Strategies To Use In This Bearish Market

Strategies To Use

In This Bearish

Market

There is a famous saying : When you fail to plan, then you plan to fail. In short, if you do not have a proper plan to do something, you are likely to fail as without a plan, there won't be a strategy to execute and help you achieve the desired results.

When we have a plan, we will think of strategies to use and finally the action needed to be taken in order to get the results.

I am also a avid fan of war movies. If you watch war movies, chances are that the side who could think of a better plan, strategy and actions taken are likely to win the battle.

Two of the most expensive Asian-financed films produced were Red Cliff and its sequel Red Cliff 2.  These Chinese epic war films were about the imperial massive mighty army led by the Chancellor, Cao Cao on a campaign to eliminate the southern warlords led by the underdogs, Sun Quan and Liu Bei, both commanding a small army of soldiers.

Both Sun Quan and Liu Bei planned well with several good strategies to upset Cao Cao's mighty army on sea and on land several times.

Planning and Strategies and Action's Method (PSAM) are also needed when you enter into the investment world at Bursa Malaysia.

But before the stages of PSAM, the goal must be there too. What is your goal when you invest? I can't think much of other choices except to win money, whether it is 5% - 10% range or 30% - 50% or even 50% and above range.

Yes, we aim to win with our investment. That is why investor must come out with their respective PSAM. I do not think there is a standard PSAM for all investors, similarly there is no fixed PSAM as well.

Many investors are now reeling badly from the on-going market downtrend of Bursa. Many are seeing their paper wealth shrinking by the days and weeks. Some actually experienced extreme "hati sakit" as their paper profit had turned into real paper loss!

If you are one of those investors, yours truly would like to tell you that I am sharing this feeling with you as some of my shares are into that positions, too!

Some are even predicting that the market can even go lower to 1300 points in months to come. Nobody seems to dare to predict any uptrend of the Kuala Lumpur Composite Index (KLCI) to above 1,700 or even 1,800 points at the moment.

Truth is no-one has a super crystal ball to see the future direction of the market. If I have one, I definitely won't be telling anyone also. I will use it to profit immensely.

But I do have a PSAM. A PSAM  allows me to be discipline enough to apply it to have a better chance.

I can choose to allocate a sum of around RM5,000.00 to buy a particular stock (hopefully I identify it correctly) each time the KLCI drops 50 points. For example the KLCI dropped from 1600 to 1550 points, then I will execute my action.

Should the KLCI further drops to 1500 points, I will apply the same action as above. And when the KLCI should drop to even 1,000 points, I would have bought a particular stocks at every 50 points drop.

I would like to call this average investing at every 50 points drop. Bear in mind that each time there is a 50 points drop, the particular identified stock would most probably be bought at lower price compared to its previous original price when I identified it.

What if the KLCI continues to hover between 1500 to 1600 points for the next several months to come? Then another PSAM would be to buy a stock at around every 30 days. In this case, it is also another average cost  investing  over a period of times.

I would also like to stress that even with PSAM, there is absolutely no guarantee that one will make money because one must also be RIGHT in picking up the RIGHT stock that can rebound back sharply when the market bounces back in the future.

I also believe that there are many investors with their respective PSAM and there are also many drifting aimlessly currently, doubting whether to invest or wait for market to rebound back or even to give up investing!

One must remember that the market will never stay low or go even lower forever although it may stay in that range for a long time. When the convergence of good news start to trickle in, Bursa does not send out any invitation letters, whatsapps or emails to you to inform that the market is poised for a return and going for a rally run.

Similarly, the market will also won't be able to go higher and higher all the time. As I have mentioned before, sometimes up, sometimes down. Investors just have to live with this yo-yo movements of KLCI.

But if one is armed with a PSAM, I believe one stands a better chance as the risk is spread out due to the average-cost investing over a period of times.

Perhaps there are other investors with different PSAM that are even better than mine, I am sure there are many readers wanting to hear from you. But I know I am likely to get an almost zero response from those who have different PSAM, based from my previous experience with my readers.

Either you are shy, secretive or the takers-type only.

Are you?

Buying more Focus Lumber

Berhad shares again!

Readers would probably know that I have been buying Focus Lumber  Berhad shares since the beginning and again during the middle of the year.

Despite its excellent 2nd Qtr results, Focus Lumber's share price remains more or less my previous average purchase price of RM1.50.

On Aug 25, 2015 when the KLCI fell 42.53 points or 2.70% to close at 1,532.14 points, yours truly purchased 5,000 shares of Focus Lumber - 3,000 shares at RM1.46 and 2,000 shares at RM1.47.

Should the KLCI drops to between 1,450.00 to 1,500.00 points, another round of shares buying spree would be exercised. This is to spread out and average out my risk over a period of time.

So, dear friends, which PSAM am I using?

By the way, a very happy Merdeka to all!

The Great Bursa Sale

The Great Bursa Sale

When a Mall/supermarket/hypermarket  announced special Big Sales, many shoppers will come in droves and many items would be snapped up faster than you think.

Some items would be sold out after one or two hours of business opening. I can vouch for it because I spend a lot of my times at these places and I experienced several disappointing trips there because there were early "bargain hunters" than yours truly and my spouse.

I have even witnessed this dramatic scene at a mall where a lady shopper  grabbed a whole tray of fruits (to be sold at Reduced Price) into her trolley  from the worker's mobile trolley before any one else can choose.

What happened later was that this lady would then slowly check through again the "Reduced Price" packets of fruits. If she finds any packet that the fruits are too rotten and too poor quality, she will then put it back.

Luckily not all shoppers are like her or else you can imagine how the scene would be when the worker push out the mobile trolley containing several stack-up trays of "Reduced Price" foods that are fruits and vegetables.

Human nature is understandable. After all, wouldn't you want to pay less for something when there is an opportunity?

That is the reason why when a Mall/supermarket/hypermarket has a Big Sale, there are bounds to be big crowd "hunting" for discounted price items/foods and one must not be late.

On the other side, Bursa Malaysia has been experiencing "Great Bargain Sale" since the last few weeks - no thanks to several factors happening locally and internationally, the latest being China devaluing its strong currency by 2%.

I shall not dwell on all those factors as I believed you know & I know what has been happening in Malaysia and the outside world.

Most stocks has been retreating to new 52-week low again. The last time this happened was during the last quarter of 2014 and the early month of January 2015.

However this time, the number of stocks falling to new 52-week low are much higher (which actually shocked me). In fact, in a more broad based basis. So much so that I actually am confused of which stock to buy this time. There are just too many to buy this time.

Many "supposedly-to-be" strong fundamental stocks are experiencing new 52-week low and as well new low of the last several years.

However, I did observed that those strong quality stocks' decline were ACTUALLY accompanied by very low volume only. What did this suggest? In my opinion, it means only a few number of weak holders are letting go of those quality stocks and corresponding due to the current poor sentiment, only a few buyers emerged to snap up at depressed price.

Hence, we witnessed some good stocks declined by between 10 - 40 sen accompanied by less than 100,000 shares. I would like to term this as artificial decline in this current situation. Therefore, investors should not really feel worry as the moment sentiment and confidence return, these stocks would resume back sharply and quickly.

Investors should only worry if their stocks are experiencing poor business or even losses. As long as their stocks continue to report reasonable good profits and reward shareholders with again reasonable good dividends, investors should not be too concerned.

This current Great Bursa Sale has given me an opportunity to "cherry-pick". However, one must also be cautious as the Great Bursa Sale can even become Greater Bursa Sale in weeks or months to come.

I hope I would be able to come out with some strategies to profit from this depressed market in my next blog.

Proposed takeover of KAF-Seagroatt

& Campbell (KAFSC)

by KAF Investment Bank (KAFIB)

KAF Investment Bank (KAFIB) has proposed a takeover of KAF-Seagroatt & Campbell (KAFSC) for RM248.6 million, or RM2.70 per share, by acquiring 92.1 million shares or 76.7% of the company from vendors. KAFIB entered into a conditional share sale agreement with the vendors, Akka SB, Akka Holdings SB, Datuk Khatijah Ahmad and Thariq Usman Ahmad, for the proposed acquisition recently.

So finally the cat is out of the bag! For a long time, this cash-rich, well-established standalone stockbroking company has been the subject of numerous mergers/takeover exercise by its major shareholders.

As early as Feb 2015, investors who had acted on the news published by The Edge daily : Insider Asia's Stock of the Day of KAF would be laughing all the way since the news of the takeover in July.

It highlighted that KAF has severely understated properties acquired at low price.

The jewel in its crown is a plot of prime freehold land measuring 34,217 sq ft at Changkat Kia Peng, near the KLCC complex, carried at just RM5.7 million or RM166.20 psf, and last revalued in 1998. In 2013, I-Berhad bought 1.05 acres in adjacent Jalan Kia Peng for RM132 million or RM2,886 psf.

A revaluation of KAF Seagroatt’s land to around RM2,500 psf suggests the land could be worth 15 times higher at RM85.54 million, with a potential revaluation gain of RM79.8 million or 66.5 sen per share. This could boost its book value from RM2.01 sen to RM2.68 per share, making the stock potentially trading at 0.6 times revalued book.

KAF also has seven acres of residential and commercial lands in Port Dickson, Negeri Sembilan with a book value of RM2.69 million, or RM8.82 psf. The lands were acquired and last revalued in 2005.

Interestingly apart from these undervalued stated properties/lands, KAF is also a solid cash-rich stock with net cash of RM180 plus million (which is equivalent to around RM1.50 per share).

KAF is actually a good share to invest and hold although its share price hardly moved and stayed below RM2 for the last decade. What is remarkable about KAF is its consistent dividend payments since 2004. Stocks like these are a rare breed on Bursa Malaysia as it traded just the average of RM1.50 range normally. It only inched up to RM1.60-RM1.70 the last few years as investors took notice of its increased dividends payout.

KAF also paid a special bumper dividend of RM352 in 2007.

I know of one patient investor who has been keeping this cash rich share since 2005 or ten years ago! I really believe that not many investors are able to hold on to shares for more than ten years. If there are, most probably the shares must be rotten shares or those veteran investors keeping quality shares like Public Bank or London Pacific Insurance.

Back to KAF, this patient investor who bought KAF at RM1.41 on Mar 29. 2005 has been rewarded with 17 times of dividend payments (interims, finals and special dividends). Total gross dividend amounts to RM1,352.00.

So the cost for this patient investor has been reduced to just RM72 only. Yet this patient investor is now being offered to sell his share back at RM2.70 by KAFIB. That is a gain of nearly RM2,000.00!

Will this patient investor accepts the offer or join in the minorities to band together and force KAFIB to offer a higher revised price. If you know who this patient investor is, most probably you would know his decision.

By the way, this patient investor is .... yours truly!