"Don't gamble, but watch for unusual circumstances. Excellent investment opportunities come about when superior businesses experience a one time event that depresses the stock price in relation to its intrinsic value." - Warren Buffett
Sunday, 31 March 2013
Why Being an Investor is an Ideal Career Path
There
are two big decisions that we all make in life; a family life, and a
career path. Personally, I think choosing the right career path is just
as, or more important, than deciding if you want to get married, start a
family, and the what-not. So here’s why I think being an investor is an
ideal career path.
Obviously, you get to work for yourself!
I hate working for others. I absolutely hate it, for two reasons.
1 – You’re not being paid what you’re worth. To make a profit, your employer can’t pay it’s employees what they’re really worth. Let’s put it this way. You’re company has 100 workers, and makes $10 million of profit each year. In order to make a profit, they must pay each employee less than $100,000 a year; less than what they’re truly worth. So if you work for yourself, and make $10 million, every single penny of that $10 million goes to you (except for the costs, of course).
2 – You’re fate is in the hands of others! If you work for others, they can decide at a moment’s notice to fire you. They can fire you during a recession, leaving you destitute. They can raise idiots up the corporate ladder, while hard working decent guys like you are stuck. I hate it when others have control over my future. This is my life, and no idiot is going to decide if I succeed or not. If I fail while working for myself as an investor, at least I can say that I tried my best, and failed with honour. But if I fail because my employer has a bone to pick with me, that’s just plain frustrating, because often times there’s nothing you can do about it.
Freedom to work from wherever you want.
The only tools I have as an investor are a couple of investment books, my laptop, InteractiveBrokers (a trading software on my laptop), Metastock, and the internet. I can choose to work from my house, the library, anywhere I want. I can move to China for 6 months and invest in the American markets from there (ahhhhh, the wonders of modern day technology). I can lounge on the beach, and work on my investments. So what happens if you work for someone else? Can you pack up at a moment’s notice? Probably not. So what happens if you run a brick and mortar business? Can you leave whenever you want? Absolutely not! Who’s going to be around to monitor your business? You’re tied to a physical location. But as an investor, you aren’t tied to any one place.]
Freedom to pack up and take a long vacation any time.
As long as I have the money, I can pack up and go on vacation for as long as I want. If I’m feeling to stressed out, I can shut down my investment positions, tell everyone I’m leaving, tour the world for a few months, then come right back to my investments. It’s a wonderful lifestyle, I tell you! If you’re an employee, your boss will probably fire your ass if you leave for more than a month or two. If you’re a small – medium sized business owner, you’re business will shut down if you leave it for more than 2 weeks! But as an investor, you can close up shop and come back whenever you want. Your investment skills will always be with you, and so will your capital.
Investing is an old man’s game.
In my opinion, working as a pure engineer in the tech industry is a terrible idea. Once you hit 40, you’re competing with guys who are in their 20s that can stay awake on 3 hours of sleep each night and work like they’re demented or something. There’s no way you can compete with them. So let’s face the truth. We’ll all be old one day. So why choose a career where you’re golden age is when you’re 20 or 30 something, and after that , go on a long decline? Choose a profession where experience counts, dammit! In the realm of the financial markets, there is nothing new. There will always be panics, fears, exuberance, bubbles, etc. Once you’ve had enough experience, you know first hand how the future for the markets will play out, because market history repeats itself.
You can go long and short, or choose not to have a position at all.
Most professions get wacked by the economic cycle one way or another. Mass layoffs in some industries during recessions, and mass layoffs in other industries in prosperous times. One cannot switch professions all the time; you can’t just jump ship to the hottest industry that’s hiring like crazy whenever you feel like it. As a business owner, you can’t profit from both good and poor economic times. A business is a slow, lumbering ship. You can’t turn 180 degrees at an instant’s notice. You can’t close down your business if you foresee bad economic clouds coming, and reopen when things are all better. But as an investor, you can change from 100% long to 100% short. Or, if you’re confused, you can close down all your positions, and choose to simply conserve cash. As an investor, you get the benefit of DOING NOTHING if you want. If a business does nothing (and doesn’t continue it’s cash flow), it will go bankrupt. If an employee does nothing, he or she will be fired, and likely be incapable of making ends meet at home. But as an investor, you have the benefit of waiting for the right opportunity.
All knowledge can be used.
If you’ve seen the Turtle Trader, you’ll notice that many successful investors didn’t start off as an investor. Many were formers soldiers, plumbers, chess players, soccer players, programmers, etc. Nothing goes unused in the realm of investments.
You develop a clearer view of the world.
A big part of investing, obviously, is knowing what’s going on in this world (which grows your ability to predict the future). You don’t want to be poor Joe down there who works 9-5, lives an oblivious life, and wonders what the hell’s going on when he gets fired and sees screaming EQUITIES ARE DOOMED headlines in the newspapers one day. I call guys like Joe a fool. They are like the masses – just following the herd to their slaughter. You have three choices in life. Be ahead of the trend, go with the trend, and fall behind the trend. Most successful investors go with the trend (although a few are talented enough to go ahead of the trend). These guys won't be killed too badly when some undesirable, unforeseeable future rears its ugly head. But most people (like Joe), are the obvious kind; behind the trend. These are the guys that get killed really, Really badly.
And last, but not least…..
This should be really obvious. If you're good at investing, you can make millions and billions. But then again, if you're not, then find another profession.
Source:http://investorzblog.com
Obviously, you get to work for yourself!
I hate working for others. I absolutely hate it, for two reasons.
1 – You’re not being paid what you’re worth. To make a profit, your employer can’t pay it’s employees what they’re really worth. Let’s put it this way. You’re company has 100 workers, and makes $10 million of profit each year. In order to make a profit, they must pay each employee less than $100,000 a year; less than what they’re truly worth. So if you work for yourself, and make $10 million, every single penny of that $10 million goes to you (except for the costs, of course).
2 – You’re fate is in the hands of others! If you work for others, they can decide at a moment’s notice to fire you. They can fire you during a recession, leaving you destitute. They can raise idiots up the corporate ladder, while hard working decent guys like you are stuck. I hate it when others have control over my future. This is my life, and no idiot is going to decide if I succeed or not. If I fail while working for myself as an investor, at least I can say that I tried my best, and failed with honour. But if I fail because my employer has a bone to pick with me, that’s just plain frustrating, because often times there’s nothing you can do about it.
Freedom to work from wherever you want.
The only tools I have as an investor are a couple of investment books, my laptop, InteractiveBrokers (a trading software on my laptop), Metastock, and the internet. I can choose to work from my house, the library, anywhere I want. I can move to China for 6 months and invest in the American markets from there (ahhhhh, the wonders of modern day technology). I can lounge on the beach, and work on my investments. So what happens if you work for someone else? Can you pack up at a moment’s notice? Probably not. So what happens if you run a brick and mortar business? Can you leave whenever you want? Absolutely not! Who’s going to be around to monitor your business? You’re tied to a physical location. But as an investor, you aren’t tied to any one place.]
Freedom to pack up and take a long vacation any time.
As long as I have the money, I can pack up and go on vacation for as long as I want. If I’m feeling to stressed out, I can shut down my investment positions, tell everyone I’m leaving, tour the world for a few months, then come right back to my investments. It’s a wonderful lifestyle, I tell you! If you’re an employee, your boss will probably fire your ass if you leave for more than a month or two. If you’re a small – medium sized business owner, you’re business will shut down if you leave it for more than 2 weeks! But as an investor, you can close up shop and come back whenever you want. Your investment skills will always be with you, and so will your capital.
Investing is an old man’s game.
In my opinion, working as a pure engineer in the tech industry is a terrible idea. Once you hit 40, you’re competing with guys who are in their 20s that can stay awake on 3 hours of sleep each night and work like they’re demented or something. There’s no way you can compete with them. So let’s face the truth. We’ll all be old one day. So why choose a career where you’re golden age is when you’re 20 or 30 something, and after that , go on a long decline? Choose a profession where experience counts, dammit! In the realm of the financial markets, there is nothing new. There will always be panics, fears, exuberance, bubbles, etc. Once you’ve had enough experience, you know first hand how the future for the markets will play out, because market history repeats itself.
You can go long and short, or choose not to have a position at all.
Most professions get wacked by the economic cycle one way or another. Mass layoffs in some industries during recessions, and mass layoffs in other industries in prosperous times. One cannot switch professions all the time; you can’t just jump ship to the hottest industry that’s hiring like crazy whenever you feel like it. As a business owner, you can’t profit from both good and poor economic times. A business is a slow, lumbering ship. You can’t turn 180 degrees at an instant’s notice. You can’t close down your business if you foresee bad economic clouds coming, and reopen when things are all better. But as an investor, you can change from 100% long to 100% short. Or, if you’re confused, you can close down all your positions, and choose to simply conserve cash. As an investor, you get the benefit of DOING NOTHING if you want. If a business does nothing (and doesn’t continue it’s cash flow), it will go bankrupt. If an employee does nothing, he or she will be fired, and likely be incapable of making ends meet at home. But as an investor, you have the benefit of waiting for the right opportunity.
All knowledge can be used.
If you’ve seen the Turtle Trader, you’ll notice that many successful investors didn’t start off as an investor. Many were formers soldiers, plumbers, chess players, soccer players, programmers, etc. Nothing goes unused in the realm of investments.
You develop a clearer view of the world.
A big part of investing, obviously, is knowing what’s going on in this world (which grows your ability to predict the future). You don’t want to be poor Joe down there who works 9-5, lives an oblivious life, and wonders what the hell’s going on when he gets fired and sees screaming EQUITIES ARE DOOMED headlines in the newspapers one day. I call guys like Joe a fool. They are like the masses – just following the herd to their slaughter. You have three choices in life. Be ahead of the trend, go with the trend, and fall behind the trend. Most successful investors go with the trend (although a few are talented enough to go ahead of the trend). These guys won't be killed too badly when some undesirable, unforeseeable future rears its ugly head. But most people (like Joe), are the obvious kind; behind the trend. These are the guys that get killed really, Really badly.
And last, but not least…..
This should be really obvious. If you're good at investing, you can make millions and billions. But then again, if you're not, then find another profession.
Source:http://investorzblog.com
Saturday, 30 March 2013
Quote for the day
"At some point in a business cycle one has to get greedy. And the time to get greedy is when everybody’s running for the hills with fear." - Bruce Berkowitz
Thursday, 28 March 2013
Investor interest shifting toward low risk counters.....
The week concluded with firm interest on blue chips with
both indices dipping marginally week on week. The All Share Price Index lost
33.2 points to close at 5,735.7 points (-0.6% WoW), while the S&P SL20 index
fell 19.1 points to close at 3,293.6 points (-0.6% WoW). The ASI fell mainly on
the back of the losses made by Ceylon Tobacco (-2.1% WoW), Bukit Darah (-2.0%
WoW), Sampath Bank (-2.6% WoW), Carsons Cumberbatch (-1.1% WoW) and Peoples
Leasing & Finance (- 4.4% WoW).
Conclusion:
The dip in both indexes during the week can also be
attributed to the shift in investor interest from counters with moderate growth
prospects towards fundamentally strong blue chip stocks with higher growth
prospects. It is notable that Banking and Diversified sectors have emerged as
the key growth drivers of the Colombo bourse marked by foreign as well as local
interest on key counters such as John Keels Holdings, Commercial Bank, Hatton
National Bank and National Development Bank. The relatively higher interest on
fundamentally strong counters by both retail and high net worth participants
indicates a general change in the level of risk appetite within the market.
This demonstrates a shift of investor interest towards low risk and
fundamentally strong growth stocks that may serve the purpose of a safe haven investment
at a time where the overall direction of the economy is being reassessed by
market forces. We are of the view that these significant changes in market
behaviour indicates that the Stock Exchange is maturing in terms of its level
of responsiveness to general economic conditions.
Commercial Bank backed by both large scale and retail
investors emerged as the main contributor to the turnover during the week
adding circa 20% to the total turnover. Further, Sampath Bank, John Keels
Holdings and National Development Bank together contributed circa 40% to the
weekly turnover demonstrating the major involvement by selected large cap counters
in raising turnover levels in the Colombo Bourse.
Meanwhile, Bank, Finance & Insurance sector counters
attracted heavy investor interest during the week with sector contributing
circa 53% to the weekly turnover. On the other hand, Diversified sector driven
by the crossings pertaining to John Keels Holdings chipped in with a 16%
contribution to the total weekly turnover. Hence Bank, Finance & Insurance sector
and Diversified Sector led the investments spree during the week with a
cumulative contribution of circa 70% to the total turnover.
Top contributors to the weekly volume were Asia Siyaka
Commodities, Commercial Leasing & Finance, PC House, Commercial Bank and Expo
Lanka Holdings .The average daily turnover for the week was LKR 1,110.3 mn up
57.5%WoW whilst the average daily volume was 66.3 mn shares.
Significant foreign investor interest was observed over the
week with foreign purchases amounting to LKR 1,204.2 mn, whilst foreign sales
amounted to LKR 728.1 mn. Market capitalisation stood at LKR 2,205.1 bn, and
the YTD performance is 1.6%.
Institutional and foreign participation keeps the bourse
alive, whilst retailers remain in the side line
The short week’s trading activities at the Colombo bourse
were primarily on a sluggish mode after witnessing a positive momentum during
last week. The bench mark index traded within a very narrow range, to wrap up
the week in red. Retailers were largely adopting a “wait and see” approach
whilst institutional and foreign participation held up the bourse’s
performance. John Keells Holdings continued to be the favourite pick of the
foreign investors, whilst country’s leading banks too grabbed the attention of
high net worth, institutional and foreign investors.
Even though the market activities were lethargic during the
week presumably due to the holiday mood creeping in and the increasing treasury
yields, foreign activity continued to dominate the market with a weekly net
foreign inflow of LKR476mn. It’s noteworthy to mention that the primary reason
behind this is that the Colombo bourse continues to remain as an attractive
frontier market whilst selected blue chip companies future prospectus remains promising.
Further it is noteworthy to mention that Sri Lankan corporate listed debt
market has shown signs of revival following the concessions provided for
corporate bond investments through 2013 budget proposals. Several Banking,
Finance & Insurance sector giants have already taken advantage of this new
development while recently Lion Brewery and Softlogic Holdings have revealed
their plans to raise LKR3bn and LKR750mn respectively through debenture issues.
This would enable firms to borrow at a rate of interest relatively below the
AWLR and more closer to AWFDR depending on the credit rating, allowing firms to
realign their attention towards long term investments and hence further
optimizing the resource allocation of the corporate sector.
Source: ASIA WEALTH MANAGEMENT CO. (PVT) LTD.
Quote for the day
"When everyone believes something is risky, their unwillingness to buy usually reduces it’s price to the point where it’s not risky at all. Broadly negative opinion can make it the least risky thing since all optimism has been driven out of it’s price." - Howard Marks
LSL Market Review 28th Mar 2013
On Thursday, profit taking in the wider market and a marked drop on Sampath Bank upon employee’s share options being exercised brought the indices lower. DFCC hit a 52-week high of Rs. 131.50 amidst an overall surge in most banking counters. Banking counters are sought after as investors view them as stable investments with regular dividends.
ASI dipped 9.31 points (0.16%) to close at 5,735.68 and the S&P SL20 index lost 6.30 points (0.19%) to close at 3,293.57. Turnover was Rs. 2,040.4Mn.
Top contributors to turnover were Commercial Bank with Rs. 614.2Mn, Sampath Bank with Rs. 357.6Mn and Asia Siyaka Commodities with Rs. 278.5Mn. Most active counters for the day were Sampath Bank, Nation Lanka Finance and Commercial Bank.
Notable gainers for the day were Infrastructure Development up by 24.4% to close at Rs. 199.00, Dunamis Capital up by 20.0% to close at Rs. 12.00 and SMB Leasing up by 14.3% to close at Rs. 0.80. Notable losers for the day were PCH Holdings down by 10.0% to close at Rs. 5.40, Galadari Hotels down by 6.9% to close at Rs. 12.20 and HNB Assurance down by 6.7% to close at Rs. 47.70.
Cash map for today was 55.14%. Foreign participation was 30.01% of total market turnover whilst net foreign selling was Rs. 33.77Mn.
Wednesday, 27 March 2013
Quote for the day
"Trading runs in cycles: some good; most bad. Trade large and aggressively when trading well; trade small and modestly when trading poorly. In "good times," even errors are profitable; in "bad times" even the most well researched trades go awry. This is the nature of trading; accept it." - Dennis Gartman
LSL Market Review 27th Mar 2013
John Keells Holdings and National Development Bank contributed well in terms of gains and turnover. However, drops in other blue-chips had an overall negative effect on the indices. Softlogic Holdings made an announcement it will issue Rs. 750 worth debentures to shore up its balance sheet.
ASI dipped 0.56 points (0.01%) to close at 5,744.99 and the S&P SL20 index lost 1.28 points (0.04%) to close at 3,294.68. Turnover was Rs. 938.0Mn.
Top contributors to turnover were John Keells Holdings with Rs. 335.4Mn, National Development Bank with Rs. 173.7Mn and Aitken Spence with Rs. 52.8Mn. Most active counters for the day were National Development Bank, Pan Asia Bank and Commercial Bank.
Notable gainers for the day were Property Development up by 5.5% to close at Rs. 46.10, Pan Asia Bank up by 3.8% to close at Rs. 19.10 and National Development Bank up by 2.4% to close at Rs. 166.00. Notable losers for the day were Blue Diamonds non-voting down by 6.7% to close at Rs. 1.40, Radiant Gems down by 5.9% to close at Rs. 48.10 and Alliance Insurance down by 5.8% to close at Rs. 800.00.
Cash map for today was 59.57%. Foreign participation was 31.96% of total market turnover whilst net foreign buying was Rs. 408.17Mn.
Monday, 25 March 2013
Quote for the day
"The stock market is filled with individuals who know the price of everything, but the value of nothing." - Philip Fisher
LSL Market Review 25th Mar 2013
Indices dropped on profit taking on retail heavy counters. National Development Bank declared a final dividend of Rs. 10.00 but its share price didn’t show a marked improvement as the current market price had already factored-in its fair value. The share price of Ceylon Tobacco saw a drop during late trading. Yields on treasuries rose in today’s auction which could also contributed to the negative sentiment.
ASI dipped 23.33 points (0.40%) to close at 5,745.55 and the S&P SL20 index lost 16.30 points (0.49%) to close at 3,296.41. Turnover was Rs. 353.4Mn
Top contributors to turnover were Sampath Bank with Rs. 76.4Mn, Asian Hotels & Properties with Rs. 52.6Mn and National Development Bank with Rs. 42.5Mn. Most active counters for the day were National Development Bank, Nation Lanka Finance and Ceylon Grain Elevators.
Notable gainers for the day were Kotagala plantations-rights up by 33.3% to close at Rs. 8.00, Mahaweli Reach Hotel up by 7.7% to close at Rs. 21.00 and Ceylon Grain Elevators up by 6.5% to close at Rs. 50.60. Notable losers for the day were Citrus Leisure- warrant 19 down by 3.9% to close at Rs. 2.50, Browns Investments down by 2.9% to close at Rs. 3.30 and Asiri Surgical down by 2.1% to close at Rs. 9.40.
Cash map for today was 60.21%. Foreign participation was 15.34% of total market turnover whilst net foreign buying was Rs. 101.61Mn.
Saturday, 23 March 2013
Quote for the day
“Confidence doesn’t come from being right all the time: it comes from surviving the many occasions of being wrong.” - Brent Steenbarge
10 qualities of a successful stock market trader
Many
people take to trading in the mistaken belief that it is the simplest
way of making money. Far from it, I believe it is the easiest way of
losing money. There is an old Wall Street adage, that "the easiest way of making a small fortune in the markets is having a large fortune".
This game is by no means for the faint hearted. And, this battle is not
won or lost during trading hours but before the markets open but
through a disciplined approach to trading.
1. A successful trader has a trading plan and does his homework diligently
Winning traders diligently maintain charts and keep aside some hours for market analysis. Every evening a winning trader updates his notebook and writes his strategy for the next day. Winning traders have a sense of the market's main trend. They identify the strongest sectors of the market and then the strongest stocks in those sectors. They know the level they are going to enter at and approximate targets for the anticipated move.
For example, I am willing to hold till the market is acting right. Once the market is unable to hold certain levels and breaks crucial supports, I book profits. Again, this depends on the type of market I am dealing with.
In a strong up trend, I want the market to throw me out of a profitable trade.
In a mild up trend, I am a little more cautious and try to book profits at the first sign of weakness.
In a choppy market, not only do I trade the lightest, I book profits while the market is still moving in my direction.
Good technical traders do not worry or debate about the news flow; they go by what the market is doing.
2. A successful trader avoids overtrading
Overtrading is the single biggest malaise of most traders. A disciplined trader is always ready to trade light when the market turns choppy and even not trade if there are no trades on the horizon. For example, I trade full steam only when I see a trending market and reduce my trading stakes when I am not confident of the expected move. I reduce my trade even more if the market is stuck in a choppy mode with very small swings.
A disciplined trader knows when to build positions and step on the gas and when to trade light and he can only make this assessment after he is clear about his analysis of the market and has a trading plan at the beginning of every trading day.
3. A successful trader does not get unnerved by losses
A winning trader is always cautious; he knows each trade is just another trade, so he always uses money management techniques. He never over leverages and always has set-ups and rules which he follows religiously. He takes losses in his stride and tries to understand why the market moved against him. Often you get important trading lessons from your losses.
4. A successful trader tries to capture the large market moves
Novice traders often book profits too quickly because they want to enjoy the winning feeling. Sometimes even on the media one hears things like, "You never lose your shirt booking profits." I believe novice traders actually lose their account equity quickly because they do not book their losses quickly enough.
Knowledgeable traders on the other hand, will also lose their trading equity -- though slowly -- if they are satisfied in booking small profits all the time. By doing that the only person who can grow rich is your broker. And this does happen because, inevitably, you will have periods of drawdowns when you are not in sync with the market. You can never cover a 15-20 per cent drawdown if you keep booking small profits. The best you will do is be at breakeven at the end of the day, which is not the goal of successful trading.
A trading account that is not growing is not sustainable. Thus when you believe you have entered into a large move, you need to ride it out till the market stops acting right. Traders with a lot of knowledge of technical analysis, but little experience, often get into the quagmire of following very small targets, believing the market to be overbought at every small rise -- and uniformly so in all markets. Such traders are unable to make money because they are too smart for their own good. They forget to see the phase of the market. Not only do these traders book profits early, sometimes they even take short positions believing that a correction is "due".
Markets do not generally correct when corrections are "due". The best policy is to use a trailing stop loss and let the market run when it wants to run. The disciplined trader understands this and keeps stop losses wide enough so that he is balanced between staying in the move as well as protecting his equity. Capturing a few large moves every year is what really makes worthwhile trading profits.
5. A successful trader always keeps learning
You cannot learn trading in a day or even a few weeks, sometimes not even in months. Successful traders keep reading all the new research on technical analysis they can get their hands on. They also read a number of books every month about techniques, about trading psychology and about other successful traders and how they manage their accounts. I often like to think about traders as jehadis; unless there is a fire in the belly, unless there is a strong will and commitment to win, it is impossible to win consistently in the market.
6. A successful trader always tries to make some money with less risky strategies as well
Futures trading, for example, is a very risky business. The best of chartists and the best of traders sometimes fail. Sure, it gives the highest returns but these may not be consistent -- and the drawdowns can be large. Traders should always remember that no matter how good your analysis is, sometimes the market is not willing to oblige. In these times the 4-5 per cent that can be earned in covered calls or futures and cash arbitrage comes in very handy. It improves the long term sustainability of a trader and keeps your profit register ringing. Traders must learn to live with lower risk and lower return at certain times in the market, in order to protect and enlarge their capital.
Disciplined traders have reasonable risk and return expectations and are open to using less risky and less exciting strategies of making money, which helps them tide over rough periods in the markets.
7. A successful trader treats trading as a business and keeps a positive attitude
Trading can be an expensive adventure sport. It should be treated as a business and should be very profit oriented. Successful traders review their performance at regular intervals and try to identify causes of both superior and inferior performance. The focus should be on consistent profits rather than erratic large profits and losses. Also, trading performance should not be made a judgement on an individual; rather, it should be considered a consequence of right or wrong actions. Disciplined traders are able to identify when they are out of sync with the market and need to reduce position size, or keep away altogether.
Successful trading is like dancing in rhythm with the market. Unsuccessful traders often cut down on all other expenses but refuse to see what might be wrong with their trading methods. Denial is a costly attitude in trading. If you see that a particular trade is not working the way you had expected, reduce or eliminate your positions and see what is going on. Most disciplined and successful traders are very humble. Humility is a virtue that traders should learn on their own, else the market makes sure that they do. Ego and an "I can do no wrong" attitude in good times can lead to severe drawdowns in the long term.
Also, bad days in trading should be accepted as cheerfully as the good ones. So disciplined traders maintain composure whether they have made a profit or not on a particular day and avoid mood swings. A good way to do this is to also participate in activities other than trading and let the mind rest so that it is fresh for the next trading day.
8. A successful trader never blames the market
Disciplined traders do not blame the market, the government, the companies or anyone else, conveniently excluding themselves, for their losses. The market gives ample opportunities to traders to make money. It is only the trader's fault if he fails to recognise them. Also, the market has various phases. It is overbought sometimes and oversold at other times. It is trending some of the time and choppy at others. It is for a trader to take maximum advantage of favourable market conditions and keep away from unfavourable ones. With the help of derivatives, it is now possible to make some money in all kinds of markets. So the trader needs to look for opportunities all the time.
To my mind, the important keys to making long term money in trading are:
- Keeping losses small. Remember all losses start small
- Ride as many big moves as possible
- Avoid overtrading.
- Never try to impose your will on the market
It is impossible to practice all of the above perfectly. However, if you can practice all of the above with some degree of success, improvement in trading performance can be dramatic.
9. A disciplined trader keeps a cushion
If new traders are lucky to come into a market during a roaring bull phase, they sometimes think that the market is the best place to put all one's money. But successful and seasoned traders know that if the market starts acting differently in the future, which it surely will, profits will stop pouring in and there might even be periods of losses. So do not commit more than a certain amount to the market at any given point of time. Take profits from your broker whenever you have them in your trading account and stow them away in a separate account. I say this because the market is like a deep and big well. No matter how much money you put in it, it can all vanish. So by having an account where you accumulate profits during good times, it helps you when markets turn unfavourable.
This also makes drawdowns less stressful as you have the cushion of previously earned profits. Trading is about walking a tightrope most times. Make sure you have enough cushion if you fall.
10. A successful trader knows there is no Holy Grail in the market
There is no magical key to the Indian or any other stock market. If there were, investment banks that spend billions of dollars on research would snap it up. Investing software and trading books by themselves can't make you enormously wealthy. They can only give you tools and skills that you can learn to apply. And, finally, there is no free lunch; every trading penny has to be earned. I would recommend that each trader identify his own style, his own patterns, his own horizon and the set-ups that he is most comfortable with and practice them to perfection. You need only to be able to trade very few patterns to make consistent profits in the market.
No gizmos can make a difference to your trading. There are no signals that are always 100 per cent correct, so stop looking for them. Focus, instead, on percentage trades, trying to catch large moves and keeping your methodology simple. What needs constant improving are discipline and your trading psychology. At end of the day, money is not made by how complicated-looking your analysis is but whether it gets you in the right trade at the right time. Over-analysis can, in fact, lead to paralysis and that is death for a trader. If you can't pull the trigger at the right time, then all your analysis and knowledge is a waste.
By Ashwani Gujral
Excerpt from How to Make Money Trading Derivatives by Ashwani Gujral.
http://www.rediff.com/money/2007/dec/12perfin.htm
1. A successful trader has a trading plan and does his homework diligently
Winning traders diligently maintain charts and keep aside some hours for market analysis. Every evening a winning trader updates his notebook and writes his strategy for the next day. Winning traders have a sense of the market's main trend. They identify the strongest sectors of the market and then the strongest stocks in those sectors. They know the level they are going to enter at and approximate targets for the anticipated move.
For example, I am willing to hold till the market is acting right. Once the market is unable to hold certain levels and breaks crucial supports, I book profits. Again, this depends on the type of market I am dealing with.
In a strong up trend, I want the market to throw me out of a profitable trade.
In a mild up trend, I am a little more cautious and try to book profits at the first sign of weakness.
In a choppy market, not only do I trade the lightest, I book profits while the market is still moving in my direction.
Good technical traders do not worry or debate about the news flow; they go by what the market is doing.
2. A successful trader avoids overtrading
Overtrading is the single biggest malaise of most traders. A disciplined trader is always ready to trade light when the market turns choppy and even not trade if there are no trades on the horizon. For example, I trade full steam only when I see a trending market and reduce my trading stakes when I am not confident of the expected move. I reduce my trade even more if the market is stuck in a choppy mode with very small swings.
A disciplined trader knows when to build positions and step on the gas and when to trade light and he can only make this assessment after he is clear about his analysis of the market and has a trading plan at the beginning of every trading day.
3. A successful trader does not get unnerved by losses
A winning trader is always cautious; he knows each trade is just another trade, so he always uses money management techniques. He never over leverages and always has set-ups and rules which he follows religiously. He takes losses in his stride and tries to understand why the market moved against him. Often you get important trading lessons from your losses.
4. A successful trader tries to capture the large market moves
Novice traders often book profits too quickly because they want to enjoy the winning feeling. Sometimes even on the media one hears things like, "You never lose your shirt booking profits." I believe novice traders actually lose their account equity quickly because they do not book their losses quickly enough.
Knowledgeable traders on the other hand, will also lose their trading equity -- though slowly -- if they are satisfied in booking small profits all the time. By doing that the only person who can grow rich is your broker. And this does happen because, inevitably, you will have periods of drawdowns when you are not in sync with the market. You can never cover a 15-20 per cent drawdown if you keep booking small profits. The best you will do is be at breakeven at the end of the day, which is not the goal of successful trading.
A trading account that is not growing is not sustainable. Thus when you believe you have entered into a large move, you need to ride it out till the market stops acting right. Traders with a lot of knowledge of technical analysis, but little experience, often get into the quagmire of following very small targets, believing the market to be overbought at every small rise -- and uniformly so in all markets. Such traders are unable to make money because they are too smart for their own good. They forget to see the phase of the market. Not only do these traders book profits early, sometimes they even take short positions believing that a correction is "due".
Markets do not generally correct when corrections are "due". The best policy is to use a trailing stop loss and let the market run when it wants to run. The disciplined trader understands this and keeps stop losses wide enough so that he is balanced between staying in the move as well as protecting his equity. Capturing a few large moves every year is what really makes worthwhile trading profits.
5. A successful trader always keeps learning
You cannot learn trading in a day or even a few weeks, sometimes not even in months. Successful traders keep reading all the new research on technical analysis they can get their hands on. They also read a number of books every month about techniques, about trading psychology and about other successful traders and how they manage their accounts. I often like to think about traders as jehadis; unless there is a fire in the belly, unless there is a strong will and commitment to win, it is impossible to win consistently in the market.
6. A successful trader always tries to make some money with less risky strategies as well
Futures trading, for example, is a very risky business. The best of chartists and the best of traders sometimes fail. Sure, it gives the highest returns but these may not be consistent -- and the drawdowns can be large. Traders should always remember that no matter how good your analysis is, sometimes the market is not willing to oblige. In these times the 4-5 per cent that can be earned in covered calls or futures and cash arbitrage comes in very handy. It improves the long term sustainability of a trader and keeps your profit register ringing. Traders must learn to live with lower risk and lower return at certain times in the market, in order to protect and enlarge their capital.
Disciplined traders have reasonable risk and return expectations and are open to using less risky and less exciting strategies of making money, which helps them tide over rough periods in the markets.
7. A successful trader treats trading as a business and keeps a positive attitude
Trading can be an expensive adventure sport. It should be treated as a business and should be very profit oriented. Successful traders review their performance at regular intervals and try to identify causes of both superior and inferior performance. The focus should be on consistent profits rather than erratic large profits and losses. Also, trading performance should not be made a judgement on an individual; rather, it should be considered a consequence of right or wrong actions. Disciplined traders are able to identify when they are out of sync with the market and need to reduce position size, or keep away altogether.
Successful trading is like dancing in rhythm with the market. Unsuccessful traders often cut down on all other expenses but refuse to see what might be wrong with their trading methods. Denial is a costly attitude in trading. If you see that a particular trade is not working the way you had expected, reduce or eliminate your positions and see what is going on. Most disciplined and successful traders are very humble. Humility is a virtue that traders should learn on their own, else the market makes sure that they do. Ego and an "I can do no wrong" attitude in good times can lead to severe drawdowns in the long term.
Also, bad days in trading should be accepted as cheerfully as the good ones. So disciplined traders maintain composure whether they have made a profit or not on a particular day and avoid mood swings. A good way to do this is to also participate in activities other than trading and let the mind rest so that it is fresh for the next trading day.
8. A successful trader never blames the market
Disciplined traders do not blame the market, the government, the companies or anyone else, conveniently excluding themselves, for their losses. The market gives ample opportunities to traders to make money. It is only the trader's fault if he fails to recognise them. Also, the market has various phases. It is overbought sometimes and oversold at other times. It is trending some of the time and choppy at others. It is for a trader to take maximum advantage of favourable market conditions and keep away from unfavourable ones. With the help of derivatives, it is now possible to make some money in all kinds of markets. So the trader needs to look for opportunities all the time.
To my mind, the important keys to making long term money in trading are:
- Keeping losses small. Remember all losses start small
- Ride as many big moves as possible
- Avoid overtrading.
- Never try to impose your will on the market
It is impossible to practice all of the above perfectly. However, if you can practice all of the above with some degree of success, improvement in trading performance can be dramatic.
9. A disciplined trader keeps a cushion
If new traders are lucky to come into a market during a roaring bull phase, they sometimes think that the market is the best place to put all one's money. But successful and seasoned traders know that if the market starts acting differently in the future, which it surely will, profits will stop pouring in and there might even be periods of losses. So do not commit more than a certain amount to the market at any given point of time. Take profits from your broker whenever you have them in your trading account and stow them away in a separate account. I say this because the market is like a deep and big well. No matter how much money you put in it, it can all vanish. So by having an account where you accumulate profits during good times, it helps you when markets turn unfavourable.
This also makes drawdowns less stressful as you have the cushion of previously earned profits. Trading is about walking a tightrope most times. Make sure you have enough cushion if you fall.
10. A successful trader knows there is no Holy Grail in the market
There is no magical key to the Indian or any other stock market. If there were, investment banks that spend billions of dollars on research would snap it up. Investing software and trading books by themselves can't make you enormously wealthy. They can only give you tools and skills that you can learn to apply. And, finally, there is no free lunch; every trading penny has to be earned. I would recommend that each trader identify his own style, his own patterns, his own horizon and the set-ups that he is most comfortable with and practice them to perfection. You need only to be able to trade very few patterns to make consistent profits in the market.
No gizmos can make a difference to your trading. There are no signals that are always 100 per cent correct, so stop looking for them. Focus, instead, on percentage trades, trying to catch large moves and keeping your methodology simple. What needs constant improving are discipline and your trading psychology. At end of the day, money is not made by how complicated-looking your analysis is but whether it gets you in the right trade at the right time. Over-analysis can, in fact, lead to paralysis and that is death for a trader. If you can't pull the trigger at the right time, then all your analysis and knowledge is a waste.
By Ashwani Gujral
Excerpt from How to Make Money Trading Derivatives by Ashwani Gujral.
http://www.rediff.com/money/2007/dec/12perfin.htm
Friday, 22 March 2013
Quote for the day
“If stock market experts were so expert, they would be buying stock, not selling advice.” - Norman R. Augustine
Colombo Bourse Sturdy despite local and foreign uncertainties.....
The week concluded on a positive note with both indices ending up in the green. The All Share Price Index rose 64.4 points to close at 5,768.9 points (1.1% WoW), while the S&P SL20 index rose by 50.3 points to close at 3,312.7 points (1.5% WoW). The ASI rose mainly on the back of the gains made by John Keells Holdings (3.3% WoW), Nestle Lanka (3.7% WoW), Hatton National Bank (5.5% WoW), Commercial Leasing & Finance (8.9% WoW) and DFCC Bank (5.8% WoW).
Indices at the Colombo Bourse continued to sustain its upward momentum during the week with bargain hunters becoming active on mid to large cap counters. This positive momentum was achieved despite the unfavourable market conditions witnessed locally, such as the verdict of the United Nations Human Rights Council (UNHCR) and the hike in the yields of the treasury securities. Moving our attention to world stock markets, European stocks continued to tumble as the region continued to increase the pace of its downturn due to the financial instability witnessed in cash-strapped Cyprus while the latest German manufacturing data showed a contraction for the month of March. Reaffirming this MSCI Europe Index witnessed WoW dip of -1.5% as at Thursday. The US markets also followed its European counterparts and took a breather after the rally witnessed in the previous 2 weeks. Although the US economy has demonstrated signs of recovery, analysts believe that European concerns could continue to wound the US economy going forward. These developments could presumably be one of the reasons for the active foreign participation in the Colombo bourse which has become attractive due to its relatively low correlation with developed markets and its attractive valuations.
Activities in the Colombo bourse was predominantly dominated by institutional, foreign and high net worth investor interest on mid to large cap counters. Conglomerate John Keells Holdings backed by heavy institutional investor play during the week, propelled itself to become the main turnover generator adding a circa 29% to the total turnover. Premier in the insurance sector Union Assurance also joined the top turnover calibre on the back of a large crossing witnessed in the last trading day.
Further, Bank, Finance & Insurance sector counters such as Commercial Bank of Ceylon, Hatton National Banka and National Development Bank witnessed institutional and high net worth interest during the week with sector contributing circa of 44% the turnover. Diversified sector also made a healthy contribution of 36% to the total turnover which was primarily energised by the crossings witnessed in John Keells Holdings. Hence Bank, Finance & Insurance sector and Diversified Sector led the turnover during the week with a cumulative contribution of 80% to the total turnover.
Top contributors to the weekly volume consists of PCH Holdings, PC House, Commercial Leasing & Finance and East West Properties .The average daily turnover for the week was LKR705.1 mn whilst the average daily volume was 27.1mn shares.
Significant foreign investor interest was observed over the week with foreign purchases amounting to LKR1,404.7 mn, whilst foreign sales amounted to LKR725.7 mn. Market capitalisation stood at LKR2217.8 bn, and the YTD performance is 2.2%.
Source: Asia Wealth Management research
Indices at the Colombo Bourse continued to sustain its upward momentum during the week with bargain hunters becoming active on mid to large cap counters. This positive momentum was achieved despite the unfavourable market conditions witnessed locally, such as the verdict of the United Nations Human Rights Council (UNHCR) and the hike in the yields of the treasury securities. Moving our attention to world stock markets, European stocks continued to tumble as the region continued to increase the pace of its downturn due to the financial instability witnessed in cash-strapped Cyprus while the latest German manufacturing data showed a contraction for the month of March. Reaffirming this MSCI Europe Index witnessed WoW dip of -1.5% as at Thursday. The US markets also followed its European counterparts and took a breather after the rally witnessed in the previous 2 weeks. Although the US economy has demonstrated signs of recovery, analysts believe that European concerns could continue to wound the US economy going forward. These developments could presumably be one of the reasons for the active foreign participation in the Colombo bourse which has become attractive due to its relatively low correlation with developed markets and its attractive valuations.
Activities in the Colombo bourse was predominantly dominated by institutional, foreign and high net worth investor interest on mid to large cap counters. Conglomerate John Keells Holdings backed by heavy institutional investor play during the week, propelled itself to become the main turnover generator adding a circa 29% to the total turnover. Premier in the insurance sector Union Assurance also joined the top turnover calibre on the back of a large crossing witnessed in the last trading day.
Further, Bank, Finance & Insurance sector counters such as Commercial Bank of Ceylon, Hatton National Banka and National Development Bank witnessed institutional and high net worth interest during the week with sector contributing circa of 44% the turnover. Diversified sector also made a healthy contribution of 36% to the total turnover which was primarily energised by the crossings witnessed in John Keells Holdings. Hence Bank, Finance & Insurance sector and Diversified Sector led the turnover during the week with a cumulative contribution of 80% to the total turnover.
Top contributors to the weekly volume consists of PCH Holdings, PC House, Commercial Leasing & Finance and East West Properties .The average daily turnover for the week was LKR705.1 mn whilst the average daily volume was 27.1mn shares.
Significant foreign investor interest was observed over the week with foreign purchases amounting to LKR1,404.7 mn, whilst foreign sales amounted to LKR725.7 mn. Market capitalisation stood at LKR2217.8 bn, and the YTD performance is 2.2%.
Source: Asia Wealth Management research
Thursday, 21 March 2013
Quote for the day
“Excellence is about stepping outside the comfort zone, training with a spirit of endeavor, and accepting the inevitability of trials and tribulations. Progress is built, in effect, upon the foundations of necessary failure.” - Matthew Syed
Market Review 21st Mar 2013
· The All Share Price Index
gained 29.0 points to close at 5,763.8 (0.5%) while the S&P SL20 Index rose
13.7 points to close at 3,313.3 (0.4%).
· Total turnover for the day
stood at LKR672.4 mn (USD5,300.6 k) vs. 12-months average daily turnover of
LKR858.2 mn (USD6,765 k), whilst the volume traded for the day was 36,336 k against the
12-month average daily volume of 37,724 k.
· Top contributors counters
towards the turnover for the day were, Hatton
National Bank LKR116.0
mn (USD914.8 k, 2.8%), East West Properties LKR92.8 mn (USD731.5 k, 7.2%), Commercial Bank LKR64.6 mn (USD509.0 k, -), Asian Hotels & properties LKR38.5 mn (USD303.8 k, 1.5%) and PC House LKR31.3
mn (USD246.8 k, 3.3%).
· The Colombo Bourse continued
to trend upwards amidst lower turnovers and volumes being recorded over the
course of the day. This was despite the hike in the yields of treasury securities and
political risk over the verdict of the United Nations Human Rights Council
(UNHCR) which took place today. Hatton
National Bank was
the top contributor towards the day’s turnover accounting for approx. 17% of
the day’s turnover.
This was on the back of a crossing which took place on the
counter where 500 k shares change hands at a price of LKR 165. Retail interest
was witnessed in counters such as Central Investments & Finance, Janashakthi Insurance and Seylan
Merchant Bank, East West Properties witnessed a significant crossing over the course of the
day where 6 mn shares change hands at a price of LKR 15, which triggered
interest in the stock resulting in a 7.2% price appreciation ending the
day at LKR 13.40. In addition crossings were also witnessed on the following
counters; PC House benefitted
from a crossing of approx. 9.85 mn shares at a price of LKR 3.10 and Central Finance witnessed a crossing of approx. 121.4 k shares at a price of LKR 180.
· Foreign purchases amounted to
LKR219.4 mn (USD1,729.8 k), whilst foreign sales amounted to LKR119.7 mn
(USD944.0 k). This resulted in a net foreign inflow of LKR 99.7 mn being recorded at the end of
the day’s trading.
· Market
capitalization stood at LKR 2,215.8 bn. YTD performance is 2.1%.
Source: Asia Wealth Management research
Wednesday, 20 March 2013
Quote for the day
“Commitment, perseverance, and discipline are the characteristics that move people beyond desire to action, that differentiate mediocrity from greatness, and that separate greatness from super stardom.” - Doug Hirschhorn,
LSL Market Review 20th Mar 2013
Investors continued to favor Financial Services counters, including leading banks and small cap insurer, Janashakthi and Blue-chip John Keells Holdings in today’s trading session and respective sectors represented 86% of the total market turnover and 57% of the aggregate trading volume. Janashakthi Insurance turned out to be the heavily traded stock amid the most awaited dividend announcement of LKR 1.00 per share with 8% dividend yield and 45% dividend payout. John Keells Holdings and Seylan Bank non-voting were the next best traded stocks and reached 52 week high of LKR 249.70 and LKR 37.50 during the day while recording several off-the floor deals at LKR 250.00 and LKR 36.30 per share respectively.
All Share Index gained 11.96 index points (+0.21%) to close at 5,734.82 and S&P SL 20 Index advanced by 15.77 points (+0.48%) to close at 3,299.56. Market turnover was LKR 539.7mn.
Top contributors to the turnover were John Keells Holdings (LKR 211.9mn), Seylan Bank non-voting (LKR 81.4mn) and National Development Bank (LKR 23.1mn).
Among the top gainers were Kotagala Plantations – rights (up by LKR 2.00, +40%), SMB Leasing (up by LKR 0.10, +33%). On the other hand, Asiri Surgical Hospitals traded excluding dividend today and lost LKR 1.60 (+14%) to close at LKR 9.80.
Foreigners were net buyers (LKR 210mn) for the tenth consecutive day and contributed 24% of the market activity. Cash map for the day was 59.5%.
All Share Index gained 11.96 index points (+0.21%) to close at 5,734.82 and S&P SL 20 Index advanced by 15.77 points (+0.48%) to close at 3,299.56. Market turnover was LKR 539.7mn.
Top contributors to the turnover were John Keells Holdings (LKR 211.9mn), Seylan Bank non-voting (LKR 81.4mn) and National Development Bank (LKR 23.1mn).
Among the top gainers were Kotagala Plantations – rights (up by LKR 2.00, +40%), SMB Leasing (up by LKR 0.10, +33%). On the other hand, Asiri Surgical Hospitals traded excluding dividend today and lost LKR 1.60 (+14%) to close at LKR 9.80.
Foreigners were net buyers (LKR 210mn) for the tenth consecutive day and contributed 24% of the market activity. Cash map for the day was 59.5%.
Tuesday, 19 March 2013
Quote for the day
"The key to trading success is emotional discipline. If intelligence were the key, there would be a lot more people making money trading." - Victor Sperandeo
LSL Market Review – 19th Mar 2013
A late rally in blue-chips saw indices driven higher. Nestle reached an all-time high price of Rs. 1,800.00 whilst John Keells Holdings is trading at a higher adjusted price than its pre-split all-time high price. Meanwhile, National Development Bank continued to gain ground today whilst DFCC also gained good ground on thin volumes. John Keells Holdings continued to dominate turnover followed by banking counters.
ASI gained 14.85 points (0.26%) to close at 5,722.86 and the S&P SL20 index gained 13.58 points (0.42%) to close at 3,283.79. Turnover was Rs. 933.7Mn.
Top contributors to turnover were John Keells Holdings with Rs. 444.2Mn, PCH Holdings with Rs. 94.5Mn and Commercial Bank with Rs. 81.0Mn. Most active counters for the day were Nations Trust Bank, Commercial Bank and Hatton National Bank non-voting.
Amongst the top gainers Kotagala Plantations – Rights, Durdans Hospitals non-voting and Nestle Lanka reached 52 week high price levels. Asiri Surgical Hospitals traded heavily and reached 52 Week High as the counter’s XD date falls tomorrow.
Cash map for today was 56.67%. Foreign participation was 37.01% of total market turnover whilst net foreign buying was Rs. 221.8Mn.
Monday, 18 March 2013
Quote for the day
"Behind every adversity is an opportunity. If you lament over the adversity, you will miss the opportunity." – Ajaero Tony Martins
LSL Market Review 18th Mar 2013
Indices
gained helped by Hatton National Bank, Commercial Bank, Carson Cumberbatch and
Bukit Darah. Ceylon Tobacco Company saw its shares sliding today whilst John
Keells Holdings and National Development Bank saw their share prices reaching
52-week highs. Turnover was a paltry site as institutions were having an
off-day.
ASI gained
3.48 points (0.06%) to close at 5,708.01 and the S&P SL20 index gained 7.77
points (0.24%) to close at 3,270.21. Turnover was Rs. 309.4Mn.
Top
contributors to turnover were John Keells Holdings with Rs. 63.8Mn, Hatton
National Bank with Rs. 49.7Mn and Hemas Holdings with Rs. 18.5Mn. Most active
counters for the day were Panasian Power, Commercial Bank and Hatton National
Bank non-voting.
Notable
gainers for the day were Ascot Holdings up by 22.3% to close at Rs. 168.70,
Panasian Power up by 7.7% to close at Rs. 2.80 and Amana Takaful up by 6.7% to
close at Rs. 1.60. Notable losers for the day were Central Investments &
Finance down by 3.6% to close at Rs. 2.70, PC house down by 3.2% to close at
Rs. 3.00 and DFCC down by 2.3% to close at Rs. 120.10.
Cash map
for today was 46.11%. Foreign participation was 26.96% of total market turnover
whilst net foreign selling was Rs. 5.92Mn.
Sunday, 17 March 2013
Quote for the day
"I believe the very best money is to be made at the market turns. Everyone says you get killed trying to pick tops and bottoms and you make all the money by catching the trends in the middle. Well, for twelve years, I have often been missing the meat in the middle, but I have caught a lot of bottoms and tops. If you are a trend follower trying to catch the profits in the middle of a move, you have to use very wide stops. I'm not comfortable doing that. Also, markets trend only about 15% of the time; the rest of the time they move sideways." - Paul Tudor Jones
Friday, 15 March 2013
Quote for the day
"For some reason, people take their cues from price action rather than from values. What doesn’t work is when you start doing things that you don’t understand or because they worked last week for somebody else. The dumbest reason in the world to buy a stock is because it’s going up." - Warren Buffett
LSL Weekly Market Review 15th Mar 2013
Market
opened on a positive note on Monday but the main index dropped after mid-day on
retail selling. It’s assumed as a result of retail investors taking a cue from
recent upward pressure on interest rates. News of Cargills/CT Holdings securing
IFC backing for their bank failed to show a marked gain on their prices. ASI
dropped 14.08 points (0.25%) and the S&P SL20 index gained 6.45 points
(0.20%). Turnover was Rs. 557.0Mn.
On
Tuesday, indices gained on the back of improved buying activity on blue-chips
such as John Keells Holdings, Commercial Bank and Ceylon Tobacco Company.
National Development Bank rose by around Rs. 3.00 on relatively thin volumes as
investors expect a lump sum final dividend. Foreign buying on blue-chips has
driven the market from last year’s low levels and we expect this trend to
continue in the mid-term. ASI gained 27.01 points (0.48%) and the S&P SL20
index gained 17.90 points (0.55%). Turnover was Rs. 671.6Mn.
Retail
selling prevailed on Wednesday although few blue-chips sought by foreigners
gained marginally. John Keells Holdings and National Development Bank reached
their 52-week highs of Rs. 239.00 and Rs. 157.00. Ceylon Tobacco Company saw
another lackluster day with buying interest slowing. Yields on all treasuries
rose by 5 basis points each which further illustrate the negative footing of
retailers. ASI lost 18.50 points (0.32%) and the S&P SL20 index lost
11.85 points (0.36%). Turnover was Rs. 447.0Mn.
A late
surge in blue-chips helped to recover from mid-day losses on Thursday. John
Keells Holdings and National Development Bank continued to improve their
52-week highs to Rs. 239.00 and Rs. 158.50 respectively. Few blue-chips are
trading beyond their intrinsic values therefore we advise investors not to get
into the herd instinct but stick to value investing. ASI gained 3.16 points
(0.06%) and the S&P SL20 index gained 5.79 points (0.18%). Turnover was Rs.
609.2Mn.
Indices
closed higher on Friday driven by gains on foreign-favourite blue-chips such as
John Keells Holdings, Ceylon Tobacco Company and Commercial Bank. Meanwhile
National Development Bank continued to rise on speculation of a large final
dividend. However, retail counters seem to be losing interest amongst investors
who seem to be looking for steady returns with blue-chips. ASI gained 15.55
points (0.27%) to close at 5,704.53 and the S&P SL20 index gained 21.41
points (0.66%) to close at 3,262.44. Turnover was Rs. 729.9Mn.
Top
contributors to turnover were John Keells Holdings with Rs. 269.3Mn, Bukit
Darah with Rs. 97.5Mn and National Development bank with Rs. 87.0Mn. Most
active counters for the day were PC House which announced a 1:2 rights issue at
Rs. 3.00, National Development Bank and John Keells Holdings.
Notable
gainers for the day were Citrus Leisure warrant-19 up by 8.3% to close at Rs.
2.60, Ceylon tea Brokers up by 4.1% to close at Rs. 5.10 and Kelani Tyres up by
3.0% to close at Rs. 33.90. Notable losers for the day were PC House down by
12.6% to close at Rs. 3.20, Panasian Power down by 3.7% to close at Rs. 2.60
and Nawaloka down by 3.3% to close at Rs. 2.90.
Cash map
for today was 57.53%. Foreign participation was 25.74% of total market turnover
whilst net foreign buying was Rs. 335.5Mn.
Thursday, 14 March 2013
Quote for the day
"Good traders get out of a position when they realize they have made a mistake. Great traders are capable of taking the opposite position when they realize their original concept was dead wrong." - Jamie Mai
LSL Market Review – 14th March 2013
A late surge in blue-chips helped to recover from mid-day losses. John Keells Holdings and National Development Bank continued to improve their 52-week highs to Rs. 239.00 and Rs. 158.50 respectively. Few blue-chips are trading beyond their intrinsic values therefore we advise investors not to get into the herd instinct but stick to value investing.
ASI gained 3.16 points (0.06%) to close at 5,688.98 and the S&P SL20 index gained 5.79 points (0.18%) to close at 3,241.03. Turnover was Rs. 609.2Mn.
Top contributors to turnover were John Keells Holdings with Rs. 169.0Mn, Sampath Bank with Rs. 106.2Mn and Odel with Rs. 46.1Mn. Most active counters for the day were PC House, Central Investments & Finance and Free Lanka Capital Holdings.
Notable gainers for the day were Talawakelle plantations up 10.0% to close at Rs. 26.50, Blue Diamonds non-voting up by 6.7% to close at Rs. 1.60 and LOLC up by 5.5% to close at Rs. 58.00. Notable losers for the day were Environmental Resource Investments down by 13.3% to close at Rs. 1.30, Vallibel Power down by 7.1% to close at Rs. 5.20 and Central Investments & Finance down by 6.7% to close at Rs. 2.80.
Cash map for today was 55.55%. Foreign participation was 39.0% of total market turnover whilst net foreign buying was Rs. 261.2Mn.
ASI gained 3.16 points (0.06%) to close at 5,688.98 and the S&P SL20 index gained 5.79 points (0.18%) to close at 3,241.03. Turnover was Rs. 609.2Mn.
Top contributors to turnover were John Keells Holdings with Rs. 169.0Mn, Sampath Bank with Rs. 106.2Mn and Odel with Rs. 46.1Mn. Most active counters for the day were PC House, Central Investments & Finance and Free Lanka Capital Holdings.
Notable gainers for the day were Talawakelle plantations up 10.0% to close at Rs. 26.50, Blue Diamonds non-voting up by 6.7% to close at Rs. 1.60 and LOLC up by 5.5% to close at Rs. 58.00. Notable losers for the day were Environmental Resource Investments down by 13.3% to close at Rs. 1.30, Vallibel Power down by 7.1% to close at Rs. 5.20 and Central Investments & Finance down by 6.7% to close at Rs. 2.80.
Cash map for today was 55.55%. Foreign participation was 39.0% of total market turnover whilst net foreign buying was Rs. 261.2Mn.
Company Valuation Toolkit
Basic toolkit of valuation measures. So let's start with the familiar:
P/E Ratio
The price earnings ratio (P/E) is the price of a share divided by its earnings per share (EPS). It is usually described as how many years of earnings are required to pay back the cost of buying a share, assuming no growth.
Another way of looking at the P/E ratio is that it is the reciprocal of earnings yield, which is EPS divided by the share price. If a company has a P/E of 8, its earnings yield is 12.5% (100/8). If it pays out 40% of its earnings each year in dividends, then its dividend yield will be 5.0% (40% x 12.5).
The P/E ratio is a ubiquitous measure of the rating of a share, and the simplest way of comparing two companies. But it is vital to ensure that you are comparing like with like:
• P/Es can be historic (based on latest reported earnings), prospective (based on forecast earnings) or trailing twelve month. If a company has reported interim results then its trailing twelve month P/E will be based on the earnings figure in the latest interims plus the last half of the previous year;
• If companies do not have coterminous year ends (e.g. if one has a year end on 30 June and another 31 December) then you need to compare the historic P/E of one with the trailing twelve month P/E of the other;
• Reported EPS figures can be basic, diluted and adjusted, so there are as many variants of the P/E ratio;
and
• It can be safer to calculate the P/E yourself, on a per share basis or on a "whole company" basis as market capitalisation divided by earnings, which gives the same result.
P/E Relative
The P/E relative is simply a company's P/E divided by the market, or sector, average P/E.
So if a company has a P/E of 10 and the sector has an average P/E of 8 then its P/E relative is 125% (10/8), meaning it is rated at a premium of 25%.
Dividend Yield
This is dividend per share divided by the share price. Dividend yield can also be historic, prospective or trailing twelve month, and similar cautions about comparing like with like apply.
Dividend yield is intrinsically linked to earnings yield, and hence P/E ratio, through the payout ratio, the proportion of earnings paid as dividends rather than reinvested in the company.
A company can set the level of its dividend by varying the payout ratio. So dividend yield should always be considered in the context of the dividend cover, or EPS divided by its dividend per share. This shows how comfortably a company can afford to pay its dividend. Dividend cover is the reciprocal of the payout ratio.
PEG Ratio
The PEG ratio is calculated as the P/E ratio divided by the forecast growth in earnings.
It attempts to measure how much investors are paying for the anticipated future growth, and is associated with the "growth at a reasonable price" investment style.
Sometimes it can be helpful to look at some other valuation metrics as well:
Price/Sales Ratio
This is calculated by dividing the share price by revenues per share, or dividing market cap by total revenues.
It can be very illuminating in comparing companies who are direct competitors, and is useful:
• In comparing companies with very different gearing, which distorts P/E ratios; and
• If there are no earning figures, e.g. the company has made losses or is a start-up.
Price/Book Value & Price/Tangible Assets
Price to book is calculated as share price divided by net assets per share (or market cap divided by net assets). It is especially useful in specific sectors such as valuing banks, and gives an indication of how much substance underlies a company's market valuation.
Using only tangible assets is a harsher test of how much the valuation is backed by physical assets and is a useful "make sense" check as well as being associated with certain styles of investing.
Some analysts prefer to compare ratios based on a company's enterprise value (EV), which is its market capitalisation plus its outstanding debt (or long-term debt).
EV/EBITDA
EBITDA is earnings before interest, tax, depreciation and amortisation, and is operating profit (EBIT) with depreciation and amortisation added back.
This ratio is more robust in comparing companies which have very different capital structures and/or depreciation and amortisation policies.
EV/NOPAT
NOPAT is net operating profit after tax. It equals earnings before interest payments are deducted, and so the ratio is analogous to the P/E ratio applied to debt holders and shareholders taken together.
Source:Edited article from www.fool.co.uk
P/E Ratio
The price earnings ratio (P/E) is the price of a share divided by its earnings per share (EPS). It is usually described as how many years of earnings are required to pay back the cost of buying a share, assuming no growth.
Another way of looking at the P/E ratio is that it is the reciprocal of earnings yield, which is EPS divided by the share price. If a company has a P/E of 8, its earnings yield is 12.5% (100/8). If it pays out 40% of its earnings each year in dividends, then its dividend yield will be 5.0% (40% x 12.5).
The P/E ratio is a ubiquitous measure of the rating of a share, and the simplest way of comparing two companies. But it is vital to ensure that you are comparing like with like:
• P/Es can be historic (based on latest reported earnings), prospective (based on forecast earnings) or trailing twelve month. If a company has reported interim results then its trailing twelve month P/E will be based on the earnings figure in the latest interims plus the last half of the previous year;
• If companies do not have coterminous year ends (e.g. if one has a year end on 30 June and another 31 December) then you need to compare the historic P/E of one with the trailing twelve month P/E of the other;
• Reported EPS figures can be basic, diluted and adjusted, so there are as many variants of the P/E ratio;
and
• It can be safer to calculate the P/E yourself, on a per share basis or on a "whole company" basis as market capitalisation divided by earnings, which gives the same result.
P/E Relative
The P/E relative is simply a company's P/E divided by the market, or sector, average P/E.
So if a company has a P/E of 10 and the sector has an average P/E of 8 then its P/E relative is 125% (10/8), meaning it is rated at a premium of 25%.
Dividend Yield
This is dividend per share divided by the share price. Dividend yield can also be historic, prospective or trailing twelve month, and similar cautions about comparing like with like apply.
Dividend yield is intrinsically linked to earnings yield, and hence P/E ratio, through the payout ratio, the proportion of earnings paid as dividends rather than reinvested in the company.
A company can set the level of its dividend by varying the payout ratio. So dividend yield should always be considered in the context of the dividend cover, or EPS divided by its dividend per share. This shows how comfortably a company can afford to pay its dividend. Dividend cover is the reciprocal of the payout ratio.
PEG Ratio
The PEG ratio is calculated as the P/E ratio divided by the forecast growth in earnings.
It attempts to measure how much investors are paying for the anticipated future growth, and is associated with the "growth at a reasonable price" investment style.
Sometimes it can be helpful to look at some other valuation metrics as well:
Price/Sales Ratio
This is calculated by dividing the share price by revenues per share, or dividing market cap by total revenues.
It can be very illuminating in comparing companies who are direct competitors, and is useful:
• In comparing companies with very different gearing, which distorts P/E ratios; and
• If there are no earning figures, e.g. the company has made losses or is a start-up.
Price/Book Value & Price/Tangible Assets
Price to book is calculated as share price divided by net assets per share (or market cap divided by net assets). It is especially useful in specific sectors such as valuing banks, and gives an indication of how much substance underlies a company's market valuation.
Using only tangible assets is a harsher test of how much the valuation is backed by physical assets and is a useful "make sense" check as well as being associated with certain styles of investing.
Some analysts prefer to compare ratios based on a company's enterprise value (EV), which is its market capitalisation plus its outstanding debt (or long-term debt).
EV/EBITDA
EBITDA is earnings before interest, tax, depreciation and amortisation, and is operating profit (EBIT) with depreciation and amortisation added back.
This ratio is more robust in comparing companies which have very different capital structures and/or depreciation and amortisation policies.
EV/NOPAT
NOPAT is net operating profit after tax. It equals earnings before interest payments are deducted, and so the ratio is analogous to the P/E ratio applied to debt holders and shareholders taken together.
Source:Edited article from www.fool.co.uk
Wednesday, 13 March 2013
Quote for the day
"It's not whether you're right or wrong that's important, but how much money you make when you're right and how much you lose when you're wrong." - George Soros
LSL Market Review 13th Mar 2013
Retail selling prevailed today although few blue-chips
sought by foreigners gained marginally. John Keells Holdings and National
Development Bank reached their 52-week highs of Rs. 239.00 and Rs. 157.00.
Ceylon Tobacco Company saw another lackluster day with buying interest slowing.
Yields on all treasuries rose by 5 basis points each which further illustrate
the negative footing of retailers.
ASI lost 18.50 points (0.32%) to close at 5,685.82 and the
S&P SL20 index lost 11.85 points (0.36%) to close at 3,235.24. Turnover was
Rs. 447.0Mn.
Top contributors to turnover were John Keells Holdings with
Rs. 104.2Mn, Hatton National Bank with Rs. 80.6Mn and 63.8Mn. Most active
counters for the day were Union Bank, Textured Jersey and Vallibel One.
Notable gainers for the day were Lanka Tiles up by 5.4% to
close at Rs. 64.20, Commercial Leasing & Finance up by 4.7% to close at Rs.
4.50 and Odel up by 4.6% to close at Rs. 23.00. Notable losers for the day were
Serendib Hotels down by 3.9% to close at Rs. 22.10, PC Pharma down by 3.9% to
close at Rs. 7.50 and Blue Diamonds down by 3.0% to close at Rs. 3.20.
Cash map for today was 52.86%. Foreign participation was
36.85% of total market turnover and net foreign buying was Rs. 64.37Mn.
Tuesday, 12 March 2013
Quote for the day
"Bull markets go to people's heads. If you're a duck on a pond, and it's rising due to a downpour, you start going up in the world. But you think it's you, not the pond." - Charlie Munger
LSL Market Review – 12th Mar 2013
Indices gained on the back of improved buying activity on
blue-chips such as John Keells Holdings, Commercial Bank and Ceylon Tobacco
Company. National Development Bank rose by around Rs. 3.00 on relatively thin
volumes as investors expect a lump sum final dividend. Foreign buying on
blue-chips have driven the market from last year’s low levels and we expect
this trend to continue in the mid-term.
ASI gained 27.01 points (0.48%) to close at 5,704.32 and the
S&P SL20 index gained 17.90 points (0.55%) to close at 3,247.09. Turnover
was Rs. 671.6Mn.
Top contributors to turnover were John Keells Holdings with
Rs. 347.6Mn, Commercial Bank with Rs. 56.9Mn and Hatton National Bank
non-voting with Rs. 26.7Mn. Most active counters for the day were Asiri
Surgical, John Keells Holdings and Commercial Bank.
Notable gainers for the day were Asiri Surgical up by 18.1%
to close at Rs. 11.10, Seylan Developments up by 5.8% to close at Rs. 9.10 and
Commercial Leasing & Finance up by 4.8% to close at Rs. 4.40. Notable losers
for the day were PC Pharma down by 7.1% to close at Rs. 7.80, PC House down by
2.4% to close at Rs. 4.00 and Lanka Cement down by 2.4% to close at Rs. 8.00.
Cash map for today was 53.44%. Foreign participation was
35.23% of total market turnover whilst net foreign buying was Rs. 320.99Mn.
Monday, 11 March 2013
Quote for the day
"The individual investor should act consistently as an investor and not as a speculator. This means.. that he should be able to justify every purchase he makes and each price he pays by impersonal, objective reasoning that satisfies him that he is getting more than his money's worth for his purchase." - Benjamin Graham
LSL Market Review 11th Mar 2013
Market opened on a positive note but the main index dropped
after mid-day on retail selling. It’s assumed as a result of retail investors
taking a cue from recent upward pressure on interest rates. News of Cargills/CT
Holdings securing IFC backing for their bank failed to show a marked gain on
their prices.
ASI dropped 14.08 points (0.25%) to close at 5,677.31 and
the S&P SL20 index gained 6.45 points (0.20%) to close at 3,229.19.
Turnover was Rs. 557.0Mn.
Top contributors to turnover were John Keells Holdings with
Rs. 135.2Mn, Commercial Bank with Rs. 102.8Mn and Kuruwita Textile with Rs.
47.4Mn. Most active counters for the day were PC House, Nation Lanka Finance
and Central Investments & Finance.
Notable gainers for the day were Ceylinco Insurance non-voting
up by 5.5% to close at Rs. 327.00, Browns up by 4.4% to close at Rs. 116.00 and
Namunukula plantations up by 4.1% to close at Rs. 77.00. Notable losers for the
day were Orient Garments down by 7.6% to close at Rs. 8.50, Kotagala
Plantations down by 7.2% to close at Rs. 50.00 and Central Investments &
Finance down by 6.5% to close at Rs. 2.90.
Cash map for today was 57.58%. Foreign participation was
27.11% of total market turnover whilst net foreign buying was Rs. 45.01Mn.
.
The three pitfalls of value investing
By Phil Oakley
Value investing – buying stocks when they're under priced by the market – is one of the few investment strategies that consistently works over the long run. But it's not a painting-by-numbers exercise. You can't just input data into a stock-screening tool and blindly buy the results. The risk is that you end up buying stocks that are cheap for a good reason. Here are some of the pitfalls of three classic value strategies – and how to avoid them.
Low price/earnings (p/e) ratios
The price/earnings (p/e) ratio of a stock is very simple to compute – just divide the share price by earnings per share (EPS). The lower it is, the cheaper the stock. But just buying a stock with a low p/e is no guarantee of success. A low p/e could be the result of various problems, such as:
Low growth prospects: the price of a stock is a function of its future profitability. Companies in declining industries with falling profits should trade on low p/es.
Fiddled figures: the denominator of the p/e ratio – EPS – is based on accounting earnings. Although a company has to meet with accounting standards when stating its profits, there is much scope for manipulation. Companies with aggressive accounting policies are probably best avoided and should trade on low p/es.
Peaking earnings: a cyclical company – such as a house builder – may have a low p/e because its profits have peaked and are set to fall as the business cycle turns. Although it is time-consuming, it is better for investors to compute p/es for cyclical companies using an average of five or ten years' earnings and compare this ratio over time.
Low tax charges: be wary of companies with low p/es and low tax charges. If the low tax charge is temporary and begins to rise, profits can fall and the p/e rise. Where possible, compute the p/e on the basis of fully taxed EPS.
Debt: consider two companies, A and B. Each has £100m of assets, trading profit of £10m and identical growth prospects. A has no debt (£100m equity), but B finances its assets with £50m of debt and £50m of equity. Assuming tax rates of 25%, interest costs of 6% and both market caps equally stated equity. A has a p/e of 13.3 (£100m/£7.5m) and B's is 9.5 (£50m/£5.25m). But can B really be cheaper than A? This is where the enterprise p/e ratio comes in handy. Unlike a normal p/e, this factors in company debt levels. By taking the enterprise values (debt + equity) of A and B and dividing by the after-tax (but pre-debt) operating profits, we can see that the p/es are the same at 13.3 (£100m/£7.5m), which makes sense.
High dividend yields:
Dividends represent tangible returns that are independent of the stockmarket. Buying shares with a high dividend yield can be a good investment strategy (especially if dividends are reinvested), but you should also look at the following:
High payout ratio/low dividend cover: a high yield may result from a company paying out most of its profits in dividends, resulting in a low level of dividend cover (net profits divided by dividend payments). This suggests the dividend could be unsustainable if business conditions deteriorate. Also, if a firm is paying out most of its profits, it means they're not being reinvested to grow the business. As a rule, you want shares with dividend cover of two times or more.
Look for growth potential: without dividend growth, the returns from a high-dividend yield strategy are unlikely to be stellar.
Value investing – buying stocks when they're under priced by the market – is one of the few investment strategies that consistently works over the long run. But it's not a painting-by-numbers exercise. You can't just input data into a stock-screening tool and blindly buy the results. The risk is that you end up buying stocks that are cheap for a good reason. Here are some of the pitfalls of three classic value strategies – and how to avoid them.
Low price/earnings (p/e) ratios
The price/earnings (p/e) ratio of a stock is very simple to compute – just divide the share price by earnings per share (EPS). The lower it is, the cheaper the stock. But just buying a stock with a low p/e is no guarantee of success. A low p/e could be the result of various problems, such as:
Low growth prospects: the price of a stock is a function of its future profitability. Companies in declining industries with falling profits should trade on low p/es.
Fiddled figures: the denominator of the p/e ratio – EPS – is based on accounting earnings. Although a company has to meet with accounting standards when stating its profits, there is much scope for manipulation. Companies with aggressive accounting policies are probably best avoided and should trade on low p/es.
Peaking earnings: a cyclical company – such as a house builder – may have a low p/e because its profits have peaked and are set to fall as the business cycle turns. Although it is time-consuming, it is better for investors to compute p/es for cyclical companies using an average of five or ten years' earnings and compare this ratio over time.
Low tax charges: be wary of companies with low p/es and low tax charges. If the low tax charge is temporary and begins to rise, profits can fall and the p/e rise. Where possible, compute the p/e on the basis of fully taxed EPS.
Debt: consider two companies, A and B. Each has £100m of assets, trading profit of £10m and identical growth prospects. A has no debt (£100m equity), but B finances its assets with £50m of debt and £50m of equity. Assuming tax rates of 25%, interest costs of 6% and both market caps equally stated equity. A has a p/e of 13.3 (£100m/£7.5m) and B's is 9.5 (£50m/£5.25m). But can B really be cheaper than A? This is where the enterprise p/e ratio comes in handy. Unlike a normal p/e, this factors in company debt levels. By taking the enterprise values (debt + equity) of A and B and dividing by the after-tax (but pre-debt) operating profits, we can see that the p/es are the same at 13.3 (£100m/£7.5m), which makes sense.
High dividend yields:
Dividends represent tangible returns that are independent of the stockmarket. Buying shares with a high dividend yield can be a good investment strategy (especially if dividends are reinvested), but you should also look at the following:
High payout ratio/low dividend cover: a high yield may result from a company paying out most of its profits in dividends, resulting in a low level of dividend cover (net profits divided by dividend payments). This suggests the dividend could be unsustainable if business conditions deteriorate. Also, if a firm is paying out most of its profits, it means they're not being reinvested to grow the business. As a rule, you want shares with dividend cover of two times or more.
Look for growth potential: without dividend growth, the returns from a high-dividend yield strategy are unlikely to be stellar.
Buy stocks with a high free cash-flow yield: From an accounting perspective, dividends are paid from profits, but in reality they require sufficient surplus cash flow. Free cash flow represents the cash left over for dividends after non-discretionary spending, such as interest, tax and capital expenditure. Buying stocks with a high free cash-flow yield as well as a high dividend yield may prove to be a conservative and fruitful strategy. Free cash dividend cover of 1.5 to 2 times is desirable (see Tim Bennett's video tutorial for more on EPS and free cash-flow yield.
Low price-to-book (p/b) value
This strategy involves buying a company for less than its accounting book value (or shareholders' equity) and was used to great success by value investors such as Benjamin Graham. Key points to remember here are:
Book value is an accounting measure: it may or may not be a relevant indicator of commercial value. To be a successful practitioner of low price to book (p/b) value investing you need to be able to assess the liquidation value of assets on the balance sheet, ie. how much money would be raised if all the companies' assets were sold tomorrow. This may be easy if most of the assets are cash, but stocks, debtors and fixed assets can be harder to value. Many company book values have large proportions of intangible assets that are difficult to value.
Poor businesses aren't worth book value: asset values are a function of the cash flows they produce. Investors can check the reality of balance sheet asset values by calculating a company's return on capital employed (ROCE). As a rough rule of thumb, a company with a ROCE consistently below 10% may have assets that are impaired and need writing down to more realistic values.
Focus on earnings power values (EPVs) instead: this is where you calculate the sustainable profits of a business and value it as a perpetual cash flow. For example, if a business has sustainable profits of £100m and you require a return of 10%, it is worth £1bn (£100m/10%). If you can buy the business at a significant discount to this value, you may have a good value investment.
Source:http://www.moneyweek.com/investment-advice/how-to-invest/strategies/the-pitfalls-of-value-investing-53516
Sunday, 10 March 2013
Quote for the day
"Human emotion is a big enemy of the average investor and trader. Be
patient and unemotional. There are periods where traders don't need to
trade." - James P. Arthur Huprich
Learn to Invest Time!
When I think of creating wealth, the first thing that comes to my mind is that
I need to invest money. I need apply what I have learned from the Rich Dad
series by Robert Kiyosaki by making my money work harder. All along, it never
crosses my mind that I need to invest another essential thing to make it
happen. In fact, I have been consciously investing this essential thing all
along except that I do not realize it.
When I first heard about it yesterday, I feel enlightened. To be rich, I need to invest time too! I need to invest my time to study so as to gain financial literacy. I need invest my time to learn how to invest. I need invest my time to analyze investment opportunities. I need to invest my time to make the actual investments. I need to invest my time to monitor my investments. Time is definitely an essential component for wealth creation.
In short, I definitely need to spend a lot of time to create my wealth as well. That is where my problem comes. I want to be rich but I cannot find time to do it! Does this excuse sound familiar to you?
Unfortunately, according to Rich Dad's series by Robert Kiyosaki, time is one of the two available components that I can invest to create wealth. In other words, if I want to become rich, I must definitely find a way to overcome this excuse.
And this excuse is used for a lot of other things too. For examples, I want to exercise regularly so that I can become healthy. But I cannot find time to do it. I want to practice regularly so that I can become a good dancer. But I cannot find time to do it. I want to spend more time with my loved ones but I cannot find time to do it.
Why do I say that it is an excuse and not a limitation? Well, I have 24 hours a day like everyone else. No one is privilege to have more time compared to the other. Since the amount of time is the same for everyone, why is it that someone seems to have more time and accomplish more things than others?
The answer is very simple. It is a matter of personal choice on how I spend my time. Usually, I choose to spend my time on something that I feel is more important. That is why I will never have time for the unimportant things. Since it is a matter of choice, then it is an excuse when I say I do not have time. It simply means that I do not find the matter important enough to invest my time on it.
Imagine if 24 hours a day is like a note of $24, how will I spend the $24? I can spend $24 to buy a dozen of can drinks such as Coke from the supermarket. Alternatively, I can spend $24 to drink a few can drinks from a high-class restaurant or pub. Comparatively, I will have gained more if I have spent my $24 on the supermarket.
That is exactly the same situation with time. How much can I accomplish in 24 hours is really dependent on how I have spent it. If I have spent it wisely, I can accomplish more things. If I just laze around and do nothing, then I will accomplish nothing.
For any typical working person, he needs to spend about 8 hours per day on sleep. He spends about 4 hours daily on meals and personal items. Another 10 hours per day of his time is spent on work including travelling time. All that is left at the end of the day is about 2 hours. If he just relaxes and watches the television, then his whole day is basically gone. But if he spends the 2 hours wisely, he will be able to accomplish more things. Similarly, the way he spends his weekends will determine how much he can accomplish in life.
Some people may be luckier than others because they have more leisure time than the others. But that does not necessary mean that they will be able to accomplish more things than others. The key is how they invest their leisure time. Just like a person who earns more than others does not invest wisely as learned from the Rich Dad's series by Robert Kiyosaki, he will be definitely poorer than others by spending mindlessly.
In conclusion, I feel that learning to invest time is as important as learning to invest money if I want to succeed in life.
Source: Rich dad Secrets 4 Me
When I first heard about it yesterday, I feel enlightened. To be rich, I need to invest time too! I need to invest my time to study so as to gain financial literacy. I need invest my time to learn how to invest. I need invest my time to analyze investment opportunities. I need to invest my time to make the actual investments. I need to invest my time to monitor my investments. Time is definitely an essential component for wealth creation.
In short, I definitely need to spend a lot of time to create my wealth as well. That is where my problem comes. I want to be rich but I cannot find time to do it! Does this excuse sound familiar to you?
Unfortunately, according to Rich Dad's series by Robert Kiyosaki, time is one of the two available components that I can invest to create wealth. In other words, if I want to become rich, I must definitely find a way to overcome this excuse.
And this excuse is used for a lot of other things too. For examples, I want to exercise regularly so that I can become healthy. But I cannot find time to do it. I want to practice regularly so that I can become a good dancer. But I cannot find time to do it. I want to spend more time with my loved ones but I cannot find time to do it.
Why do I say that it is an excuse and not a limitation? Well, I have 24 hours a day like everyone else. No one is privilege to have more time compared to the other. Since the amount of time is the same for everyone, why is it that someone seems to have more time and accomplish more things than others?
The answer is very simple. It is a matter of personal choice on how I spend my time. Usually, I choose to spend my time on something that I feel is more important. That is why I will never have time for the unimportant things. Since it is a matter of choice, then it is an excuse when I say I do not have time. It simply means that I do not find the matter important enough to invest my time on it.
Imagine if 24 hours a day is like a note of $24, how will I spend the $24? I can spend $24 to buy a dozen of can drinks such as Coke from the supermarket. Alternatively, I can spend $24 to drink a few can drinks from a high-class restaurant or pub. Comparatively, I will have gained more if I have spent my $24 on the supermarket.
That is exactly the same situation with time. How much can I accomplish in 24 hours is really dependent on how I have spent it. If I have spent it wisely, I can accomplish more things. If I just laze around and do nothing, then I will accomplish nothing.
For any typical working person, he needs to spend about 8 hours per day on sleep. He spends about 4 hours daily on meals and personal items. Another 10 hours per day of his time is spent on work including travelling time. All that is left at the end of the day is about 2 hours. If he just relaxes and watches the television, then his whole day is basically gone. But if he spends the 2 hours wisely, he will be able to accomplish more things. Similarly, the way he spends his weekends will determine how much he can accomplish in life.
Some people may be luckier than others because they have more leisure time than the others. But that does not necessary mean that they will be able to accomplish more things than others. The key is how they invest their leisure time. Just like a person who earns more than others does not invest wisely as learned from the Rich Dad's series by Robert Kiyosaki, he will be definitely poorer than others by spending mindlessly.
In conclusion, I feel that learning to invest time is as important as learning to invest money if I want to succeed in life.
Source: Rich dad Secrets 4 Me
Friday, 8 March 2013
Quote for the day
"Remember, I am neither a bear nor a bull, I am an
agnostic opportunist. I want to make money short- and long-term. I want to find
good situations and exploit them." - Jim Cramer
LSL Weekly Market Review 08th Mar 2013
Mid-capped and low-capped counters led the losers on Monday
although encouraging activity was seen Commercial Bank and Sampath Bank.
Foreigners were net buyers in banking counters. Ceylon Tobacco Company was on
the losers list as well. ASI slipped 20.80 points (0.37%) and S&P SL 20
Index lost 3.07 points (0.10%). Turnover was Rs.1.1bn. Top contributors to
turnover were Commercial Bank, Sampath Bank and National Development Bank. Most
active counters for the day were Commercial Bank, National Development Bank and
Touchwood Investments. Cash map was 54.28% which mostly led by solid buying on
banking counters. Foreign participation was 41.6% while net foreign buying was
Rs.858.31Mn.
On Tuesday gains on blue-chips helped to shore up some of
the losses on the broader index as indices closed on a mixed note. Private
deals on John Keells Holdings and Hatton National Bank provided the market with
more than half of the turnover. Promoting retail buying in this sluggish period
is critical for the success of the local capital market. ASI dipped 5.12points
(0.09%) the S&P SL20 index gained 5.14 points (0.16%). Turnover was
Rs.602.8Mn. Top contributors to turnover were John Keells Holdings, Hatton
National Bank and Hatton National Bank non-voting. Most active counters for the
day were Tess Agro, Central Investments & Finance and Touchwood
Investments. Cash map was 58.0%%. Foreign participation was 25.21% whilst net
foreign buying was Rs.281.95Mn.
Indices gained higher on Wednesday helped by advances on
low-capped and mid-capped counters which is a clear reversal from recent
patterns. Deals on Hatton National Bank, Cargills and Asia Siyaka Commodities
propelled turnover levels. Yields on treasuries advanced in today’s auction
which might indicate Monetary Board will hold policy rates at the current rate.
ASI gained 36.59 points (0.65%) and the S&P SL20 gained 5.94 points.
Turnover was Rs.1.3bn. Top contributors to turnover were Hatton National Bank,
Cargills and Asia Siyaka Commodities. Most active counters for the day were
Central Investments & Finance, HVA Foods and Nation Lanka Finance. Cash map
closed 51.7%. Foreign investors were net sellers with net outflow of Rs.248.5Mn.
The transfer of a minority stake in Asian Alliance Insurance
to Dutch and German investors from Softlogic Holdings was the highlight of the
Thursday’s trading. Buying activity was also evident in Cargills and John
Keells Holdings. Market trended in the opposite direction according to the
implications of Wednesday’s rise in treasury yields. ASI gained 16.66 points
(0.29%) and S&P SL20 index gained 5.55 points (0.17%). Turnover was
Rs.2.5Bn. Top contributors to turnover were Asian Alliance Insurance, Cargills
and John Keells Holdings. Most active counters for the day were Nation Lanka
Finance, Nation Lanka Finance-W0021 and PC House. Cash map closed at 71.5%.
Foreign participation was 48% whilst net foreign buying was Rs.2.2Bn.
Colombo shares rose further on Friday driven mainly by
blue-chips and the banking sector stocks. Central Bank, as expected, decided to
hold the policy rates at the current level on expectations of favorable
inflation rate in the near future. With the earnings season coming to an end,
the market PE has now reached 11.3x, which is the lowest among the peer indices
such as MSCI frontier market index (11.8x), MSCI emerging frontier markets
index (14.5x). ASI advanced by 11.37 points (+0.2%) to close at 5,691.39
while S&P SL 20 index gained 2.33 points (+0.1%) to close at 3,222.74.
Market turnover was Rs.1.2bn. Blue chips dominated the market activity where
Ceylon Tobacco (Rs.331mn), John Keells Holdings (Rs.314 mn) and Commercial Bank
(Rs.103 mn) were the top contributors to the days’ turnover. Retailers were
seen active in the counters such as Nation Lanka Finance, PC House and Janashakthi
Insurance. Noteworthy gainers for the day were, HNB voting at Rs.156.00, up by
Rs.4.00, HNB non-voting at Rs.127.40, up by Rs.3.70. Ceylon Tobacco at Rs.
800.00, up by Rs.10.60 while notable losers were Nation Lanka Finance at
Rs.9.50, down by Rs.0.40, Free Lanka Capital at Rs.2.40, down by Rs.0.10 and
Piramal Glass at Rs.6.00, down by Rs.0.20. Cash map declined to five day low of
45%. Foreigners were net buyers for the third consecutive day with a net
foreign inflow of Rs.206mn. The foreign participation accounted for 53% of the
market activity.
Thursday, 7 March 2013
Quote for the day
"A market is the combined behavior of thousands of
people responding to information, misinformation and whim." - Kenneth Chang
LSL Market Review 7th Mar 2013
The transfer of a minority stake in Asian Alliance Insurance
to Dutch and German investors from Softlogic Holdings was the highlight of the
day’s trading. Buying activity was also evident in Cargills and John Keells
Holdings. Market trended in the opposite direction according to the
implications of yesterday’s rise in treasury yields.
ASI gained 16.66 points to close at 5,680.02 and the S&P
SL20 index gained 5.55 points to close at 3,220.41. Turnover was Rs. 2.5Bn.
Top contributors to turnover were Asian Alliance Insurance
with Rs.1.8Bn, Cargills with Rs.238.0Mn and John Keells Holdings with Rs.
89.0Mn. Most active counters for the day were Nation Lanka Finance, Nation
Lanka Finance warrant 21 and PC House.
Notable gainers for the day were Nation Lanka Finance
warrant 21 up by 25.0% to close at Rs. 1.50, Nation Lanka Finance up by 8.7% to
close at Rs. 10.00 and Durdans up by 7.3% to close at Rs. 103.00. Notable
losers for the day were Environmental Resource Investments down by 5.6% to
close at Rs. 1.70, Pan Asian Power down by 3.7% to close at Rs. 2.60 and Ceylon
Guardian Investments down by 3.5% to close at Rs. 161.10.
Cash map for today was 71.45%. Foreign participation was 48%
of total market turnover whilst net foreign buying was Rs. 2.2Bn.
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