Friday, October 26, 2007

Mad Selling in a Over-Cautious Mood

Well, I guess I may have done it again. I may have succumbed to the falling market and my over-cautious mood last week.

I have sold C&G, Techcomp, Tuan Sing and UE at low prices and even loss-making prices. On hindsight, my portfolio may have performed better if I have not sold them.

On hindsight, I do not even have to sell most of them in the first place if my margin of safety is larger. Since I may not own them in the first place. Hence, I decide to increase my required margin of safety before I should buy a stock. A higher margin of safety should also help in lowering number of trades.

Well, let's hope that a higher margin of safety works out for me.

Sunday, October 14, 2007

Porfolio as at Mid-Oct

My portfolio:

China Precision
Fujian Plastics
United Engineers
Tuan Sing
1 HK Stock
1 Hk Stock

Over the past few weeks, I have been paring the Techcomp stake since Techcomp has announced a placement of shares. The Techcomp proceeds are used to purchase United Engineers, Tuan Sing and 1 HK stock.

The purchase of United Engineers is mainly due to a NRA research report (seen in SGX website). The report states that United Engineer is trading at a XX% discount to its sum-of-parts valuation. Furthermore, upon a look at the Annual Report, it seems that United Engineer may have the intention of disposing of non-core business which may help to unlock some of the asset value. Hence this is more of an asset play to me, where the catalyst lies in the possible unlocking and further enhancement of asset value. (Despite the fact that Unitied Engineer is trading at 1.3 NAV.)

The purchase of Tuan Sing is also more of an asset play to me, where the catalyst lies in the re-valuation of its two CBD office blocks at end of year and sale of its developed China Property in perhaps 2008. However, as my knowledge in properties is limited, my stakes in both United Engineers and Tuan Sing are smaller than usual.

And perhaps, I may end up selling them someday to raise cash for other more undervalued stocks. But then, I do not see any undervalued stocks recently. Hence I shall wait.

Saturday, October 13, 2007

Measuring Portfolio Performance

How can we measure portfolio performance? Do you know that the returns that are seen in the blogs or newspaper may be imprecise?

Recently, Interative Investor Blog (IIB)has two posts that cover them. I find them quite interesting and relevant. The posts:

Prior to reading the posts, I use unit value method and monthly time-weighted method to compute my portfolio performance. The unit value method is used to give me a weekly price of my portfolio, while I use the monthly-weighted method for a real-time returns. The returns are year-to-date returns.

IIB's posts introduces XIRR (a form of internal rate of return computation) method. I have tried out the XIRR. XIRR measures the yearly internal rate of return. Hence, it would give me a higher percentage return (compared to the returns I am already computing) This is becasue XIRR would adjust the year-to-date 2007 return to an annual return. Or a higher return in a shorter period would translate to a higher annual return.

Hopefully, IIB will have a one more post to round up the discussion on measuring portfolio returns.

Saturday, October 6, 2007

Book Review: The markets and The media

This post is a review on 'The Markets And The Media' by Thomas Schuster. It can be borrowed from NLB (at 332.63222).

The book has three chapters, a afterword and tons of references since the three chapters are drawn from many sources: academic papers, books and articles etc.

Basically, if you are interested in how the media may influence the market, you may want to read the book. And perhaps if you have read Nassim Taleb's book(s), you may better understand why Taleb prefers to read literary stuffs than to be exposed to the media after you have read 'The Markets And The Media'.

Learning points:
1) The book explains that stock recommendations by the media (tv shows, newspaper, internet forums) tend not to outperform the market (indices). The stocks mentioned in the media may have moved before their appearance in the media. Hence any news on the stocks may have already reflected in the prices.

2) It is difficult to explain stock price movements using media as the main reason. There are times where significant news occur with little market movement and times where significant market movement occurs with little significant news.

3) The media tend to emotionalize the news due to the competition in the media industry as emotionalized news would grab more attention. Certain news may also be repeated in several media at different times.

4) The emotionalized news and its repetition may be part of the reasons why media can lead to increased feedback effects, further amplified market movements and thus adding to the boom/burst cycle in the market. Hence the media can be a destablizing factor to the market.

5) Due to the reflexive interaction between the media and the market, an upmarket would tend to lead to increased optimistic news in the media. An optimistic media may lead to a more optimistic outlook on the market. These cyclic influences may play a role in the formation of the market euphoria. Similarly, pessimistic cycle may play a role in market crashes.

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