Investment ; Bye-bye 2015 and hello 2016

To many investors 2015 can be regarded as a  very difficult year. Even in a difficult year like 2015 there are investors who are able to grow their wealth investing just in Bursamalaysia. Mr. Koon Yew Yin is one the shrewd and experienced investors able do just that. Below is his ideas on how to approach the local stockmarket to stay on the safe side. Hope that the readers here will find the piece below helpful.

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How can investors make money in 2016? Koon Yew Yin

Author: Koon Yew Yin   |   Publish date: Sat, 26 Dec 2015, 09:06 AM 

Many people have asked me this question. In the last 2 festive days, many people told me how I have changed their lives through my charity work and my writing on Malaysian politics and share investment.

One commentator of my recent article said that 99% of the readers like my writing and only 1% do not like. As a writer, I expect some critics and I expect them to do it in a polite manner and not like illiterates or idiots.    

Here are some of holdings which still comply with my share selection golden rule even after their prices have gone up quite rapidly.  My golden rule is that I must be sure that the company can make more profit this year than last year and the projected P/E ratio is not more than 10.

I advise you to check all the shares you are holding to see that they can comply with my golden rule. Otherwise, you must cut loss and utilize the proceeds to buy better shares.  

Can One: It is the largest tin cans and jerry cans manufacturer. It started more than 40 years ago and continues to improve its operation. It bought 146.1 million or 32.9% of Kian Joo shares at Rm 1.65 per share in 2012. The current price of Kian Joo is about Rm 3.30 per share. EPF is one of the 2 parties who have made an offer to buy up Kian Joo. Can One is waiting patiently.

Its 3 quarter EPS ending Sept 2015 was 39 sen and I can safely project its full year EPS to be about 55 because some of its products are sold in US$. Its last closing price was Rm 4.50. It will announce its full year result before end of February 2016.

Chin Well: It is among the largest manufacturers of screws, nuts and bolts in the world. 76% of its products are exported in foreign currencies. After it has acquired the 40% shares from its Vietnamese partners, its latest quarter EPS jumped to 6.07 sen from 4.41 sen. Its last closing price was Rm 1.92 per share.

Thong Guan: It is one of the largest plastic stretch film and bags, raffia stings, drinking straws and paper serviette manufacturers in the Asians region. It started business in 1942.

Its 1^st, 2^nd and 3^rd quarter EPS are 4.4, 6.75 and 10.7 sen respectively. It about 2 months it will have to announce its 4^th quarter result. In view of the depressed fossil fuel price, its raw plastic materiel is getting cheaper.  What will be its share price when its annual result is announced before end of Feb 2016?     

I am also holding VS, Latitude, Lii Hen, Focus Lumber and Ge Shen because they still comply with my golden rule although their share prices have gone up quite rapidly. 

I am not asking you to buy any of the shares I mentioned above. But if you buy, you are doing it at your own risk.

Above is re-posted from the link below:-

http://klse.i3investor.com/blogs/koonyewyinblog/

5 Must-Have Metrics For Value Investors

To cultivate lifelong learning is just a habit. We read and learn from the work of others, Today I read the article written by Jonas Elmerraji and would like to share with all the value investors out there.

By Jonas Elmerraji

If you're a value investor, there's no "right way" to analyze a stock. Even so, any successful investor will tell you that focusing on certain fundamental metrics is the path to cashing in gains. That's why you need to keep your eye on the metrics that matter.

As a value investor, you already know that when it comes to a company's health, the fundamentals are king. Fundamentals, which include a company's financial and operational data, are preferred by some of the most successful investors in history, including the likes of George Soros and Warren Buffett. That's no surprise, as knowing the ins and outs of a company's financial numbers - like earnings per share and sales growth - can help an in-the-know investor weed out the stocks that are trading for less than they're worth.

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But that doesn't mean that all metrics are created equal – some deserve more of your attention than others. Here's a look at the five must-have fundamentals for your value portfolio.

1. Price-to-Earnings RatioWhile the price-to-earnings ratio (also known as the P/E ratio or earnings multiple) is likely one of the best-known fundamental ratios, it's also one of the most valuable. The P/E ratio divides a stock's share price by its earnings per share to come up with a value that represents how much investors are willing to shell out for each dollar of a company's earnings.

The P/E ratio is important because it provides a measuring stick to compare valuations across companies. A stock with a lower P/E ratio costs less per share for the same level of financial performance than one with a higher P/E. What that essentially means is that low P/E is the way to go.

But one place where the P/E ratio isn't as valuable is when you're comparing companies across different industries. While it's completely reasonable to see a telecom stock with a P/E in the low teens, a P/E closer to 40 isn't out of the line for a high-tech stock. As long as you're comparing apples to apples, though, the P/E ratio can give you an excellent glimpse at a stock's valuation. (Learn more about the P/E ratio in our Investment Valuation Ratios Tutorial.)

2. Price-to-Book RatioIf the P/E ratio is a good indicator of what investors are paying for each dollar of a company's earnings, the price-to-book ratio (or P/B ratio) is an equally good indication of what investors are willing to shell out for each dollar of a company's assets. The P/B ratio divides a stock's share price by its net assets, less any intangibles such as goodwill.

Taking out intangibles is an important element of the price-to-book ratio. It means that the P/B ratio indicates what investors are paying for real-world tangible assets, not the harder-to-value intangibles. As such, the P/B is a relatively conservative metric.

That's not to say that the P/B ratio isn't without its limitations; for companies that have significant intangibles, the price-to-book ratio can be misleadingly high. For most stocks, however, shooting for a P/B of 1.5 or less is a good path to solid value. (See Digging Into Book Value to learn how book value per share is normally calculated.)

3. Debt-Equity

Knowing how a company finances its assets is essential for any investor – especially if you're on the prowl for the next big value stock. That's where the debt/equity ratio comes in. As with the P/E ratio, this ratio, which indicates what proportion of financing a company has received from debt (like loans or bonds) and equity (like the issuance of shares of stock), can vary from industry to industry.

Beware of above-industry debt/equity numbers, especially when an industry is facing tough times – it could be one of your first signs that a company is getting over its head in debt.

4. Free Cash FlowWhile many investors don't actually know it, a company's earnings almost never equal the amount of cash it brings in. That's because companies report their financials using GAAP or IFRS accounting principles, not the balance of the corporate checking account. So while a company could be reporting a huge profit for its latest quarter, the corporate coffers could be bare.

Free cash flow solves this problem. It tells an investor how much actual cash a company is left with after any capital investments. Generally speaking, it's a good idea to shoot for positive free cash flow. As with the debt-equity ratio, this metric is all the more significant when times are tough. (Watch out for accounting trickery when looking at free cash flow, see Free Cash Flow: Free, But Not Always Easy to learn more)

5. PEG RatioThe price/earnings to growth ratio (or PEG Ratio), is a modified version of the P/E ratio that also takes earnings growth into account. Looking for stocks based on their PEG ratios can be a good way to find companies that are undervalued but growing, and could gain attention in upcoming quarters. Like the P/E ratio, this metric varies from industry to industry. (For further reading, check out Move Over P/E, Make Way For The PEG.)

Going Beyond the NumbersWhen it comes to investing, the numbers aren't everything. There are times when low valuations are justified, and there are qualitative metrics – like management quality – that also factor into a company's valuation. Just because a stock seems cheap doesn't mean that it deserves to increase in value.

Ultimately, the only way to improve your fundamental analysis skills is to put them into practice. With these five must-have fundamentals under your belt, you're well on your way to finding the most undervalued stocks on the market.

Maybulk

The Baltic Dry Index and what it is telling us is sobering

From an historical perspective, shipping has often been considered one of the most accurate means of measuring present day and future global trade. The most commonly used measure of seaborne (non-liquid) international trade is the Baltic Dry index. What it telling us is sobering. Over the past 12-month period, the Baltic Dry (BDI) is off nearly 40%. From the yearly high to yesterday’s close, the drop off in trade, as measured by the BDI, is even more dramatic. On November 11 of 2014 the BDI closed at 1464.00. Yesterday the BDI closed at 587. The drop has been 59.9%. The Baltic Dry Index is a figure issued daily by the London-based Baltic Exchange. It takes all 23 major global shipping routes into account. A large majority of what is considered dry bulk are raw materials. The building blocks of economic growth; from coal to grains and iron-ore. The BDI is telling us that global economic growth is nearly non-existent. Slowing growth in China, anemic growth in the Euro-zone, Latin America, Japan and an unconvincing economic landscape here at home are all reflected in the BDI’s weak performance. Simply put, there is very little global demand for dry goods as measured by the BDI. That may change. For the time being however, the data we have been receiving that speaks to tepid Q1 growth here at home and sub-target economic activity globally have confirmation in the global trade data represented by the Baltic Dry index. A secondary theme that can be gleaned from the BDI price action this year is that those economies that are export dependent will have to aggressively engage in devaluing their currencies in order to gain a competitive pricing advantage in a world of weak demand. A stronger dollar is the last thing our fragile expansion needs. The counter in Bursamalaysia that is very much affected by the weakness in Baltic Dry Index is Maybulk.

The price of Maybulk is trending down for more that a year. There are two temporary buy signs (indicated by the green arrows) followed by a sell sign (indicated by the red arrow). Since there it is still below the 200day movinf average there is no sign of this counter making a reversal. Can stay out but do monitor it regularly in terms of Baltic Dry Index (DBI). I believe that the weakness of DBI is mainly due to overcapacity worldwide. This overcapacity will eventually kill off some of the less efficient operators leaving behind the more efficient and better managed companies like Maybulk. Hopefully, in some point of time Maybulk will shine again but for now it is better to saty clear of this counter and the right thing to do is just to keep monitoring the DBI and sign of price turnaround.

Correction at BursaMalaysia imminent?

With S & P 500 closing at 2,110.30 ; Dow at 18,140.44 and Nasdaq at 4,955.97 which are all near record highs many stock gurus out there are looking into their crystal balls hoping to see when the major correction is going to happen. Some say it is imminent but few say that S&P 500 still has a leg to go higher.
I am not certain who is correct but I am very certain that eventually a correction has to come.
This current super bull started sometime around March 2009. The current bull is already 6 years old and if history is to repeat itself very soon a new bear will be borne to rule supreme at least for a year or two.

As for FBMKLCI the current bull started at around 800 points and reached a high of around 1895 somewhere around July 2014. It has corrected to around 1674 in December 2014. The big question is whether this correction is good enough or more bad days a ahead. No one knows.

A good strategy maybe is to sell into strength (if any) and hold more cash so that in the event the bear comes we can do some cherry picking.