staying inside the circle." As simple as it sounds, it is the most difficult principle to follow. And wandering away from it can cause investors the biggest harm.
A case in point for this is that of the emerging market guru, Mark Mobius. While Mobius has enjoyed tremendous success with his investment techniques in Asia, his emerging market fund has not done so well outside of the region. In fact, the geographically diverse Emerging Market Fund has ranked only 103 out of 236 funds over 10 years in total returns.
So does it mean that Mobius has changed his style of investing? No he has not. He still sticks to his principles of picking value buys. However, it may be possible that he has just stepped outside his circle of competence.
Do you stick to your own circle of competence while choosing your investments?
http://www.equitymaster.com/
But the most important principle is to invest only in what you understand. This means to stay within your own circle of competence. As Buffett puts it "Everybody's got a different circle of competence. The important thing is not how big the circle is. The important thing is staying inside the circle." As simple as it sounds, it is the most difficult principle to follow. And wandering away from it can cause investors the biggest harm.
A case in point for this is that of the emerging market guru, Mark Mobius. While Mobius has enjoyed tremendous success with his investment techniques in Asia, his emerging market fund has not done so well outside of the region. In fact, the geographically diverse Emerging Market Fund has ranked only 103 out of 236 funds over 10 years in total returns.
So does it mean that Mobius has changed his style of investing? No he has not. He still sticks to his principles of picking value buys. However, it may be possible that he has just stepped outside his circle of competence.
Do you stick to your own circle of competence while choosing your investments?
http://www.equitymaster.com/
Subscribe to:
Posts (Atom)