Small fish vs big fish

Small fish vs big fish

 

In the very vast ocean sea or even in a small pond, do you think a small fish will stand to have any chance of survival when it is surrounded by some big fishes around?

Most probably you and I will agree that only the big fish will win in the battle for survival.

As most of us are virtually individual lonely retailer in the local stock market, we are somehow very much like the small fish trying to make some decent good profits in our investment adventure.

Our rivals are the so-called institutional funds, unit trust funds, syndicates and even the "major owners" of the companies listed. Mostly compete with one simple goal i.e. to make big money. You see, in the investment world, there is no such feeling of sympathy for any loser. It is a dog eats dog's world. It is a world of every man for himself first! So one must be willing to pay the price.

If one is to over speculate and suffer major loss, nobody is going to be his 'Uncle Sam". After all, if he speculates and win enormous profits, do you think he will even share one ringgit with you? Or give you a big ang pow?

It is common knowledge that most individual retailers lose money in the stock market. (This is a real fact. If most retailers makes money, then most of us would not be working anymore. How nice we can just go to the stock market after a good breakfast, make one or two buys, sells for a profit later in the afternoon or the next day and this is consistently repeated again and again).

But this is not happening, right? On the contrary, most retailers tend to end up the other way round, i.e. winning paltry amount and losing major trades. Seriously, are you able to identify ANY individuals who continue to make more than 100% winning trades most of the times and only suffer the occasional minor loss?

You can't, right? Because there is hardly, although there are a few elites around and most probably, they are a low-profile group.  Because most of us are exactly that SMALL FISH in this BIG OCEAN with full of big giant white sharks around, that is the reason most lose money!

But I beg to differ. Although I am a 100% small fish in the investment world, I also have my advantages.

My advantages are that I am able to move around freely, meaning I can buy some small amount of shares of this company and that company and then I can simply sell any portion immediately or anytime should the counters spike up suddenly.

I am also not restricted to any red-tape where I need to declare my purchase or selling to anyone. I am also not restricted to buy or not allow to buy any amount of shares in any company as long as my cash is there to pay for it.

But I believed the greatest advantage is I have a biggest choices of companies to buy and sell any time. I can choose any company I like to buy and I can set my own criteria for these companies.

What I mean is buy into companies that are preferably cash-rich, making consistent profits quarter after quarter (even though the profits are average), willing to share its profits as dividends with its shareholders), stable business that is difficult for competitors to challenge or overtake) and good management who DO NOT OVERPAID themselves!

Of course, the entry price to buy such companies is also very important. If one buys at price that is trading at over 20 price earning ratios, then one is actually paying quiet a high price. It would be better to scout around for such companies trading at around 10-15 price earnings ratios.

As a small lonely individual, one can CONTROL oneself to invest in such companies. One can even move in and out easily when the stock price moves up significantly.

Similarly, the small fish also has many disadvantages compared to the big fish in Bursa Malaysia. The lonely retailer is the last to know of any sensitive material information that will have a big impact on the share price.

A good example is comes November, many companies would be announcing their quarterly results ending September. During those moment, many companies' accounts are being audited by auditing and accounting firms. Surely these firms are the first to know how the results would be for the companies they are auditing, next would be the top guns of the companies and lastly you know I know are the lonely retailers or small fish when they surf the website of Bursa Malaysia.

That is why the Securities Commissions are very strict when it comes to leakage of sensitive informations. We can call it Insider Trading.

So if you are also a small fish like me, please do not despair of your current situation. You and I have also many advantages and disadvantages.

If you think the disadvantages are too much for you, you can choose not to invest at all.

But if you still choose to invest, then do not blame any others should you lose money in your investment. You determine your own decision as you are responsible for your action.

Lastly, is the world fair or unfair to the small fish?

The Power of Market Sentiment

The Power of

Market Sentiment

The current global market turmoil has been volatility in recent days. Such is the volatility that countless investors throughout the world must be enduring extreme stressful days and nights as investors experienced dramatic paper-loss or paper-profit being reduced over times.

Who could have imagine the plunge of more than 1,000 points of Dow Jones in the opening few minutes on Aug 24? And within a period of time, the index was narrowed down to just over minus 100 plus points before settling down at a loss of more than 500 points.

It is as seem as suddenly, stocks are no longer in vogue anymore in the world. The carnage is actually broad-based this time as far as I can imagine.

On Bursa Malaysia, we are experiencing one day sunshine and several days of thunder storm. You know what I mean? One day the KCLI is up and then down again for the next several days.

How low will the KLCI go is anybody's guess. But are all the stocks as bad and so unloved and so unwanted right now? Poor market sentiment is so extremely weak and poor that some good stocks were also punished despite showing improvements in its quarterly report.

To see how strong market sentiment is, I have compiled three companies that recently announced its quarterly results. They are YSP Sah, Signature International and Focus Lumber.

YSP Sah's second Qtr 2015 results of 2.75 sen was 60% lower than its preceding 1st Qtr of 7.02 sen. Such declining earnings would have seen investors dumping its shares the next very day yet YSP Sah closed 19 sen higher the next day at RM2.52 (previous day RM2.33).

Why? Because market sentiment was good on that day (Aug 19) as the market was experiencing a broad-based rally although the KLCI was up only by 2.53 points.

Focus Lumber's second Qtr 2015 results of 7.8 sen was 142% higher than its preceding 1st Qtr of 3.22 sen. Such highly improved earnings would have seen investors scrambling for its shares the next very day yet Focus Lumber actually closed 5 sen lower the next day at RM1.46 (previous day RM1.55).

Why? Because market sentiment was at its worst extreme times (exacerbated by the massive plunge of Dow Jones of 530 points on Aug 21) So powerful was market sentiment on that day (Aug 24) that investors cashed shares out/sold out/dumped/abandoned (whatever words else?) Focus Lumber despite such solid improving results!

Your truly could not imagine how badly it would be if Focus Lumber had reported a poorer set of second Qtr set of results!

Signature International's fourth Qtr 2015 results of 3.2 sen was 71% lower than its preceding third Qtr of 11.20 sen. Such vastly declining earnings saw investors selling out  its shares the next very day. Signature closed at RM2.01 which was a massive plunge of 35 sen.

Despite the KLCI inching up by a whalloping 31.80 points, market sentiment still remain very weak and investors wasted no times in cashing out Signature.

What can we learn from here

regarding market sentiment?

For one, when market sentiment is extreme poor, most stocks see a decline in share price. But fortunately or unfortunately, there are some good stocks which were also pushed down. This is irrationally selling by weak investors. Such irrationally selling allows long-term investors with holding power to buy these good stocks at great bargain!

Over a longer period of time when market starts to rebound, when market sentiment improves, when oil and commodities price start to rise and a flow of good news of economies start to trickle in, then the stock market will rise quickly before you can even have time to catch it.

If you don't believe me, then let us wait and see. The stock market is like an animal with many senses. It always runs ahead when the good news are just beginning to come in. Similarly, it will also start to plunge lower ahead before you read any of the bad news.