When good results are still not good enough

When good results

are still not good enough

The stock market continues to intrigue me more and more these days. Although I have been trading since 1993, I have not been able to understand very well the intriguing movements of the market from time to time.

The latest several incidents are fine examples. It is the nature of investors to be looking forward when your stock is going to announce a quarterly result. You pray it will be a good one so that more investors will be more keen to buy the shares and hence reduce the supply in the market. In the process, the more demand vs less supply situation will help to push up the price.

Well, that is what I thought so until three of my stocks posted good quarterly results, but the share price either shot up temporarily and then came down worse later or tanked in just like that the very next  trading day.

The first one is Tek Seng Holdings Berhad. Prior to announcing its 4th Qtr  2015 results on Feb 15, 2016, its share price touched as high as RM1.30 on Jan 11. But on Feb 15, it announced a sterling results of 4.02 eps for 4th Qtr 2015. It is by far the highest eps per quarter since the last decade.

In fact, its total culminated nine months earnings of 2015 is just 4.4 sen when compared to its 4th Qtr earning of 4.02 sen alone. Is the solar business finally bringing in the revenue and hence rising profits now?

But the next trading day saw Tek Seng closing at RM1.19, up just 7 sen. Why didn't it surpass its peak price of RM1.30 done on Jan 11? Shouldn't it be at least traded near that peak price of RM1.30?

Worse, if you care to look at today's closing price, April 14, it is just RM1.10 which is below the post 4th Qtr result day.

The second one is Cycle and Carriage Bintang Berhad. Prior to announcing its 4th Qtr 2015 results, its share price touched a high of RM3.93 on Jan 11, 2015. When it announced its 4th Qtr results on Feb 22 an 10.12 eps (thus bringing a total 51.74 sen for 2015 compared to just 10.25 sen for 2014), its share price closed at RM3.76.

What happened the next trading days scared off investors. Its share price dropped to RM3.49, a drop of 27 sen and it was amongst the top ten losers of the day! Perhaps most investors were very disappointed with the paltry dividend of 5 sen only.

Investors must have anticipated a bumper special dividend of at least 50 sen this time. The last time CCB paid a special dividend was in 2006 and the amount was as much as RM2.03. So perhaps after a ten years lapse of special dividend, investors were fervently betting of a special dividend this time.

Sadly it did not materialize and this could be the reason the share price dropped so much. At the close of today, April 14, the price is RM3.59 which is still down by as much as 17 sen compared to the price of RM3.76 on Feb 22.

Finally NTPM Holdings Berhad. In case you are not sure what NTPM stands for, it is Nibong Tebal Paper Mills. Actually, I learned it from some reports too.

On Mar 25, NTPM reported an excellent 3rd Qtr 2016 results of 1.6 eps, which is higher than 1st Qtr & 2nd Qtr's 1.2 eps and 1.5 eps respectively. It closed at RM1.06 although it touched a high of RM1.09 on Mar 23.

Instead of surging higher the next trading day after the good announcement results, it dropped as much as 6 sen instead and closed at RM1. At the time of writing on April 13, NTPM's share price is still hovering below RM1 and last traded at 97 sen.

Seriously how many of us noticed or experienced this type of share price falling down situation despite announcing a better result? I bet most of us won't feel it until it happens to our very own shares.

What can we conclude from these three disappointing situation?

For one, investors should not put too much hope each time a better Qtr result is announced. There is no guarantee the share price will react positively after the announcement. If it moves up positively after the announcement, it might not stay there for long once the euphoria is down.

But at least a better result announcement is still better than a poorer result announcement. Isn't it?

Ha ha, that is the intriguing aspect of investors' sentiment towards a share each time a Quarterly result is announced. It is one I still find it hard to grasp with despite all my years of experience.

CK must be one of my favourites followers/readers. For the second consecutive time, ck has been emailing me with a couple of questions.

On April, 1, ck asked : which export-oriented stocks are you looking to buy?

Good question. There are a few, but it has not fallen to the price target I have set in. I also have a target price to buy for each stock. But what if three different stocks of my choice hit the target price at almost the same day? Would I be buying all?

No, the answer is a firm NO. I would buy one and still patiently wait for another time (depending on whether I choose to make a purchase every one month or so).

In this way, I believed I have applied the average way of investing consistently periodically. I strongly believe this is a good strategy provided one is willing to hold on and buying for mid to long term.

Anyway, I have decided to make another purchase and the stock is ....

Buying 4,000 shares of

BP Plastics Holdings Bhd

at RM1.57 on April 14, 2016.

I shall elaborate more about this company in my coming blog.