Hi all, mid-term exams are around the corner, so there hasn't been much time for the blog. I am dropping by just to give a quick update.
Recently, my trading account has seen a lower number of trades thanks to the bleak market outlook, economic volatility, and my current experimentation with different methods of screening the companies.
However, I would like to highlight a recent trade I have made on the company: HanKore Environment Tech Group Ltd. Touted as one of the up-and-coming counters on the market, I briefly checked its financials before looking at some technical indicators. Even though MACD showed the beginning of a downtrend, I noticed that 3/14-period Stochastics showed a current undervaluation. Volume traded throughout the day was also strong, with a large number of buyers entering the market to buy at the ask price.
I decided to enter the market based on these factors for a short term investment. As of now, I have sold off all shares of HanKore through a contra trade, and my returns are as follows:
Return on HanKore: 9.01%
Total Cumulative Return on Portfolio 2014: 13.24%
Update: I have also sold off all Ezion shares to make a positive, but negligible return. I have decided to relinquish ownership of the shares for a number of reasons:
1. The stock price moves too slowly for my personal liking.
2. I bought at a high. While there is still much potential upside based on valuation (even those done by brokerages), Ezion's share price has had a track record of not being able to meet, or even come close to the target.
3. Market outlook is bad. Being an oil & gas company, Ezion's share price is very likely to be hit hard by a depression, or a poor global economy. I will revisit Ezion when such a time occurs (forecasted to be this year or the next).
Tuesday, 18 February 2014
Tuesday, 4 February 2014
A Goal, a Portfolio, and some Info
Time for a quick update!
Currently my aim is to earn 2 million dollars by the time I hit 40 years old. Seems crazy doesn't it. But I'm gonna try. After working out the math, I would need to earn close to 25% on my initial investment, year-on-year for the next 17 years. And judging by how bearish the market looks at this point in time, its gonna be a rocky start to this new year.
Moving into the new year, I am invested into three different sectors. The Water Treatment industry, the Semiconductor industry, and the Oil & Gas Industry. My portfolio make-up is shown below:
I have reduced my holdings in United Envirotech (UEL) to 0 recently because I decided it was time to exit the market and realize my gains. These lots (1,000 shares) were accumulated between August and November 2013, and at time of sale, have produced a return of 16.44%.
Return on UEL: 16.44%
Total Cumulative Return on Portfolio 2014: 11.75%
For those interested in why I was/am invested in UEL:
The Water Treatment Industry (WT) in China is huge. China is home to huge network of rivers and inland water bodies, including two of the most notable rivers in the world: the Yangtze River, and the Yellow River. With this knowledge, one would think that water would not be China's biggest problem. However, thanks to deep-set practices that aggravate water pollution, along with the booming industries generating huge amounts of wastewater, China's government needs to do something about it. And they are.
Based on China's 12th Five-Year Plan (2011-2015), the Chinese government has increased the total projected investment into water treatment to RMB 430 billion. That works out to 17% more than the 11th FYP. Because of this, WT companies in China are projected to flourish in the wake of this wave of investments. UEL is a leading company in the WT Industry, and is and has been doing increasingly well over the past few quarters/years because of this strong demand for water treatment. I'll keep it short for now, but you can find more information in the links below.
Do read this article for more background information on China's WT industry. Article Here.
For more information about UELs financial health, Click Here.
Currently my aim is to earn 2 million dollars by the time I hit 40 years old. Seems crazy doesn't it. But I'm gonna try. After working out the math, I would need to earn close to 25% on my initial investment, year-on-year for the next 17 years. And judging by how bearish the market looks at this point in time, its gonna be a rocky start to this new year.
Moving into the new year, I am invested into three different sectors. The Water Treatment industry, the Semiconductor industry, and the Oil & Gas Industry. My portfolio make-up is shown below:
Return on UEL: 16.44%
Total Cumulative Return on Portfolio 2014: 11.75%
For those interested in why I was/am invested in UEL:
The Water Treatment Industry (WT) in China is huge. China is home to huge network of rivers and inland water bodies, including two of the most notable rivers in the world: the Yangtze River, and the Yellow River. With this knowledge, one would think that water would not be China's biggest problem. However, thanks to deep-set practices that aggravate water pollution, along with the booming industries generating huge amounts of wastewater, China's government needs to do something about it. And they are.
Based on China's 12th Five-Year Plan (2011-2015), the Chinese government has increased the total projected investment into water treatment to RMB 430 billion. That works out to 17% more than the 11th FYP. Because of this, WT companies in China are projected to flourish in the wake of this wave of investments. UEL is a leading company in the WT Industry, and is and has been doing increasingly well over the past few quarters/years because of this strong demand for water treatment. I'll keep it short for now, but you can find more information in the links below.
Do read this article for more background information on China's WT industry. Article Here.
For more information about UELs financial health, Click Here.
Saturday, 25 January 2014
Values, Values, Values
My objective in this post is to lay the ground for all those who are interested in learning about investing in Equity. It may seem overwhelming initially (it was for me), but do take the time to let it soak in, and soon you'll find yourself on the path to financial freedom.
Earning from Equity
Here we are, stepping out into the great unknown. How do we earn money off financial investments in Equity (a Publicly-listed Company's stocks)? Well, one could simply buy stocks that give out regular Dividends (Dividends are basically a portion of a company's earnings that a firm's board of directors decide to give out to the shareholders). Another way would be to buy the stock at a low price, and sell it at a higher price. Sums of money earned this way are called Capital Gains. Personally, I prefer investing in stocks that provide a greater potential for Capital Gains.
Often enough however, we are likely to see our earnings made up of both Capital Gains and Dividends. These earnings can then be simply coined Total Returns. The formula below shows the relationship:
P : Price of 1 Share now
D : Expected Dividends paid per share, 1 year from now
g : Expected Annual Growth Rate of Dividends
Now consider this scenario: The minimum return we accept is 6.3%, Singtel is expected to pay a Dividend of $0.17 one year from now, and is expected grow steadily by 1.8% per year.
Using these figures, our valuation of Singtel's share price would be $3.78. This value does not necessarily reflect current market prices, but it shows what we think Singtel's shares should be worth. Intuition would then lead us to think that if the market price for Singtel's shares is now only $3.50, our potential upside (profit) would be $0.28, or 8%.
Tying this back up with the start of the post, if we buy one Singtel share at $3.50 now, and sell it one year later at $3.78 (earning $0.17 on Dividends), we are likely to see our Total Returns as something like this:
At this point, I would like to congratulate you. You've made it! You survived this post, and I want to thank you for taking the time to read it through.
But it's not over just yet. We haven't actually earned any money from reading. Now is the time to practice. Go ahead and derive valuations for stocks, keep track of their market prices, and find opportunities to invest!
Good luck! And till next time.
Earning from Equity
Here we are, stepping out into the great unknown. How do we earn money off financial investments in Equity (a Publicly-listed Company's stocks)? Well, one could simply buy stocks that give out regular Dividends (Dividends are basically a portion of a company's earnings that a firm's board of directors decide to give out to the shareholders). Another way would be to buy the stock at a low price, and sell it at a higher price. Sums of money earned this way are called Capital Gains. Personally, I prefer investing in stocks that provide a greater potential for Capital Gains.
Often enough however, we are likely to see our earnings made up of both Capital Gains and Dividends. These earnings can then be simply coined Total Returns. The formula below shows the relationship:
Total Returns = Dividends + Capital Gains
Simple Formulas
With this out of the way, we know we want to make money through equity, but how do we know what a company's shares are worth? To begin, we must first realize our Required Rate of Return (Rs) for the company we want to invest in. (The Rs is simply the minimum return an investor is willing to accept for his investment, based on a host of factors like risk, etc.). In order to derive this, we have the Capital Asset Pricing Model (CAPM):
Rs = Rrf + (Rm - Rrf) * B
Rrf : Risk Free Rate (The Interest Rate of US Treasury Bills)
Rm : Expected Market Return (Yearly Historical Market Returns can be used)
B : Beta (The volatility of the share price relative to the Market; figures can be be obtained from Reuters)
Try the CAPM out! I recommend using Singtel, a telecommunications company listed on the Singapore Exchange (SGX) that pays out stable and regular Dividends (Singtel's Beta (B) is available here). For this case, try using Singapore's Treasury Bills (Rrf), and get your historical expected market returns (Rm) here!
Valuing Stocks
Here comes the exciting part! Once we have obtained our Rs, we can make use of 3 methods to derive the price.
- The Dividend Growth Model
- The Discounted Cash Flow Model
- The Comparables Method
Basically, all these methods provide us with a valuation of the company's share price. Ultimately, this helps us to make our final decision on whether to buy the stock or not. Due to time constraints, I will only be talking about one of the three above. However, do leave a comment if you would like to know more about the others, and I will try my best to answer.
The Dividend Growth Model
The idea behind this model is to use the projected Dividends that will be paid in the future to calculate the present value of the Company. There are a few variations in this model based on the expected growth of Dividends, but for the sake of using Singtel as an example, we will be focusing on the formula concerning perpetual growth Dividends:
P = D / (Rs - g)
P : Price of 1 Share now
D : Expected Dividends paid per share, 1 year from now
g : Expected Annual Growth Rate of Dividends
Now consider this scenario: The minimum return we accept is 6.3%, Singtel is expected to pay a Dividend of $0.17 one year from now, and is expected grow steadily by 1.8% per year.
Using these figures, our valuation of Singtel's share price would be $3.78. This value does not necessarily reflect current market prices, but it shows what we think Singtel's shares should be worth. Intuition would then lead us to think that if the market price for Singtel's shares is now only $3.50, our potential upside (profit) would be $0.28, or 8%.
Tying this back up with the start of the post, if we buy one Singtel share at $3.50 now, and sell it one year later at $3.78 (earning $0.17 on Dividends), we are likely to see our Total Returns as something like this:
Total Returns = Dividends + Capital Gain
= 0.17 + 0.28
= $0.45, or 12.86% profit on our initial investment
Now, growing your money by 12.86% per year is quite an achievement, considering the interest rates (about 0.05% per year at time of writing) that local banks are providing: DBS/POSB, UOB, OCBC, and Maybank. Do note: I am not putting down banks, nor dissuading you from depositing money in banks. Bank deposits serve their purpose of keeping our money relatively safe. However, it is in my opinion that if we want to achieve financial freedom, investments in equity seem like a much better option.
But it's not over just yet. We haven't actually earned any money from reading. Now is the time to practice. Go ahead and derive valuations for stocks, keep track of their market prices, and find opportunities to invest!
Good luck! And till next time.
Friday, 24 January 2014
Tick Tock, the clock doesn't stop
An Introduction
Hi!
Today marks the start of the second year (kinda. it's the 3rd week of Jan) in my journey towards financial freedom. It has been amazingly uplifting, but at times terribly frustrating as well. I will be recording my progress as I continue down this path, and I invite all those who are interested to provide their insights and comments. (Don't forget, your advice won't only help me, but all who read this blog!) For those who are just starting out as well, I warmly welcome you to draw knowledge from my experiences, and perhaps share your experiences as well. Portions of posts dedicated to you will be highlighted in blue, like this. Look out for them!
So, you may wonder, who exactly is this guy, and what does he do?
Well, my name's Joshua, and at time of writing, I'm a sophomore in Singapore Management University (SMU). I'm majoring in Business and Accountancy, and while I hope and aspire to land myself a good job in the future, I have come to the realization that earning a fixed income will not be enough to provide the shelter/education/comfort that I seek for my family in the future.
I've come to realize that there is a strong need for me to grow my money as I earn it, and thus began my foray into the world of investments. Wet behind the ears, I leaped out into the abyss, investing a good proportion of the savings I had into Equity (aka Shares of Publicly Listed Corporations) on the Singapore Exchange (SGX). Trading suddenly became a roller coaster ride of emotions, and I was struck by how easily I could be overcome by fear, or greed. However, I am glad to say that by year's end, my portfolio had doubled in value.
Moving back to the present, I recognize that some of you may think that I am a child genius/investment prodigy/Warren Buffet (it's humour, don't beat me up over it). This is not the way I see it. I largely attribute the growth of my portfolio to something along the lines of : God's help, good advice, some stroke of luck, and perhaps a few good decisions on my part.
Moving Forward
Drawing motivation from my goals in life, I am compelled to wade deeper into the sea of finance. This year, I am resolved to make more informed and better trading decisions. At the same time, I will specifically be learning more about Technical Analyses and how they can be used to improve the frequency of positive returns. For those who are just starting out, one good place to start would be Investopedia 101, a treasure trove of information about the Financial world.
With this, I conclude my first post on this blog. Till the next time.
Hi!
Today marks the start of the second year (kinda. it's the 3rd week of Jan) in my journey towards financial freedom. It has been amazingly uplifting, but at times terribly frustrating as well. I will be recording my progress as I continue down this path, and I invite all those who are interested to provide their insights and comments. (Don't forget, your advice won't only help me, but all who read this blog!) For those who are just starting out as well, I warmly welcome you to draw knowledge from my experiences, and perhaps share your experiences as well. Portions of posts dedicated to you will be highlighted in blue, like this. Look out for them!
So, you may wonder, who exactly is this guy, and what does he do?
Well, my name's Joshua, and at time of writing, I'm a sophomore in Singapore Management University (SMU). I'm majoring in Business and Accountancy, and while I hope and aspire to land myself a good job in the future, I have come to the realization that earning a fixed income will not be enough to provide the shelter/education/comfort that I seek for my family in the future.
I've come to realize that there is a strong need for me to grow my money as I earn it, and thus began my foray into the world of investments. Wet behind the ears, I leaped out into the abyss, investing a good proportion of the savings I had into Equity (aka Shares of Publicly Listed Corporations) on the Singapore Exchange (SGX). Trading suddenly became a roller coaster ride of emotions, and I was struck by how easily I could be overcome by fear, or greed. However, I am glad to say that by year's end, my portfolio had doubled in value.
Moving back to the present, I recognize that some of you may think that I am a child genius/investment prodigy/Warren Buffet (it's humour, don't beat me up over it). This is not the way I see it. I largely attribute the growth of my portfolio to something along the lines of : God's help, good advice, some stroke of luck, and perhaps a few good decisions on my part.
Moving Forward
Drawing motivation from my goals in life, I am compelled to wade deeper into the sea of finance. This year, I am resolved to make more informed and better trading decisions. At the same time, I will specifically be learning more about Technical Analyses and how they can be used to improve the frequency of positive returns. For those who are just starting out, one good place to start would be Investopedia 101, a treasure trove of information about the Financial world.
With this, I conclude my first post on this blog. Till the next time.
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