My Past Performance

Being a small-time retail investor and actually quite inexperienced, its vital to keep track of your investments so that we can learn from our mistakes. 

I want to share my past performance, and the kind of lessons it has taught me.

Below is a table of my recent trades. As you can see, some trades were closed at a loss...this is because i really did not see the counter moving higher anytime soon(6-18months), therefore would not justify holding on to a losing stock/unit. 

SMART TIP #1: Its important to cut your losses early and shift the capital elsewhere.

SMART TIP #2: Always stick to your target price and get out of the trade. (No point regretting later, like for example: why did i close Starhub @ $3.14 when now its trading at $4.20! That just was not my target, i never anticipated or valued Starhub at anything more than $3.20) So i don't regret my decision.

SMART TIP #3: Shift your capital around as you see fit during the fiscal year. Financials do well from Oct to Feb. Telecom and Consumer Goods are defensive plays and good to hold from March to Sept. Pharmaceuticals generally do well from May to Sept.

***Following fiscal cycle (business cycle) is one thing, trying to match with general Market cycle and trend is another. Therefore you need to match business cycle with Market cycle and trend. I will talk about Market cycle in another post.   

 

Coca-Cola is set to rise again

Recent News about Coca-Cola:

Coca-Cola (KO) catches an upgrade from Credit Agricole to Outperform from Underperform. The stock has been a noticeable laggard during the bull run of 2013. 

Coca-Cola has always been a defensive stock with steady dividend payout rising by 7% annually for the past. It also happens to be my favourite stock, which i have been waiting patiently the past 3 years for an opportunity to get in. Recent stock split makes it cheaper for us small retail investors where price was adjusted from $80 to $40/share. Also KO has not been performing well in the past few months. I suspect this is due to people taking profit year end and moving into riskier assets like Bank Of America, JP Morgan and Goldman Sachs. (Which have all risen significantly, I personally took 40% profit from GS @ my set TP: $155)  

Back to Coca-cola, the stock price has been consolidating at around $37-38. To me, it looks like a great opportunity to pick this stock up @ current price below $39 with a target price $55. However, for me actually, this stock would fall under Warren Buffett scheme of buy and hold. Keep in mind that coca-cola has 42.8% market share, its a $74billion dollar brand, sells 1.7 billion servings per day. If they raise the price of each serving by 10 cents, they would  be earning $170 million profit/day. 

Insights On Commodity Stocks

Given the current inflationary environment, it is good to diverfisy your portfolio to include some commodity based stocks. Many companies benefit from rising commodity prices which we are observing over the past 12 years.

If you are bullish about certain commodities, you might want to purchase shares in companies that are involved in their production. But consider doing your own research into the company business structure before investing any money into it, like whether they have ownership of the commodities or provide services for the extraction and procurement of these commodities. For example Apache (APA) is involved in oil and gas exploration but they would hire other companies such as Haliburton (HAL) to drill for them. Haliburton will make money regardless of whether they find anything. However, Apache will benefit the most if they do something. Exxon Mobil (XOM) is one of the biggest player when it comes to Oil & Gas exploration, yet they would not actually compete with Apache (APA). On the other hand, Haliburton has to compete with say...Schlumberger (SLB) for drilling contracts. If oil prices were to rise, drilling companies do make more money but the competitive nature of drilling business would undermine their profits. (i.e. not making as much as they should because they compete on price and quality of service)

Lets look at another commodity, copper. Copper is one the most widely used commodity in the world, however companies producing this commodity is depending on other commodities. If oil and steel prices appreciate faster than copper prices, then a copper producing company may suffer even if copper prices rise. This is because they use oil-fueled machines built with steel to extract and ship copper. Therefore it is vital to assess the real situation before investing in commodity stocks. We need to choose which commodity companies will perform better, considering the risks properly, it will allow hedging against inflation with some capital gains. 

Few tips To Investment Planning

Investing requires discipline and I cannot stress enough the need to stick to certain set of rules. Lets look at a couple of rules I have agreed to before I began investing. Rule Number 1: Make use of Compounding Compounding is vital to grow your investments over time and anybody can do it as long as you stick to the following principles. In order to compound successfully, you need perseverance, knowledge of how it works and most importantly TIME. One should have the understanding of how compounding actually works so that he/she can stick to a savings and investment plan. I put TIME in bold because unfortunately this is no get-rich-quick scheme, compounding works only through time. But there is a catch, you MUST keep your investment money aside, that means no spending it. Although it may be boring, for people with itchy fingers want to move money around to riskier investment vehicles, just endure until such time as to when you really need the money. It should get a little more interesting after 8 to 10 years of continuous, uninterrupted compounding. Let us look at a typical example i picked out from the internet, you can just google "power of compounding" and get so many examples.  But here's one from ICMARC website:  http://www.icmarc.com/Images/investments/COTW/20080328startsavingearly.gif For someone who starts contributing (annually $4k) into his retirement plan 10 years earlier can expect to compound at least twice the amount if he were to start contributing at a later time. Another study done by Market Logic in US, shows how compounding magic can happen even if you stop contributing on a yearly basis. Let us assume investor (B) opening a retirement fund at age 19. For 7 consecutive years, he contributes $2000  at an average growth rate of 10% (7% + interest). Then he stops putting anymore money into his retirement fund. A second investor (A) makes no contributions until the age of 26 (same age at which investor B stops contributing to his retirement fund) but investor A starts to diligently contribute $2000 annually until he is 65 years old. (assuming the same 10% growth rate. Look at the incredible results in the table below. Investor B ends up with higher return on investment (ROI) than A but he only contributed for 7 years (total: $14,000). Investor B on the other hand kept contributing $2000/year for 40 years. (total of 2000x40 = $80,000). The only difference being that B has had 7 more early years of compounding than A which were worth more than all of investor A's 33 additional contributions.

* If you are below the age of 25 and reading this, i urge you to go and start investing little by little in your own choice of blue-chip stocks. Its not too late for your kids too, I suggest starting early for your kids. It's a study which i wish i discovered earlier because i had a "poor dad" using the definition by Robert Kiyosaki in his popular book "Rich Dad, Poor Dad". Unfortunately my father did not feel that his kids needed to learn about money, he only taught us to save, get a good job and save some more. Having a saving plan running concurrently with your investment plan is very important too, but as a rule, i never keep more than 8 months living expenses in my bank account. Rule Number 2: Try Not to Lose Money This may sound funny to some but i think we should have the mentality of not losing money unnecessarily. If we want to preserve our capital and eventually grow it, we must aim not to lose big money. I have noticed that most people do end up losing money through gambling, ridiculous investment schemes, poorly executed business deals, greed and often times poor market timing. Over the years, there have been so many cases in Singapore where people lost money in the stock market, options, futures, in terrible loans, mindless gambling and in their own business. This rule may be simple, but we have to be disciplined in the way we spend our money and perform due dilligence enterning into any kind of investment. Rule Number 3: It takes Money to make Money  The wealthy investor has a major advantage over the smalltime amateur investor, they have the MONEY. One can argue that actually the wealthy investor does not need the market, somehow the market always moves in their favour. Understand the wealthy investor's mindset, he already has all the income he needs, not depending on the investment outcome, removing all emotions out of the equation. He probabaly has money invested in BONDS, Treasury-bills, Money market funds, Stocks, Real Estate and Other Business shareholdings. The wealthy investor is an expert is seeing VALUE. For example, he would invest in Bonds when its cheap and yields are high or move his money to Stocks when they are cheap with higher yields. With the ultimate goal of acquiring REAL ASSETS, eventually these investors buy real estate, physical gold, jewellery, expensive watches, diamonds and artwork; Things with great value. Another thing is when there is no opportunity presenting itself, they can afford to wait. We need to have patience. What about the little guy with little or no money? They feel pressurised to make money, or SAVE, SAVE, SAVE into a bank. This is madness at current interest rates less than 1%, being offered by banks. When the small investor is not buying overvalued stocks offerting 1-2% yields, he is off to gamble away his hard earned savings like buying lottery tickets or some ridiculous get-rich quick scheme. The small investor is always trying to force the market to do something for him, he is a guaranteed loser. Without understanding VALUES, he constantly overpays swayed by his/her emotions. I like this statement which i found on the internet : "He who understands interest - earns it. He who doesn't understand interest - pays it". The poor guy usually end up in huge debts, making payments on his house, electronic equipments (Thanks to COURTS easy installment plans), loses money gambling...in short always runs after money. So why is it that life is unfair, wealthy people always have the upper hand? I thought the poor always maintain a strict discipline of never overspending. Instead of taking his extra savings and compounding it in smart income producing securities, we always see them in debt. The usual answer is "I'm not making enough money". Although I symphathise on this situation, I know its possible to take two jobs, upgrade your skills, lower your monthly expenditure, do whatever it takes to work towards financial freedom. Be Positive. It makes alot of difference, both in one's mental attitude and in the way one actually handles one's money. Rule Number 4: Investment Value Usually I will suggest that one should stick to the basic compounding system and let it work over time. But if the opportunity arises when the market offer great value, Take it! [like post Dot.Com bubble (2001), Post-Subprime crisis (2008)] I would judge an investment to be of great value if it presents Lower Risk, Attractive Return(yield), Capital Appreciation. The key to making money is definitely to stay liquid, move your money from one market to another, follow the basic rule of buying undervalued investments.

The Hidden Investor

This is my first blog post for the Hidden Investor, created to share my knowledge and ideas on investing. I hope to post some interesting articles as well and keep track of my investment journey which happens to start in 2011. Since then i have made as many terrible decisions as good ones. Hopefully someone will learn from my mistakes and profit from my experiences. This blog is for the hidden investor, who just wants to make a decent return on his/her money.

Investing is for EVERYONE and each investor should have EQUAL CHANCES to make money. We live in an unfair world, the financial system receives plenty criticism BUT still presents ample opportunities to profit from it. Yes, the hidden investors are out there predicting which way the stock or bond markets are heading to figure out which stock or fund will bring back huge profits.

Need a Plan

The basic requirement to make money is that you need to PLAN for it. Majority of investors do have some kind of plan, self-discipline and desire. It does'nt take a genius to have some sort of investment plan. I will take about investment planning in upcoming blog entries.