When sanity returns

When sanity

returns

According to a Goggle search, the meaning of SANITY is explained as the  the ability to think and behave in a normal and rational manner. What it means is that for one to do something or to make a decision for something,  one must be in a state of sanity so that a better decision is derived.

But during the times of chaos or crisis happenings, many people actually act in the opposite of sanity. They panic, act irrationally and become insanity with their actions and decisions.

One of the most common places to find insanity is actually in Bursa Malaysia. And these insanity situation happens from time to time each time a major crisis develops.

It is during these time of panic caused by those insanity people that those with sanity state of mind are likely to make a better and wiser decision that will ultimately tilt in their favours over a period of times when finally ... sanity returns.

Just a few months back at the height of world market crash where even at one time the Dow Jones dropped over one thousands points on the opening bell before  crawling back for some recovery. Even our Composite Index dropped by some forty points on certain days.

It was during those panic-stricken times that many investors lost their nerve and dump their shares in massive drove and sellers simply overwhelmed buyers all days through, even though it is common knowledge amongst investors that investing is all about the strong fundamental of a company that will dictate the share price.

But when the majority of sellers become insane on that day, and genuine sanity buyers are few, prices can be swiftly pressed down to unimaginable levels. It is during those moments of madness that the real long term investors will dare to pick up some shares at heavily discounted price.

One of those incident was when the bad news hit Supermax Corporation Berhad about the insider trading issue related to APL Industries Berhad (APLI). The share felled to unbelievable price under such great ferocity selling and I was those lucky brave ones to pick up at RM1.67 the very next day (on Dec 16, 2014). It hit a 52-week low of RM1.58 on Dec 15, 2014. Since then, the current share price has recovered  superbly to close at  RM2.96 on Dec 17 following bouts of rallies accompanied by some encouraging corporate news.

Another of my 2015 favourites, Focus Lumber Berhad reported an excellent 2nd Qtr results of 7.8 sen compared to its 1st Qtr of 3.22 sen. But due to such extreme weak market sentiment on that day where the Composite Index dropped over 40 points, "insane" sellers ditched such a good cash rich company for a cheap price. Despite having 31,000 shares before this, I still could not resist such a fire bargaining sale and picked up 5,000 shares at RM1.46 plus.

As a matter of fact, on that day and some other days, market behaved in a very irrational way for many companies. I have to believed Focus Lumber shares must be one unjustifiably sold at a song on that day.

All because many strong hearted investors lost their sanity and courage  on that day .....

But as time is always a healer and a good judge, another few months down  the road, when companies started to announce results again and market sentiment has returned to sanity level, the share prices of good fundamental companies also begin to find its justified levels.

When Focus Lumber announced its 3rd Qtr results on Nov 17 with an even better sequential results of 9.35 sen and an almost 100% increase dividend payout (10 sen dividend followed by an earlier interim dividend of 5 sen), "sane" investors chased after the shares from the next day onwards resulting in a gain of 23 sen to RM2.68.

Since then, Focus Lumber has constantly traded at the RM2.70 - RM2.80 range although it touched a high of RM3.00 on Nov 24, 2015.

The share price of Focus Lumber has even surpassed YSP Sah and Signature International Berhad right now. Refer to my previous blog on Sep 13, 2015 titled : The Power of Market Sentiment.

At that time, on YSP Sah was traded at RM2.53 on Aug 19, Signature was traded at RM2.36 on Ag 24 and Focus Lumber was just traded at RM1.51 on Aug 21, 2015.

Fast forward to another three months and another set of quarterly results and the share price of these three mentioned companies are as followed  on Dec 17.

Focus Lumber is at RM2.77 on Dec 17, 2015.

(Up by a whopping RM1.31)

YSP Sah is at RM RM2.47 on Dec 17, 2015.

(Down by 5 sen)

Signature is at RM RM1.88 on Dec 17, 2015.

(Down by 13 sen)

What does this tell you?

From my point of view, it says that when the market sentiment has returned and most investors has recovered from insanity, a better decision to base a fairer value of a particular company based on its fundamental points from a vastly majority of investors will surely accord a fairer value share price.

Buying 10,000 shares

of NTPM Holdings Bhd

on Dec 17, 2015

It has been a long time since I bough a new stock. Many times I have been frequently asked if there is any good stock to buy. Well, here it is this "premier tissue and toilet paper' company called NTPM Holdings Bhd. Perhaps I shall share some of my reasons why I am buying some shares of this company in my future blogs, most probably in 2016.

As this probably is my last blog for 2015, I like to thank all those readers/followers/email fans/supporters who have been with me throughout the year and since this blog's inception.

I like to wish you a very Merry Christmas and a very wonderful 2016!

Mercury springs a pleasant surprise

Mercury springs

a pleasant surprise

Malaysia's second largest car paint maker Mercury Industries Berhad recently sprang a pleasant surprise news for its shareholders when it announced its 3rd Qtr results.

Mercury announced a strong set of results, achieving an earning per share of 5.02 sen, which must be the highest ever recorded since 2012. Compared to its 2nd Qtr 2015 results of only 1.95 sen, it is indeed a remarkable turn-around one.

As we recalled, Mercury had already diversified into the construction business a few months back, acquiring a 70% stake in a inter-related deal, construction company PBSB.

At that time, I was a little sceptical about Mercury's diversification as I normally prefer the companies I invested to focus more or solely on their main strong business/products.

However, this time, the diversification of Mercury seemed to have paid off so far. According to its 3rd Qtr report, its PBSB, the construction arm of the Group contributed a revenue of RM12.47 million and a pretax profit of RM2.64 million. This good profits helped to offset its other business segment i.e. its paint business which reported lower revenue and lower pretax profit.

The decrease in revenue can be attributed to the slowdown in consumer spending due to the weaker Ringgit and lower commodities prices. Also the higher cost of goods and services arising from the implementation of the Goods & Service Tax (GST).

The decrease in pretax profit was mainly attributed to the expenses incurred for the acquisition of PBSB even though it was partially offset by forex gain.

Going forward to the next several coming quarters, will the construction division continues to deliver strong consistent earnings that will boast up the overall earnings of Mercury?

I do not know. I don't own any construction stocks before because I am sometimes confused with the accounting way of construction companies. Sometimes the results are excellent in this quarter, but poor results in the next quarters due to sort of unbilled billings or unrecognised earnings, it is quite confusing for someone like me.

Once these ways of accounting confused me, I am unlikely to invest. But in the case as I have been one of advocator for Mercury as early as the beginning of my blogs in 2013 and has been challenging/inviting you to join in the wagon, I will stick to my investment.

Besides, Mercury has been paying steady dividends since the last four year. The dividends received were 8 sen, 8 sen, 10 sen and 6 sen in 2012, 2013, 2014 and 2015 respectively.

These rate of dividends is considered high as Mercury's share price is normally traded between 1.15 - 1.50 range. As long as the dividends are maintained for the next few years, I really have no qualm if the share price continue to even languish at this ranging price.

What about you whom might have joined in the party for Mercury shares after being "brainwashed" to invest? Sorry, I used the word "brainwashed" as only a joke. I know most of you are sort of experts in your own way when it comes to analysing stocks.

Again, I believed some might have sold off, some might still be hanging on. But I am still holding on as long as the two divisions of Mercury can continue to earns profits over the next several years. It means that the dividends will continue to be credited into my banking account.

Profits in hands that turned into paper loss

Just recently I share about the dilemma of not taking profit when there is paper profits to be realised into actual cash profit. I shared about the anxiety of investors whether taking profits too early is a wise decision or not.

Well, I am now regretting my decision for not turning paper profit into cash profit for one of my mentioned stocks, APM Automotive Holdings Berhad, a cash rich company and also a subsidiary of its parent company, Tan Chong Consolidated Sdn Bhd. Tan Chong owned 32.47 % of APM.

APM was featured on Sept 30, 2013 titled : A Tale of Two Automotive Companies

Bought by yours truly at RM4.66 on Nov 29, 2012, APM went on to as high as RM6.40 on May 12, 2014 riding on the good sentiment of the market.

However in recent times, its quarterly profits has been declining as evidenced from its reducing dividends payout. Hence, the share price followed in tandem and is now trading at below my original price.

If you care to check, it closed at RM 3.93 on Dec 10, 2015.

Why I didn't sell when it was starting to report declining profits? Why I did not take at least some profits when there was time to do so? Or was I still hoping there would be a turn around of fortune for APM? Or maybe I did not pay attention to it as I was focusing on others?

I really don't have the answer. All I can say is I am now sitting on paper loss and I hope the paper loss would not balloon to a bigger one.