Do you have to be wealthy to start investment in stock market?

Hi Readers,

There are many misconceptions in this topic such as its high risk, speculative, easy to lose money, gambling if you will, and some think that it's for those going into retirement or older people. Majority have the perceptions that you have to be wealthy (extra cash) to start investing in stock market. Hence, many failed to take advantage of the power of stock market to boost their wealth over time. Isn't it amazing if you can grow your money and seeing how quickly it could grow with the compounding effect.

First of all, I would like to take this opportunity to thank all our readers (friends, family members and new readers) for taking the time to read our posting. We started this journey in Jan'19 and we have achieved the 1st 2000 views after 3 months. Best of all, the feedbacks that you are making positive returns is something that we are happy to hear. We hope that our journey is also your journey as well - finding the TIME with your loved ones as well through trading/investing in stock market. We all have our own full time job and different roles in our life, hence, different objectives when it comes to investing - time, approach and capital cost. Personally for me, I am not into the type of sitting in front of PC chasing and monitoring my positions. That defeats the meaning of this journey. 

A recap of our stock picks since January based on aggressive trade setups and last price on 19-Apr for open positions (yellow - long term holdings):

Stock pick performance as of 19-Apr for both open and close positions

Average returns yielding 11.28% with the highest return on AZRB (53%) and lowest of 6% for Genting. The open position highlighted in yellow are meant for longer term and it is still manageable. The reason for sharing this is to support the objective of this article - possibility of growing your money. Throughout this journey, I have been stressing on managing risk/reward and following your rate of returns. I have shared before this (My Experience with Profit Target) whereby as long as your trading return is higher than fixed deposit, it is a good return as it is per trade instead of per annum. Below is a quick projection on what it meant if we were to use a 8% rate of returns for trading stocks and with a starting capital of $10000. 

Simple Compounding Effect with 8% rate of returns

Based on the projections above, one can see the difference in terms of compounding 8% returns comparing to fixed deposit return of approximately 4% per annum. Alternatively, one can also choose to build a portfolio of dividend stocks yielding 6% which can also be served as passive income. There are many ways to build additional income through the stock market. Anyone can invest in stock market and if you still think that it is only for the wealthy, I would suggest that you should seriously reconsider your thoughts on this although last 4 months stock picks is no guarantee of future performance. 😉

p/s: Please feel free to deposit your email on the right side of our page so that you will receive notification in your mailbox in the event of new article posting or comments. 

Enjoy your weekends and all the best!!!

Market Look Ahead

Hi Readers,

I shared the market look ahead back in Jan'19 (the article is in Jan folder) and I extracted KLCI index projections back then as shown in Image 1. As I have initiated short positions for FKLI Mar'19 contracts in Dec'18, there is a need for me to estimate where the index is heading. The KLCI index behaved nicely per the projections with all the local and global headwinds as shown in Image 4. You will notice how the price actions following the projections downwards.

Image 1: KLCI Index projections back in Jan'19

I have closed my sell FKLI Mar'19 contracts and looking to initiate positions again. Here we are now in Apr'19; 3 months later since I shared the market look ahead back in Jan. 

Summary back in Jan'19

• World Bank's forecast for Malaysia GDP showing GDP is flat in 2019 at 4.7% against 2018 and drop to 4.6% in 2020. This will bring back to the valuations in our stock markets whereby a risk in corporate earnings and high P/E ratio.

Summary as in Apr'19

• Bank Negara Annual Report 2018 indicated sustained growth momentum in 2019 and the economy is projected to expand by 4.3% to 4.8% in 2019. This is supported by firm private sector activity and recovery in commodity sectors as shown in Image 2 and Image 3. In the same report, it is mentioned that public investment is projected to contract by 7.1% due mainly to lower investment by public corporations following the completion of large-scale projects. Capital spending by the General Government is expected to be mainly channeled towards upgrading and improving public infrastructure and amenities.
• Possibility of OPR reduction rates by Bank Negara surfaced in local media that resulted in financial sectors sell down recently. A lower OPR would translate to cheaper borrowing cost s, benefiting domestic households and businesses. However, it will also impact the net interest margin (NIM) for banks.
• There is much buzz in local media as well on the revival of ECRL projects which led to positive sentiments for the construction sectors. However, as the focus is on national debt, it is logical that the government will be more prudent in spending. This will lead to margins achieved in the past via direct negotiations will be eroded. In fact, there are already news that the government is working on renegotiating the deals leading to substantial savings.
• Combining the lower GDP forecast, lower margins, possibility of lower OPR, there is a possibility that corporate earnings will be lackluster impacting the valuations of our stock market near term.  

Image 2: Extracted from Bank Negara Annual Report 2018

Image 3: Real GDP Expenditure Extracted from Bank Negara Annual Report 2018

Considering the local happenings, I will be on the lookout for KLCI to test the support at 1611. If it is supported well, there is a possibility of sideway consolidations due to the positive sentiments on capital spending by the government towards upgrading and improving public infrastructure and amenities until further clarity of OPR rates. Failure to support at 1611 will lead it to next support level at 1511. At the point of writing, there is much pessimism and optimism considering the local and external headwind (US-China trade war, possible of new US-Europe trade war, Brexit, weak global outlook and upcoming corporate earnings for S&P500 companies which is pointing to lower earnings). In my opinion, it is rather important to focus on valuations and fundamentals of companies as we trade/invest in 2019.

Image 4: Updated chart from Jan'19 and possible KLCI Index projections

Good luck and all the best!!!

Disclosure: The information above is for sharing purposes. References to the fundamental data and price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. The opinion expressed here is not a recommendation to buy/sell.

Growth Story In the Making - D&O (7204)

Hi Readers,

Growth stocks are associated with companies whose earnings are expected to continue growing and generally have high price-to-earnings (P/E) ratios and high price-to-book ratios. As it is a growth stocks, investors generally see such stocks having great worth and willing to pay more. That's how the high P/B and PE ratios come about. For me, there are two types of growth stocks:

1. Unsustainable growth stocks - one that has rapid increase in profit growth outpacing sales growth, profit growth via one-time gains, or cost savings, one that is becoming the talk of the town (high euphoria). Such stocks will eventually lose its euphoria over a longer period of time due to unsustainable growth
2. Sustainable growth stocks - one that has constant increase in sales growth outpacing profit growth, one that continues to re-invest its earnings. Such stocks will eventually perform better than the unsustainable growth stocks. 

On the other hand, a value investor may see growth stocks as expensive and overvalued. Value stocks are traded at a lower price comparing to its fundamentals due to short term issues (weak sentiments or short term setbacks) and are considered cheap compared to their competitors.

It is never easy when it comes to deciding whether to go for growth stocks or value stocks when it comes to investing for a longer period of time. Its just two different types of investing style. Personally there is no harm to have both types in your portfolios for longer term. Now, trends of technology is driven by market demand. Hence, that's the idea behind looking for a tech stocks that will grow over time which led me to D&O (7204). D&O Green Technology Berhad primary business currently is in the automotive lighting business. Back in 2015, the company decided to exit the semiconductor and TV lighting business and focus on the niche/specialized automotive lighting business. It currently has sales and marketing presence in 6 countries - EU, US, China, India, South Korea and Malaysia. D&O is based in Melaka, Malaysia. 

Future trends:

What makes automotive lighting business interesting is that the new trends of autonomous driving is creating a new market segment. Light sources and lighting technology adapted to autonomous vehicles driven by data obtained from sensors has to go through changes for the future traffic environment. There is definitely opportunity for D&O in this area in the future. 

Coming back to D&O, I decided to dig a little deeper into its financial performance and below are the summary of the data extracted and plotted into graphical representation as shown in Image 1. Looking at its revenue (sales) growth %, profitability % (net margin, ROE, ROA) and capital spending, one should be able to notice that the performance is becoming more predictable post 2015 business streamlining. The decision is starting to pay off gradually based on the data extracted. There is definitely an opportunity for the company to fit into my criteria of sustainable growth stocks. The sales is growing at a high single digit and when it starts growing in double digits, that's when it will start to catch attentions. 

Image 1: D&O Sales Growth, Profitability and Capital Spending

The next upcoming annual report for 2018 is estimated to be released by end of Apr'19 and will definitely be the one that will further confirm that D&O continues to grow or starting to see a stagnant growth. Do keep an eye on the report especially its sales growth.

Technically, an interesting chart pattern is repeating towards its annual report. The first one happened between Dec'17 to Apr'18 whereby consolidations happened during this period of time before it got out from consolidations after its annual report showing improved sales and profitability. The same pattern is happening again whereby current consolidations started since Oct'18 to currently as shown in Image 2. 

Image 2: D&O Charting

At the point of writing and combining both its fundamentals and technical, it is definitely an interesting counter that should be watched closely both short term and longer term. I am looking forward to review its upcoming report as to whether any doubts that D&O should not fit to my definition of sustainable growth stocks.

Possible trade setups in coming days:

Aggressive trader:

Entry: $0.685 +/- 3%

Stop Loss: $0.635 or below

Target Profit: According to your rate of returns or the levels above

Remarks: Watch for bottom at $0.67 followed by $0.635, follow the commentary for this article as i will be updating its performance after the annual report

Conservative trader:

Entry: Breakout above $0.72 or reversal upon hitting support at $0.635

Stop Loss: $0.635 or below

Target Profit: According to your rate of returns or the levels above

Remarks: Watch for bottom at $0.67 followed by $0.635, follow the commentary for this article as i will be updating its performance after the annual report

Good luck and all the best!!!

Disclosure: The information above is for sharing purposes without any understanding of investment targets and needs of readers. References to the fundamental data and price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. Please do your own due diligence before initiating a position as this article is not a recommendation to buy/sell.

Trading Ideas - LIONIND (4235), MRCB (1651) and CCK (7035)

Hi Readers,

First of all, thank you for your compliments and your patience/attention to the blog is much appreciated. I am glad that you are making profitable trades. Do share with your family members and friends if you find it helpful. There were asks to share more trading ideas on top of long term investing ideas. I wanted to take the opportunity to ensure we are all aligned on the understanding. While there may be different interpretation on trading versus investing, my personal opinion is that the biggest difference is holding time and skills required between the two. Skills here referring to identifying trading counters and entry/exit plan (price actions, timing, risk management). As trading involves shorter duration of holding time, hence it requires higher skills including emotional reaction. Even with skills, one can make a mistake. No joke about it and there is risk involved.

With that, I would like to share some trading ideas below.

1. LIONIND (4235)
The nature of the business was in steel products and cyclical in nature. Came down from the high of $1.67 in 2017 to where it is today. The fact that it was in sideway consolidations at the back of major downtrend makes it really attractive. A breakout from the sideway consolidations will trigger the bullish sentiments.

LIONIND Charting

Possible trade setups:
Aggressive trader:
Entry: Now in between the sideway channel
Stop loss: 0.44 cents.
Target profit: According to your rate of returns or the levels above
Remarks: Watch for breakout above $0.635 which will bring it to $0.775

Conservative trader:
Entry: Breakout above $0.635
Stop loss: $0.50 cents and below
Target profit: According to your rate of returns or the levels above
Remarks: Confirmation of breakout of the channel if the price is able to stay above $0.605 for 3 days.

2. MRCB (1651)
The nature of the business is in property and constructions. It was in the range bound between $0.83 and $1.28 since 2007 until 2018. A new lower range bound developed in 2018 to 2019 in the range bound of $0.555 to $0.83. The recent euphoria of potential beneficiary for ECRL pushes it above $0.83 entering the previous 10 years range bound. That's where it caught my attention.

MRCB Charting

Possible trade setups:
Entry: $0.88 to $0.89
Stop loss: $0.83 cents and below
Target profit: According to your rate of returns or the levels above
Remarks: It has achieved breakout above $0.83 cents from the chart above and stayed above for 3 days. Hence, it is safe to enter. We should be seeing some profit taking and bringing it close to the entry level.

3. CCK (7035)
The nature of the business is in poultry and seafood. Went through major corrections beginning Jun'18 after being bullish since 2016. At the same time in Jun'18, bonus and subdivision share happening at the same time which resulted in dilution of its value. A death cross (technical charting) happened in Nov'18 which further bring it down to the low of $0.365.

CCK Charting

Possible trade setups:
Aggressive trader:
Entry: $0.645 +/- 3%
Stop loss: $0.57 cents and below
Target profit: According to your rate of returns or the levels above
Remarks: Watch for breakout above $0.70 cents

Conservative trader:
Entry: $0.605 +/- 3%
Stop loss: $0.57 cents and below
Target profit: According to your rate of returns or the levels above
Remarks: Revisit entry price if price continues to stay above 20 and 50 days MA


Good luck and all the best!!!




Disclosure: The information above is for sharing purposes without any understanding of investment targets and needs of readers. References to the price movements is informational based on my analysis and data obtained from sources believed to be reliable at the point of writing. Please do your own due diligence before initiating a position as this article is not a recommendation to buy.