The word Contrarian refers to an investment style that goes against prevailing market trends by buying assets that are performing poorly and then selling when they perform well. A contrarian believes that certain crowd behavior among investors can lead to exploitable mispricings in securities markets. e.g., widespread pessimism about a stock can drive a price so low that it overestimates the company's risks, and underestimates its potential returning to profitability. Identifying and purchasing such distressed stocks, and selling them after the company recovers, can lead to above market average gains. Similarly, widespread optimism can also result in unjustifiably high valuations of a particular company or stock that will eventually lead to significant downfall, when these high expectations are not fulfilled. Therefore, avoiding investments in over-hyped investments reduces such risk.
Contrarians are sometimes thought of as perma-bears, i.e., market participants who are permanently biased to a bear market view. However, a contrarian does not necessarily have a negative view of the overall stock market, nor does he believe that it is always overvalued, or that the conventional wisdom is always wrong. Instead, a contrarian seeks opportunities to buy or sell specific investments when the majority of investors appear to be doing the opposite, to the point where that investment has become mispriced or misguided. Such buying opportunities are likely to be identified during market declines. For instance, the recent market crashes in March and September 2007 where investors sold in panic served as a good opportunity for contrarians to pick up fundamentally sound stocks.
Famous contrarian include Benjamin Graham and David Dreman. A classic example in Malaysia is the self-made billionaire and ex-stockbroker Chua Ma Yu's recent acquisition of Star Cruises, which is loss making over the years.
In reality, it is not easy to become a contrarian. It takes a lot of courage and patience, and often, one will be left alone. Investors (particularly retail) are often driven by greed and fear, and highly influenced by daily media such as newspaper and television. When a market crashes, most investors do not have the courage to buy shares because they fear that the shares that they purchase today may get even cheaper tomorrow. It's more so difficult given the scenario of Asian financial crisis in 1997. where the savvy investor may not be able to withstand the kind of market collapse that happened. However, for those who did, at or near market rock-bottom, theiy would have been laughing all the way to the bank by now! On the other hand, an investor, may regret selling their investments too soon in a bull market, and as a result of feeling uneasy over the decision to sell too soon, coupled with little sign of market correction, one starts to buy back stocks and eventually run into problems due to severe market downfall triggered by unforeseen events such as winding off of Yen-carry trades, inflation, US sub-prime property woes, etc.
Tuesday, October 30, 2007
The Myth of Contrarian Investing
Wednesday, October 24, 2007
Alibaba and the IPO Thieves
Remember the story of Ali Baba and the 40 Thieves, from the famous book of One Thousand and One Nights? This is no story telling here....i am actually referring to the popular China's B2B e-commerce website, Alibaba.com.
I first came across Alibaba.com towards the end of 2006, having known very little about this company. I then realized that they are the biggest B2B e-commerce trading company in China, with the forecast to profit more than US$80million this year alone! What is great about this company is that it serves as the critical connecting bridge between global traders and the Chinese traders made up of mostly small and mid-sized businesses.
Alibaba.com is going for listing and it has chosen Hong Kong for listing. The IPO has attracted great interest among the retail investors, as they queued frantically to get hold of the prospectus and application form. The reason for the enormous interest is simple.....For those who have witnessed the dizzying performance of Google's and Baidu's share prices since listing, it's an opportunity that no one should miss out! Even institutional investors are not missing out, as shown by the over 50 times oversubscription rate of the institutional tranche! On the other hand, Yahoo! has also pledged to purchase 10% of the available shares from Alibaba, which further ignites the excitement among investors!
Alibaba possesses a great growth story, judging by China's huge population and the currently low internet penetration rate. In addition, the industry is potentially lucrative if more of China's 32 million small and medium-sized enterprises (SMEs) can be persuaded to use the internet. It is believed that trade among Chinese SMEs reached $532 billion in 2007, and will grow by about 15 percent per year over the next five years!
The IPO price is anywhere between HK$12-HK$13.5 per share. The range was in fact revised from the initial HK$10-HK$12 a piece! At the higher point of the scale, this would mean its stock would be listed at 106 times multiple of 2007 earnings, a record price for global IPO listing! By contrast, Google shares were priced at a P/E of 90 in its IPO and currently fetch a 50 P/E multiple. Sounds like too much an investor is paying for but given the current frenzy and the great future prospects, i believe investors will still ride the waves.
No doubt one can potentially gain substantially by the direct route, i.e, via IPO, but there's no guarantee one would get it. There lies another potential, via the indirect route, i.e, watch out for Yahoo's share price, given its shareholding in Alibaba. If Alibaba shares do well, it may also trigger a rerating of Yahoo! Shares!
The stock is scheduled for listing on Nov 6 and is expected to raise US$1.3 billion!
Tuesday, October 23, 2007
A Tribute To Lim Goh Tong
Lim Goh Tong is a popular Malaysian household name for owning Malaysia's only casino resort in Genting Highlands, a hilltop hotel cum resort. He passed away this morning at Subang Jaya Medical Center (SJMC) at the age of 90. Lim made himself famous by battling against the odds to build Genting Highlands, considering Malaysia is a muslim country, and flourished into a Las Vegas-style resort.
Born in Anxi in Fujian province, Lim was the fifth child among seven siblings who migrated to Malaya, as Malaysia was then known, in 1937 at the age of 19 with only a suitcase and US$175 in his pocket.
Forbes magazine listed Lim, among the world's top 250 billionaires in 2006 and the third richest person in Malaysia with a personal net worth of US$4.3 billion (€3.04 billion).
His empire of business now includes hotels and resorts, plantations, properties, paper manufacturing, power generation, oil and gas, electronic commerce and information technology development.
His company, Genting International, last year made headlines by securing a lucrative contract awarded by Singapore Government to build and operate a world class integrated casino and resort in Singapore's Sentosa Island.
This post is a special tribute to this person who has achieved many great things in life and a fine example for entrepreneurs.
For more information, go to http://www.axilltv.com/bkpost-2.php?newsid=75731.
Monday, October 22, 2007
Heads Up, Malaysia-based Internet Marketers, Paypal Will Pay You!
Finally, a piece of good news for all Malaysia-based Internet Marketers! You are now finally able to withdraw money from Paypal! This must be one of the best piece of news for all Malaysians earning a living in the cyberspace! In fact, many Malaysians have been suffering from the fate of not able to withdraw their earnings from Paypal due to Paypal's restriction. For those who did not know, there is actually a way out before this, ie., by applying a VMI (Virtual Money Inc card)....anyhow, that's history now!
For the official announcement made by Paypal, please click http://pages.ebay.com.sg/sea/paypal/withdraw.html
However, this piece of news have actually created plenty of confusion among Malaysians due to the policies varied among banks! For the matter, not all Malaysian banks offer this withdrawal facility.
First and foremost, do take note that the current withdrawal method is available to Visa® branded credit, debit or prepaid card ONLY. So any card with Master logo is OUT!
As at current, only the following banks entertain such request:
- RHB Bank (7 days)
- CIMB Bank & Southern Bank (12 days)
- Citibank (14 days)
- HSBC Malaysia (6 days)
- United Overseas Bank (12 days) - NO DEBIT VISA ELECTRON
VISA cards that can be used for PayPal withdrawals for now:
1. Al-Rrajhi ATM Debit Card i
2. Public Bank Visa Electron Debit Card
3. UOB ATM with VISA Electron
4. BSN Matix Visa Electron
(source: Geek's Corner)
The Debit cards are:
1. Public Bank Visa Electron Debit Card
2. UOB ATM with VISA Electron
Before you happily go to the bank and withdraw the money, you need to be aware of the following terms and conditions:
- There is USD5.00 Withdrawal Fee charged by Paypal;
- Prevailing Visa + Bank Commission of 2.0% to 2.5% is imposed by the Bank before conversion to Ringgit;
- The whole transaction may takes 7-14 working days to clear;
- There is a maximum amount of $500 a day withdrawal, minimim is $10.
On Paypal perspective, the account must also be a verified or confirmed status.
To transfer the funds to credit card is now made simple by Paypal. Login to your account and click withdrawal. You will then see the option of "transfer funds to your card". That's it!
For more information, please click the following weblogs:
Geek's Corner
Matt's Internet Marketing Blog
Wednesday, October 17, 2007
Keeping Your Rental Property In Good Shape
Have you had the experience of not able to rent out your rental property despite getting a number of prospective tenants to view your property? An you think hey, that can't be right, because you heard from your friend earlier, who managed to rent out his or her property without much of a problem. What went wrong? One of the problem, might be, your rental property IS NOT IN GOOD SHAPE!
Quite often, i hear complaints from property owners that they were not able to secure a tenant for many months, only to find out that their rental property is in such a lousy shape! I mean, things like a well-kept and clean place, properly organized furniture, keep the place nice and tidy especially visually inviting areas such as living room and kitchen, functioning and proper lighting, etc....these are essentials in order to greet your "guests" the positive way! It's like meeting your partner's parents for the first time...you need to dress up "appropriately"! Many people have mistaken that as soon as they put up the ads (of their property for rent), prospective tenants who walk in would just fall in "love" with their place or so much so that they will simply find it "irresistible". In fact, one of the simplest way to testing that "irresistible" theory is by putting yourself in the shoe of the prospective tenant, i.e., ask yourself how you feel when you walk into the house? If the feeling is negative, very likely the prospective tenant would feel the same too!
Up until now, I always have very little difficulty in renting out my properties and that is because, i understand this concept of "putting yourself in his shoe" very well. With vast competition and tenants simply spoiled for choice, it is important to "package" your property so that it becomes more rentable than others. Just think about it this way, how would you market your product effectively against your competition? Just imagine a can of coke with just a basic label and without packaging, would anyone buy it? Answer is simple, packaging is obviously a critical element. However, a word of caution is that you should avoid packaging your property overzealously until you put up the most advance design and overspend your budget. After all, "beauty" is in the eye of beholder. The right "taste" can be quite personal, really. So, to me, just make it SIMPLE, PRESENTABLE AND NICE will do. How i define this is really by thinking through how I would like to see and have if I were a tenant myself. Obviously, some level of comfort and convenience are essential ingredients to consider.
These are my top 10 must-do list to make your property appealing:
- Put on a fresh coat of paint. Repaint the dead old or worn-off spot at the very least
- Spring clean the house (so that you won't see any dead ants or cockroaches lying on the floor!)
- If your unit comes with wooden pargue or marble flooring, give it a "polish" state in order to return some gloss over the surface.
- Fix any problems you may have encountered, such as water leakage, door rust, squeeky sound, broken furniture or lighting, etc.
- Service all the air-conditioners (and regularly do so every 6 to 12 months)
- Organize all the furniture and fittings...turning your place into "move-in" condition
- Fix some nice decorative items such as picture or painting hanging on the walls. However they should blend with the overall theme of the property and they may not need to be expensive
- Get ready some basic utilities such as toilet roll and hand wash detergent. These things make your place extra homely!
- Check all electrical items should be in working condition. If not, send them for repair or replace them.
- Extend welcome gestures and smile, when meeting your prospective tenants for the first time!
By keeping your property in GOOD SHAPE, you should be able to achieve a higher success rate of securing new tenants and retaining them!
Monday, October 8, 2007
Unleash The Power of Real Estate Residual Income
Time passes by so quickly that it's been more than a month since i moved into my new apartment. Believe it or not, simple things could turn out to be a complete nightmare, such as the problems I am still facing with my furniture supplier for poor quality of goods delivered and my little balcony lighting still remained unfixed! I am sure many house movers would be able to share this kind of unpleasant experience with me. Anyhow, i reckon that while such issues are to be resolved, i need to move on with life quickly.
Two immediate agendas appear in my list. The first one being Internet Marketing. Internet Marketing is not something new to me. In fact, I was somewhat involved in Internet Marketing since the year of 2003, having seen its vast potential as a business. Unfortunately, I never quite get myself into the thick of it, mainly because i had not put sufficient time and effort into it. Over the years, i have personally witnessed the industry blossomed into a multi-billion dollar business and it has certainly enriched many people and introduced a new way of life for many too. It's not uncommon to hear money making tag lines such as making money while sleeping or making money in your pyjamas! So, i told myself that enough is enough. I am not going to let this opportunity slip by any longer. I need to buck up and get SERIOUS into ACTION! More about this in my upcoming post.
My second immediate agenda is to turn my previous home to become a rental property. Condominium apartment is an excellent asset to generating endless passive income. I actually have 2 options, i.e., to dispose it off for a decent capital gain, or to put it up for the rental market. If i were to sell it, it would probably give me a capital gain of about 25% (which is not too good considering I have owned this property for 8 years!). However, if i were to rent it out, it would give me a short term gross annual return on investment from 8% to 11%! In fact, i am quite confident that i could fetch a gross annual return of 9.4%, which is very attractive considering average rental yield between 4% and 7%. Some of you may be asking, why is it possible to fetch such a high rental yield given such a capital return? Well, it's simply a matter of supply and demand. Whilst home purchasers and investors have generally overlooked this area where my property is located, there are actually great demand in people seeking out for a decent lease home for their own convenience. This property is strategically located, with close amenities such as shopping mall, hypermarket, school, medical center, public transport and recreational parks. In fact, there is also a soon-to-be-launched large commercial and retail center named "The Paradigm". It would consist of service apartment suites, commercial office tower, retail shopping and fine dining. For those interested to find out more, the developer is WCT land, a major property developer who has made themselves popular in successfully developing Bandar BukitTinggi, Klang.
Besides, the nearby soon-to-be completed Plaza Kelana Jaya will also add to the potential attraction to the area. In fact, it is the only waterfront promenade commercial development in Petaling Jaya. Also, another prominent hypermarket operator, UK based Tesco, is believed to be setting up a hypermarket around the area soon.
With such array of positive development soon to be happening, I am eager to hold out for longer term for a bigger capital return and of course in the near term, I could still enjoy my rental income with spare cash to spare when my unit is tenanted. In the meantime, I have some work to be done to get this property tenanted.
Wednesday, October 3, 2007
10 Common Stockmarket Myths To Avoid
1. Stock market is a form of gambling. Someone must lose in order for someone to gain - As a matter of fact, it is possible that everyone gains without the need for someone to lose (in real terms). How is that possible? In a bull market, it is possible that different investors buying into a common share at a different time make money. It is only the "economic" (not real doll loss) loss that an investor suffers as a result of selling the stock early.
2. Buy a stock when there is large buying volume sitting in the order transaction queue, as if there were many buyers waiting to buy the particular stock. - Very often this could well be the play of syndicates, to entice investors to buy the stocks when in fact they were looking to sell! For all you know, the buyer order could well evaporate all of a sudden! Sometimes, it could also well be an act of institution investor to provide support to the share price.
3. Buy when the share price has achieved higher highs on multiple consecutive days -
Quite often the particular stock with such pattern of trade may well be a sign of overbought position. A correction could be on its way!
4. Buy on news. - Very often investors already started accumulating the stock upon anticipation of a major event that will significantly enhance earnings of a company ahead of time. So instead, a better approach would be buy on "rumours", sell on "news or fact"! However, there are exceptions to this rule, such as if the market has not anticipated such event from happening.
5. Buy the Top 10 or 20 most active stocks, that is, follow the herd's mentality and buy when the particular stock is hotly traded. More often than not, you could well be buying a stock at a high price when the other wise investors were selling. Buying at a high price merely put yourself in a high risk position for potentially a smaller gain!
6. buy or sell with a view of short-term gain. Most people like making QUICK money, so that one does not "tie down" his or her funds. - I know the day traders and technical chartist will disagree with this. The fact of the matter is that unless you are a full-time trader, it will be difficult to monitor your stocks on an active manner. Moreover, doing short-term trading merely increases your cost of transactions over time!
7. Buy a stock when a key businessman or politician is buying the stock, as there must be some positive development going on. - This is pure speculation. Prices could well go the opposite way if the speculated event does not materialize. Moreover, a significant event may take a long time to materialize.
8. Holding on to stocks with the false believes that stock prices will ultimately revert to where they were once upon a time. - Never be afraid to cut losses as you could reinvest the money elsewhere with better returns. Be bold to admit your mistakes (After all, everyone does make mistakes). Holding on to stocks with poor fundamentals may well cause you to suffer significant losses! It is utmost important to understand a company's fundamentals before investing. Merely guided by rumours or tips is a risky business!
9. Only insiders can make money in stock market. - Fact of the matter is, you do not need to be an insider to make money. In fact, insider trading is illegal in most markets. You can make money by investing in fundamentally sound stocks. Value the business of a stock in the form of potential growth and management capability.
10. Stock market prediction is the key to successful investing. - Fact of the matter is, no one can accurately predict the movement of a stock, not even the most experience technical chartist! Technical analysis merely serve as a guidance, based on sophisticated software that can churn out predictions based on historical data and complex algorithms that no lay man can understand. Fact is, software is a program written by humans to best reflect patterns but never human behaviour which can be unpredicted, due to various circumstances such as fears due to uncertainty.
Monday, October 1, 2007
Saving Private Equity
The recent US Federal Reserve's decision to lower interest rates by 50bp have indeed given a huge interim lifeline to the global financial sector to continue extending credit to credit-worthy borrowers and encouraging Merger and Acquisition (M&A) activities. Unlike the market crash in August where many investors were found catching a falling knife, most markets have since recovered. In fact, some stock markets such as Wall Street and Hong Kong Hang Seng have either reached or surpassed the all-time high. Some attributed the bullish sentiment to global funds' window dressing activities, which coincided with third quarter closing, whilst some relate the reason being recovery of confidence due to lesser probability of credit crunch. However, in my personal view, the real impact will only be testified in the coming months or quarter, where corporate earnings are due to release. Certainly i do not think we are totally out of the woods yet. Whatever it is, it is certainly positive for all, including private equity, whom has been recently heavily hit by the US subprime woes as a result of the meltdown in residential real estate property prices. Many of the private equity had indeed either suffered major losses or facing the crude reality of closure. Indeed, this is a good lesson for all that for those who are fond of "HIGH RISK, HIGH RETURN", the reverse (HIGH RISK, HIGH LOSSES) holds true too!
Nevertheless, private equity is definitely here to stay as companies, institutions and high net worth individuals continue to pursue opportunities for greater returns at "whatever" cost. This is the risk that investors should bear in mind and ready to accept the "fate" if the worse should happen. However, let's not rule the whole forest as bad as there are a number of "genuine" private equity funds that are continuing to do very well.
