Tuesday, July 31, 2012

Venture Corporation

This is a post to highlight a typical pattern which Venture Corporation exhibits in the period August to Dec. If you buy into the idea, look for the suggested entry and exit points at the end.

This first picture is the share price of Venture Corporation in 2008.


The drop was a brutal 60% off value from August 1 till End Dec. Now, cast your eye below for a look at 2009.



In 2009, when every stock and its grandfather was soaring away, Venture Corporation managed to lose 2%.


In 2010, Venture managed an outstanding 4% increase in share price, as seen above.

In 2011, as seen above, the ides of August, claimed venture , showing a 21% drop.

Looking at even older years, there were drops in 2004 and 2005 as well.

2006 was the year this bucked the trend of a drop with a nice hefty 21% gain, a rarity for Venture in the last seven years.

The average gain (Loss in this case) is around 11%.

Venture is trading at 7.41 at the time of this post.

If you are an optimist, you can buy it now and hope the market treats 2012 like 2006 and sell Venture when it hits 8.94, actually, leave a bit on the table and sell at 8.88.

If you are terribly pessimistic and feel this is like 2008 all over again, then buy it when it reaches 3, actually, aim for 3.1-3.2. The predicted chart value is 3.

My guess for what it is worth is that it will trade down to around 6.6-6.81 by December.

I would want to buy Venture any time it trades below 6.81.

Now, that is a good attractive entry point for me.

In terms of exit point, look for an exit around 8.4 to 8.6 between April to June of next year.

In terms of ROC, that is around 23% ROC in a time frame of between 9 to 11 months.

Full Disclosure : I am neither long nor short Venture at this time


Monday, July 30, 2012

SATS

This post is to review the trading idea on SATS posted on May 14.


The price at the time of writing in May 14 was 2.61.

That was the sell price, so let us say you bought it then at 2.61.

The reason for the trading idea was the belief that there will be a special dividend.

That turned out to be true and the total dividend declared was 21 cents against the 12 cents the previous year.

So, we can award me 1 point for guessing that there was a special dividend.

The estimated price it would reach was 2.96.

In actually, SATS hit 2.88 in between, not 2.96 though.

That is a 2.8% difference. So, only 0.9 points for that.

The trading idea was to buy at 2.61 and sell at 2.87

It did hit 2.88, so you would have been able to exit at 2.87.

All in all, if you had followed the idea, you would have made 10%.


Sunday, July 29, 2012

K-Green Trust


This is a link to the trust


http://www.kgreentrust.com/



From the web-site, K-GREEN TRUST is a business trust with an investment focus on "green" infrastructure assets in Singapore, as well as Asia, Europe and the Middle East. 


The Trust aims to provide long-term, regular and predictable distributions to its Unitholders.


It is a bit early to look at the long term picture.

However, i have made an attempt to see its value.

The annual dividend is 7.44 to 7.82 cents over a year over the last two years.

The trust is trading at 97.5 cents.

Largely, some of this is due to the pay out from the NAV.

I have projected that the NAV will decline by anywhere between 1.9% to 3.6% over the next twenty years.

The DPU has been projected to grow by 5% per year.

These two combine to give a value of 1.49 for the trust.

At 80 cents, it is a screaming buy, at $1, it is so-so buy. (Because i have bought around $1).

Full disclosure: I am long this stock

The Perfect Stock Search


Every investor would love to stumble upon the perfect stock. But will you ever really find a stock that provides everything you could possibly want?
One thing's for sure: You'll never discover truly great investments unless you actively look for them. Let's discuss the ideal qualities of a perfect stock,
The quest for perfection
Stocks that look great based on one factor may prove horrible elsewhere, making due diligence a crucial part of your investing research. The best stocks excel in many different areas, including these important factors:
· Growth. Expanding businesses show healthy revenue growth. While past growth is no guarantee that revenue will keep rising, it's certainly a better sign than a stagnant top line.
· Margins. Higher sales mean nothing if a company can't produce profits from them. Strong margins ensure that company can turn revenue into profit.
· Balance sheet. At debt-laden companies, banks and bondholders compete with shareholders for management's attention. Companies with strong balance sheets don't have to worry about the distraction of debt.
·  Money-making opportunities. Return on equity helps measure how well a company is finding opportunities to turn its resources into profitable business endeavors.
· Valuation. You can't afford to pay too much for even the best companies. By using normalized figures, you can see how a stock's simple earnings multiple fits into a longer-term context.
· Dividends. For tangible proof of profits, a check to shareholders every three months can't be beat. Companies with solid dividends and strong commitments to increasing payouts treat shareholders well.
Factor
What We Want to See
Your Stock
Growth
5-Year Annual Revenue Growth > 15%


1-Year Revenue Growth > 12%

Margins
Gross Margin > 35%


Net Margin > 15%

Balance Sheet
Debt to Equity < 50%


Current Ratio > 1.3

Opportunities
Return on Equity > 15%

Valuation
Normalized P/E < 20

Dividends
Current Yield > 2%


5-Year Dividend Growth > 10%





Total Score



If your stock gets a ten on ten, you are almost guaranteed to have the perfect stock.

This link below gives you a link to Motley fool, from which this article is copied.

http://www.fool.com/investing/high-growth/2012/07/27/has-pricelinecom-become-the-perfect-stock.aspx?source=ihasithla0000001


Thursday, July 26, 2012

Dividend Stocks and REITS are not a substitute for Bonds

With interest rates being so low,  investors are not getting the interest income they need from their fixed income portfolio.


As a result, the advice of experts is to turn to riskier REITS and other  assets, such as high-dividend stocks.



While these investments may look attractive, historically they haven't been a good solution.

The main role of fixed-income assets in a portfolio should be to reduce portfolio risk to the level appropriate for the investor's unique circumstances. 

Jared Kizer has done a study on this.

His findings confirm that  these strategies tend to dramatically under perform high-quality fixed income assets when market risks show up. 

Simply put, there's considerable risk involved when replacing high-quality bonds with higher-yielding strategies

Stretching for yield -- whether in the form of dividends from common stocks or  interest on junk bonds or REITS-- is a bad idea. 

The historical evidence demonstrates that these risks haven't been well-rewarded, and their returns haven't mixed well with stocks in a portfolio

Monday, July 23, 2012

Ascendas REIT

There is a lot of interest in REITs among investors.

This is also fanned by articles in the newspaper highlighting that REITs have delivered a higher return for investors over the last decade or so.

As an intelligent investor, you would imagine by now where I am heading.

By and large, any trend which is worth highlighting in a newspaper is almost sure to be a dying or dead trend.

I have nothing against REITs per se, just saying.

As an academic exercise, i pulled out the numbers for Ascendas REIT over the last five years and examined it carefully for its value.

As on date of writing, it is being sold at SGD 2.19 per unit.

The intrinsic value for Ascendas REIT is between $1.46 to $1.93.

As you can see, the current price is higher than intrinsic value. So, if you were buying now for the yield of 6% or so, that it seems to offer, my word of caution is that you are overpaying and be careful.

Wednesday, July 4, 2012

Rotary Engineering - Estimating Value

There are two potential approaches to estimating the value of Rotary Engineering.

One is to take a look at its potential income over the next 20 years and the other is to look at its income to me as a shareholder over the next twenty years.


Parameter 2011 2010 2009 2008 2007
Net Income 42.6 81.9 65.3 69.8 71.5
Depreciation 14.5 12.8 10.7 6.9 5.6
Changes in Working Capital -108.4 -84.1 -95.7 -6.1 15.2
Capital Expenditures -16.1 -15.7 -25.5 -25.4 -11.1
FCF -67.4 -5.1 -45.2 45.2 81.2
Total Current Liabilities 374.46 427.81 232.75 237.81 237.06
Total Equity 286.99 283.12 246.98 204.48 168.21
Total Liabilities 413.35 456.41 250.47 251.66 245.9
Common Shares Outstanding 567.85 567.85 567.84 567.84 567.84
Capital Employed 325.88 311.72 264.7 218.33 177.05


This is Rotary Engineering, reduced to numbers and cents, above.

An estimate of its value derived from owner earnings, indicates that one share is worth 58 cents.

The current share price is 53 cents.

The other approach is its dividend payout.


Year Dividend Growth(%)
2012 0.03 0%
2011 0.03 -40%
2010 0.05 25%
2009 0.04 100%
2008 0.02 -67%
2007 0.06


This provides a value to the share of 48.5 cents per share.

One last look, which is a very optimistic view of it is to project a longer term ROE.

This provides a value of 99 cents per share as on date.

So, there you have it, Rotary is worth anywhere between 48 cents to 99 cents per share.

I would be a definite buyer at current prices of 53 cents per share.

Monday, July 2, 2012

Wilmar

This post is on Wilmar.

I have just added on to my position on Wilmar.

The entry price after commissions is 3.69.

The expectation is that this will deliver a 30% return by the same time next year.

I will review this after six months to see whether this was a right move.