My Investment Record (6) - 01 February 2014

The stock market (KLCI) will close for CNY and Federal Holidays and reopen on 4th February. Hence, any performance of broad index (KLCI) and my current stocks holdings will stay until then. Hence this is why i can do the performance evaluation in advance now. 

I will try to evaluate my portfolio performance against broad market index (KLCI) on a more regular basis at the end of each quarter. ( Hence the next evaluation date will be 1st of April). 

Market Overview

The taping off of US Federal Reserve Quantitative Easing Program (QE) and the falling of China's PMI index results in global investors shifting capital from emerging market to advance economy. This had caused KLCI stock market to fall from its peak of 1872.52 at the end of 2013 to 1788.78 at 27th Jan 2013. Although stock buying activities at the end of Chinese Lunar Year had lifted the market back to 1800+ level, US Fed decision to continue reduce the size of QE program will likely to cause the stock market fall back later. 

Current Return and performance

The holding period return for KLCI in the past period ( 2nd November 2013 - 31st January 2014) is 0.48% (with dividend included). Holding Period return for my portfolio, is -0.40%. Total holding period return since the start of investing is 5.11%, annualized to be 3.58%, this match the Fixed Deposit rate of 3.2-3.8%, but still far below KLCI return of 15.16%(annualized, 10.48%)

As stated in previous post, 

" In theory, my performance should track KLCI return although i currently hold non of the KLCI composite stock. In practice, my performance would lag behind KLCI return by 0.5% - 1.0% due to 

1) Trading cost (currently average 0.3%-0.5% per trade)

2) Portion of cash that earn only risk free rate. 

The objective of this investment program remain the same. I will try if i can track the market overcome trading cost and requirement to have cash position, if i can beat the market, that shows i can survive in the investment management business. " 

Trading Activities

i. Increase holding of MFCB(3069), with higher NAV, growing revenue and earning, MFCB remain attractive at current price level (P/E of 9.2)

ii. Increase holding of MNRB (6459), the reasoning is similar to i, MNRB remain attractive at current price level (P/E of 6.62)

iii. Increase holding of MSPORTS (5150), the company just start a new venture into leisure/ casual wear business. I am betting that the new venture can at least breakeven while core activity (shoe soe manufacturing) remain profitable. 

iv. Addition of TECNIC (9741), the company specialize in making plastic product, healthy revenue growth, stable profit, low P/E (6.85) make this attractive. 

v. Addition of TROP (5401), if we believe malaysia property market still had some room for growth, then buying Tropicana Corporation at 60-65% of current NAV level will be a bargain. Especially when two things (unbilled sales close to RM2 billion and profit from two sales of land lots ) are not reflected in TROP financial statements yet. 

vi. Addition and subsequently disposal of FIMACOR (3107), i make a quick small profit (approx RM 200) for the transaction done within a months. The reason for addition? i see great potential in security paper trading business for stable income. The reason for disposal? FIMACOR recent venture into Oil Palm Plantation in Indonesia is going to turn sour due to fall of IDR and trending low of CPO price. Besides, the stocks is thinly traded. 

How stock is priced?

This post is intended to show the reader how stock is priced in stock market (or Bursa Saham in Malaysia). 

Basically, 

Stock price recorded is the price of last transaction in the market. 

In every transaction, there must be a willing buyer and a willing seller, else no transaction would happen. 

In other words, the stock price will be set, when there is at least one willing buyer and one willing seller to transact at that particular price. 

Everyday, participants for the stock market will give order to their brokers regarding how much, and at what price level they want to sell/buy a particular stock. As a results, a summary of buy/sell order will be listed on the trading screen as shown in figure below. In the left column you will see a summary of quantity bid at particular price level, in the right column you will see a summary of quantity offer at particular price level. 

Hence, from the figure, 33 lots bid at RM. 3.56 means that the buyers collectively willing to buy 3300 shares of the stock (MNRB) at RM 3.56. Similarly, 64  lots offer at 3.58 means that the seller collectively willing to offer 6400 shares of the stock at RM 3.58. 

As nobody are bidding/offer at RM3.57, no new transaction will occur. A new transaction will occur, either if the seller accept a lower price (RM3.56), or the buyer willing to pay for higher price (RM.3.58). 

The implications are as below:

i. The price will likely go down when there are more sellers than buyers, and likely go up when there are more buyers than sellers. 

ii. How much the price will go down, depends on how much the seller willing to accept for the shares, during the economy crisis, as stock holders eager to cash in their stocks, thus a market "crash" (stock price fall sharply) is more likely. 

iii. How much the price will go up, depends on how much the buyer willing to pay for the shares, during bull's market, when everyone believe that one particular stock will rise to double or triple level of current price level, they will bid for the stock for higher price. Thus a sharp rise. 

iv. This means that, current stock price is not reflective on the actual value of the underlying company. Instead, what stock price reflect is the expectations of the stock market participant. 

v. And, the stock price level is actually determine by the participants which is less than 0.2% of the total shareholders only. ( for example, Bursa Saham Market Capitalization for year 2012 is 1466 billion, while the average daily trading value is 1.666 billion only. )

Hence, the advice to gain in stock market, dont follow the trend, especially if the trend is only  less than 0.2% of the market participants. 

Introducing Coursera

The way i came across this online education platform, was through an article in Wall Street Journal Chinese Website. which say that we would be able to follow class taught by one of the Nobel Economics price winner - Robert Shiller.

Basically , it had more than 500 online courses available, with subject ranging from mathematics to social science. All courses are free. However if you want to earned a verified certificate for the course that you completed, you can always do so by paying a small fee.

But for me, is not about the certificate, it has less to do with the joy of learning. Its more about, empower myself with knowledge that is essential to reach my dream.

The link is here. https://www.coursera.org/courses