For those who find it hard to follow I suggest reading through my previous posting on how I am using technical indicators as a trend seeker.
I never did post this but I had a discussion with some friends during office lunch that the world just suddenly panicked for no GOOD DAMN reason. S&P rating cut of the US credit is not really what I expected but the most surprising thing is that the reason given is political debate NOT economic sense. Plus the S&P isn't really that credible going back to US housing bubble time frame. Crisis in Europe is nothing new as well. Emotions run high as usual. Bursa wasn't spared and as you can see it is clearly in bearish state but not in recession mode yet. I will explain:
First, the 40-50 support line is broken, this means we will now observe whether the failure swing will PASS or FAIL. This will determine whether we head into recession or pull up.
Second, MACD divergence approached and went down the centerline crossover further solidifies bearish nature.
Third, to add on to it, the 12-day EMA is now below the 26-day EMA (bearish > bullish).
BUT BUT we should not panic yet because the most important test is the upcoming failure swing. There is no hard rule to say what the future holds as technical indicators are pretty much lagging ones. Previously I have shared the most recent failure swing which resulted in Bursa pulling back up into another new high. See below.
IMO this small sneeze in the world economy is just a short term effect contributed by mass paranoia, nothing more than that. I'll give Bursa a 90% chance to pull up based on good but slow growing world economy. RM->USD is now at 3. This should be another read of my previous post for your information since the debt ceiling has been passed: Taking A Look At The USD
Because JOBST (last closed @ rm2.80) is not traded yet I have to compute the portfolio gains manually. The gains are now @ 10.95% down from previous month's 17.7%. Due to the mass paranoia KLCI lost about the same % as mine. Nevertheless there was no immediate concern for me to sell anything off considering all are either under or equal to my computed DCF fair values.
Instead I have placed some reserve cash more into my GENTING holdings doubling what I have right now @ a cheaper price point compared to my first buy. Cost average puts my GENTING at RM10.26 with my just revised fair value @ RM14.05 makes GENTING the most heavily discounted counter at the moment. This is the reason why I did not choose FREIGHT as my first choice.
SUPERMX continues to disappoint and I will touch upon it on my reevaluation in the coming posts this month.
Previous month: VirtualPot Folio for July 2011
5 comments:
Market overreaction to the triple A downgrade is pent up anxiety on the weak economy recovery and debt woes in both US and EU. But it gives value investors a chance to accumulate good stocks. what are your views on Public Bank? At such over-valued klci stocks, it is the only one i feel is fair priced.
First, I do not know how PBBANK is fairly priced because I do not have computations on hand for banking stocks. Second, I am very new if not almost no knowledge on banking stocks.
But looking at the investment statistics for FY09, FY10, FY11F and FY12F I can say it looks good and healthy indeed. Plus PBBANK and GENTING has been Msia best performing stock since they started a long time ago. Historically it is good.
To answer your question is to answer for yourself. If your thorough research (comparing to other banks is a must) and you have come figures in hand to reflect it is fairly valued then by all means do not hesitate. The reason why fair value computations works well is because you have yourself a reference price to start with instead of toying with emotions.
I was hoping your bible Dynaquest covers banking stocks too.
Do you have a cutloss strategy?
I could grab that page for you and scan a copy of it. My cutloss strategy is not really a clear cut one. As long as the stock I am holding is below or equal to the fair value of my DCF I would never sell even in bad times.
I do not play the short term game or day trading because that would give me a heart attack. I minimize the effect of volatility by buying a discount and selling it at more than 20% premium or when there is something else better to buy.
I look at tech indicators are trend seekers not as a guide to buy or sell.
Thanks so much. I did consider subscribing to Dynaquest but the rate is rather steep, and they dun offer a softcopy version. Lugging a book around isn't very favorable.
What if we make a mistake in our analysis? A cutloss can protect us from further loss. Atleast we will still have capital to continue investing and perhaps make up for the loss.
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